Exhibit 2
Agreement and Plan of Merger dated June 14, 1999
Exhibit 2
AGREEMENT AND PLAN OF MERGER
by and among
HTD CORPORATION,
HTD MANAGEMENT, INC.,
CERTAIN STOCKHOLDERS OF HTD CORPORATION,
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
MEDIQ INCORPORATED
and
HTD ACQUISITION CORPORATION
Dated as of June 14, 1999
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER..............................................................................................3
Section 1.1 Surviving Corporation........................................................................3
Section 1.2 Effective Time...............................................................................4
Section 1.3 Closing......................................................................................4
Section 1.4 Effects of the Merger........................................................................4
Section 1.5 Certificate of Incorporation.................................................................4
Section 1.6 Bylaws.......................................................................................4
Section 1.7 Directors and Officers.......................................................................5
ARTICLE II CONSIDERATION.........................................................................................5
Section 2.1 Consideration................................................................................5
Section 2.2 Closing Date Payments........................................................................7
Section 2.3 Escrow Agreement.............................................................................7
Section 2.4 Options......................................................................................8
Section 2.5 Adjustment of Aggregate Closing Consideration................................................9
Section 2.6 Purchase of MEDIQ Securities................................................................11
ARTICLE III STATUS AND CONVERSION OF SECURITIES..................................................................12
Section 3.1 Status and Conversion of Securities.........................................................12
Section 3.2 Closing of the Company's Transfer Books.....................................................13
Section 3.3 Exchange of Certificates....................................................................13
Section 3.4 Dissenting Shares...........................................................................14
Section 3.5 Appointment of Stockholders' Agents.........................................................14
Section 3.6 Distribution by Stockholders' Agents........................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................16
Section 4.1 Company and Subsidiaries...................................................................16
Section 4.2 Capital Stock..............................................................................16
Section 4.3 Authority and Enforceability...............................................................18
Section 4.4 Consents and Approvals.....................................................................18
Section 4.5 Non-Contravention..........................................................................18
Section 4.6 Financial Statements.......................................................................19
Section 4.7 Absence of Undisclosed Liabilities.........................................................20
Section 4.8 No Material Adverse Changes................................................................20
Section 4.9 Absence of Certain Developments............................................................20
Section 4.10 Real Properties............................................................................23
Section 4.11 Accounts Receivable........................................................................24
Section 4.12 Contracts and Commitments..................................................................25
Section 4.13 Intellectual Property Rights...............................................................27
Section 4.14 Litigation.................................................................................28
Section 4.15 Employees..................................................................................28
ii
Section 4.16 Employee Benefit Plans.....................................................................29
Section 4.17 Insurance..................................................................................32
Section 4.18 Compliance.................................................................................33
Section 4.19 Environmental Matters......................................................................33
Section 4.20 Tax Liabilities............................................................................34
Section 4.21 Books and Records..........................................................................36
Section 4.22 Inventory and Equipment....................................................................36
Section 4.23 Customers..................................................................................37
Section 4.24 Bank Accounts..............................................................................37
Section 4.25 Relationships with Related Parties.........................................................37
Section 4.26 Assets.....................................................................................38
Section 4.27 Brokerage..................................................................................39
Section 4.28 Disclosure.................................................................................39
Section 4.29 Board Recommendation.......................................................................39
Section 4.30 Required Company Vote......................................................................39
Section 4.31 Certain Payments...........................................................................39
Section 4.32 Third-Party Payment Contracts..............................................................40
Section 4.33 Billing; Gratuitous Payments...............................................................40
Section 4.34 Fraud and Abuse Matters....................................................................40
Section 4.35 Reimbursement Matters......................................................................41
Section 4.36 Federal Health Care Programs...............................................................42
Section 4.37 No Criminal Proceedings....................................................................43
Section 4.38 PrimeSource Transaction....................................................................44
Section 4.39 Indebtedness...............................................................................44
Section 4.40 Fees and Expenses..........................................................................44
Section 4.41 Severance, Bonus and Other Expenses........................................................44
Section 4.42 Other Agreements...........................................................................45
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS...............................................45
Section 5.1 Ownership...................................................................................45
Section 5.2 Authorization and Enforceability............................................................45
Section 5.3 Non-Contravention...........................................................................45
Section 5.4 Consents and Approvals......................................................................46
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PENMAN..............................................................46
Section 6.1 Investment Intent...........................................................................46
Section 6.2 Unregistered Shares.........................................................................46
Section 6.3 Sophistication; Familiarity.................................................................46
Section 6.4 Investment Risk.............................................................................46
Section 6.5 Information.................................................................................47
Section 6.6 Investment Decision.........................................................................47
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE MEDIQ PARTIES..................................................47
Section 7.1 Corporate Existence and Power...............................................................47
Section 7.2 Corporate Authorization.....................................................................47
Section 7.3 Non-Contravention...........................................................................47
Section 7.4 Government Authorization....................................................................48
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ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF MEDIQ TO PENMAN...................................................48
Section 8.1 Litigation..................................................................................48
Section 8.2 Compliance..................................................................................48
Section 8.3 Existence; Good Standing; Authority.........................................................49
Section 8.4 Capitalization..............................................................................49
Section 8.5 SEC Documents...............................................................................50
Section 8.6 Absence of Certain Changes..................................................................51
Section 8.7 Books and Records...........................................................................51
Section 8.8 Disclosure..................................................................................51
ARTICLE VIII CERTAIN OBLIGATIONS OF THE PARTIES..................................................................51
Section 9.1 Public Announcements.......................................................................51
Section 9.2 Costs, Expenses and Taxes..................................................................51
Section 9.3 Access to Information......................................................................52
Section 9.4 Further Assurances.........................................................................52
Section 9.5 Non-Competition............................................................................52
Section 9.6 Severance..................................................................................54
Section 9.7 Releases...................................................................................54
Section 9.8 Obligation to Consummate the PrimeSource Transaction.......................................54
Section 9.9 Officer and Director Indemnification.......................................................54
Section 9.10 Stockholder Approval.......................................................................54
Section 9.11 Release of Prior Indemnification Rights....................................................55
ARTICLE X DELIVERIES AT THE CLOSING..............................................................................55
Section 10.1 Deliveries to the MEDIQ Parties............................................................55
Section 10.2 Deliveries to the Company and the Principal Stockholders...................................57
ARTICLE XI INDEMNIFICATION.......................................................................................58
Section 11.1 Indemnification by the Stockholders........................................................58
Section 11.2 Indemnification by the MEDIQ Parties.......................................................60
Section 11.3 Notice and Procedure for Indemnification...................................................61
Section 11.4 Exclusive Remedy...........................................................................62
ARTICLE XII TAX MATTERS..........................................................................................62
Section 12.1 Tax Matters Agreement; Termination of Tax Sharing Agreement................................62
Section 12.2 Tax Effect of Payments.....................................................................62
ARTICLE XIII MISCELLANEOUS.......................................................................................63
Section 13.1 Amendment and Modification.................................................................63
Section 13.2 Notices....................................................................................63
Section 13.3 Counterparts...............................................................................64
Section 13.4 Entire Agreement; No Third Party Beneficiaries.............................................64
Section 13.5 Severability...............................................................................64
Section 13.6 Nature and Survival of Representations.....................................................65
Section 13.7 Governing Law; Jurisdiction................................................................65
iv
Section 13.8 Successors and Assigns; Assignment.........................................................65
v
INDEX OF DEFINED TERMS
Page
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Acquired Businesses...............................................................................................3
Acquired Companies...............................................................................................16
Acquired Company.................................................................................................16
Acquired Subsidiaries.............................................................................................3
Acquisition Corp..................................................................................................1
Acute Care Consideration..........................................................................................2
Acute Care Subsidiaries...........................................................................................2
Adjustment Amount.................................................................................................9
Aggregate Closing Consideration...................................................................................5
Aggregate Equipment Value.........................................................................................9
Aggregate Option Consideration....................................................................................8
Agreement.........................................................................................................1
Allocation Percentage.............................................................................................1
Antares...........................................................................................................6
Antares Indebtedness..............................................................................................6
Average NBV......................................................................................................10
Balance Sheet....................................................................................................19
Balance Sheet Date...............................................................................................19
Carve-Out Financial Statements...................................................................................19
Carve-Out Interim Financials.....................................................................................19
Cash Closing Consideration........................................................................................5
Certificate......................................................................................................12
Certificate of Merger.............................................................................................4
Closing...........................................................................................................4
Closing Date......................................................................................................4
Closing Statement.................................................................................................9
Code.............................................................................................................29
Common Stock......................................................................................................1
Company...........................................................................................................1
Company Expenses.................................................................................................51
Company Stock.....................................................................................................1
Computer Software................................................................................................37
Contract.........................................................................................................18
Contracts........................................................................................................18
Damages..........................................................................................................57
DGCL..............................................................................................................2
Dissenting Shares................................................................................................13
Effective Time....................................................................................................4
Environmental Claims.............................................................................................33
Environmental Laws...............................................................................................33
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Equipment Value..................................................................................................10
ERISA............................................................................................................29
ERISA Affiliate..................................................................................................29
Escrow Agent......................................................................................................7
Escrow Agreement..................................................................................................7
Escrow Fund.......................................................................................................8
Executive Compensation Plan......................................................................................29
Financial Statements.............................................................................................18
Former Real Property.............................................................................................33
GAAP.............................................................................................................19
General Merger Consideration......................................................................................5
Governmental Entity..............................................................................................18
Hazardous Materials..............................................................................................33
HTD Management....................................................................................................1
Improvements.....................................................................................................23
Indebtedness.....................................................................................................43
Indemnified Party................................................................................................59
Indemnifying Party...............................................................................................59
Independent Accounting Firm......................................................................................10
Initial Acute Care Consideration..................................................................................2
Initial Escrow Fund...............................................................................................7
Interim Financials...............................................................................................18
knowledge........................................................................................................19
Law..............................................................................................................18
Leased Real Property.........................................................................................22, 23
Leases...........................................................................................................22
Lien.............................................................................................................17
Litigation Conditions............................................................................................60
Material Adverse Effect..........................................................................................16
Medicaid.........................................................................................................22
Medicare.........................................................................................................21
MEDIQ.............................................................................................................1
MEDIQ Material Adverse Effect....................................................................................48
MEDIQ Parties.....................................................................................................1
MEDIQ Shares.....................................................................................................45
MEDIQ/PRN.........................................................................................................1
Merger............................................................................................................1
Money Options.....................................................................................................8
Option Holders....................................................................................................1
Options...........................................................................................................1
PENMAN............................................................................................................3
vii
PENMAN Closing Consideration......................................................................................5
PENMAN Escrow Fund................................................................................................8
PENMAN Initial Escrow Fund........................................................................................7
PENMAN Merger Consideration.......................................................................................6
Pension Plan.....................................................................................................30
Per Share Cash Payment...........................................................................................12
Permitted Liens..................................................................................................37
person...........................................................................................................16
Plan.............................................................................................................29
PrimeSource.......................................................................................................2
PrimeSource Agreement.............................................................................................2
PrimeSource Escrow Agreement......................................................................................2
PrimeSource Escrow Deposit........................................................................................2
PrimeSource Escrow Fund...........................................................................................2
PrimeSource Letter................................................................................................3
PrimeSource Transaction...........................................................................................2
Principal Stockholder.............................................................................................1
Principal Stockholders............................................................................................1
Real Properties..................................................................................................22
Related Party....................................................................................................37
Rental Equipment.................................................................................................36
Rental Equipment Category.........................................................................................9
Restricted Period................................................................................................51
S/H Escrow Fund...................................................................................................7
S/H Initial Escrow Fund...........................................................................................7
Section 6(h) Value Per Share......................................................................................8
Securities Laws..................................................................................................17
Severance........................................................................................................44
Stock Option Committee............................................................................................8
Stock Option Plan.................................................................................................8
Stockholder Agent................................................................................................14
Stockholders......................................................................................................1
Stockholders' Agents.............................................................................................14
Subsidiary........................................................................................................3
Surviving Corporation.............................................................................................3
Tax..............................................................................................................35
Tax Matters Agreement............................................................................................61
Taxes............................................................................................................35
Taxing Authority.................................................................................................35
Third Party Claim................................................................................................60
TRIAD.............................................................................................................2
Triad Asset Transfer..............................................................................................2
Triad Transfer Bill of Sale.......................................................................................2
Year 2000 Compliance.............................................................................................38
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INDEX OF EXHIBITS
Exhibit A Stockholders List
Exhibit B Option Holders List
Exhibit C Form of Triad Transfer Bill of Sale
Exhibit D Form of PrimeSource Agreement
Exhibit E Form of Joinder Agreement
Exhibit F Form of Escrow Agreement
Exhibit G Rental Equipment Categories
Exhibit H Form of Opinion of Porter & Hedges
Exhibit I Form of Opinion of Altheimer & Gray
Exhibit J Form of Opinion of Dechert Price & Rhoads
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INDEX OF SCHEDULES
Schedule 2.2 Company and Stockholder Expenses
Schedule 2.4 Money Options
Schedule 4.1 Company and Subsidiaries
Schedule 4.2 Capital Stock
Schedule 4.4 Consents and Approvals
Schedule 4.5 Noncontravention
Schedule 4.6 Financial Statements
Schedule 4.7 Undisclosed Liabilities
Schedule 4.9 Certain Developments
Schedule 4.10 Real Properties
Schedule 4.11 Accounts Receivable
Schedule 4.12 Contracts
Schedule 4.13 Intellectual Property Rights
Schedule 4.14 Litigation
Schedule 4.15 Employees
Schedule 4.16 Employee Benefit Plans
Schedule 4.17 Insurance
Schedule 4.18 Compliance
Schedule 4.19 Environmental Matters
Schedule 4.20 Taxes
Schedule 4.22 Inventory and Equipment
Schedule 4.23 Customers
Schedule 4.24 Bank Accounts
Schedule 4.25 Relationships with Related Parties
Schedule 4.26 Assets
Schedule 4.32 Third Party Payment Contracts
Schedule 4.33 Billing
Schedule 4.34 Fraud and Abuse
Schedule 4.35 Reimbursement Matters
Schedule 4.36 Federal Health Care Programs
Schedule 4.41 Funds Flow Statement
Schedule 5.3 Non-Contravention
Schedule 5.4 Consents and Approvals
Schedule 8.4 Capitalization
Schedule 8.5 SEC Documents
Schedule 9.6 Severance Matters
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT and PLAN OF MERGER (the "Agreement") is dated as of the 14th
day of June, 1999, by and among HTD Corporation, a Delaware corporation (the
"Company"), HTD Management Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("HTD Management"), the stockholders of the Company
listed on the signature page hereof (each individually referred to herein as a
"Principal Stockholder" and collectively as the "Principal Stockholders"), MEDIQ
Incorporated, a Delaware corporation ("MEDIQ"), MEDIQ/PRN Life Support Services,
Inc., a Delaware corporation ("MEDIQ/PRN"), and HTD Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of MEDIQ/PRN ("Acquisition
Corp." and, together with MEDIQ and MEDIQ/PRN, the "MEDIQ Parties").
WHEREAS, Acquisition Corp. is a duly incorporated Delaware corporation
formed by MEDIQ/PRN for the purpose of the Merger (as defined herein), with
authorized capital stock consisting of 1,000 shares of common stock, $.01 par
value, of which 1,000 shares are duly and validly issued and outstanding and
owned by MEDIQ/PRN;
WHEREAS, the Company is a duly incorporated Delaware corporation, with
authorized capital stock consisting of (i) 10,000,000 shares of common stock,
$.001 par value per share ("Common Stock"), of which 5,442,660 shares are duly
and validly issued, outstanding and entitled to vote as of the date hereof (the
issued and outstanding shares of Common Stock at any time prior to the Effective
Time (as defined herein) being the "Company Stock"), and (ii) 1,000,000 shares
of preferred stock, $.001 par value per share, none of which are issued or
outstanding;
WHEREAS, the respective Boards of Directors of the Company and the MEDIQ
Parties have approved the merger of Acquisition Corp. with and into the Company
(the "Merger"), pursuant to which the Company will be the Surviving Corporation
(as defined herein);
WHEREAS, the Principal Stockholders constitute the record owners of 86% or
more of the outstanding shares of Common Stock;
WHEREAS, the holders of the Company Stock listed on Exhibit A (the
"Stockholders") constitute all the holders of record of Company Stock, and
Exhibit A sets forth for each Stockholder (i) the number of shares of Common
Stock held by such Stockholder immediately prior to the Effective Time and (ii)
the percentage of the total number of issued and outstanding shares of Company
Stock that are held by such Stockholder (the "Allocation Percentage");
WHEREAS, the holders of outstanding options to acquire Common Stock of the
Company ("Options") listed on Exhibit B (the "Option Holders") constitute all of
the holders of Options and Exhibit B sets forth for each Option Holder (i) the
number of shares of Common Stock underlying the Options held by such Option
Holder immediately prior to the Effective Time, (ii) the exercise price per
share with respect to each Option and (iii) the portion of the Aggregate Option
Consideration (as defined herein), if any, applicable to each Option.
WHEREAS, contemporaneously with the execution of this Agreement, the Merger
is being approved by the holders of shares of Common Stock representing at least
86% of the Company Stock in accordance with the Delaware General Corporate Law
(the "DGCL") and the Company's Certificate of Incorporation and the Company's
Bylaws;
WHEREAS, pursuant to a Bill of Sale and Assignment and Assumption Agreement
dated June 14, 1999 attached hereto as Exhibit C (the "Triad Transfer Bill of
Sale"), all the operating assets and operating liabilities of the following
subsidiaries of the Company: (i) Healthcare Technology Delivery, Inc., a
Delaware corporation, (ii) Futuretech, Inc., an Alabama corporation, (iii)
Medical Companies Alliance, Inc., a Utah corporation, (iv) Futuretech of
Maryland, a Maryland corporation formerly known as Megatech Medical, Inc., (v)
Bimeco, Inc., a Florida corporation ("Bimeco"), (vi) Douglass Medical, Inc., a
Florida corporation, and (vii) Futuretech of Washington, Inc., a Washington
corporation formerly known as Omni Medical, Inc. (collectively, the "Acute Care
Subsidiaries"), which are not primarily related to the Company's acute care
distribution business were transferred (the "Triad Asset Transfer") to TRIAD
Holdings, Inc., a Delaware corporation ("TRIAD"), or to a subsidiary of TRIAD;
WHEREAS pursuant to a Stock Purchase Agreement dated the date of this
Agreement, among PrimeSource Surgical, Inc., a Delaware corporation
("PrimeSource"), the Company, HTD Management, and MEDIQ, a copy of which is
attached hereto as Exhibit D (the "PrimeSource Agreement"), PrimeSource has
agreed to acquire the Acute Care Subsidiaries on the date hereof through a
purchase (the "PrimeSource Transaction") to occur simultaneously with the
Effective Time of the Merger of all of the outstanding capital stock of all
Acute Care Subsidiaries that are not subsidiaries of other Acute Care
Subsidiaries;
WHEREAS the PrimeSource Agreement contemplates that, as a result of the
PrimeSource Transaction, all of the liabilities of the Acute Care Subsidiaries
that are primarily related to the Company's acute care distribution business
will remain liabilities of the Acute Care Subsidiaries and that PrimeSource will
pay to HTD Management the following consideration: $17,000,000 in cash (the
"Acute Care Consideration"); subject to (i) an adjustment based on working
capital levels at the closing of the PrimeSource Transaction and (ii) a holdback
of funds pursuant to an escrow arrangement;
WHEREAS, the PrimeSource Agreement provides that of the Acute Care
Consideration (i) $15,500,000 is to be paid to HTD Management upon the closing
of the PrimeSource Transaction for the account of and for subsequent
distribution to the Stockholders as herein provided (the "Initial Acute Care
Consideration"), and (ii) $1,500,000 (the "PrimeSource Escrow Deposit" and such
amount with any additions thereto or deletions therefrom being the "PrimeSource
Escrow Fund") is to be paid to an escrow agent for later distribution in
accordance with an escrow agreement (the "PrimeSource Escrow Agreement");
2
WHEREAS, the Company and PrimeSource have delivered evidence to the MEDIQ
Parties that they are prepared to consummate the PrimeSource Transaction,
including executed copies of all the agreements and instruments contemplated to
be delivered at the closing of the PrimeSource Transaction, evidence that
PrimeSource has received adequate financing for the transactions contemplated by
the PrimeSource Agreement and a certificate certifying that all conditions to
PrimeSource's obligations under the PrimeSource Agreement have been satisfied;
WHEREAS, pursuant to the PrimeSource Agreement (A) PrimeSource agrees to
indemnify the Company and the MEDIQ Parties from any liability related to (i)
the capital stock, assets, liabilities and businesses acquired by PrimeSource in
connection with the PrimeSource Transaction or (ii) the PrimeSource Agreement
and the transactions contemplated thereby, in each case other than the
obligation to consummate the PrimeSource Transaction and pay the Acute Care
Consideration to the Stockholders in accordance with the terms set forth in the
PrimeSource Agreement and this Agreement and the obligation to recognize any
gain arising from the PrimeSource Transaction and MEDIQ/PRN agrees to indemnify
PrimeSource from any liability transferred to TRIAD in the Triad Asset Transfer;
WHEREAS the direct and indirect subsidiaries of the Company (each a
"Subsidiary") other than the Acute Care Subsidiaries (such other Subsidiaries
being the "Acquired Subsidiaries"), as such Acquired Subsidiaries are conducted
after the Triad Asset Transfer, engage in the business of the rental of movable
rental equipment, the sale of disposable products and biomedical repair services
(the "Acquired Businesses"); and
WHEREAS, in contemplation of the transactions contemplated hereby, PENMAN
Private Equity and Mezzanine Fund, L.P. ("PENMAN") and MEDIQ executed a joinder
(the "Joinder Agreement") to the Securities Purchase and Holders Agreement,
dated May 29, 1998, by and among MEDIQ and certain parties named therein (the
"Securities Purchase Agreement") and the Registration Rights Agreement, dated
May 29, 1998 by and among MEDIQ and certain parties named therein, in the form
attached hereto as Exhibit E.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. Surviving Corporation. At the Effective Time, and in
accordance with the provisions of this Agreement and the DGCL, Acquisition Corp.
shall be merged with and into the Company, which shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") and which
shall continue its corporate existence under the laws of the State of Delaware
and whereupon the separate corporate existence of Acquisition Corp. shall cease.
References herein to the Company or Acquisition Corp. with respect to
transactions or acts occurring after the Effective Time shall mean the Surviving
Corporation.
3
Section 1.2. Effective Time. The Merger shall become effective when the
Certificate of Merger (as defined herein) is filed with the office of the
Secretary of State of the State of Delaware in accordance with the applicable
provisions of the DGCL. The Certificate of Merger shall be filed as soon as
practicable after the Closing (as defined herein) and shall provide that the
Merger shall become effective immediately upon the filing of the Certificate of
Merger. The date and time when the Merger shall become effective are herein
referred to as the "Effective Time."
Section 1.3. Closing.
(a) The closing of the transaction contemplated by this Agreement (the
"Closing") shall take place at the offices of Dechert Price & Rhoads, 4000 Bell
Atlantic Tower, 1717 Arch Street, Philadelphia, PA 19103, on the date hereof
(the date and time of such Closing being herein referred to as the "Closing
Date"). The parties shall use all reasonable efforts to cause the Closing Date
and the Effective Time to occur on the same calendar day.
(b) At the Closing the Surviving Corporation shall execute a certificate of
merger (the "Certificate of Merger") and cause said Certificate of Merger to be
filed and recorded in accordance with the applicable provisions of the DGCL.
Section 1.4. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Acquisition Corp. shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition Corp. shall become the debts, liabilities and duties of
the Surviving Corporation without further act or deed.
Section 1.5. Certificate of Incorporation. The Certificate of Incorporation
of Acquisition Corp. as in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided therein and in accordance with law; provided,
however, that at the Effective Time the Certificate of Incorporation of the
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be HTD Corporation.
Section 1.6. Bylaws. The Bylaws of Acquisition Corp. as in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended as
provided therein and in accordance with law.
Section 1.7. Directors and Officers. Each person who is a director or
officer of Acquisition Corp. immediately prior to the Effective Time shall,
after the Effective Time, be a director or officer of the Surviving Corporation,
without change until the earlier of such person's resignation or removal or the
election and qualification of his successor in accordance with the Certificate
of Incorporation and Bylaws of the Surviving Corporation and in accordance with
law.
4
ARTICLE II
CONSIDERATION
Section 2.1. Consideration.
(a) As used herein, "Aggregate Closing Consideration" means $35,753,293.02,
consisting of the sum of (i) $25,418,919.48 (the "Cash Closing Consideration"),
(ii) the S/H Initial Escrow Fund (as defined herein), (iii) the S/H Escrow Fund
(as defined herein), (iv) the value of the PENMAN Closing Consideration (as
defined herein), (v) the PENMAN Initial Escrow Fund (as defined herein) and (vi)
the PENMAN Escrow Fund (as defined herein).
(b) "General Merger Consideration" means, for each share of Common Stock
issued and outstanding immediately prior to the Effective Time, other than the
shares of Common Stock held by PENMAN, the right in accordance with the terms of
this Agreement to receive (i) at the Effective Time, the quotient obtained by
dividing the Cash Closing Consideration by the aggregate number of shares of
Common Stock issued and outstanding immediately prior to the Effective Time,
other than the shares of Common Stock held by PENMAN, (ii) within two business
days after the Closing Statement (as defined herein) has been finalized in
accordance with Section 2.5, the quotient obtained by dividing the S/H Initial
Escrow Fund (after taking into consideration all deletions therefrom, if any,
that are required by Section 2.5) by the aggregate number of shares of Common
Stock issued and outstanding immediately prior to the Effective Time, other than
the shares of Common Stock held by PENMAN, (iii) subjec to the terms of the
Escrow Agreement, on the date 18 months after the Effective Time or, if MEDIQ
has not submitted claims (excluding claims which have been resolved favorably to
the Stockholders before the first anniversary of the Closing) against the Escrow
Fund aggregating at least $1.25 million on or before the first anniversary of
the date hereof, then on such first anniversary, the quotient obtained by
dividing the S/H Escrow Fund (subject to reduction, if any, as provided in
Section 2.5 and Section 11.1) by the aggregate number of shares of Common Stock
issued and outstanding immediately prior to the Effective Time, other than the
shares of Common Stock held by PENMAN, (iv) promptly upon and in any event
within two business days after receipt of any portion of the Initial Acute Care
Consideration by HTD Management on behalf of the Stockholders, the quotient
obtained by dividing such received amount by the aggregate number of shares of
Common Stock issued and outstanding immediately prior to the Effective Time,
including shares of Common Stock held by PENMAN and (v) promptly upon and in any
event within two business days after receipt of any portion of the PrimeSource
Escrow Funds by HTD Management on behalf of the Stockholders in accordance with
the PrimeSource Escrow Agreement, the quotient obtained by dividing such funds
received by the aggregate number of shares of Common Stock issued and
outstanding immediately prior to the Effective Time.
(c) "PENMAN Closing Consideration" means, 35,405.75 shares of MEDIQ common
stock, par value $.01 per share ("MEDIQ Common Stock"), 373,830.20 shares of
MEDIQ Series A 13% Cumulative Compounding Preferred Stock, par value $.01 per
5
share ("MEDIQ Series A Preferred Stock"), 106,498.96 shares of MEDIQ Series B
13.25% Cumulative Compounding Perpetual Preferred Stock, par value $.01 per
share ("MEDIQ Series B Preferred Stock"), and 192,493.55 shares of MEDIQ Series
C 13.5% Cumulative Compounding Preferred Stock, par value $.01 per share ("MEDIQ
Series C Preferred Stock").
(d) "PENMAN Merger Consideration" means for the aggregate number of issued
and outstanding shares of Common Stock held by PENMAN immediately prior to the
Effective Time, the right in accordance with the Agreement to receive (i) at the
Effective Time, the PENMAN Closing Consideration, (ii) within two business days
after the Closing Statement has been finalized in accordance with Section 2.5,
the PENMAN Initial Escrow Fund (after taking into consideration all deletions
therefrom, if any, that are required by Section 2.5), (iii) subject to the terms
of the Escrow Agreement, on the date 18 months after the Effective Time or, if
MEDIQ has not submitted claims (excluding claims which have been resolved
favorably to the Stockholders before the first anniversary of the Closing)
against the Escrow Fund aggregating at least $1.25 million on or before the
first anniversary of the date hereof, then on such first anniversary, the PENMAN
Escrow Fund (subject to reduction, if any, as provided in Section 2.5 and
Section 11.1), (iv) promptly (and in any event within two business days) upon
receipt of any portion of the Initial Acute Care Consideration by HTD Management
on behalf of the Stockholders, the product of such received amount and a
fraction the numerator of which is the aggregate number of shares of Common
Stock owned by PENMAN immediately prior to the Effective Time and denominator of
which is the aggregate number of shares of Common Stock issued and outstanding
immediately prior to the Effective Time and (v) promptly (and in any event
within two business days) upon receipt of any portion of the PrimeSource Escrow
Funds by HTD Management on behalf of the Stockholders in accordance with the
PrimeSource Escrow Agreement, the product of such funds received and a fraction
the numerator of which is the aggregate number of shares of Common Stock owned
by PENMAN immediately prior to the Effective Time and denominator of which is
the aggregate number of shares of Common Stock issued and outstanding
immediately prior to the Effective Time.
(e) For accounting and tax purposes and if and to the extent permitted by
applicable tax laws and regulations, the parties intend that the Closing of the
transactions contemplated hereby shall be deemed to be 12.01 a.m. on May 28,
1999 (the "Accounting Effective Time").
Section 2.2. Closing Date Payments. At the Effective Time, the MEDIQ
Parties shall cause the Company to pay, and the MEDIQ Parties shall provide to
the Company, such cash funds as the Company may require in order to pay:
(i) $21,026,884.46 to Antares Leveraged Capital Corp. ("Antares"),
representing payment in full of the unpaid balance, including principal and
interest and fees accrued through the Closing Date, of all indebtedness
owed by the Company and the Subsidiaries to Antares at the Closing Date and
all prepayment penalties or premiums related thereto (the "Antares
Indebtedness");
6
(ii) $2,025,000 to Equus II Incorporated, representing payment in full
of the unpaid principal balance of the non-interest bearing promissory note
of the Company dated May 1, 1998, payable to the order of Equus II
Incorporated in the original principal amount of $2,025,000;
(iii) $50,000 to Robert A. Butterworth and $50,000 to Regis Farrell,
in exchange for their assumption or payment of, and their obtaining the
release of Bimeco from all obligations in respect of the mortgage
indebtedness of Bimeco secured by the Largo, Florida office and warehouse
facility formerly owned by Bimeco;
(iv) $39,111.71, which amount includes all amounts required to be
withheld therefrom under applicable withholding laws on behalf of the
employer and the employee, to or on behalf of the holders of all Money
Options (as defined herein), representing the Aggregate Option
Consideration payable under Section 2.4 hereof;
(v) an aggregate $15,000 in the following amounts to the individuals
named below pursuant to the Warrant Surrender Agreement dated May 25, 1999,
among the Company and such individuals:
Edward Berman $7,500
William G. Graue $7,500
(vi) an aggregate $134,770.80 to the persons named on Schedule 2.2
attached hereto in payment of all Company and Stockholder expenses of the
nature described in Section 4.40 hereof; and
(vii) $521,740 to Robert A. Butterworth pursuant to the Cancellation
Agreement dated June 4, 1999, executed by Mr. Butterworth.
Section 2.3. Escrow Agreement. On the date hereof, an escrow agreement in
the form attached hereto as Exhibit F (the "Escrow Agreement") shall be executed
by MEDIQ/PRN, the Stockholders' Agents (as defined herein) and the escrow agent
named therein (the "Escrow Agent"). Pursuant to the Escrow Agreement, at the
Closing, MEDIQ/PRN shall and MEDIQ shall cause MEDIQ/PRN to deposit with the
Escrow Agent: (i) $388,036.10 in cash (such amount, including any accretions
thereto and reductions therefrom, and any interest earned thereon, the "S/H
Initial Escrow Fund") and 6,220.88 shares of MEDIQ Series A Preferred Stock,
1772.25 shares of MEDIQ Series B Preferred Stock, and 3,203.26 shares of MEDIQ
Series C Preferred Stock (such securities, including any cash exchanged therefor
and accretions thereto and reductions therefrom, and any interest and dividends
earned thereon, the "PENMAN Initial Escrow Fund," and, together with the S/H
Initial Escrow Fund, being the "Initial Escrow Fund" to be held in escrow as
security for any adjustment of the Aggregate Closing Consideration as provided
for in Section 2.5 hereof and (ii) $1,940,180.40 in cash (such amount, including
any accretions thereto and reductions therefrom, and any interest earned
thereon, less the Escrow Agent's fees and expenses, being the "S/H Escrow Fund")
and 31,104.41 shares of MEDIQ Series A Preferred Stock 8,861.21 shares of MEDIQ
Series B Preferred Stock, and 16,016.34 shares of MEDIQ Series C 13.5%
7
Cumulative Compounding Preferred Stock (such securities, including any cash
exchanged therefor and any accretions thereto and reductions therefrom, and any
interest earned thereon, being the "PENMAN Escrow Fund," and, together with the
S/H Escrow Fund, being the "Escrow Fund") to be held in escrow as additional
security for any adjustment of the Aggregate Closing Consideration and as
security for indemnification obligations of the Stockholders set forth herein
and distributed in accordance with the Escrow Agreement. Any portion of the
Acute Care Consideration held in escrow shall be held in escrow pursuant to the
PrimeSource Escrow Agreement.
Section 2.4. Options.
(a) As used in this Section 2.4 and elsewhere in this Agreement:
(i) "Stock Option Plan" means the Company's 1997 Incentive Plan under
which all of the outstanding Options have been granted;
(ii) "Stock Option Committee" means the Committee of the Board of
Directors of the Company charged with the administration of the Stock
Option Plan;
(iii) "Section 6(h) Value Per Share" has the meaning specified in
paragraph (b) of this Section 2.4;
(iv) "Money Options" means all Options which have an exercise price
per share of Common Stock which is less than the Section 6(h) Value Per
Share; and
(v) "Aggregate Option Consideration" means an amount of cash equal to
(x) the Section 6(h) Value Per Share multiplied by the maximum number of
shares of Common Stock issuable upon exercise of all Money Options
outstanding at the Effective Time, minus (y) the aggregate exercise price
of all Money Options outstanding at the Effective Time.
(b) The Stock Option Committee, acting pursuant to clause (ii) of Section
6(h) of the Stock Option Plan, and after taking into account various factors
deemed relevant by the Stock Option Committee (including the deferral and
contingent nature of the amounts, if any, to be received by the Stockholders
after the Closing Date in respect of the Initial Escrow Fund, the Escrow Fund
and the PrimeSource Escrow Deposit, and the obligations imposed by this
Agreement and the PrimeSource Agreement on the Stockholders and the Principal
Stockholders, respectively), has determined that the value of the cash and other
property received or to be received by the Stockholders in respect of each share
of Company Stock in connection with the Merger and the PrimeSource Transaction
is $9.30 (the "Section 6(h) Value Per Share"). Immediately prior to the
Effective Time, the Company, acting through the Stock Option Committee and
pursuant to Section 6(h) of the Stock Option Plan, shall cancel all then
outstanding Options. At or immediately following the Effective Time, the Company
shall pay to each holder of a Money Option, in cash, an amount equal to (i) the
Section 6(h) Value Per Share multiplied by the maximum number of shares of
Common Stock issuable upon the exercise of such Money Option, minus (y) the
aggregate exercise price at which such Money Option is then exercisable, which
8
such amount is set forth on Schedule 2.4 for each holder of a Money Option.
Notwithstanding the foregoing, all payments under this Section 2.4(b) shall be
net of any applicable required tax withholding.
Section 2.5. Adjustment of Aggregate Closing Consideration.
(a) The Aggregate Closing Consideration is based, in part, upon the
Aggregate Equipment Value (as defined herein) as of the Accounting Effective
Time being equal to at least the difference between (i) the Aggregate Equipment
Value of the Acquired Companies as of May 31, 1999, and (ii) $500,000 (such
difference being the "Reference Amount"). For purposes hereof, the value
referred to in the foregoing clause (i) shall be determined by the Company based
upon the books and records of the Acquired Companies within 20 days of the
Effective Time. After the Closing Date, the Aggregate Closing Consideration
shall be reduced dollar for dollar to the extent that the Aggregate Equipment
Value as of the Accounting Effective Time is less than the Reference Amount
(such difference being, the "Adjustment Amount") The Closing Statement (as
defined herein) on which the Adjustment Amount, if any, is based shall set forth
the Aggregate Equipment Value.
(b) Within ten (10) days after the Closing, MEDIQ/PRN shall conduct a
physical equipment count to determine the aggregate number of usable and
rentable units of Rental Equipment for each category of Rental Equipment set
forth on Exhibit G (each, a "Rental Equipment Category") that are in the
physical possession of an Acquired Company at the Accounting Effective Time and
within twenty (20) days after Closing, MEDIQ/PRN shall determine the aggregate
number of usable and rentable units of Rental Equipment for each Rental
Equipment Category that were on rent to customers at the Accounting Effective
Time. For purposes of this Section 2.5, "usable and rentable" means patently
rentable in the ordinary course of business, subject to any requirement for
routine maintenance and repair. MEDIQ/PRN will either physically observe and/or
obtain third party confirmations of the aggregate number of usable and rentable
units of Rental Equipment to be included in the Aggregate Equipment Value.
(c) Within thirty (30) days after the Closing, MEDIQ/PRN shall prepare and
deliver to the Stockholders' Agents a statement (the "Closing Statement") of the
Aggregate Equipment Value as of the Accounting Effective Time stating that the
Aggregate Equipment Value as shown on the Closing Statement has been determined
in accordance with this Section 2.5 and including a calculation of the
Adjustment Amount, if any.
(d) For purposes hereof, the following defined terms have the following
meanings:
(i) "Aggregate Equipment Value" means the sum of the Equipment Value
for each Rental Equipment Category.
(ii) "Average NBV" means the average net book value of such Rental
Equipment Category as of May 31, 1999, which shall be determined by the
9
Company based upon the books and records of the Acquired Companies within
20 days of the Effective Time.
(iii) "Equipment Value" for each Rental Equipment Category means the
product of (x) the Average NBV for the units included in such Rental
Equipment Category and (y) the aggregate number of usable and rentable
units for such Rental Equipment Category owned by the Acquired Subsidiaries
on the applicable measurement date, and with respect to the Equipment Value
at the Accounting Effective Time shall be based on the equipment count
conducted pursuant to this Section 2.5.
(e) Subject to this Section 2.5, the Closing Statement and Adjustment
Amount calculation delivered by MEDIQ/PRN to the Stockholders' Agents shall be
deemed to be and shall be final, binding and conclusive on the parties hereto.
The Stockholders' Agents may dispute any amounts reflected on the Closing
Statement or in any Adjustment Amount calculation but only on the basis that the
Aggregate Equipment Value was not determined in accordance with this Section 2.5
or on the basis of mathematical errors; provided, however, that the
Stockholders' Agents shall notify MEDIQ/PRN in writing of each disputed amount,
and specify the amount thereof in dispute, within ten (10) days of the
Stockholders' Agents' receipt of the Closing Statement. In the event of such a
dispute, the Stockholders' Agents and MEDIQ/PRN shall attempt to reconcile their
differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties. If the Stockholders' Agents and
MEDIQ are unable to reach a resolution to such effect within 30 days of receipt
of the Stockholders' Agents' written notice of dispute to MEDIQ/PRN, MEDIQ/PRN
and the Stockholders' Agents shall submit the amounts remaining in dispute for
resolution to an independent accounting firm of national reputation mutually
appointed by the Stockholders' Agents and MEDIQ/PRN or, in the absence of
agreement by the parties, to PricewaterhouseCoopers LLP (such independent
accounting firm being herein referred to as the "Independent Accounting Firm,"
which shall be instructed to determine and report to the parties, within 30 days
after such submission, determine and report to the parties upon such remaining
disputed amounts, and such report shall be final, binding and conclusive on the
parties hereto. The fees and disbursements of the Independent Accounting Firm
shall be allocated between MEDIQ/PRN and Stockholders so that the Stockholders'
share of such fees and disbursements shall be in the same proportion that the
aggregate amount of such remaining disputed amounts so submitted by the
Stockholders' Agents to the Independent Accounting Firm that is unsuccessfully
disputed by the Stockholders' Agents (as finally determined by the Independent
Accounting Firm) bears to the total amount of such remaining disputed amounts so
submitted by the Stockholders' Agents to the Independent Accounting Firm. The
Stockholders' share of such fees and disbursements shall be paid proportionately
from the S/H Initial Escrow Fund and the PENMAN Initial Escrow Fund.
(f) Within five (5) business days after the Closing Statement has been
prepared, and if applicable, the Adjustment Amount has been finally determined
in accordance with this Section 2.5, MEDIQ/PRN and the Stockholders' Agents
shall jointly notify the Escrow Agent (as defined herein) as follows: (A) if no
Adjustment Amount is determined to be payable to MEDIQ/PRN, the Escrow Agent
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shall pay all escrow funds in the S\H Initial Escrow Fund to the Stockholders'
Agents for the benefit of the Stockholders (other than PENMAN) in accordance
with the Escrow Agreement and all escrow funds in the PENMAN Initial Escrow Fund
to PENMAN in accordance with the Escrow Agreement, and (B) if an Adjustment
Amount is determined to be payable to MEDIQ/PRN, the Escrow Agent shall (x)
distribute the Adjustment Amount, together with interest thereon for the period
commencing on the Closing Date through the date on which all of the Adjustment
Amount is paid (such interest to be calculated at the rate announced from time
to time during such period by Citibank, N.A. as its United States prime base or
reference rate for commercial loans) from the S/H's Initial Escrow Fund (for the
Stockholders in accordance with their respective Allocation Percentages) and,
the PENMAN Initial Escrow Fund in accordance with the terms of the Escrow
Agreement, and to the extent that the Adjustment Amount exceeds the aggregate
value of the S/H Initial Escrow Fund and the PENMAN Initial Escrow Fund, from
the S/H Escrow Fund (proportionate, as provided above) and the PENMAN Escrow
Fund (proportionate, as provided above) in accordance with it Allocation
Percentage, and (y) distribute to the Stockholders' Agents for the benefit of
the Stockholders (other than PENMAN) the aggregate amount of any remaining
escrow funds in the S/H Initial Escrow Fund (after taking into account all
additions thereto and deletions therefrom that are required by this Section
2.5), and distribute to PENMAN any remaining escrow funds in the PENMAN Initial
Escrow Fund (after taking into account all additions thereto and deletions
therefrom that are required by this Section 2.5), all in accordance with the
terms of the Escrow Agreement.
Section 2.6. Purchase of MEDIQ Securities. HTD Management on behalf of and
for the account of PENMAN shall purchase and MEDIQ shall cause to be issued to
PENMAN 8,819.25 shares of MEDIQ Common Stock, 102,392.51 shares of MEDIQ Series
A Preferred Stock, 29,170.58 shares of MEDIQ Series B Preferred Stock and
52,724.85 shares of MEDIQ Series C Preferred Stock on the Closing Date with a
portion of PENMAN's pro rata share of the Acute Care Consideration. HTD
Management agrees to pay to MEDIQ on PENMAN's behalf $1,993,864.96 through
application of PENMAN's pro rata portion of the Acute Care Consideration in
respect of HTD Management's purchase (on behalf of PENMAN) of MEDIQ securities
pursuant to this Section 2.6 and distribute such MEDIQ Securities to PENMAN as
part of its Acute Care Consideration.
ARTICLE III
STATUS AND CONVERSION OF SECURITIES
Section 3.1. Status and Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders therefor:
(a) Each share of Common Stock held by the Company as a treasury share
shall be canceled and retired and no consideration shall be delivered in
exchange therefor.
(b) Each outstanding share of Common Stock held by any of the MEDIQ Parties
shall be canceled and retired and no consideration shall be delivered in
exchange therefor.
11
(c) Each outstanding share of Common Stock, other than (i) the shares of
Common Stock held by PENMAN, (ii) the shares of Common Stock held by the Company
as treasury shares, (iii) the outstanding shares of Common Stock held by any of
the MEDIQ Parties and (iv) Dissenting Shares (as defined herein), shall be
converted into the right to receive the General Merger Consideration. As of the
Effective Time, each such share of Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a Certificate (as defined herein) shall cease to have any rights
with respect thereto, except the right to receive the General Merger
Consideration. For purposes hereof, each valid certificate representing any
share of Common Stock outstanding immediately prior to the Effective Time (other
than shares held by any MEDIQ parties) is referred to herein as a "Certificate."
(d) The shares of Common Stock held by PENMAN shall be converted into the
right to receive the PENMAN Merger Consideration. As of the Effective Time, each
such share of Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a Certificate in respect thereof shall cease to have any rights with respect
thereto, except the right to receive the PENMAN Merger Consideration.
(e) Each outstanding share of common stock of Acquisition Corp. shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, $.01 par value per share, of the Surviving Corporation.
Section 3.2. Closing of the Company's Transfer Books. At the Effective
Time, (i) each share of Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and each holder of a Certificate shall cease to have any rights as a
stockholder of the Company and (ii) the transfer books of the Company shall be
closed and no transfer of shares of Company Stock shall thereafter be made. If,
after the Effective Time, a Certificate representing shares of Company Stock is
presented to MEDIQ/PRN or to the Surviving Corporation, it shall be canceled and
exchanged for the consideration applicable with respect to such shares as
provided in Sections 2.1, 2.3, 2.5, 3.1, and 3.3 hereof.
Section 3.3. Exchange of Certificates.
(a) Prior to the Effective Time, MEDIQ/PRN shall deliver to each record
holder of a Certificate a form of letter of transmittal (which shall specify
that delivery shall be effected only upon proper delivery of a Certificate to
MEDIQ/PRN and which shall provide for the appointment of the Stockholders'
Agents (as defined herein)) and instructions for use in effecting the surrender
of the Certificates and payment therefor. Upon surrender to MEDIQ/PRN of a
Certificate, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by MEDIQ/PRN, MEDIQ/PRN shall pay, and
MEDIQ shall cause MEDIQ/PRN to pay, the holder of such Certificate, other than
PENMAN, in exchange therefor, cash in an amount equal to (i) the quotient
obtained by dividing the Cash Closing Consideration by the aggregate number of
shares of Common Stock issued and outstanding immediately prior to the Effective
Time, other than the shares of Common Stock held by PENMAN, multiplied by (ii)
the number of shares of Common Stock represented by the surrendered Certificate.
MEDIQ/PRN shall cancel each Certificate surrendered pursuant to this Section
3.3. Upon PENMAN's surrender to MEDIQ/PRN of its Certificates, which such
Certificates represent an aggregate of 1,218,763 shares of Common Stock,
together with a duly executed letter of transmittal and such other documents as
may be reasonably required by MEDIQ/PRN, MEDIQ/PRN shall deliver the PENMAN
Closing Consideration to PENMAN. If any Certificate shall have been lost, stolen
12
or destroyed, MEDIQ/PRN may, in its discretion and as a condition precedent to
the issuance of the General Merger Consideration or the PENMAN Merger
Consideration, as applicable, with respect to each share represented by such
Certificate, require the owner of such lost, stolen or destroyed Certificate to
provide an appropriate affidavit and indemnity so as to indemnify against any
claim that may be made against any MEDIQ Party or the Surviving Corporation with
respect to such Certificate. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. Until surrendered in accordance
with the provisions of this Section 3.3, each Certificate (other than
Certificates representing shares outstanding prior to the Effective Time owned
by the Company, any MEDIQ Party or Dissenting Shares) shall represent for all
purposes only the right to receive, subject to the terms and conditions of this
Agreement, the General Merger Consideration, or PENMAN Merger Consideration, as
applicable, in respect of each share represented thereby, without interest
thereon.
(b) No party hereto shall be liable to a holder of shares of Common Stock
for any portion of the General Merger Consideration or the PENMAN Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Section 3.4. Dissenting Shares.
(a) Notwithstanding any provisions of this Agreement to the contrary, each
share of Company Stock held by a holder who after the Effective Time properly
demands and perfects his, her or its demand for appraisal of his, her or its
shares in accordance with Section 262 of the DGCL (the "Dissenting Shares")
shall not be converted into or represent a right to receive the General Merger
Consideration, but shall be entitled to only such rights as are granted by
Section 262 of the DGCL. Such holders shall cease to be Stockholders for all
purposes of this Agreement. MEDIQ/PRN shall be entitled to retain any of the
General Merger Consideration not paid on account of such Dissenting Shares
pending resolution of the claims of such holders, and the remaining Stockholders
shall not be entitled to any portion thereof.
(b) Notwithstanding the provisions of subsection (a) of this Section 3.4,
if any holder of Common Stock issued and outstanding immediately prior to the
Effective Time and who demands appraisal of his, her, or its Common Stock under
the DGCL and thereafter effectively withdraws or loses (through the failure to
perfect or otherwise) his, her or its right to appraisal, then as of the
occurrence of such event, each share held by such holder shall automatically be
converted into and represent only the right to receive, subject to the terms and
13
conditions of this Agreement, the General Merger Consideration, without interest
thereon, upon surrender of the Certificate representing such share.
Section 3.5. Appointment of Stockholders' Agents. Each Principal
Stockholder hereby irrevocably constitutes and appoints, and by execution and
delivery of a letter of transmittal under Section 3.3 each other Stockholder
(other than a holder of Dissenting Shares) will thereby irrevocably constitute
and appoint, PENMAN, Equus II Incorporated and Regis Farrell (collectively, the
"Stockholders' Agents," and each a "Stockholder Agent"), and any two of them
acting together, as such Stockholder's true and lawful agents and
attorneys-in-fact, with full power of substitution, to act in the name and on
behalf of such Stockholder:
(i) to amend or supplement this Agreement and the PrimeSource Agreement,
and to grant waivers, consents and extensions under this Agreement and the
PrimeSource Agreement; provided, however, that any amendment of or supplement to
this Agreement which discriminates against or adversely affects any one
Stockholder, or any group of less than all Stockholders, shall require the
written approval of the adversely affected Stockholder or a majority in interest
(determined in accordance with Allocation Percentages) of the adversely affected
Stockholders.
(ii) to execute and deliver the Escrow Agreement and the PrimeSource Escrow
Agreement and to thereafter execute and deliver such amendments or supplements
to, and to grant such waivers and consents under, the Escrow Agreement or the
PrimeSource Escrow Agreement as the Stockholder Agents in their sole discretion
shall deem advisable;
(iii) in connection with any claim for indemnification made by the MEDIQ
Parties under Section 11.1(a), to take any and all actions required or
authorized to be taken by the Indemnifying Party (as defined herein) pursuant to
Section 11.3;
(iv) to receive all notices and other communications required or permitted
to be given to such Stockholder under this Agreement, the Escrow Agreement, the
PrimeSource Agreement or the PrimeSource Escrow Agreement including all notices
under Section 11.3 relating to any Third-Party Claim (as defined herein);
(v) to direct the investment and reinvestment of the Initial Escrow Fund,
the Escrow Fund and the funds held pursuant to the PrimeSource Escrow Agreement;
(vi) to receive and receipt for all amounts which may be distributable from
the Initial Escrow Fund, the Escrow Fund or the funds held in escrow pursuant to
the PrimeSource Escrow Agreement for the account of such Stockholder;
(vii) to employ legal counsel to represent such Stockholder in connection
with any indemnity matter arising under Section 11.1(a) hereof or arising
pursuant to the PrimeSource Agreement;
14
(viii) to defend, compromise or settle any claim for indemnification made
(i) by any MEDIQ Party or the Company against the Escrow Fund under Section
11.1(a), or, in accordance with Section 11.3, any Third-Party Claim which has
given rise to any claim for indemnification; or (ii) by PrimeSource against the
funds held in Escrow pursuant to the PrimeSource Escrow Agreement;
(ix) to authorize and instruct the Escrow Agent to act in any manner under
the Escrow Agreement and with respect to the Initial Escrow Fund and the Escrow
Fund; and
(x) to authorize and instruct the escrow agent under the PrimeSource Escrow
Agreement to act in a manner under the PrimeSource Escrow Agreement and with
respect to the funds held pursuant thereto.
Each Principal Stockholder acknowledges, and each other Stockholder will,
pursuant to a Letter of Transmittal, acknowledge that the power of attorney
granted in this Section 3.5 or under a Letter of Transmittal is being or will be
granted with the understanding that such Stockholder's interest in the Initial
Escrow Fund, the Escrow Fund and the escrow funds held under the PrimeSource
Escrow Agreement is hereby rendered subject to the interests of the other
Stockholders, the MEDIQ Parties and the Company for the purpose of the Merger.
The powers and authority granted in this Section 3.5 shall be irrevocable, shall
not be terminated by any act of a Stockholder and shall survive the death or
incompetency of a Stockholder to the fullest extent permitted by law. The
Stockholder Agents shall incur no liability for and the Stockholders waive and
release the Stockholders' Agents from any action taken by the Stockholder
Agents, or any omission to take action, in good faith and in accordance with
this Section 3.5, and shall be indemnified by the Principal Stockholders from
and against any Damages (as defined in Section 11.1(a)) incurred by the
Stockholder Agents in the performance of their duties as such in the absence of
bad faith, gross negligence or willful misconduct on the part of the Stockholder
Agents.
Section 3.6. Distribution by Stockholders' Agents. By their execution of
this Agreement, the Stockholders' Agents agree, for the benefit of the
Stockholders, that upon their receipt of any distributions under this Agreement,
the Stockholders' Agents shall promptly redistribute such amounts to the
Stockholders in accordance with their respective Allocation Percentages or
Adjusted Allocation Percentages (as defined in the Escrow Agreement), as
applicable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the MEDIQ Parties as follows:
Section 4.1. Company and Subsidiaries. Schedule 4.1 lists each Subsidiary
and the address and jurisdiction of incorporation for such Subsidiary. Each of
the Company and each Acquired Subsidiary (the Company and the Acquired
Subsidiaries being herein referred to collectively as the "Acquired Companies,"
15
and individually as an "Acquired Company") is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to own and
lease its assets and operate its business as currently operated. Each Acquired
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction listed with respect to it on Schedule 4.1 and
those jurisdictions are all those in which such qualification is required by law
as a consequence of the character of the property owned or leased by such entity
or the nature of such entity's activities except for failures to be so qualified
which would not reasonably be expected to have a material adverse change or
effect in the properties, assets, liabilities, operating results, supplier,
customer or employee relations, business, condition (financial or other) or
prospects of the Acquired Companies, taken as a whole (a "Material Adverse
Effect"). Schedule 4.1 lists with respect to each Acquired Company and each
Subsidiary each location where such entity has a place of business or owns or
leases property. The Company has heretofore furnished MEDIQ/PRN with a complete
and correct copy of the Certificate of Incorporation and Bylaws for the Company
and each Subsidiary. Such Certificates of Incorporation and Bylaws are in full
force and effect.
Section 4.2. Capital Stock.
(a) Schedule 4.2 sets forth the authorized capital stock and the number of
shares currently outstanding for the Company and each Acquired Subsidiary.
Except as set forth on Schedule 4.2, neither the Company nor any Acquired
Subsidiary has any other authorized, issued or outstanding equity securities or
securities containing any equity features, or any other securities convertible
into, exercisable or exchangeable for or entitling any person to otherwise
acquire any other securities containing any equity features. As used herein,
"person" means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental or regulatory body or other entity.
(b) All of the shares of Company Stock have been duly authorized and are
validly issued, fully paid and nonassessable, are owned of record by the
Stockholders in accordance with Schedule 4.2 and were not issued in violation of
any agreement or other understanding binding upon the Company. Schedule 4.2 sets
forth for each Option the name of the holder of each Option, the number of
shares of Common Stock issuable upon the exercise of such Option and the
exercise price of such Option. Except as set forth on Schedule 4.2, all of the
outstanding securities of each Acquired Subsidiary are owned by the Company,
free and clear of any Lien (assuming payment in full of the Antares
Indebtedness). As used herein, "Lien" means any lien, charge, claim,
restriction, limitation, pledge, security interest, conditional sale agreement
or other title retention agreement, lease, mortgage, security agreement, option
or other encumbrance of any kind (including but not limited to the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code of
any jurisdiction and, with respect to securities, any restriction on the right
to vote, sell or otherwise dispose of securities). Except as set forth on
Schedule 4.2, there are no agreements or other rights or arrangements existing,
and to which the Company or any Acquired Subsidiary is a party or by which the
16
Company or any Acquired Subsidiary may be bound, or as to which the Company has
any knowledge, that provide for the sale or issuance of any of the Company's or
any Acquired Subsidiaries' capital stock or any securities convertible into or
exercisable or exchangeable for the capital stock of any of them, and neither
the Company nor any Acquired Subsidiary has used or granted, or is a party to or
bound by, nor does it have knowledge of, any rights, subscriptions, warrants,
options, preemptive rights, convertible securities, puts, calls, conversion
rights, rights of first refusal or agreements of any kind relating to the
capital stock of the Company or any Acquired Subsidiary or obligating the
Company or any Acquired Subsidiary to issue or sell any shares of capital stock
or other securities of the Company or of any Acquired Subsidiary.
(c) Except as set forth on Schedule 4.2, there are no agreements or other
obligations (contingent or otherwise) that may require the Company to
repurchase, redeem, otherwise acquire, or register under the Securities Act of
1933, as amended, any state's securities laws or any rules or regulations
thereunder (collectively, the "Securities Laws"), any shares of its capital
stock or to provide funds to or make any investment (in the form of a loan,
capital contribution, guaranty or otherwise) in any other entity. All of the
shares of Company Stock have been issued in compliance with the Securities Laws.
The Company and the Acquired Subsidiaries do not, directly or indirectly, own
any capital stock or other securities or interests of any kind in any
corporation or business entity, other than the Subsidiaries.
(d) Each Principal Stockholder is the sole record owner of the Company
Stock set opposite such Principal Stockholder's name on Exhibit A hereto.
Exhibit B is true and correct.
Section 4.3. Authority and Enforceability.
(a) The Company has the requisite corporate power and authority to execute,
deliver and perform this Agreement and all other agreements and instruments
contemplated hereby. The execution and delivery by the Company of this Agreement
and all other agreements and instruments contemplated hereby and the performance
by the Company of its obligations hereunder and thereunder have been duly
authorized by all necessary corporate action on the part of the Company
(including approval by Stockholders holding shares of Common Stock representing
at least 86% of the total number of shares of Common Stock outstanding). This
Agreement and all other agreements and instruments contemplated hereby to be
executed and delivered by or on behalf of the Company have been duly executed
and delivered by the Company. This Agreement and each of the other agreements
and instruments contemplated hereby to be executed and delivered by or on behalf
of the Company constitute legal, valid and binding obligations of the Company,
enforceable in accordance with their terms.
Section 4.4. Consents and Approvals. No consent, approval or authorization
of, or declaration, filing or registration with, any foreign, federal, state,
local or other governmental or regulatory authority (a "Governmental Entity"),
or any third person or entity, is required to be made or obtained by the Company
in connection with the execution, delivery or performance of the Agreement and
the consummation of the transactions contemplated hereby, other than those set
forth in Schedule 4.4.
17
Section 4.5. Non-Contravention. Except as set forth on Schedule 4.5, and
assuming that the consents and approvals described in Schedule 4.4 are obtained
and the Antares Indebtedness will be repaid in full at the Closing, the
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company and the Principal Stockholders of the transactions
contemplated hereby do not and will not (i) contravene or conflict with, or
result in any breach of, the Certificate of Incorporation or Bylaws of the
Company or any Subsidiary, (ii) contravene or conflict with or constitute a
violation of any provision of any foreign, federal, state or local law, rule,
regulation, code, ordinance, judgment, permit, injunction, writ, statute, order,
decree or other requirement (each, a "Law") binding upon or applicable to the
Company or any Subsidiary, or by which any of their properties or assets is
bound or affected, (iii) result in a breach or violation of, or constitute a
default or unauthorized assignment under (with or without notice or lapse of
time or both) or give rise to a right of termination, cancellation, modification
or acceleration of any right or obligation of the Company or any Acquired
Subsidiary or to a loss of any benefit to which the Company or any Acquired
Subsidiary is entitled under any provision of any contracts, agreements,
mortgages, deeds of trust, bonds, leases, licenses, notes, certificates,
options, warrants, rights, instruments or other agreements (each a "Contract"
and collectively the "Contracts" ), whether written or oral, binding upon the
Company or any Acquired Subsidiary or any of their respective properties or
assets or any shares of the Common Stock or (iv) result in the creation or
imposition of any Lien of any kind on any property or asset of the Company or
any Acquired Subsidiary or on any shares of the Company Stock.
Section 4.6. Financial Statements.
(a) Schedule 4.6(a) includes copies of the following financial statements
(collectively, the "Financial Statements"): (i) the unaudited consolidated
balance sheet of the Company and the Subsidiaries at December 31, 1998 and the
related unaudited statements of income and cash flows for the year then ended
and (ii) the unaudited consolidated balance sheet of the Company and the
Subsidiaries at April 30, 1999 and related unaudited statements of income and
cash flows for the four-month period then ended (the "Interim Financials"). The
books and records of the Company and the Subsidiaries fairly reflect in
reasonable detail their assets, liabilities and transactions. The Financial
Statements (i) were prepared in accordance with the books and records of the
Company and the Subsidiaries, (ii) fairly present in all material respects the
financial condition, assets and liabilities of the Company and the Subsidiaries
as at the date thereof and results of operations and cash flows for the periods
covered thereby, (iii) have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods indicated; provided, however, that (x) the Interim Financials omit
explanatory footnote disclosures and year-end adjustments consisting of normal
recurring accruals, and (y) the Financial Statements do not include a statement
of stockholders' equity, and (iv) except as set forth on Schedule 4.6(b) do not
contain any extraordinary items. For purposes hereof, the "Balance Sheet" shall
mean the consolidated balance sheet of the Company as of December 31, 1998 and
the "Balance Sheet Date" shall mean December 31, 1998.
18
(b) Schedule 4.6(c) includes copies of the following financial statements
(collectively, the "Carve-Out Financial Statements"): (i) unaudited combined
balance sheet and statement of income of the Company and Acquired Subsidiaries
at December 31, 1998 and for the year then ended and (ii) the unaudited combined
balance sheet and statement of income of the Company and the Acquired
Subsidiaries at April 30, 1999 and for the four-month period then ended (the
"Carve-Out Interim Financial ). The Carve-Out Financial Statements (i) were
prepared in accordance with the books and records of the Company, (ii) fairly
present in all material respects the financial condition, assets and liabilities
of the Company and the Acquired Subsidiaries as at the dates thereof and results
of operations for the periods covered thereby on a basis consistent with the
Financial Statements and (iii) except as set forth on Schedule 4.6(d), have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated.
(c) When a representation and warranty in Article IV is made to the
"knowledge" of the Company, it means receipt of notice by or actual knowledge of
any officer or director of the Company or any of the following persons Lance C.
Ruud, William C. Klintworth, Jr., R. Tucker Coop, and Marvin Marks.
Section 4.7. Absence of Undisclosed Liabilities. Neither the Company nor
any Acquired Subsidiary has any liability or obligation of any nature (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due and regardless of when asserted) except (i) liabilities that are
reflected on the Interim Financials, (ii) current liabilities or obligations
incurred in the ordinary course of business since the date of the Interim
Financials, none of which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect, (iii) liabilities specifically
described on Schedule 4.7 or any other Schedule to the Agreement referred to on
Schedule 4.7, (iv) obligations under any Contract identified on Schedule 4.12,
(v) obligations under any Plan (as defined in and disclosed under Section 4.16),
and (vi) liabilities that would not reasonably be expected to have a Material
Adverse Effect.
Section 4.8. No Material Adverse Changes. Since the Balance Sheet Date,
there has been no Material Adverse Effect and the Company does not know of any
set of circumstances which exists that is reasonably likely to give rise to any
Material Adverse Effect.
Section 4.9. Absence of Certain Developments. Except as set forth on
Schedule 4.9, since the Balance Sheet Date, each of the Company and the
Subsidiaries has conducted itself only in the ordinary course of business with
respect to the Acquired Businesses, consistent with past practice and, without
limiting the generality of the foregoing, has not:
(a) borrowed any amount or incurred or become subject to any liability in
excess of $50,000, singly or $100,000 in the aggregate other than (i) trade
payables and accrued operating expenses incurred in the ordinary course of
business, consistent with past practice and (ii) borrowings under the Company's
revolving credit facility;
(b) mortgaged, pledged or subjected any of its assets to any Lien other
than a Permitted Lien (as defined herein);
19
(c) declared, set aside or paid any dividends or other distributions with
respect to any shares of its capital stock (other than dividends or
distributions from a Subsidiary to the Company or another Subsidiary) or
redeemed or purchased or otherwise acquired, directly or indirectly, any shares
of its capital stock or any options or other rights to acquire its capital
stock;
(d) suffered any theft, damage, destruction or loss of or to any property
or properties owned or used by it, whether or not covered by insurance, with a
value in excess of $50,000, singly or $100,000 in the aggregate;
(e) made or granted any bonus or any wage, salary, compensation,
termination or severance increase to any director, officer, employee or
consultant, or made or granted any increase in any Plan (as defined herein) or
arrangement, made any discretionary contribution to an existing Plan or amended
or terminated any existing Plan or arrangement, or adopted any new Plan or
arrangement or made any commitment or incurred any liability to any labor
organization, in any case other than in the ordinary course of business,
consistent with past practice;
(f) made or authorized any single capital expenditure or commitment
therefor in excess of $25,000 individually or $50,000 in the aggregate;
(g) made any loans or advances to, or guarantees for the benefit of, any
person or entities, such that the aggregate amount of such loans, advances or
guarantees at any time outstanding was or is in excess of $25,000 (other than
intercompany advances and guarantees so long as no advance to or guarantee for
the benefit of any Acute Care Subsidiary by the Company or any Acquired
Subsidiary is currently outstanding;
(h) canceled or waived any right or claim of substantial value to the
operation of the business of the Company or any Subsidiary, including, without
limitation, any leases, licenses or certifications relating to the operation of
the business, or canceled or waived any debts or claims against any Related
Party;
(i) sold, transferred or otherwise disposed of any assets of the Company or
any Subsidiary, other than sales of current assets and immaterial fixed assets
in the ordinary course of business consistent with past practice and other than
the Triad Asset Transfer;
(j) made any payment, discharge or satisfaction of any liability or
obligation (whether accrued, absolute, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities or obligations shown or fully reflected on the Financial Statements
or incurred in the ordinary course of business since December 31, 1998 and
consistent in character and amount with those liabilities incurred in the past;
(k) written-off as uncollectible any notes or accounts receivable of the
Company or any Subsidiary or written down the value of any assets or inventory
of any Acquired Company, other than in immaterial amounts and amounts charged
against reserves established in the ordinary course of business consistent with
20
past practice on the books of an Acquired Company for that purpose on or before
December 31, 1998;
(l) changed any method of accounting or keeping its books of account or
accounting practices;
(m) made any payment or loan or advanced any amount to or in respect of, or
sold, transferred or leased any properties or assets (whether real, personal or
mixed, tangible or intangible) to, or entered into any agreement, arrangement or
transaction with, any Related Party (as defined herein), except for compensation
to the officers and employees of the Company or any Subsidiary at rates not
exceeding the rates of compensation disclosed on Schedule 4.15 hereto;
(n) made any disposition of or failed to keep in effect any rights in, to
or for the use of any patent, trademark, service mark, trade name or copyright,
or made any disclosure to any person not an employee or other disposal of any
trade secret, process or know-how other than disclosures to PrimeSource and its
representatives and lenders so long as such disclosures relate solely to the
Acute Care Subsidiaries and are subject to a confidentiality agreement;
(o) entered into any transaction or agreement or had knowledge of any event
outside the ordinary course of the Company's or any Subsidiary's business or
materially inconsistent with past practice;
(p) amended its Certificate of Incorporation or Bylaws;
(q) experienced any strike, walkout or labor trouble (excluding isolated
instances involving individual employees);
(r) experienced any adverse change or, to the knowledge of the Company, any
threat of any adverse change in its relations with, or any loss or threat of
loss of, any of its third party payors (including, but not limited to, Title
XVIII ("Medicare") of the Social Security Act and Title XIV ("Medicaid") of the
Social Security Act), suppliers, clients, customers or employees;
(s) created, incurred, assumed or guaranteed any obligations or liabilities
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), except in the ordinary course of business;
(t) made any election for Tax (as defined in Section 4.20(e)) purposes or
for purposes of a Tax return (or had any such election made on its behalf), or
entered into any agreement, arrangement or settlement with respect to Taxes, or
filed an amended Tax return;
(u) changed or modified in any manner the Company's or its Subsidiaries'
credit, collection and payment policies, procedures and practices with respect
to accounts receivable and accounts payable, respectively, as in effect on
December 31, 1998, including without limitation, any acceleration of collections
21
of receivables, failure to make or delay in making collections of receivables
(whether or not past due), acceleration of payment of payables or failure to pay
or delay in payment of payables; or
(v) sold, transferred, assigned or issued any Common Stock or rights to
purchase Common Stock.
Section 4.10. Real Properties.
(a) Neither the Company nor any Subsidiary owns any real property. Schedule
4.10 contains a true, correct and complete list of all real properties leased,
subleased or otherwise occupied by the Company or any Subsidiary (collectively,
the "Real Properties") separately indicating the nature of the Company's or the
Subsidiary's interest therein. Except as set forth in Schedule 4.10, no other
person has any oral or written right, agreement or option to acquire, lease,
sublease or otherwise occupy all or any portion of such Real Properties. Neither
the Company nor any Subsidiary has received any written or oral notice for
assessment for public improvements against any of the Real Properties which
remains unpaid and, to the knowledge of the Company, no such assessment has been
proposed. There is no pending condemnation, expropriation, eminent domain or
similar proceeding affecting all or portion of any of the Real Properties and,
to the knowledge of the Company, no such proceeding is contemplated.
(b) Accurate and current copies of all real property leases, subleases,
licenses or other occupancy agreements (and all amendments thereto) listed in
Schedule 4.10 have previously been delivered to MEDIQ/PRN (collectively, the
"Leases," and the real property leased thereunder, collectively, the "Leased
Real Property"). Neither the Company nor any Subsidiary has assigned its rights
under any Leases (except as security for the Antares Indebtedness to be paid off
at the Closing). The Leases are in full force and effect and constitute binding
obligations of the Company or a Subsidiary and, to the knowledge of the Company,
the other parties thereto and (i) there are no defaults thereunder by the
Company or, to the knowledge of the Company, by any other party thereto, and
(ii) no event has occurred which with notice, lapse of time, or both would
constitute a default by the Company or, to the knowledge of the Company, by any
other party thereto.
(c) Neither the Company nor any Subsidiary has subjected the Leased Real
Property to or caused the Leased Real Property to be subjected to any Lien,
exception, item, encumbrance, easement, restriction or other matter either of
record or not of record, but excluding Permitted Liens and encumbrances created
by the terms of the applicable Lease. To the knowledge of the Company, no
default or breach exists under any of the covenants, conditions, restrictions,
rights-of-way or easements, if any, affecting all or any portion of the Real
Properties.
(d) All utilities, including without limitation, water, sewer, gas,
electric, telephone, and other public utilities and all storm water drainage
required by Law or necessary for the operation of the Real Properties (i) to the
knowledge of the Company, either enter the Real Properties through open public
22
streets adjoining the Real Properties or, if they pass through adjoining private
land, do so in accordance with valid public or private easements or rights of
way which will inure to the benefit of the Surviving Corporation, (ii) to the
knowledge of the Company, are installed, connected and operating, in good
condition, and in compliance with all applicable Laws, with all installation and
connection charges paid in full, including, without limitation, connection and
the permanent right to discharge sanitary waste and all other non-hazardous
liquid wastes generated at the Real Property into the collector system of the
appropriate sewer authority and (iii) are adequate (in both quality and
quantity) to service the Real Properties for their respective use in the
business as presently conducted thereon.
(e) To the knowledge of the Company, all accounts for work and services
performed or materials placed or furnished upon or in respect of the
construction and completion of any of the buildings, improvements or other
structures constructed on the Real Properties have been fully paid and no one is
entitled to claim a Lien (other than a Permitted Lien) under any Law by or on
behalf of the Company or any Subsidiary.
(f) To the knowledge of the Company, there are no material defects in,
mechanical failure of or damage to the improvements located on the Real
Properties (the "Improvements"), including the roof, structure, soil, elevators,
walls, heating, ventilation, air conditioning, plumbing, electrical, drainage,
fire alarm, communications, sprinkler, security and exhaust systems and their
component parts, or other improvements on or forming a part of the Real
Properties, all of which have been constructed in a good and workmanlike manner.
None of the Company, any Subsidiary or any Principal Stockholder has received
any notification of any outstanding or incomplete work orders in respect of any
of the Improvements or of any current non-compliance with applicable Laws and
regulations or building and zoning bylaws and regulations.
(g) All certificates of occupancy, if any, required for the occupancy and
use of the Real Property for its intended purpose have been obtained and are in
full force and effect and no other licenses, permits, authorizations, consents,
and approvals by any Governmental Entity are required for the use and occupancy
thereof, and no certificates of the local board of fire underwriters (or other
body exercising similar functions) have been issued or are required for any
Improvements.
(h) The use and operation of the Real Property conform to all applicable
building, zoning, safety, environmental and other Laws, licenses and
certificates and all restrictions and conditions affecting title. None of the
Company, any Subsidiary or any Principal Stockholder has received any written or
oral notice from any local, state or federal governmental agency that (i) the
continued maintenance, operation or use of any and all Improvements (for their
current purpose), violates any zoning, building, environmental or other Law and
the Company has no knowledge of any such violation or (ii) there are existing
violations of any Laws affecting all or any portion of the Real Property,
including without limitation violations of the building, safety, health, fire,
23
or zoning ordinances, codes and regulations of the municipality or county within
which the Improvements are located, and the Company has no knowledge of any such
violations.
Section 4.11. Accounts Receivable. All of the accounts and notes receivable
(including any amounts due from affiliates or any Related Party) of the Acquired
Companies related to the Acquired Businesses represent amounts receivable for
merchandise actually delivered or services actually provided (or, in the case of
non-trade accounts or notes, represent amounts receivable in respect of other
bona-fide business transactions), have arisen in the ordinary course of
business, are not subject to any counterclaims or offsets and have been billed
and are generally due within 30 days after such billing. All such receivables
have been validly billed and represent revenue that has been recognized by an
Acquired Company. All such receivables fully reflect all allowances for
reimbursement limitations and coinsurance, subject to the reserves for doubtful
accounts reflected on the Interim Financials. Management of the Company and the
Subsidiaries has either specifically reserved for and/or written off accounts
deemed uncollectible. Schedule 4.11 sets forth for each Acquired Company (i) the
total amount of accounts receivable related to the Acquired Businesses
outstanding as of the last day of the month immediately preceding the present
month and (ii) the agings of such receivables based on the following schedule:
0-30 days, 31-60 days, 61-90 days and over 90 days, from the due date thereof.
No account debtor has asserted any such set-off, deduction or defense, and, to
the knowledge of the Company, no account debtor has any valid set-off, deduction
or defense with respect thereto.
Section 4.12. Contracts and Commitments.
(a) Schedule 4.12 sets forth an accurate, correct and complete list of the
material Contracts currently in effect related to the Acquired Businesses to
which the Company or any Subsidiary is a party, by which such entity is bound or
pursuant to which such entity is an obligor or a beneficiary, written or
unwritten, including but not limited to:
(i) each Contract relating to the capital stock or other securities of
the Company or any Subsidiary;
(ii) each Contract for capital expenditures by any Acquired Company
which involves amounts in excess of $25,000 in any fiscal year (other than
those that have been fully performed);
(iii) each Contract evidencing any indebtedness or obligation of the
Company or any Subsidiary for borrowed money, for the extension of Credit
or the granting of Liens, for the deferred purchase price of assets
(excluding ordinary course trade payables) or guaranteeing any
indebtedness, obligation or liability;
(iv) each Contract wherein any Acquired Company is bound by a
non-competition provision;
24
(v) each joint venture, partnership, teaming arrangement, cooperative
arrangement or any other Contract involving a sharing of profits;
(vi) each Contract with any Governmental Entity other than for
services or sale of property in the ordinary course of business;
(vii) each power of attorney, proxy or similar instrument granted by
or to any Acquired Company;
(viii) each agreement, arrangement or understanding with any Related
Party;
(ix) each Contract with respect to real property (other than those
disclosed on Schedule 4.10);
(x) each agreement, arrangement or understanding with respect to
intellectual property rights (which is not disclosed on Schedule 4.13);
(xi) each union or other collective bargaining agreement;
(xii) each sales agency, manufacturers representative and
distributorship agreement and other distribution or commission arrangement;
(xiii) each agreement, order or commitment for the purchase of
equipment, services, raw materials, supplies or finished products from any
one supplier for an amount in excess of $50,000 (other than those that have
been fully performed);
(xiv) each outstanding agreement, order or commitment for the rental,
lease or sale of equipment, products or services by an Acquired Company for
more than $25,000 to any single purchaser or lessee;
(xv) each agreement requiring the consent of any party thereto to the
consummation of the transactions contemplated hereby;
(xvi) each other Contract related to the Acquired Businesses or
binding on any Acquired Company which involves payments in excess of
$50,000, or which relates to material rights, assets or liabilities, and is
not by its express terms cancelable upon less than thirty (30) days'
notice, or which was entered into other than in the ordinary course of
business; and
(xvii) each contract or agreement relating to the response to
environmental conditions on or off the Real Property;
(b) Current, correct and complete copies of each such Contract described in
this Section 4.12 or, in the case of unwritten Contracts, descriptions thereof,
have been delivered by the Company to MEDIQ/PRN.
25
(c) Each Contract required to be listed or referred to on Schedule 4.12 or
listed or referred to on any other Schedule to this Agreement to which the
Company or any Subsidiary is a party, by which such entity is bound or pursuant
to which such entity is an obligor or a beneficiary is in full force and effect.
Such entity has complied with all commitments and obligations on its part to be
performed or observed under each such Contract to which it is a party. To the
knowledge of the Company, each party to each such Contract other than the
Company or a Subsidiary has complied with all commitments and obligations on its
part to be performed or observed thereunder. The Company has not received any
notice of a default under any such Contract and no event or condition has
occurred or currently exists which constitutes a default or, after notice or
lapse of time or both, would constitute a default under any such Contract.
Section 4.13. Intellectual Property Rights.
(a) Schedule 4.13 contains a complete and accurate list of all patents and
patent applications, trademarks, service marks, trade names, and registrations
and applications for registration of industrial designs, copyrights, mask works,
trademarks, service marks, trade names, trade dress and domain names used or
held for use by the Company or any Subsidiary in the conduct of the Acquired
Businesses, specifying as to each such item, as applicable: (i) the owner of the
item, (ii) the jurisdictions in which the item is issued or registered or in
which any application for issuance or registration has been filed, (iii) the
respective issuance, registration, or application number of the item and (iv)
the date of application and issuance or registration of the item.
(b) Schedule 4.13 also contains a complete and accurate list of all
material licenses, sublicenses, consents and other agreements (whether written
or otherwise) (i) pertaining to any patents, industrial design rights,
trademarks, service marks, trade names, trade dress, domain names, copyrights,
mask works, trade secrets, computer software programs (other than standard,
commercially available programs) or other intellectual property used by the
Company or any Subsidiary in the conduct of the Acquired Businesses and (ii) by
which the Company or any Subsidiary licenses or otherwise authorizes a third
party to use such intellectual property. None of the Company or any Subsidiary
or, to the knowledge of the Company, any other party is in breach of or default
under any such license or other agreement and each such license or other
agreement is now and immediately following the Closing shall be valid and in
full force and effect.
(c) Except as explicitly indicated in Schedule 4.13, the Company and the
Subsidiaries own or are licensed or otherwise have the exclusive right to use,
and have the right to bring actions for the infringement or other violation of,
all patents, industrial design rights, trademarks, service marks, trade names,
trade dress, domain names, copyrights, mask works, inventions, technology,
know-how, designs, formulae, trade secrets, confidential and proprietary
information, computer software programs (other than standard, commercially
available programs), and other intellectual property necessary for the operation
of the Acquired Businesses as currently conducted.
26
(d) The business operations of the Acquired Companies do not infringe,
dilute or otherwise violate the patents, industrial design rights, trademarks,
service marks, domain names, trade names, trade dress, copyrights, mask works,
trade secrets or other intellectual property rights of any third party, and no
claim has been made, notice has been given, or dispute has arisen to that
effect. No Acquired Company has any pending claim that a third party has
violated or infringed any of the Acquired Companies' patents, industrial design
rights, trademarks, service marks, trade names, trade dress, copyrights, trade
secrets or other proprietary rights. No Acquired Company has given any
indemnification to any third party against infringement of such intellectual
property rights.
(e) Except as explicitly indicated in Schedule 4.13, all of the patents,
industrial design registrations, trademark and service mark registrations,
copyright registrations, mask work registrations and domain name registrations
indicated in Schedule 4.13 are valid and in full force, are held of record in
the name of an Acquired Company, free and clear of all Liens (other than
Permitted Liens), and are not the subject of any cancellation or reexamination
proceeding or any other proceeding challenging their extent or validity. Except
as explicitly indicated in Schedule 4.13, an Acquired Company is the applicant
of record in all patent applications, and applications for trademark, service
mark, trade dress, industrial design, copyright and mask work registration
indicated in Schedule 4.13 and no opposition, extension of time to oppose,
interference, rejection, or refusal to register has been received in connection
with any such application.
(f) To the knowledge of the Company, none of the material trade secrets,
know-how or other confidential or proprietary information of any Acquired
Company has been disclosed to any person unless such disclosure was necessary
and was made pursuant to an appropriate confidentiality agreement.
Section 4.14. Litigation. Except as set forth on Schedule 4.14, there are
no actions, suits, proceedings, claims, orders or investigations pending or, to
the knowledge of the Company, threatened against any Acquired Company or any
Principal Stockholder (if relating to any Acquired Company) at law or in equity
and there exists no set of circumstances that is reasonably likely to give rise
to any such suit, proceeding, claim, order or investigation. Except as set forth
on Schedule 4.14, there are presently no outstanding notices, judgments,
decrees, consent agreements or orders of any court or any Governmental Entity
against or affecting any Acquired Company or any of their assets or businesses
or affecting the capital stock of the Company or any Subsidiary or any Principal
Stockholder's rights thereto.
Section 4.15. Employees.
(a) Each Acquired Company has complied with all Laws relating to the
employment of labor, including, without limitation, provisions thereof relating
to wages, hours, equal opportunity, collective bargaining, the payment of social
security and other employment-related taxes, and occupational safety and health.
27
(b) Schedule 4.15 lists each individual who currently performs services
valued in excess of $10,000 per annum to or for the Company or any ERISA
Affiliate as an independent contractor. Each individual who is currently
performing or has performed services to or for either the Company or any ERISA
Affiliate as an independent contractor could not reasonably be found by the
Internal Revenue Service or any governmental agency to be an employee of either
the Company or such ERISA Affiliate, as applicable, while such individual was
providing services as an independent contractor.
(c) No Acquired Company is a party to or bound by any collective bargaining
or other labor agreement. No Acquired Company has any labor relations problem
pending (other than isolated grievances or disputes involving individual
employees). To the knowledge of the Company, there are no union organizing
efforts involving any employees of the Company or any Subsidiary.
(d) Except as set forth on Schedule 4.15, there are no workers'
compensation claims pending against the Company or any Subsidiary and, to the
knowledge of the Company, there exists no set of circumstances that is
reasonably likely to give rise to such a claim.
(e) To the knowledge of the Company, no employee of any Acquired Company is
subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the Acquired Businesses.
(f) Schedule 4.15 contains a complete and accurate list of the following
information for each employee or director of each Acquired Company, including
each employee on leave of absence or layoff status: name, job title, current
compensation paid or payable and any change in compensation since January 1,
1999, vacation accrued and service credited for purposes of vesting and
eligibility to participate under any of the Plans. Schedule 4.15 contains a
complete and accurate list of each person formerly employed by or related to a
former employee of any Acquired Company receiving "COBRA" benefits as of the
Effective Time.
Section 4.16. Employee Benefit Plans.
(a) The only "employee pension benefit plans," (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
including, without limitation, any "multiemployer plan" as defined in Section
3(37) of ERISA), employee welfare benefit plans (as defined in Section 3(1) of
ERISA), and all other pension, profit sharing, retirement, supplemental
retirement, stock, stock option, basic and supplemental accidental death and
dismemberment, basic and supplemental life and health insurance, post-retirement
medical or life, welfare, dental, vision, savings, bonus, deferred compensation,
incentive compensation, business travel and accident, holiday, vacation,
severance pay, salary continuation, sick pay, sick leave, short and long term
disability, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit and other employee benefit plans, arrangements,
contracts, policies, or practices (whether written or unwritten, qualified or
unqualified, funded or unfunded and including any "employee pension benefit
28
plan" that has been frozen or terminated), maintained, contributed to, or
required to be contributed to by the Company or any other employer that is, or
at any relevant time was, together with the Company, treated as a "single
employer" under section 414 of the Internal Revenue Code of 1986, as amended
(the "Code") (an "ERISA Affiliate") with respect to any employees of the Company
or any ERISA Affiliate, or pursuant to which the Company or any ERISA Affiliate
may have any liability with respect to any employees of the Company or any ERISA
Affiliate, any former employees of the Company or any ERISA Affiliate or any
current or former director or officer of the Company are listed on Schedule
4.16(a) (each, a "Plan").
(b) Set forth on Schedule 4.16(b) is a true and complete list of: (i) each
employment or consulting agreement, arrangement or other understanding that is
currently in effect to which the Company or any ERISA Affiliate is a party, by
which such entity is bound or pursuant to which such entity is an obligator or a
beneficiary, (ii) each agreement, arrangement or other understanding that could
result in any severance payment or benefit payable by the Company or any ERISA
Affiliate, whether as a result of the Company's execution and performance of the
transactions contemplated by this Agreement or otherwise, to any employee,
former employee, director, or officer of the Company or any ERISA Affiliate and
(iii) each agreement, arrangement or other understanding that could result in a
"parachute payment" as defined in section 280G of the Code (each, an "Executive
Compensation Plan"), whether as a result of the Company's execution and
performance of the transactions contemplated by this Agreement or otherwise.
(c) As applicable, with respect to each of the Plans, the Company has
delivered to MEDIQ/PRN true and complete copies of (i) all Plan documents
(including all amendments and modifications thereof) and, in the case of an
unwritten Plan, a written description thereof, and in either case all related
agreements including, without limitation, trust agreements and amendments
thereto, insurance contracts, and investment management agreements, (ii) all the
annual reports (Form 5500 and all schedules thereto), if any, filed with the
Internal Revenue Service, actuarial reports, financial reports or trustee
reports, (iii) the current summary plan descriptions and all modifications
thereto and (iv) copies of any private letter rulings, requests and applications
for determination and determination letters issued with respect to the Plans
within the past five years. As applicable, with respect to each of the Executive
Compensation Plans, the Company has delivered to MEDIQ/PRN true and complete
copies of all Executive Compensation Plan documents (including all amendments
and modifications thereof) and, in the case of an unwritten Executive
Compensation Plan, a written description thereof, and in either case related
agreements including, without limitation, trust agreements and amendments
thereto, insurance contracts, and investment management agreements.
(d) The Company and each ERISA Affiliate are in compliance in all respects
with all Laws, including ERISA and the Code, applicable to the Plans. Each Plan
has been maintained, operated and administered in compliance in all respects
with its terms and any related documents or agreements and the applicable
provisions of ERISA and the Code.
29
(e) The Plans which are "employee pension benefit plans" within the meaning
of Section 3(2) of ERISA and which are intended to meet the qualification
requirements of Section 401(a) of the Code (each a "Pension Plan") now meet, and
at all times since their inception have met, the requirements for such
qualification and the related trusts are now, and at all times since their
inception have been, exempt from taxation under Section 501(a) of the Code.
(f) Except as disclosed in Schedule 4.16, all Pension Plans have received
determination letters from the IRS to the effect that such Pension Plans are
qualified and the related trust are exempt from federal income Taxes and no
determination letter with respect to any Pension Plan has been revoked nor, to
the knowledge of the Company, is there any reason for such revocation, nor has
any Pension Plan been amended since the date of its most recent determination
letter in any respect which would adversely affect its qualification. Neither
the Company nor any ERISA Affiliate has ever contributed to, or been required to
contribute to any "multiemployer plan" (within the meaning of Section 3(37) of
ERISA) and neither the Company nor any ERISA Affiliate has any liability
(contingent or otherwise) relating to the withdrawal or partial withdrawal from
a multiemployer plan.
(g) No Plan is (or at any time has been) subject to Part 3, Subtitle B of
Title I of ERISA or Title IV of ERISA.
(h) There are no currently pending audits or investigations by any
Governmental Entity involving the Plans, no currently pending or, to the
knowledge of the Company, threatened claims (except for individual claims for
benefits payable in the normal operation of the Plans), suits or proceedings
involving any Plan, any fiduciary thereof or service provider thereto and, to
the knowledge of the Company, there is no set of circumstances which exists that
will give rise to any such claim, suit or proceeding.
(i) None of the Company, any ERISA Affiliate, or any employee of the
Company or any ERISA Affiliate has engaged in or, in connection with the
transactions contemplated by this Agreement, will engage in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code and no such person or entity has breached any duty imposed by Title I of
ERISA with respect to any Plan. To the knowledge of the Company, no other person
or entity has engaged or will engage in such a prohibited transaction or breach
with respect to any Plan. None of the assets of any Plan is invested in any
property constituting "employer real property" or an "employer security" within
the meaning of Section 407 of ERISA.
(j) Any insurance premium under any insurance policy related to a Plan for
any period up to and including the Closing shall have been paid or accrued and
booked on or before the Closing, and, with respect to any such insurance policy
or premium payment obligation, none of the Company, any ERISA Affiliate or the
MEDIQ Parties shall be subject to a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability.
(k) Except as disclosed on Schedule 4.16, no Plan provides benefits,
including, without limitation, death or medical benefits, beyond termination of
30
service or retirement, other than (i) coverage mandated by law or (ii) death or
retirement benefits under a Plan qualified under Section 401(a) of the Code.
(l) With respect to each Plan that is a "group health plan" within the
meaning of Section 607 of ERISA and that is subject to Section 4980B of the
Code, the Company and each ERISA Affiliate comply in all respects with the
continuation coverage requirements (including, without limitation, any
requirement to provide any notice to any individual) of those provisions and
Part 6 of Title I of ERISA.
Section 4.17. Insurance.
(a) Attached hereto as Schedule 4.17 is a complete and correct list of all
policies of insurance related to the Acquired Businesses of which the Company or
a Subsidiary is the owner, insured or beneficiary, or covering any of their
property, indicating for each policy the carrier, risks insured, the amounts of
coverage, deductible, premium rate, cash value, if any, expiration date and any
pending claims thereunder. All such policies are outstanding and in full force
and effect. In the opinion of the Company's management, the coverages provided
by such policies are reasonable, in both scope and amount, in light of the risks
attendant to the businesses in which the Company and the Subsidiaries are, or
have been, engaged and are comparable to coverages customarily maintained by
companies in similar lines of business and such insurance is sufficient in the
aggregate to cover all reasonably foreseeable damage to and liabilities or
contingencies relating to the conduct by the Company and the Subsidiaries of
their respective businesses and affairs. There is no default with respect to any
provision contained in any such policy, nor has there been any failure to give
any notice or present any claim under any such policy in a timely fashion or in
the manner or detail required by the policy. Except as set forth on Schedule
4.17, there are no outstanding unpaid premiums or claims under such policies.
Schedule 4.17 contains an accurate and complete description of each provision
contained in such policies which provides for retrospective or retroactive
premium adjustments. No notice of cancellation or non-renewal with respect to,
or disallowance of any claim under, any such policy has been received by the
Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary has been refused any insurance,
nor has any of their coverage been limited by any insurance carrier to which any
of them has applied for insurance or with which any of them has carried
insurance during the last five years. All products liability and general
liability policies maintained by or for the benefit of the Company or any
Subsidiary have been "occurrence" policies and not "claims made" policies.
Section 4.18. Compliance. Each Acquired Company has for the past five years
complied and is currently in compliance with all applicable Laws, including
without limitation those relating to third party reimbursement, Medicare,
Medicaid, and other Federal Health Care Programs (as defined in Section 1128B of
the Social Security Act), fraudulent or abusive practices, health care industry
regulation, occupational safety and health, environmental matters, equal
employment practices and fair trade practices except where the failure to be in
compliance would not have a Material Adverse Effect. Schedule 4.18 sets forth a
list of all material permits, certificates, licenses, orders, registrations,
31
franchises, authorizations and other approvals from all Governmental Entities
held by the Company or any Subsidiary. All such permits, certificates, licenses,
orders, registrations, franchises, authorizations and other approvals are in
full force and effect and each of the Company and each Subsidiary is in
compliance with the terms and conditions thereof except where the failure to be
in compliance would not have a Material Adverse Effect. Except as disclosed in
Schedule 4.18 and except where the failure to be in compliance would not have a
Material Adverse Effect, each of the Company and each Subsidiary holds and is in
compliance with all permits, certificates, licenses, approvals, registrations
and authorizations required under all Laws in connection with its respective
business, and all of such permits, certificates, licenses, approvals,
registrations and authorizations are in full force and effect. No notice,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any Governmental Entity or other person with respect to any
alleged violation by the Company or any Subsidiary of any Law or with respect to
any alleged failure by the Company or any Subsidiary to have any permit,
certificate, license, approval, registration or authorization required in
connection with its businesses. The Company and each Subsidiary have correctly
maintained all records (whether financial, medical or otherwise) required by
state and federal agencies including, without limitation, the Environmental
Protection Agency, and pursuant to the requirements of Medicare, Medicaid and
other Federal Health Care Programs.
Section 4.19. Environmental Matters.
(a) As used in this Agreement, the following terms shall have the following
meanings:
(i) "Environmental Laws" means all Laws and the common law relating to
pollution, contamination or protection of human health or the environment
(including, without limitation, all Laws relating to Hazardous Materials).
(ii) "Hazardous Materials" means any toxic or hazardous pollutant,
contaminant, chemical, waste, material or substance, as currently defined
in or governed by any Environmental Law, including, without limitation, any
chemical, waste, material, substance, pollutant or contaminant in
quantities that might cause any injury to human health or safety or to the
environment or might subject the Company or any Subsidiary to any
environmental costs or liability under any Environmental Law.
(iii) "Environmental Claims" mean any notice, request for information,
claim, complaint, order, assessment, demand, action or other proceeding
with respect to the Company or any Subsidiary (x) relating to the presence,
release or threat of release of any Hazardous Materials on or from any Real
Property or real property previously owned, leased, subleased or otherwise
occupied by the Company or any Subsidiary ("Former Real Property") or
otherwise caused or alleged to have been caused by the operations or
business of the Company or any Subsidiary, (y) arising under any
Environmental Law, including without limitation, civil, criminal and/or
administrative proceedings; and (z) based on negligence, trespass, strict
liability, nuisance, toxic tort, or any other cause of action or theory
under any Environmental Law.
32
(b) Except as set forth on Schedule 4.19, (i) no Environmental Claims have
been asserted or assessed against the Company or any Subsidiary, (ii) to the
knowledge of the Company, no Environmental Claims are threatened against the
Company or any Subsidiary, (iii) neither the Company nor any Subsidiary has
generated, possessed, manufactured, processed, distributed, used, treated,
stored, disposed, transported, recycled or handled any Hazardous Materials in
violation of any Environmental Law or which would require a permit, reporting
investigation or other response action under any Environmental Law and no
Hazardous Materials are present in or have been released at, in, on, under or
from any Real Property in violation of any Environmental Law or which would
require a permit, reporting investigation or other response action under any
Environmental Law or, to the Company's knowledge at, in, on under or from any
Former Real Property in violation of any Environmental Law or which would
require a permit, reporting investigation or other response action under any
Environmental Law or at any other property as a result of the operations of the
Company or any Subsidiary or former subsidiary and (iv) to the knowledge of the
Company, neither the Company nor any Subsidiary has by contract or operation of
law assumed or retained liability (including the obligation to indemnify any
entity) in connection with any actual or potential Environmental Claims or any
response to any Release (as defined in the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended), and (vi) to the knowledge
of the Company, no set of circumstances exists that is reasonably likely to give
rise to any of the foregoing or otherwise lead to any future environmental
responsibility, liability, or expense of or claims against the Company or any
Subsidiary.
Section 4.20. Tax Liabilities.
(a) Except as set forth on Schedule 4.20, each of the Company and its
Subsidiaries has timely filed all federal, state, local and foreign Tax (as
defined herein) returns (including information returns) required to be filed by
it and no extension of time in which to file any such return is in effect or has
been requested as of the date of this Agreement. All such Tax returns are true,
complete and accurate. Each of the Company and its Subsidiaries has paid on a
timely basis all Taxes shown to be due on its Tax returns or otherwise due and
payable, and has adequately provided for on its books of account and related
records liability for all other current Taxes not yet due and payable. Each of
the Company and its Subsidiaries has withheld all Taxes required to have been
withheld from payments to employees and other persons and has properly deposited
all such withheld Taxes with the appropriate Taxing Authority. Except as
disclosed on Schedule 4.20, the Tax returns of the Company and each Subsidiary
have never been examined or audited (except for Tax returns for Taxable periods
that are closed either by virtue of limitations or the issuance of a closing
statement by the appropriate Taxing Authority), and neither the Company nor any
of the Subsidiaries is aware of any threatened or proposed audits of such
returns. None of the Company or any of the Subsidiaries has received any notice
of any pending proposed adjustment, deficiency or underpayment with respect to
Taxes, and there are no claims that have been asserted or threatened relating to
Taxes. There are no Liens upon, or inchoate liens which can be asserted against,
the Company, any Subsidiary or any of their respective assets that arose in
connection with any failure to pay any Tax. None of the Company or any of the
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency. Each of
33
the Company and its Subsidiaries has delivered or made available to the MEDIQ
Parties copies of all foreign, federal and state income Tax returns filed for
the last two taxable years (including all amended income Tax returns). The
accruals for Taxes contained in the Balance Sheet are adequate to cover all
liabilities of the Company and the Subsidiaries for Taxes for all periods ending
on or before the Balance Sheet Date and nothing has occurred subsequent to the
date to make any of such accruals inadequate.
(b) For the taxable year ending December 31, 1998, each of the Company and
its Subsidiaries will be required to file Tax returns in the states and
localities listed on Schedule 4.20. No Taxing Authority in a jurisdiction in
which the Company or any Subsidiary does not file Tax returns has asserted that
the Company or any of its Subsidiaries may be subject to Tax in that
jurisdiction.
(c) Except as set forth in Schedule 4.20, (i) neither the Company nor any
Subsidiary has ever been a member of a consolidated, combined or unitary group
of corporations (other than a group the common parent of which was the Company
or another Subsidiary) as a result of which the Company or Subsidiary could be
liable all or in part for the Taxes of another member pursuant to Treasury
Regulation ss.1.1502-6 or analogous provisions of state, local or foreign law,
(ii) neither the Company nor any Subsidiary has ever agreed to or been required
to make any adjustment under Section 481(a) of the Code (or analogous provisions
of state, local or foreign law) by reason of a change in accounting method and
has not otherwise deferred for Tax purposes the recognition of income or gain
that was economically attributable to periods before the Closing Date (under
installment sale rules, completed contract accounting or other method) to a
period following the Closing Date, (iii) neither the Company nor any Subsidiary
is a party to any Tax sharing or similar agreement or arrangement with any other
person other than this Agreement and as disclosed on Schedule 4.20; (iv) neither
the Company nor any Subsidiary has ever filed a consent under Section 341(f) of
the Code and (v) neither the Company nor any Subsidiary has ever applied for a
ruling from the Internal Revenue Service or other Taxing authority or been the
subject of a closing agreement with a Taxing authority.
(d) Neither the Company nor any Subsidiary owns an interest in an entity
that is characterized as a partnership or as an "eligible entity" within the
meaning of Treasury Regulationss.301.7701-3. Neither the Company nor any
Subsidiary is a party to any agreement or arrangement that could result in a
payment that will not be deductible due to Section 280G of the Code. Neither of
the Company nor any of its Subsidiaries has been a U.S. real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
(e) At December 31, 1998, the federal income Tax basis of the Company in
the capital stock of each of those Acute Care Subsidiaries to be sold to
PrimeSource in the PrimeSource Transaction was not less than the amount
reflected on Schedule 4.20(e). The MEDIQ Parties acknowledge that neither the
representations and warranties of the Company made in this Section 4.20, nor any
provision for Taxes reflected on any balance sheet included in the Financial
34
Statements, gives effect to, or is required to give effect to, any federal or
state income Tax consequences of either the Triad Asset Transfer or the
PrimeSource Transaction.
(f) For purposes of this Agreement, "Tax" and "Taxes" mean all federal,
state, local and foreign taxes, and any similar levies, impositions, deductions,
charges and withholdings of any kind whatsoever, including without limitation,
income or franchise taxes or other taxes imposed on or with respect to net
income or capital gain, gross receipts, profits, sales, use occupation, value
added, ad valorem, transfer, withholding, payroll, employment, excise or
property taxes, and shall include any interest, penalties or other additions
thereto; and "Taxing Authority" means the Internal Revenue Service or other
Governmental Entity responsible for the administration or collection of Taxes.
Section 4.21. Books and Records. The books of account, minute books, stock
record books, and other records of each Acquired Company, all of which have been
made available to MEDIQ/PRN, are true and complete in all material respects and
have been maintained in accordance with sound business practices and contain
accurate and complete records of all meetings of, and corporate action taken by,
the respective stockholders, the Boards of Directors, and committees of the
Board of Directors of each Acquired Company and no formal meeting of any such
stockholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of an Acquired
Company.
Section 4.22. Inventory and Equipment.
(a) All of the inventory of the Company and the Subsidiaries related to the
Acquired Businesses, including that reflected in the Balance Sheet, and all such
inventories acquired since the Balance Sheet Date, are valued at the lower of
cost or market, the cost thereof being determined on a first-in, first-out
basis, and consists of items of a quality and quantity usable or saleable in the
ordinary course of the Company's and the Subsidiaries' businesses within a
reasonable period of time and at normal profit margins for the Company over the
last twelve months. None of the inventory of the Company and the Subsidiaries
related to the Acquired Businesses is obsolete or slow moving, subject to the
reserves in respect thereof reflected in the Financial Statements. Management of
the Company and the Subsidiaries has either specifically reserved for and/or
written off inventory related to the Acquired Businesses deemed as excess or
obsolete. There has been no material reduction in the level of inventory related
to the Acquired Businesses from the level set forth in the Balance Sheet.
(b) Except as set forth on Schedule 4.22(b), all of the Rental Equipment of
the Company and the Subsidiaries related to the Acquired Businesses including
equipment reflected in the Balance Sheet is valued at its acquisition cost less
accumulated depreciation. The Rental Equipment is in good operating condition,
ordinary wear and tear excepted, and leasable or rentable in the ordinary course
of the Company's business within a reasonable period of time. None of the Rental
Equipment of the Company and the Subsidiaries related to the Acquired Businesses
is obsolete or slow moving. Management of the Company and the Subsidiaries has
either specifically reserved for and/or written off Rental Equipment related to
35
the Acquired Businesses deemed as excess or obsolete. There has been no material
reduction in the level of Rental Equipment related to the Acquired Businesses
from the level set forth in the Balance Sheet. For purposes hereof, the term
"Rental Equipment" means equipment that is owned or leased by an Acquired
Company (or at any time before, and to the extent included in, the TRIAD Asset
Transfer, by any Subsidiary), and that is held for lease or rental in the normal
course of the Acquired Businesses. Notwithstanding the foregoing, in no event
shall the Company be deemed to be giving any representation or warranty under
this Section 4.22(b) with respect to Rental Equipment deemed to be not usable
and rentable under Section 2.5.
(c) Attached hereto as Schedule 4.22(a) is a summary of the Company's and
the Subsidiaries' inventory and Rental Equipment related to the Acquired
Businesses on hand as of the last day of the month for the month immediately
preceding the present month.
Section 4.23. Customers. Schedule 4.23 sets forth, for the last fiscal
year, a complete and accurate list of the ten (10) customers of the Acquired
Businesses that accounted for the most revenues, in dollar terms. Except as set
forth on Schedule 4.23, the Company has no knowledge that any customer of the
Acquired Businesses will terminate or otherwise alter its business relationship
with the Acquired Businesses as a result of the transactions contemplated
hereby.
Section 4.24. Bank Accounts. Schedule 4.24 sets forth the name of each bank
in which the Company or any Acquired Subsidiary has an account or safe deposit
box, the identifying numbers or symbols thereof and the names of all persons
authorized to draw thereon or to have access thereto.
Section 4.25. Relationships with Related Parties. Except as set forth on
Schedule 4.25, no Related Party (i) has had any interest in any property
(whether real, personal, or mixed and whether tangible or intangible) used in or
pertaining to the Acquired Businesses, (ii) has had business dealings or a
material financial interest in any transaction with an Acquired Company, (iii)
has any contractual or other claim, express or implied, of any kind whatsoever
against any Acquired Company or (iv) has borrowed money from or loaned money to
any Acquired Company which remains outstanding. "Related Party" means any
Stockholder, any officer or director of the Company or any Subsidiary, any
immediate relative of any Stockholder or officer or director of the Company or
any Subsidiary, or any business or entity in which any Stockholder, officer or
director of the Company or any Subsidiary, or immediate relative thereof has any
direct or material indirect interest.
Section 4.26. Assets.
(a) Except as set forth on Schedule 4.26, each of the Company and each
Subsidiary has good title to, or a valid leasehold interest in, all of such
entity's respective tangible property and assets that are used in or useful in
the Acquired Businesses (including those reflected on the Financial Statements,
except for current assets and immaterial amounts or items of fixed assets sold,
consumed or otherwise disposed of in the ordinary course of business since the
date of the Financial Statements), free and clear of all Liens, except (i) minor
36
imperfections of title, none of which, individually or in the aggregate,
materially detracts from the value of or impairs the use of the affected
properties and assets or impairs the operations of any Acquired Companies, (ii)
liens for current Taxes not yet due and payable, (iii) mechanics', landlords',
carriers', workers', materialmen's, warehousemen's and similar liens arising or
incurred in the ordinary course of business, (iv) liens securing the Antares
Indebtedness, and (v) liens disclosed on Schedule 4.26 (collectively, the
"Permitted Liens"). All of such tangible property and assets (i) is in good
operating condition and repair (reasonable wear and tear excepted), (ii) is
suitable for the purposes for which it is currently being used, (iii) is free of
defect in construction or design, and (iv) is usable for its intended use. The
assets of the Acquired Companies constitute all of the assets, properties and
rights which are necessary to the operation of the Acquired Businesses as
currently conducted.
(b) Each Acquired Company owns or licenses all computer hardware, software
and data processing systems or other electronic data transmission, storage or
computation programs used in connection with the operation of its respective
businesses (collectively, the "Computer Software") which are listed on Schedule
4.26. Except as provided for in Schedule 4.26, other than the Computer Software,
no computer hardware, software and data processing system or other electronic
data transmission is required for the Company or any Subsidiary to operate its
business as currently conducted or proposed to be conducted. Subject to
subparagraph (c) below, there are no material malfunctions or design failures
with respect to the Computer Software. Subject to subparagraph (c) below, the
billing information generated by the Computer Software is accurate in all
material respects, and the Computer Software is otherwise reasonably adequate
for the conduct of each Acquired Company's business as currently conducted.
(c) "Year 2000 Compliance" refers to the ability of each Acquired Company's
computer systems to accurately recognize, process, calculate, manage,
manipulate, store and exchange date and time data from, into and between the
20th and 21st centuries including, without limitation, the years 1999 and 2000
and leap year calculations, such that neither performance nor functionality will
be affected by dates prior to, during or after the year 2000. The Acquired
Companies have taken appropriate actions to achieve Year 2000 Compliance and the
annual cost of such reasonably anticipated actions and expenditures to achieve
Year 2000 Compliance is not expected to be materially in excess of the amounts
which the Company has been spending on computer hardware, software and services
during 1997, 1998 and 1999. The costs of attaining Year 2000 Compliance are not
expected to have a Material Adverse Effect.
Section 4.27. Brokerage. Except as provided to be paid pursuant to Section
2.2, no third party is or will be entitled to receive any brokerage commissions,
finder's fees, fees for financial advisory services or similar compensation from
any Acquired Company in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the
Company, any Subsidiary or any Stockholder.
37
Section 4.28. Disclosure. To the knowledge of the Company, no
representation or warranty by the Company in this Agreement or any agreement or
certificate statement executed by the Company in favor of any MEDIQ Party, in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading. There is no fact or condition known to the Company which
has not been disclosed to the MEDIQ Parties in the schedules to this Agreement
or otherwise in writing, that had or has, or which, in the opinion of the
management of the Company reasonably exercised is likely to have a Material
Adverse Effect.
Section 4.29. Board Recommendation. The Board of Directors of the Company,
through a unanimous written consent or at a meeting duly called and held, has by
unanimous vote of those directors present (who constituted 100% of the directors
then in office) (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together, are fair to and in
the best interests of the Stockholders, (ii) recommended that the Stockholders
approve this Agreement and the transactions contemplated hereby, including the
Merger; and (iii) approved the execution and delivery of this Agreement (and the
transactions contemplated by this Agreement) in accordance with the requirements
of the DGCL.
Section 4.30. Required Company Vote. The approval of the Stockholders,
being the affirmative vote of the holders of a majority of the shares of Common
Stock issued and outstanding, is the only vote of the holders of any class or
series of the Company's securities necessary under applicable law and the
Certificate of Incorporation and Bylaws of the Company to approve this Agreement
and the Merger and the other transactions contemplated hereby and such required
vote has been obtained.
Section 4.31. Certain Payments. None of the Company, the Subsidiaries or
the Principal Stockholders or their current or former shareholders, directors,
officers, agents, employees, sales persons or other persons or entities
associated with or acting on behalf of any Acquired Company or the Principal
Stockholders (if acting on behalf of or with respect to an Acquired Company) has
offered, paid, solicited or received any remuneration (directly or indirectly)
or engaged in any billing or other practices in violation of Medicare or
Medicaid or any applicable state or federal fraud or abuse laws or statutes
including, without limitation, the Medicare and State Health Care Programs
Anti-Fraud and Abuse Amendments of the Social Security Act, as amended by the
Health Insurance Portability and Accountability Act of 1996 (42 U.S.C.
ss.1320a-76(b)) (commonly known as the "Anti-Kickback Statute") and the
amendments to Section 1877 of the Social Security Act (42 U.S.C.ss.1395nn),
enacted as part of the Omnibus Budget Reconciliation Act of 1993 (commonly known
as "Stark II").
Section 4.32. Third-Party Payment Contracts. Each of the Company and each
Subsidiary is approved as a participating provider of services in and under the
third-party payment programs listed on Schedule 4.32. No action or investigation
is pending or, to the knowledge of the Company, threatened to suspend, limit,
terminate, or revoke the status of the Company or any Subsidiary as a provider
in any such program, and none of the Company, any Subsidiary or any Principal
38
Stockholder has been provided notice by any such third-party payor of its
intention to suspend, limit, terminate, revoke, or fail to renew any contractual
arrangement with the Company or Subsidiary as a participating provider of
services in whole or in part.
Section 4.33. Billing; Gratuitous Payments.
(a) Billing. Except as set forth in Schedule 4.33, all billing by, or on
behalf of, the Company or any Subsidiary to third party payors including, but
not limited to, Medicare, Medicaid and private insurance companies has been true
and correct in all material respects and in compliance in all material respects
with all applicable legal requirements and the policies of such third party
payors. Neither the Company nor any Subsidiary has received any notice from any
third party payor, including but not limited to, Medicare or Medicaid, that
indicates that the Company or any of its Subsidiaries could not continue to bill
in substantially the same manner and structure as it is billing on the date
hereof.
(b) Absence of Certain Business Practices. None of the Company, any
Subsidiary, any Principal Stockholder or any officer, employee or agent of the
Company, any Subsidiary or any Principal Stockholder or any other person acting
on their respective behalf has within the past five years given, directly or
indirectly, any remuneration, gift, keepsake, or similar benefit to any patient,
referral source, provider, customer, supplier or governmental employee which
could reasonably be expected to subject any Acquired Company or to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, were
any such litigation or proceeding to be commenced.
Section 4.34. Fraud and Abuse Matters. Except as set forth in Schedule
4.34, no Acquired Company is presently, or has, engaged in any activities which
are prohibited, or are cause for criminal or civil penalties and/or mandatory or
permissive exclusion from Medicare, Medicaid or other Federal Health Care
Program under Sections 1320a-7, 1320a-7a, 1320a-7b or 1395nn of Title 42 of the
United States Code, the Federal False Claims Act or the regulations promulgated
pursuant to such statutes, or similar state or local statutes or regulations, or
which are prohibited by applicable statutes, regulations, or ethical codes
governing professional conduct or standards of care or by any private
accrediting organization from which the Company has or has sought accreditation,
including, but not limited to, the following activities (as defined in the cited
statutory and regulatory provisions):
(a) knowingly and willfully making or causing to be made a false statement
or representation of a material fact in any application for any benefit or
payment;
(b) knowingly or willfully making or causing to be made any false statement
or representation of a material fact for use in determining rights to any
benefit or payment;
(c) presenting or causing to be presented a claim for reimbursement under
Medicare, Medicaid, or other Federal Health Care Program or that is (i) for an
item or service the claimant knows or should know was not provided as claimed,
(ii) for an item or service that is based on a billing code that the claimant
knows or should know will result in a greater payment to the claimant than the
39
billing code the claimant knows or should know is applicable to the item or
service actually provided, (iii) for an item or service the claimant knows or
should know is false or fraudulent or (iv) for an item or service the claimant
knows or should know is not medically necessary;
(d) any failure by a claimant to disclose knowledge of the occurrence of
any event affecting the initial or continued right to any benefit or payment on
its own behalf or on behalf of another, with the intent to fraudulently secure
such benefit or payment;
(e) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind, or offering to pay or receive such remuneration:
(i) in return for referring, or to induce the referral of, an individual to a
person for the furnishing or arranging for the furnishing of any item or service
for which payment may be made in whole or in part by Medicare, Medicaid, or
other Federal Health Care Program or (ii) in return for, or to induce,
purchasing, leasing or ordering or arranging for, or recommending, purchasing,
leasing or ordering any good, facility, service or item for which payment may be
made in whole or in part by Medicare, Medicaid or other Federal Health Care
Program; or
(f) referring any party to a person or entity in which the Company, any
Subsidiary or any Principal Stockholder has a financial interest that is
prohibited by applicable Law.
Section 4.35. Reimbursement Matters. Except as disclosed on Schedule 4.35,
(i) neither the Company nor any Subsidiary has and, to the knowledge of the
Company, no nursing home, hospital or other healthcare facility or healthcare
provider or other person with respect to which the Company or any Subsidiary
provides services has received any written notice of denial or recoupment from
Medicare or Medicaid programs, or any other third party reimbursement source
(inclusive of managed care organizations) with respect to products or services
provided by the Company or any Subsidiary, (ii) to the knowledge of the Company,
there is no basis for the assertion after the Closing of any such denial or
recoupment claim and (iii) none of the Company, any Stockholder or any Principal
Stockholder (but only if and to the extent acting on behalf of an Acquired
Company or with respect to the Acquired Businesses), nor to the Company's
knowledge, any nursing home, hospital or other healthcare facility or healthcare
provider or other person with respect to which any Acquired Company provides
services has received written notice from any Medicare or Medicaid program or
any other third party reimbursement source (inclusive of managed care
organizations) of any pending or threatened investigations or surveys
specifically with respect to, or arising out of, products or services provided
by the Company or any Subsidiary, and to the knowledge of the Company, no such
investigation or survey is pending, threatened or imminent. The Company and the
Subsidiaries have fully and accurately disclosed to the appropriate
intermediaries and carriers all material billing and business practices with
respect to Medicare and Medicaid reimbursement to the extent necessary for the
Company and each Subsidiary to comply with applicable Law. To the knowledge of
40
the Company, the Company and the Subsidiaries have complied with all material
requirements imposed by any such intermediary or carrier with respect to such
billing. The Company and the Subsidiaries have billed the applicable
intermediaries and/or carriers for the services rendered by the Company or any
Subsidiary in material compliance with all applicable Medicare and Medicaid
Laws, and none of the Company, any Subsidiary or any Principal Stockholder is
aware of any non-compliance by the Company or any Subsidiary with any state
licensing or corporate practice of medicine law that would cause such billing or
business practices to not be in material compliance with any of such Medicare or
Medicaid Laws. None of the Company, any Subsidiary or any Principal Stockholder
has received any notice from any regulatory authority or intermediary that
indicates that the Surviving Corporation could not continue to bill
intermediaries in substantially the same manner and structure as the Company and
the Subsidiaries are billing on the date hereof.
Section 4.36. Federal Health Care Programs.
(a) All services provided by the Company, any Subsidiary or any
professional employee or agent of the Company or any Subsidiary or for which the
Company or any Subsidiary directly or indirectly receives payment under
Medicare, Medicaid or other Federal Health Care Programs are, to the extent
required by Law, certified for participation or enrollment in all such Federal
Health Care Programs, have a current and valid provider contract with such
Federal Health Care Programs, are in compliance with the conditions of
participation or enrollment of such Federal Health Care Programs, and, to the
extent required by Law, have received all approvals or qualifications necessary
for capital reimbursement, except for such certifications, contracts,
compliances, approvals and qualifications which are set forth on Schedule 4.36
and which, individually or in the aggregate, would not have a Material Adverse
Effect. The Company has delivered to MEDIQ/PRN true and complete copies of all
Medicare and Medicaid compliance reports by the applicable licensing authority,
cost reports and material correspondence for any period after December 31, 1994
for each location of the Company for which there is a Medicare or Medicaid
provider number. Schedule 4.36 sets forth the applicable Medicare and/or
Medicaid provider numbers utilized by the Company and the Subsidiaries and a
true and correct list of the applicable TEFRA limitation with respect to each
such provider.
(b) None of the Company, any Subsidiary or any person who has a direct or
indirect ownership interest (as those terms are defined in 42 C.F.R.
ss.1001.1001(a)(2)) in the Company of 5% or more, or who has an ownership or
control interest (as defined in Section 1124(a)(3) of the Social Security Act or
any regulations promulgated thereunder) in the Company, or who is an officer,
director, agent or managing employee (as defined in 42 C.F.R.
ss.1001.1001(a)(i)): (i) has had a civil monetary penalty assessed against it
under Section 1128A of the Social Security Act or any regulations promulgated
thereunder, (ii) has been excluded from participation under any Federal Health
Care Program or (iii) has been convicted (as that term is defined in 42
C.F.R.ss.1001.2) of any of the following categories of offenses as described in
the Social Security Act Section 1128(a) and (b)(1), (2), (3) or any regulations
promulgated thereunder:
41
(i) criminal offenses relating to the delivery of an item or service
under Medicare or any State Health Care Program;
(ii) criminal offenses under federal or state Law relating to patient
neglect or abuse in connection with the delivery of a health care item or
service;
(iii) criminal offenses under federal or state Law relating to fraud,
theft, embezzlement, breach of fiduciary responsibility or other financial
misconduct in connection with the delivery of a health care item or service
or with respect to any act or omission in a program operated by or financed
in whole or in part by any federal, state or local government agency;
(iv) federal or state Laws relating to the interference with or
obstruction of any investigation into any criminal offense described in (i)
through (iii) above; or
(v) criminal offenses under federal or state Laws relating to the
unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
Section 4.37. No Criminal Proceedings. There are no pending or, to the
knowledge of the Company, threatened actions, charges, indictments, information,
or investigations of the Company or any Subsidiary or any of their agents,
officers or employees, whether pending or threatened, which involve allegations
of criminal violations by the Company, any Subsidiary or any of their agents,
officers or employees acting on behalf of the Company or any Subsidiary of any
Law including, without limitation, Medicare or Medicaid.
Section 4.38. PrimeSource Transaction. The Principal Stockholders
acknowledge and agree that, other than the obligation to consummate the
PrimeSource Transaction and pay any portion of the Acute Care Consideration
actually received by HTD Management to the Stockholders in accordance with the
terms set forth in the PrimeSource Agreement and to pay Taxes in accordance with
the terms of the Tax Matters Agreement, neither the Company nor any MEDIQ Party
shall have any obligation related to the PrimeSource Transaction including but
not limited to the indemnification obligations and, except as specifically
contemplated in this Agreement, obligations with respect to the payment of the
consideration contemplated by the PrimeSource Agreement.
Section 4.39. Indebtedness. Total Indebtedness at the close of business on
the date hereof, does not exceed $23,027,901.46 in the aggregate. As used
herein, "Indebtedness" means (i) all indebtedness of the Company and the
Subsidiaries for borrowed money (not including Company Expenses, as defined
below, and capital leases), (ii) all obligations of the Company and the
Subsidiaries for the deferred purchase price of property or services (not
including ordinary course trade payables), (iii) all obligations of the Company
or any Subsidiary evidenced by notes, bonds, debentures or other similar
instruments, (iv) all Indebtedness of the type referred to in clauses (i)
through (iii) above guaranteed directly or indirectly in any manner by the
Company or any Subsidiary, and (v) all accrued but unpaid interest (or interest
42
equivalent) and all prepayment premiums or penalties related to any items of
Indebtedness of the type referred to in clauses (i) through (iv) above;
provided, however, that Indebtedness shall not include indebtedness reflected in
the April 30, 1999 balance sheet included in the Financial Statements which is
owed to North Georgia Medical Center in connection with the "buyback rental
programs" described in the agreements disclosed in item 32 under clause (iv) of
Schedule 4.12.
Section 4.40. Fees and Expenses. Total unpaid Company Expenses (as defined
herein) do not and will not exceed $134,770.80 in the aggregate and such amount
will be paid pursuant to Section 2.2.
Section 4.41. Severance, Bonus and Other Expenses. Total Severance at the
close of business on the date hereof, does not exceed $903,553 in the aggregate
and the Company has on hand sufficient cash to pay such payment in full. As used
herein, "Severance" means all severance obligations of the Acquired Companies,
not accrued in the Balance Sheet, including $231,927.77 to Regis Farrell,
$157,712.99 to Clyde A. Blankenship, Jr., $263,277.36 to Robert A. Zimardo, and
$38,669.95 to Michael K. Campbell, an aggregate of $91,966 in respect of all
severance obligations owed to employees terminated at or prior to the Effective
Time, as reflected on Schedule 4.7, and an aggregate of $67,581 in respect of
all severance obligations owed to individuals to be retained by an Acquired
Company on a temporary basis, as reflected on Schedule 4.7, $52,417.88 to James
L. Stariha respect of all bonus and vacation obligations owed to Mr. Stariha
(including all obligations under the terms of the letter agreement dated May 25,
1999 between the Company and Mr. Stariha), in each case the amounts referenced
herein and on Schedule 4.7 include all amounts required to be withheld therefrom
under applicable withholding laws on behalf of the employer and the employee.
Immediately after giving effect to the payments made by the Company's
Subsidiaries as contemplated by Schedule 4.41 and payment of all checks written
by the Acquired Companies prior to the Effective Time (including checks to
directors of the Company in the aggregate amount of $101,000), the Acquired
Companies on a consolidated basis will have a positive cash account balance.
Section 4.42. Other Agreements. Neither the Company nor any Subsidiary has
asserted any claim pursuant to Prior Indemnity Arrangements (as defined herein)
and neither the Company nor any Subsidiary is aware of any material claim that
is entitled to be asserted under Prior Indemnity Arrangements that has not been
asserted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDERS
Each Principal Stockholder as to himself, herself or itself hereby
represents and warrants to MEDIQ as follows:
Section 5.1. Ownership. Such Principal Stockholder (i) is the sole record
or beneficial owner of the Company Stock and Options set opposite such Principal
Stockholder's name on Exhibit A hereto, free and clear of any Lien and (ii) has
full legal right, power and authority to enter into this Agreement, surrender
such Company Stock or Option(s) in exchange for the General Merger Consideration
or PENMAN Merger Consideration, as the case may be, and to perform such
43
Principal Stockholder's obligations hereunder, in each case without the need for
the consent of any other person or entity.
Section 5.2. Authorization and Enforceability. Such Principal Stockholder
has full power and authority to execute, deliver and perform this Agreement and
all other agreements and instruments contemplated hereby. This Agreement has
been and as of the Closing Date all other agreements and instruments
contemplated hereby to be executed and delivered by or on behalf of such
Principal Stockholder will be duly executed and delivered by such Principal
Stockholder. This Agreement constitutes and as of the Closing Date all other
agreements and instruments contemplated hereby to be executed and delivered by
or on behalf of such Principal Stockholder will constitute the legal, valid and
binding obligations of such Principal Stockholder enforceable in accordance with
their terms.
Section 5.3. Non-Contravention. Except as set forth on Schedule 5.3, the
execution, delivery and performance by the Principal Stockholders of this
Agreement and the consummation by the Principal Stockholders of the transactions
contemplated hereby do not and will not (i) contravene or conflict with, or
result in any breach of, the Certificate of Incorporation, Bylaws or other
constitutive documents of any such Principal Stockholder that is an entity, (ii)
contravene or conflict with or constitute a violation of any provision of any
Law binding upon or applicable to any Principal Stockholder or the Company Stock
or Options held by such Principal Stockholder or (iii) result in the creation or
imposition of any Lien of any kind on the Company Stock or Options held by such
Principal Stockholder.
Section 5.4. Consents and Approvals. No consent, approval or authorization
of, or declaration, filing or registration with, any Governmental Entity, or any
third person or entity, is required to be made or obtained by any Principal
Stockholder in connection with the execution, delivery or performance of the
Agreement and the consummation of the transactions contemplated hereby, other
than those set forth in Schedule 5.4.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PENMAN
PENMAN represents and warrants to MEDIQ (it being understood and agreed
that the following representations and warranties do not negate the
representations and warranties of the Company) that:
Section 6.1. Investment Intent. The shares of capital stock of MEDIQ to be
acquired by PENMAN hereby (the "MEDIQ Shares") will be acquired by Seller solely
for its own account for investment, and not with a present view to the
distribution thereof in violation of the Securities Act of 1933, as amended (the
"Securities Act").
Section 6.2. Unregistered Shares. PENMAN understands that the MEDIQ Shares
have not been registered under the Securities Act and must be held indefinitely
44
unless subsequently registered under the Securities Act or unless an exemption
from such registration becomes or is available.
Section 6.3. Sophistication; Familiarity. PENMAN is well versed in
financial matters, has had extensive dealings over the years in securities, and
based on books and records made available to PENMAN by MEDIQ and MEDIQ's filings
pursuant to the Securities Exchange Act of 1934, as amended, is fully familiar
with the operating history and financial results of MEDIQ, and is fully capable
of understanding the type of investment being made pursuant to this Agreement
and the risks involved in connection therewith.
Section 6.4. Investment Risk. PENMAN is financially able to hold the MEDIQ
Shares for long-term investment, believes that the nature and amount of the
MEDIQ Shares being acquired by PENMAN are consistent with PENMAN's overall
investment program and financial position, and recognizes that there are
substantial risks involved in the acquisition of the MEDIQ Shares.
Section 6.5. Information. PENMAN confirms that MEDIQ has made available to
it the opportunity to ask questions of MEDIQ's officers and directors and to
acquire (and that it has received to its satisfaction) such information about
the business and financial condition of MEDIQ as PENMAN has requested.
Section 6.6. Investment Decision. In formulating a decision to acquire the
MEDIQ Shares, PENMAN has relied upon an independent investigation of the MEDIQ's
business and upon consultations with PENMAN's legal and financial advisers with
respect to this Agreement and the nature of its investment, the MEDIQ Reports
(as defined herein), review of MEDIQ's financial and corporate books and
records, and the representations and warranties made by MEDIQ in Article VIII of
this Agreement.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE MEDIQ PARTIES
Each of the MEDIQ Parties represents and warrants to the Stockholders as
follows:
Section 7.1. Corporate Existence and Power. Each of the MEDIQ Parties is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own and lease its assets and operate its business as currently operated.
Section 7.2. Corporate Authorization. Each of the MEDIQ Parties has the
requisite power and authority to execute, deliver and perform this Agreement and
all other agreements and instruments contemplated hereby, including the Joinder
Agreement. The execution and delivery by the MEDIQ Parties of this Agreement and
all other agreements and instruments contemplated hereby to be executed and
delivered by or on behalf of the MEDIQ Parties, including the Joinder Agreement,
and the performance by each MEDIQ Party of its respective obligations hereunder
45
and thereunder have been duly authorized by all necessary corporate action. This
Agreement and all other agreements and instruments contemplated hereby to be
executed and delivered by or on behalf of the MEDIQ Parties, including the
Joinder Agreement, have been duly and validly executed and delivered by each
MEDIQ Party. This Agreement and each of the other agreements and instruments
contemplated hereby to be executed and delivered by or on behalf of the MEDIQ
Parties, including the Joinder Agreement, constitute the legal and binding
obligations of the MEDIQ Parties, enforceable against each MEDIQ Party that is a
party thereto in accordance with their terms.
Section 7.3. Non-Contravention. The execution, delivery and
performance by the MEDIQ Parties of this Agreement and the Joinder Agreement and
the transactions contemplated hereby and thereby do not and will not (i)
contravene or conflict with, or result in any breach of, the Certificate of
Incorporation or Bylaws of any MEDIQ Party, (ii) contravene or conflict with or
constitute a violation of any provision of any Law binding upon or applicable to
any MEDIQ Party, any properties or assets of any MEDIQ Party or (iii) result in
a breach or violation of, or constitute a default or unauthorized assignment
under (with or without notice or lapse of time or both) or give rise to a right
of termination, cancellation, modification or acceleration of any right or
obligation of any MEDIQ Party or to a loss of any benefit to which any MEDIQ
Party. is entitled under any provision of any contracts, binding upon any MEDIQ
Party which contravention, conflict, breach, violation, assignment or right
would have a material adverse effect on any MEDIQ Party's ability to consummate
the transactions contemplated hereby.
Section 7.4. Government Authorization. Except for the Certificate of
Merger, no consent, approval or authorization of, or declaration, filing or
registration with any Governmental Entity is required to be made or obtained by
any MEDIQ Party in connection with the execution, delivery and performance of
this Agreement and the Joinder Agreement and the consummation of the
transactions contemplated hereby and thereby.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF MEDIQ TO PENMAN
MEDIQ represents and warrants to PENMAN that:
Section 8.1. Litigation. Except as disclosed in periodic reports filed by
MEDIQ with the Securities and Exchange Commission, there are no actions, suits,
proceedings, claims, orders or investigations pending or, to the knowledge of
the MEDIQ, threatened against MEDIQ or its subsidiaries at law or in equity
except for such actions, suits, proceedings, claims or orders required by Item
101 of Regulation S-K to be disclosed in periodic reports under the Securities
Exchange Act of 1934, as amended, (regardless of whether required to be
disclosed on the date hereof). There are presently no outstanding notices,
judgments, decrees, consent agreements or orders of any court or any
Governmental Entity against or affecting MEDIQ or its subsidiaries or any of
their assets or businesses or affecting the capital stock of MEDIQ or its
subsidiary.
46
Section 8.2. Compliance. MEDIQ and its subsidiaries are currently in
compliance with all applicable Laws, including without limitation those relating
to third party reimbursement, Medicare, Medicaid, and other Federal Health Care
Programs (as defined in Section 1128B of the Social Security Act), fraudulent or
abusive practices, health care industry regulation, occupational safety and
health, environmental matters, equal employment practices and fair trade
practices except where the failure to be in compliance reasonably be expected to
have a material adverse effect on the business assets, results of operations or
condition (financial or otherwise) of MEDIQ and its subsidiaries taken as a
whole ("MEDIQ Material Adverse Effect"). All material permits, certificates,
licenses, orders, registrations, franchises, authorizations and other approvals
are in full force and effect and each of the Company and each of its
subsidiaries is in compliance with the terms and conditions thereof except where
the failure to be in compliance would not have a MEDIQ Material Adverse Effect.
No notice, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending or
to the knowledge of MEDIQ threatened by any Governmental Entity or other person
with respect to any alleged violation by MEDIQ or its subsidiaries of any Law or
with respect to any alleged failure by the Company or any of its subsidiaries to
have any permit, certificate, license, approval, registration or authorization
required in connection with its businesses. MEDIQ and each of its subsidiaries
have correctly maintained in all material respects, all records (whether
financial, medical or otherwise) required by state and federal agencies
including, without limitation, the Environmental Protection Agency, and pursuant
to the requirements of Medicare, Medicaid and other Federal Health Care
Programs.
Section 8.3. Existence; Good Standing; Authority. MEDIQ is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of any other jurisdiction in which the character of the properties
owned or leased by it therein or in which the transaction of its business
therein makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified or in good standing would not have a
MEDIQ Material Adverse Effect. Each of the subsidiaries of MEDIQ and MEDIQ/PRN
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has the corporate power and authority
to own its properties and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business as a foreign corporation and is
in good standing under the laws of any other jurisdiction in which the character
of the properties owned or leased by it therein or in which the transaction of
its business therein makes such licensing or qualification necessary, except
where the failure to be so licensed or qualified or in good standing would not
have a MEDIQ Material Adverse Effect. MEDIQ/PRN is a wholly-owned subsidiary of
the MEDIQ.
Section 8.4. Capitalization. The authorized capital stock of MEDIQ consists
of 30,000,000 shares of MEDIQ Common Stock and 40,000,000 shares of preferred
stock, par value $.01 per share ("MEDIQ Preferred Stock"), of which 10,000,000
shares have been designated as MEDIQ Series A Preferred Stock, 5,000,000 shares
have been designated as MEDIQ Series B Preferred Stock; and 5,000,000 shares
have been designated as MEDIQ Series C Preferred Stock. As of June 3, 1999,
there were 1,074,823 shares of MEDIQ Common Stock, 7,813,743 shares of MEDIQ
Series A Preferred Stock, 2,999,999 shares of MEDIQ Series B Preferred Stock and
3,000,000 shares of MEDIQ Series C Preferred Stock issued and outstanding. In
47
addition, 9,458 shares of MEDIQ Series A Preferred Stock are issuable upon
receipt of certificates representing former capital stock of MEDIQ. To the
knowledge of MEDIQ, the shareholders listed on Exhibit A to the Securities
Purchase and Holders Agreement dated May 29, 1998 between MEDIQ and certain
shareholders have not affected any transfers of MEDIQ stock other than transfers
to relatives. Except as set forth on Schedule 8.4, MEDIQ has no outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of MEDIQ on any matter. All such
issued and outstanding shares of MEDIQ Common Stock, MEDIQ Series A Preferred
Stock, Series B Preferred Stock and MEDIQ Series C Preferred Stock are duly
authorized, validly issued, fully paid and non-assessable, and, except as set
forth in that certain Securities Purchase and Holders Agreement, dated May 29,
1998 among the Company, the stockholders of MEDIQ and the other parties thereto
("Stockholders Agreement"), are free of preemptive rights. Except as listed on
Schedule 8.4, there are no other existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate MEDIQ or its subsidiaries to issue, transfer or sell
any shares of stock or other equity interest of MEDIQ or its subsidiaries.
Except for (a) the Certificate of Incorporation of MEDIQ, (b) the Stockholders
Agreement, (c) that certain Registration Rights Agreement dated May 29, 1998, by
and among the Company and the stockholders of MEDIQ, and (d) those documents and
instruments listed on Schedule 8.4, there are no voting agreements or trusts,
transfer restrictions, "buy-sell" or similar agreements or arrangements, or any
other agreement, instrument or arrangement relating to the issued or unissued
MEDIQ Common Stock or MEDIQ Preferred Stock.
Section 8.5. SEC Documents. MEDIQ has delivered or made available to PENMAN
each registration statement, report, proxy statement or information statement
and all exhibits thereto prepared by it or relating to its properties since
January 1, 1998, each in the form (including exhibits and any amendments
thereto) filed with the Securities and Exchange Commission (the "SEC")
(collectively, the "MEDIQ Reports"). Except as set forth on Schedule 8.5 the
MEDIQ Reports were filed with the SEC in a timely manner and constitute all
forms, reports and documents required to be filed by MEDIQ under the Securities
Act of 1933, the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder (the "Securities Laws"). As of their respective dates,
the MEDIQ Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of MEDIQ included in or incorporated by reference
into the MEDIQ Reports (including the related notes and schedules) fairly
presents in all material respects in accordance with generally accepted
48
accounting principles consistently applied the consolidated financial position
of MEDIQ and its subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows of MEDIQ included in or
incorporated by reference into the MEDIQ Reports (including the related notes
and schedules) fairly presents in all material respects in accordance with
generally accepted accounting principles consistently applied the results of
operations, retained earnings or cash flows, as the case may be, of MEDIQ and
its subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC.
Section 8.6. Absence of Certain Changes. Except as disclosed in the MEDIQ
Reports filed with the SEC prior to the date hereof, since March 31, 1998 MEDIQ
and its subsidiaries have conducted their business only in the ordinary course
of such business and there has not been (i) any MEDIQ Material Adverse Effect,
(ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to the MEDIQ Common Stock, MEDIQ Series A Preferred
Stock, MEDIQ Series B Preferred Stock or MEDIQ Series C Preferred Stock, or
(iii) any material change in the MEDIQ's accounting principles, practices or
methods.
Section 8.7. Books and Records. The books of account, minute books, stock
record books, and other records of the MEDIQ Parties are true and complete in
all material respects and have been maintained in accordance with sound business
practices and contain accurate and materially complete records of all meetings
of, and corporate action taken by, the respective stockholders, the Boards of
Directors, and committees of the Board of Directors of the MEDIQ Parties and no
formal meeting of any such stockholders, Board of Directors, or committee has
been held for which minutes have not been prepared and are not contained in such
minute books.
Section 8.8. Disclosure. To the knowledge of MEDIQ, no representation or
warranty by MEDIQ in this Agreement or any agreement or certificate statement
executed by MEDIQ in favor of PENMAN, in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading.
ARTICLE IX
CERTAIN OBLIGATIONS OF THE PARTIES
Section 9.1. Public Announcements. The Principal Stockholders, the Company,
each Subsidiary and MEDIQ shall consult with each other before issuing any press
release with respect to this Agreement and shall not issue any such press
release or make any such public statement without the prior consent of the other
party, which shall not be unreasonably withheld; provided, however, that a party
may, without the prior consent of the other party, issue such press release or
make such public statement that is upon the advice of counsel required by law,
provided that in any such case the party making such disclosure shall notify and
consult with the other parties hereto as early as practicable.
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Section 9.2. Costs, Expenses and Taxes. The MEDIQ Parties shall pay their
costs and expenses, including legal fees, in connection with negotiation,
execution, delivery, performance of, and compliance with, this Agreement and the
transactions contemplated hereby. The Company shall pay, on or before the
Closing Date, all costs and expenses, including legal fees of counsel for the
Company (but not including legal fees for any separate counsel for any
Stockholders) incurred by the Company in connection with the negotiation,
execution, delivery and performance of, and compliance with, this Agreement, the
PrimeSource Agreement and the transactions contemplated hereby and thereby
(collectively, the "Company Expenses"). The Stockholders shall pay all transfer,
documentary and similar taxes in connection with the delivery of the Common
Stock to be made hereunder. The Company Expenses do not include the payment of
up to $55,000 of expenses by MEDIQ pursuant to Section 10 of the Joinder
Agreement.
Section 9.3. Access to Information. The Principal Stockholders, the Company
and the MEDIQ Parties shall reasonably cooperate with each other after the
Closing so that each party and its representatives has access to the business
records, contracts and other information existing at the Closing Date and
relating to the Company (whether in the possession of any Stockholders, the
Company or any MEDIQ Party) (including copies thereof) as is reasonably
necessary for the (i) preparation of or the prosecution or defense of any suit,
action, litigation or administrative, arbitration or other proceeding or
investigation (other than one by or on behalf of another party to this
Agreement) by or against Stockholders, any MEDIQ Party or the Company),
preparation and filing of any Tax Return or election relating to the Company and
any audit by any taxing authority of any returns of any MEDIQ Party or any
Principal Stockholder relating thereto, (ii) preparation and filing of any other
documents required by Governmental Entities, (iii) transfer of data to the MEDIQ
Parties relating to the Company or any Subsidiary and (iv) compliance with
Regulation S-X in connection with registering the offering and sale of
securities of the Company under the Securities Act of 1933, as amended.
Additionally, the Company will, and will direct the Company's accountants to
provide such information related to the period prior to the Closing as shall be
required for such compliance with Regulation S-X and to consent to the inclusion
of such information in a registration statement. The party requesting such
information and assistance shall reimburse the other party for all out-of-pocket
costs and expenses incurred by such party in providing such information and in
rendering such assistance. The access to files, books and records contemplated
by this Section 9.3 shall be during normal business hours and upon not less than
two (2) business days prior written request, shall be subject to such reasonable
limitations as the party having custody or control thereof may impose to
preserve the confidentiality of information contained therein, and shall not
extend to material subject to a claim of privilege unless expressly waived by
the party entitled to claim the same.
Section 9.4. Further Assurances. From and after the Closing, the parties
agree to take all such further actions and execute all such further instruments
or documents as shall be deemed reasonably necessary by any of them in order to
carry out the purposes and intent of the transactions contemplated by this
Agreement.
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Section 9.5. Non-Competition.
(a) For a period of five (5) years (the "Restricted Period") from and after
the Closing, Regis Farrell shall not, unless acting as an officer or employee
of, or consultant to, a MEDIQ Party or an Acquired Company, directly or
indirectly, (i) for its, his or her own account or for the account of others,
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or be connected as an
officer, director, employee, stockholder, consultant, advisor or partner,
whether or not compensated for any of the foregoing with, any business which at
any relevant time during such period directly or indirectly anywhere in the
United States competes with the Acquired Businesses as conducted at the date of
this Agreement, (ii) solicit, employ, retain as a consultant, interfere with or
attempt to entice away from an Acquired Company any individual who is, has
agreed to be or within one year of such solicitation, employment, retention,
interference or enticement has been, employed or retained by an Acquired Company
or (iii) engage or participate in any effort or act to induce any customers,
suppliers, associates, or independent contractors of an Acquired Company to take
any action which is intended to be disadvantageous an Acquired Company,
including but not limited to, the solicitation of customers, suppliers,
associates, or independent contractors of an Acquired Company to cease doing
business, or their association or employment, with an Acquired Company;
provided, however, that the employment of Richard Sorrento and Ron Sokolowski by
Regis Farrell after the thirty-first day after the Closing shall not, in and of
itself, be a violation of this Section 9.5. Ownership of not more than 2% of the
outstanding stock of any publicly traded company shall not, in and of itself, be
a violation of this Section 9.5.
(b) The existence of any claim which Regis Farrell or any of his affiliates
may allege against any other party to this Agreement, whether based on this
Agreement or otherwise, shall not prevent the enforcement of this covenant.
(c) The Restricted Period shall be tolled with respect to Regis Farrell
during any period of violation of any of the covenants contained in this Section
9.5 by such person and during any other period required for litigation during
which an Acquired Company or a MEDIQ Party seeks to enforce this covenant
against any such person or entity.
(d) In the event that any of the covenants contained in this Section 9.5
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too long a period of time or over too large a
geographical area or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the longest period of time for which
it may be enforceable, and/or over the largest geographical area as to which it
may be enforceable and/or to the maximum extent in all other aspects as to which
it may be enforceable, all as determined by such court in such action. Regis
Farrell acknowledges that both the lengths of time and the geographic scope are
reasonable given the nature of the business of the Acquired Companies and
necessary to the protection of the Acquired Businesses.
(e) Regis Farrell acknowledges that MEDIQ/PRN is purchasing the goodwill of
the Company and its Subsidiaries and the covenants contained in this Section 9.5
are essential to the protection of MEDIQ/PRN's investment in the Company and
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that MEDIQ/PRN would not purchase the Company but for these covenants. Regis
Farrell agrees that a breach by such Regis Farrell of this Section 9.5 shall
cause irreparable harm to the MEDIQ Parties, the Acquired Companies and the
Acute Care Subsidiaries and that the MEDIQ Parties', the Company's and the Acute
Care Subsidiaries' remedies at law for any breach or threat of breach of the
provisions of this Section 9.5 shall be inadequate, and that the MEDIQ Parties,
the Acquired Companies and the Acute Care Subsidiaries shall be entitled to an
injunction or injunctions to prevent breaches of this Section 9.5 and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which the MEDIQ Parties or any Acquired Company may be entitled at law or in
equity.
Section 9.6. Severance. From and after the Effective Time, the MEDIQ
Parties shall cause HTD Management and Triad Holdings, Inc., respectively, to
fully perform and pay when due all of their respective severance and benefit
continuation obligations to each of the individuals named on Schedule 9.6 under
each of the employment agreements described on Schedule 9.6.
Section 9.7. Releases. Effective as of the Effective Time, each Principal
Stockholder, for good and valuable consideration, hereby releases and discharges
each of the MEDIQ Parties, the Acquired Companies and the Acute Care
Subsidiaries and their respective affiliates, directors, officers, employees or
agents from any and all claims, liabilities and obligations of any nature,
whether accrued, absolute, contingent, unliquidated or otherwise, whether due or
to become due and regardless of when asserted (other than (i) claims arising
directly pursuant to this Agreement or the PrimeSource Agreement, (ii) claims
for compensation and benefits incurred in the ordinary course consistent with
past practice and the terms of this Agreement, and (iii) severance payments as
set forth on Schedule 9.6, and (iv) claims for which directors are entitled to
receive indemnification pursuant to the Certificate of Incorporation or Bylaws
of the Company) that such shareholder may have, now or in the future, against
the MEDIQ Parties, the Company or their respective affiliates, directors,
officers, employees or agents.
Section 9.8. Obligation to Consummate the PrimeSource Transaction. Upon
satisfaction of the conditions to the Company's obligations to consummate the
PrimeSource Transaction, each of the MEDIQ Parties agrees to cause the Company
to consummate the PrimeSource Transaction in accordance with the terms of the
PrimeSource Agreement.
Section 9.9. Officer and Director Indemnification. The MEDIQ Parties agree
that for the six-year period following Closing, they will not cause or permit
the provisions of the articles of incorporation or bylaws of any Acquired
Company which require or permit indemnification by such Acquired Company of its
past or present officers and directors to be repealed or amended in any way
which decreases or restricts the nature or scope of such Acquired Company
obligations thereunder, except to the extent required by law.
Section 9.10. Stockholder Approval. Pursuant to Sections 228 and 251 of the
DGCL, the Principal Stockholders, by their execution of this Agreement, hereby
approve and consent to this Agreement and Plan of Merger.
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Section 9.11. Release of Prior Indemnification Rights. By their execution
of this Agreement, the Company, and HTD Management, as the assignee of the
Company, for the benefit of all Stockholders, hereby release and discharge all
Stockholders from all indemnification obligations, other than related to or
arising from non-competition, non-solicitation or confidentiality provisions
("Prior Indemnity Arrangements") of the respective Stockholders under Article
VIII of each of the following agreements:
(i) the Agreement and Plan of Reorganization dated as of May 1, 1998,
among the Company, Triad Holdings, Inc., Triad Acquisition, Inc. and the
then stockholders of Triad Holdings, Inc.;
(ii) the Agreement and Plan of Reorganization dated as of May 1, 1998,
among the Company, Healthcare Technology Delivery, Inc., HTD Acquisition,
Inc. and the then stockholders of Healthcare Technology Delivery, Inc.;
(iii) the Agreement and Plan of Reorganization dated as of May 1,
1998, among the Company, Megatech Medical, Inc., Megatech Acquisition,
Inc., and the then stockholders of Megatech Medical, Inc., and
(iv) the Agreement and Plan of Reorganization dated as of May 1, 1998,
among the Company, Bimeco, Inc. Bimeco Acquisition, Inc., and the then
stockholders of Bimeco, Inc.
ARTICLE X
DELIVERIES AT THE CLOSING
Section 10.1. Deliveries to the MEDIQ Parties. Contemporaneously or
substantially contemporaneously with the execution of this Agreement:
(a) Opinion of Counsel. The Company has caused Porter & Hedges, counsel for
the Company and the Principal Stockholders, to deliver an opinion dated the date
of the Closing in the form attached hereto as Exhibit H, and PENMAN has caused
Altheimer & Gray, counsel to PENMAN to deliver an opinion dated the date of the
Closing in the form attached hereto as Exhibit I.
(b) Required Consents. The Company has delivered certain executed consents
and approvals of Governmental Entities and third persons required to be obtained
in connection with the transactions contemplated hereby.
(c) Escrow Agreement. The Escrow Agent and Stockholders' Agents have
executed and delivered the Escrow Agreement.
(d) Satisfactory Instruments. The MEDIQ Parties have received, in form and
substance reasonably satisfactory to MEDIQ and its counsel, all instruments and
53
documents required on the part of the Principal Stockholders, the Company or any
Subsidiary to effectuate and consummate the transactions contemplated hereby.
(e) Stockholder Approval and Deliveries. The MEDIQ Parties have received
evidence from the Company that fewer than fourteen percent (14%) of the
outstanding shares of Common Stock are eligible to become Dissenting Shares.
(f) PrimeSource Agreement. The MEDIQ Parties have received from the Company
evidence that the Company and PrimeSource have executed and delivered the
PrimeSource Agreement and are prepared to consummate the transactions
contemplated thereby, including executed copies of all the agreements and
instruments contemplated to be delivered at the closing of the PrimeSource
Transaction, evidence that PrimeSource has received adequate financing for the
transactions contemplated by the PrimeSource Agreement and a certificate
certifying that all conditions to PrimeSource's obligations have been satisfied.
(g) FIRPTA Matters. The Company has delivered a statement (in such form as
may be reasonably acceptable to MEDIQ's counsel) conforming to the requirements
of Section 1.897 - 2(h)(1)(i) of the Treasury Regulations, and evidence that the
Company shall have delivered to the Internal Revenue Service the notification
required under Section 1.897 - 2(h)(2) of the Treasury Regulations.
(h) Officer's Certificate. The Company has delivered an executed
certificate of an officer of the Company in form and substance satisfactory to
MEDIQ certifying as to (i) the Certificate of Incorporation of the Company, (ii)
the Bylaws of the Company, (iii) the resolutions of the Board of Directors of
the Company authorizing the transactions contemplated by this Agreement and (iv)
the incumbency of the officers executing this Agreement on behalf of the
Company.
(i) Good Standing Certificates. The Company has delivered for the Company
and each Subsidiary, a certificate of the Secretary of State of their respective
states of incorporation evidencing, as of a recent date, the good standing of
the Company and each Subsidiary.
(j) Resignations. The Company has delivered written resignations of the
officers and directors of the Company and each Subsidiary and of the trustees,
plan administrators and fiduciaries of the Plans, each in form acceptable to
MEDIQ.
(k) PrimeSource Letter. PrimeSource has delivered to MEDIQ the PrimeSource
Letter Agreement.
(l) Tax Matters Agreement. The parties thereto have executed and delivered
the Tax Matters Agreement.
(m) Joinder Agreement. PENMAN has executed and delivered the Joinder
Agreement.
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(n) Capitalization of Intercompany Obligations. The Company has delivered
evidence to MEDIQ that all intercompany obligations among the Company and the
Subsidiaries have been capitalized and that such actions have been approved by
all requisite corporate action.
Section 10.2. Deliveries to the Company and the Principal Stockholders.
Contemporaneously or substantially contemporaneously with the execution of this
Agreement:
(a) Opinion of Counsel. The MEDIQ Parties have caused Dechert Price &
Rhoads, counsel to the MEDIQ Parties, to deliver an opinion, dated the date of
the Closing, in the form attached hereto as Exhibit J.
(b) Escrow Agreement. MEDIQ/PRN has executed and delivered the Escrow
Agreement.
(c) Satisfactory Instruments. The MEDIQ Parties have delivered all
instruments and documents required on the MEDIQ Parties' part to effectuate and
consummate the transactions contemplated hereby in form and substance
satisfactory to the Company and the Stockholders' Agents and their counsel.
(d) MEDIQ Officer's Certificate. MEDIQ has delivered an executed
certificate of an officer of MEDIQ in form satisfactory to the Company
certifying as to (i) the Certificate of Incorporation of MEDIQ, (ii) the Bylaws
of MEDIQ, (iii) the resolutions of the Board of Directors of MEDIQ authorizing
the transactions contemplated by this Agreement and (iv) the incumbency of the
officers executing this Agreement and any other instrument, agreement or
document to be executed in connection herewith on behalf of MEDIQ.
(e) MEDIQ/PRN Officer's Certificate. MEDIQ/PRN has delivered an executed
certificate of an officer of MEDIQ/PRN in form satisfactory to the Company
certifying as to (i) the Certificate of Incorporation of MEDIQ/PRN, (ii) the
Bylaws of MEDIQ/PRN, (iii) the resolutions of the Board of Directors of
MEDIQ/PRN authorizing the transactions contemplated by this Agreement and (iv)
the incumbency of the officers executing this Agreement and any other
instrument, agreement or document to be executed in connection herewith on
behalf of MEDIQ/PRN.
(f) Acquisition Corp. Officer's Certificate. Acquisition Corp. has
delivered an executed certificate of an officer of Acquisition Corp. in form
satisfactory to the Company certifying as to (i) the Certificate of
Incorporation of Acquisition Corp., (ii) the Bylaws of Acquisition Corp., (iii)
the resolutions of the Board of Directors of Acquisition Corp. authorizing the
transactions contemplated by this Agreement and (iv) the incumbency of the
officers executing this Agreement and any other instrument, agreement or
document to be executed in connection herewith on behalf of Acquisition Corp.
(g) Tax Matters Agreement. The parties thereto have executed and delivered
the Tax Matters Agreement.
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(h) MEDIQ has executed and delivered the Joinder Agreement.
ARTICLE XI
INDEMNIFICATION
Section 11.1. Indemnification by the Stockholders.
(a) Each Stockholder (acting through the Stockholders' Agents pursuant to
the terms of the Escrow Agreement) shall severally (to the extent of its, his or
her Allocation Percentage of the Escrow Fund) indemnify, defend and hold
harmless the MEDIQ Parties, the Company and their subsidiaries, officers and
directors from and against any Damage (defined below) of or to the Company, any
MEDIQ Party or their subsidiaries, officers and directors arising out of or
resulting from any misrepresentation or breach of representation or warranty of
the Company contained in this Agreement or in any agreement or statement or
certificate furnished by the Company or any Stockholder to any MEDIQ Party
pursuant hereto or in connection with the transactions contemplated hereby (it
being understood and agreed that for purposes of calculating the amount of
Damages incurred in connection with any such misrepresentation or breach of
representation or warranty, any and all references to material or material
adverse effect (or other correlative terms) shall be disregarded).
For purposes of this Agreement, "Damages" means the aggregate amount of all
damages, claims, losses, obligations, liabilities (including any governmental
penalty, fines or punitive damages), deficiencies, interest, costs and expenses
arising out of or relating to a matter and any actions, judgments, costs and
expenses (including reasonable attorneys' fees and all other expenses incurred
in investigating, preparing, defending or responding to any litigation or
proceeding, commenced or threatened) incident to such matter or to the
enforcement of this Agreement, including, but not limited to, reasonable legal
fees incurred by the party entitled to indemnification under this Agreement. The
amount of any Damages under this Article XI shall (i) take into account any
applicable insurance proceeds actually received by the indemnified party from an
unaffiliated third party, and (ii) be net of any Tax benefit if and when
actually realized (as offset by any Tax burden resulting from the matter for
which a claim is asserted or from the indemnification) that accrues to such
indemnified party in respect of the matter for which a claim is asserted;
provided, that no indemnified party under this Article XI shall be required
solely for the purpose of realizing a benefit to take any Tax position that
could have an adverse effect on such indemnified party if taken; provided,
further, that the indemnified party shall not be required to disclose its (or
its affiliates) Tax returns, work papers or other information with respect to
the preparation of such returns, but shall be required to disclose the foregoing
only to a nationally recognized accounting firm.
Although all the Stockholders are not parties to this Agreement, this
Section 11.1 relates to the Escrow Fund provided for in the Escrow Agreement
entered into by the Stockholders' Agents on behalf of all the Stockholders.
(b) Each Principal Stockholder hereby agrees to severally indemnify the
MEDIQ Parties, the Company and their subsidiaries, officers and directors from
and against:
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(i) any Damage of or to the Company, any MEDIQ Party or their
subsidiaries, officers and directors arising out of or resulting from (A)
any breach of warranty or inaccurate or erroneous representation made
severally by such Principal Stockholder in Article V, (B) any breach or
default in the performance by such Principal Stockholder of any covenant or
agreement made severally by such Principal Stockholder in this Agreement,
and (C) any breach of warranty or inaccurate or erroneous representation in
Section 4.2 or Section 4.3; provided, however, that the obligation of each
Principal Stockholder to indemnify the MEDIQ Parties under this clause (C)
shall be limited to such Principal Stockholder's Allocation Percentage
multiplied by the lesser of (x) the aggregate Damages suffered or incurred
by the MEDIQ Parties as a result of all breaches of warranty or inaccurate
or erroneous representations in Section 4.2 and Section 4.3 and (y) the
Aggregate Closing Consideration.
(ii) any Damage of or to the Company, any MEDIQ Party or their
subsidiaries, officers and directors arising out of or resulting from any
untrue, inaccurate or erroneous representation or warranty made by the
Company in Article IV of this Agreement which such Principal Stockholder
caused or permitted to be made with a willful or fraudulent intent to
deceive.
(iii) any and all Damages of or to the Company, any MEDIQ Party or
their subsidiaries, officers and directors (A) related to the assets,
liabilities and businesses acquired by PrimeSource in connection with the
PrimeSource Transaction and (B) related to the PrimeSource Agreement and
the transactions contemplated thereby, in each case other than with respect
to the obligation of the MEDIQ Parties to consummate the PrimeSource
Transaction and pay any portion of the Acute Care Consideration actually
received by HTD Management to the Stockholders in accordance with the terms
set forth in the PrimeSource Agreement; provided, however, that the
obligation of each Principal Stockholder to indemnify the MEDIQ Parties
under this clause (iii) shall be limited to each such Principal
Stockholder's Allocation Percentage multiplied by the lesser of (x) the
aggregate Damages suffered or incurred by the MEDIQ Parties as described in
this clause (iii) and (y) the Aggregate Closing Consideration.
(c) Time Limit on Certain Indemnification Claims. No action or claim for
Damages pursuant to Section 11.1(a) shall be brought or made after the
expiration of an 18-month period from the Closing Date or, if MEDIQ has not
submitted claims (excluding claims which have been resolved favorably to the
Stockholders before the first anniversary of the Closing Date) against the
Escrow Fund aggregating at least $1.25 million on or before the 12-month
anniversary of the date hereof, then after the expiration of such 12-month
period from the Closing Date, except any claims which have been the subject of a
written notice from any MEDIQ Party or the Company to the Stockholders' Agents
prior to the expiration of any of the foregoing periods, which notice specifies
in reasonable detail the nature of the claim.
(d) Limitations on Liability. Subject to the terms of this Agreement, the
Company, the MEDIQ Parties and their affiliates (i) shall not recover Damages
pursuant to Section 11.1(a) unless the cumulative total of Damages under Section
11.1(a) exceeds $100,000, and then only to the extent of such excess and (ii)
shall not recover damages in excess of the Escrow Fund for any and all Damages
57
under Section 11.1(a); provided, that no limitation provided in Section
11.1(d)(i) shall apply to (A) the breach of Section 4.9(u) or (B) the breach of
any of the representations, warranties and covenants contained herein or in
agreements under this Agreement or in any statement or certificate furnished or
to be furnished pursuant hereto or in connection with the transactions
contemplated hereby if such representation or warranty was willfully breached or
made with intent to deceive, or with actual knowledge that it contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements or facts contained therein not misleading or if
such covenant was willfully breached.
(e) Sources of Recovery. The Escrow Fund shall be the exclusive source of
funds for the recovery of Damages pursuant to Section 11.1(a). The Escrow Fund
shall also be a source of funds for the recovery of Damages pursuant to Section
11.1(b) (other than Damages pursuant to clause (B) of Section 11.1(b)(i)), but
is not the exclusive source for such funds.
Section 11.2. Indemnification by the MEDIQ Parties
(a) Each of the MEDIQ Parties hereby agrees to indemnify and hold harmless
the Stockholders from and against:
(i) any Damage of or to any Stockholder arising out of or resulting
from any misrepresentation or breach of representation or warranty of the
MEDIQ Parties contained in Article VII of this Agreement or in any
agreement or statement or certificate furnished by a MEDIQ Party to the
Stockholders pursuant hereto or in connection with the transactions
contemplated hereby; and
(ii) any Damage of or to any Stockholder arising out of or resulting
from any breach or non-fulfillment of any covenant or agreement of any
MEDIQ Party contained in this Agreement or in any agreement or statement or
certificate furnished or to be furnished to the Principal Stockholders
pursuant hereto or in connection with the transactions contemplated hereby.
(b) MEDIQ hereby agrees to indemnify and hold harmless PENMAN from and
against any damage of or to PENMAN arising out of or resulting from any
misrepresentation or breach of representation or warranty of MEDIQ contained
Article VIII of this Agreement.
Section 11.3. Notice and Procedure for Indemnification.
(a) A party seeking indemnification pursuant to Section 11.1 or 11.2 of
this Agreement (an "Indemnified Party") shall give prompt written notice to the
party from whom such indemnification is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any action, suit or proceeding by
a third party which is not an affiliate of any party hereto in respect of which
indemnity may be sought hereunder (a "Third Party Claim"), and will give the
Indemnifying Party such information with respect thereto as the Indemnifying
Party may reasonably request, but failure to give such notice shall not relieve
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the Indemnifying Party of any liability hereunder except to the extent that the
Indemnifying Party is actually prejudiced thereby.
(b) Except as otherwise provided in Section 11.3, the Indemnifying Party
shall have the right, exercisable by written notice to the Indemnified Party
within 30 days of receipt of notice from the Indemnified Party of the
commencement or assertion of any Third Party Claim in respect of which indemnity
may be sought hereunder, to assume and conduct the defense of such Third Party
Claim with counsel selected by the Indemnifying Party and reasonably acceptable
to the Indemnified Party; provided that (i) the defense of such Third Party
Claim by the Indemnifying Party will not, in the judgment of the Indemnified
Party, have a material adverse effect on the Indemnified Party, (ii) the
Indemnifying Party has sufficient financial resources, in the judgment of the
Indemnified Party, to satisfy the amount of any adverse monetary judgment that
is reasonably likely to result, (iii) the Third Party Claim solely seeks (and
continues to seek) monetary damages and (iv) the Indemnifying Party expressly
agrees in writing that as between the Indemnifying Party and the Indemnified
Party, the Indemnifying Party shall be solely obligated to satisfy and discharge
the Third Party Claim (the conditions set forth in clauses (i) through (iv) are
collectively referred to as the "Litigation Conditions"). If the Indemnifying
Party does not assume the defense of such Third Party Claim in accordance with
this Section 11.3, the Indemnified Party may continue to defend the Third Party
Claim. If the Indemnifying Party has assumed the defense of a Third Party Claim
as provided in this Section 11.3, the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof; provided, however, that if (i) the Litigation
Conditions cease to be met or (ii) the Indemnifying Party fails to take
reasonable steps necessary to defend diligently such Third Party Claim, the
Indemnified Party may assume its own defense, and the Indemnifying Party will be
liable for all reasonable costs or expenses paid or incurred in connection
therewith.
(c) The Indemnifying Party or the Indemnified Party, as the case may be,
shall have the right to participate in (but not control), at its own expense,
the defense of any Third Party Claim which the other is defending as provided in
this Agreement.
(d) The Indemnifying Party, if it shall have assumed the defense of any
Third Party Claim as provided in this Agreement, shall not, without the prior
written consent of the Indemnified Party, consent to a settlement of, or the
entry of any judgment arising from, any such Third Party Claim (i) which does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a complete release from all liability in
respect of such Third Party Claim, (ii) which grants any injunctive or equitable
relief or (iii) which may reasonably be expected to have a material adverse
effect on the affected business of the Indemnified Party. The Indemnified Party
shall have the right to settle any Third Party Claim, the defense of which has
not been assumed by the Indemnifying Party.
(e) Whether or not the Indemnifying Party chooses to defend or prosecute
any Third Party Claim, all the parties hereto shall cooperate in the defense or
prosecution thereof and shall furnish such records, information and testimony,
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and attend such conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested in connection therewith.
Section 11.4. Exclusive Remedy. Following the Closing, the rights to
indemnification under this Agreement shall be the exclusive remedy for the
parties with respect to any Damages related to the events giving rise to this
Agreement and the transactions provided for herein or contemplated hereby (other
than in respect of any confidentiality agreement between the parties) and none
of the parties shall be entitled to pursue, and each hereby expressly waives as
of the Closing, any and all other rights that may otherwise be available to it
either at law or in equity with respect thereto, except in respect of fraud or
securities law violations.
ARTICLE XII
TAX MATTERS
Section 12.1. Tax Matters Agreement; Termination of Tax Sharing Agreement.
Concurrently with the execution of this Agreement, MEDIQ/PRN, and PrimeSource
are entering into a Tax Matters Agreement (the "Tax Matters Agreement"), setting
forth certain rights and responsibilities of the parties to the Tax Matters
Agreement concerning certain federal and state Tax matters. Except as otherwise
provided in Tax Matters Agreement, all tax sharing agreements, arrangements,
policies and guidelines, formal or informal, express or implied, that may exist
between the Company and/or a Subsidiary and any other person and any obligations
thereunder shall terminate as of the Closing Date and the Company and the
Subsidiaries shall have no liability thereunder for any and all amounts due in
respect of periods ending on or before the Closing Date.
Section 12.2. Tax Effect of Payments. MEDIQ and the Stockholders agree that
any indemnification payments made pursuant to this Agreement shall be treated
for all purposes as an adjustment to the General Merger Consideration and PENMAN
Merger Consideration unless otherwise required by applicable Law.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Amendment and Modification. This Agreement may not be amended
without the written consent of the MEDIQ Parties, the Company and the
Stockholder's Agent acting on behalf of the Stockholders. This Agreement may be
amended as permitted by Section 251 of the DGCL, notwithstanding the
Stockholders' approval of this Agreement. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any subsequent such occurrence.
Section 13.2. Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given if delivered
to the party personally, at the time of delivery, if sent to the party by
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telecopy, upon receipt of confirmation of good transmission, or if by registered
or certified mail (return receipt requested) with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below (or at such other address for a party as shall be specified by like
notice):
(a) if to a Principal Stockholder, to the address for such Principal
Stockholder set forth below such Principal Stockholder's signature,
with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
Attention: James M. Harbison, Jr.
Facsimile: 713-226-0204
(b) if to any other Stockholder, to the Stockholders' Agents as follows:
PENMAN Private Equity and Mezzanine Fund, L.P.
333 West Wacker Drive, Suite 510
Chicago, Illinois 60606
Attention: Kelvin J. Pennington
Facsimile: 312-346-1801
Equus II Incorporated
2929 Allen Parkway, 25th Floor
Houston, Texas 77019
Attention: Nolan Lehmann
Facsimile: 715-529-9545
Regis Farrell
P.O. Box 787 (Street Address:
836 Point Seaside Drive) (Overnight)
Crystal Beach, FL 34681
(c) If to the Company or MEDIQ, to:
MEDIQ/PRN Life Support Services, Inc.
One Mediq Plaza
Pennsauken, NJ 08110
Attention: Alan S. Einhorn, Esquire,
General Counsel
Facsimile: 609-661-0958
61
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Henry N. Nassau, Esquire
Facsimile: 215-994-2222
Section 13.3. Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 13.4. Entire Agreement; No Third Party Beneficiaries. This
Agreement and all schedules and documents delivered hereunder constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral among the parties with respect to the subject matter hereof and
thereof and is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder, except that (i) all persons indemnified
under Article IX of this Agreement shall be entitled to the benefits of Article
IX and (ii) all Stockholders shall be entitled to the benefits of Section 9.11
of this Agreement.
Section 13.5. Severability. If any provision of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, (i) such provision shall be
modified in scope to permit the party in whose favor such provision was
reasonably intended to operate to obtain the maximum benefit permissible under
applicable law or policy and (ii) the remaining provisions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
Section 13.6. Nature and Survival of Representations. The representations,
warranties, covenants and agreements of the parties contained in this Agreement,
and all statements contained in this Agreement or schedule hereto shall be
deemed to constitute representations, warranties, covenants and agreements of
the respective party delivering the same. Subject to Section 12.1, all such
representations, warranties, covenants and agreements shall survive the Closing.
The Company acknowledges that its representations and warranties in this
Agreement shall not be affected or mitigated by any investigation conducted by
the MEDIQ Parties or their representatives prior to Closing or any knowledge of
the MEDIQ Parties.
Section 13.7. Governing Law; Jurisdiction. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflicts of law thereof. EACH OF THE PARTIES
UNCONDITIONALLY AND IRREVOCABLY AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION
OF ANY COURT OF GENERAL JURISDICTION SITTING IN THE STATE OF ILLINOIS AND
UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT
62
OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN THE COURTS OF THE STATE OF ILLINOIS AND HEREBY FURTHER IRREVOCABLY
AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
Section 13.8. Successors and Assigns; Assignment. This Agreement shall be
binding on the parties hereto and their respective successors, heirs and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties.
63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
HTD CORPORATION
By: /s/ Regis Farrell
--------------------------------------
Name: Regis Farrell
Title: President
HTD MANAGEMENT, INC.
By: /s/ Regis Farrell
--------------------------------------
Name: Regis Farrell
Title: Chief Executive Officer
MEDIQ INCORPORATED
By: /s/ Alan S. Einhorn
--------------------------------------
Name: Alan S. Einhorn
Title: Vice President
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.
By: /s/ Alan S. Einhorn
--------------------------------------
Name: Alan S. Einhorn
Title: Vice President
HTD ACQUISITION CORPORATION
By: /s/ Alan S. Einhorn
--------------------------------------
Name: Alan S. Einhorn
Title: Vice President
64
PRINCIPAL STOCKHOLDERS:
PENMAN PRIVATE EQUITY AND
MEZZANINE FUND, L.P.
By: PENMAN Asset Management, L.P.,
the general partner
By: /s/ Lawrence C. Manson, Jr.
--------------------------------------------
Lawrence C. Manson, Jr., a general
partner
EQUUS II INCORPORATED
By: /s/ Nolan Lehmann
--------------------------------------------
Name: Nolan Lehmann
Title: President
/s/ Robert A. Butterworth
--------------------------------------------
Robert A. Butterworth
/s/ Marvin L. Marks
--------------------------------------------
Marvin L. Marks
/s/ Regis Farrell
--------------------------------------------
Regis Farrell
/s/ William C. Klintworth, Jr.
--------------------------------------------
William C. Klintworth, Jr.
R. TUCKER COOP FAMILY TRUST
By: /s/ R. Tucker Coop
--------------------------------------------
Name: R. Tucker Coop
/s/ Roberta Gressman
--------------------------------------------
Roberta Gressman
65
/s/ Michael K. Campbell
--------------------------------------------
Michael K. Campbell
/s/ Gary R. Baily
--------------------------------------------
Gary R. Baily
/s/ Robert A. Zimardo
--------------------------------------------
Robert A. Zimardo
STEPHEN E. FARROW AND NANCY J. FARROW TRUST
By: /s/ Stephen E. Farrow
--------------------------------------------
Name: Stephen E. Farrow
Title: Trustee
STEPHEN E. FARROW AND NANCY J.
FARROW CHARITABLE TRUST
By: /s/ Stephen E. Farrow
--------------------------------------------
Name: Stephen E. Farrow
Title: Trustee
/s/ Lance C. Rund
--------------------------------------------
Lance C. Rund
/s/ James A. Pearson
--------------------------------------------
James A. Pearson
CHILD HEALTH INVESTMENT CORPORATION
By: /s/ Craig F. Fischer
--------------------------------------------
Name: Craig F. Fischer
Title: Chief Operating Officer
/s/ Richard Sorrento
--------------------------------------------
Richard Sorrento
66
/s/ Ron Sokolowski
--------------------------------------------
Ron Sokolowski
/s/ Walter D. Wallach
--------------------------------------------
Walter D. Wallach
/s/ Mark A. Jungers
--------------------------------------------
Mark A. Jungers
/s/ Bradford C. Bond
--------------------------------------------
Bradford C. Bond
THE RICHARD H. PERRY FAMILY TRUST
By: /s/ Richard H. Perry
--------------------------------------------
Name: Richard H. Perry
Title: Trustee
PARK CITY COMMUNITY CHURCH
By: /s/ Brian E. Ward
--------------------------------------------
Name: Brian E. Ward
Title: President
ROBERT R. MCCLENDON AND MARSHA B.
MCCLENDON FAMILY TRUST
By: /s/ Robert R. McClendon
--------------------------------------------
Name: Robert R. McClendon
Title: Trustee
/s/ John B. Benear, II
--------------------------------------------
John B. Benear, II
67
KLINTWORTH FAMILY TRUST
By: /s/ William C. Klintworth, Jr.
--------------------------------------------
Name: William C. Klintworth, Jr.
E. L. KLINTWORTH REVOCABLE TRUST
By: /s/ William C. Klintworth, Jr.
--------------------------------------------
Name: William C. Klintworth, Jr.
ROYCE MEDICAL CO.
By: J. Haines
--------------------------------------------
Name: J. Haines
Title: President and Chief Operating Officer
/s/ Stephen W. Walls
--------------------------------------------
Stephen W. Walls
/s/ Rick Sullivan
--------------------------------------------
Rick Sullivan
/s/ Randy Prude
--------------------------------------------
Randy Prude
/s/ Gary M. Glasscock
--------------------------------------------
Gary M. Glasscock
/s/ Terry Handsel
--------------------------------------------
Terry Handsel
JOEL D. SPUNGIN REVOCABLE TRUST
By: /s/ Joel D. Spungin
--------------------------------------------
Name: Joel D. Spungin
68
By execution of this Agreement in the space provided below, the undersigned
agree to act as Stockholders Agents in accordance with this Agreement.
The STOCKHOLDERS AGENTS in such capacity:
PENMAN PRIVATE EQUITY AND
MEZZANINE FUND, L.P.
By: PENMAN ASSET MANAGEMENT, L.P.,
the general partner
By: /s/ Lawrence C. Manson, Jr.
--------------------------------------------
Lawrence C. Manson, Jr., a general
partner
EQUUS II INCORPORATED
By: /s/ Nolan Lehmann
--------------------------------------------
Name: Nolan Lehmann
Title: President
/s/ Regis Farrell
--------------------------------------------
Regis Farrell
69