AGREEMENT AND PLAN OF REORGANIZATION
Dated as of November 8, 1996
among
INTEGRATED HEALTH SERVICES, INC.,
IHS ACQUISITION XXI, INC.
and
SELLING SHAREHOLDERS OF LIFEWAY, INC.,
and
LIFEWAY, INC.
TABLE OF CONTENTS
Page
ARTICLE I: MERGER.................................................................................................1
1.1 Merger..........................................................................................1
1.2 Issuance of IHS Stock...........................................................................1
1.3 Taking of Necessary Action......................................................................1
1.4 Assets..........................................................................................2
1.5 Liabilities.....................................................................................2
ARTICLE II: MERGER CONSIDERATION.................................................................................3
2.1 Determination and Payment of Merger Consideration...............................................3
2.2 IHS Stock.......................................................................................3
ARTICLE III: THE CLOSING.........................................................................................7
3.1 Time and Place of Closing.......................................................................7
3.2 Filings at Closing..............................................................................7
3.3 Effective Time..................................................................................7
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 8
4.1 Organization and Standing of the Company........................................................8
4.2 Absence of Conflicting Agreements...............................................................8
4.3 Consents........................................................................................8
4.4 Assets..........................................................................................8
4.5 Company Shares..................................................................................9
4.6 Trademarks......................................................................................9
4.7 Contracts.......................................................................................9
4.8 Financial Statements...........................................................................10
4.9 Material Changes...............................................................................11
4.10 Licenses; Permits..............................................................................11
4.11 Title, Condition of Personal Property..........................................................12
4.12 Legal Proceedings..............................................................................13
4.13 Employees......................................................................................13
4.14 Collective Bargaining, Labor Contracts, Employment Practices, Etc..............................13
4.15 ERISA..........................................................................................14
4.16 Insurance and Surety Agreements................................................................14
4.17 Relationships..................................................................................15
4.18 Absence of Certain Events......................................................................15
4.19 Compliance with Laws...........................................................................16
4.20 Finders........................................................................................16
4.21 Tax Returns....................................................................................16
4.22 Encumbrances Created by this Agreement.........................................................17
4.23 Subsidiaries and Joint Ventures................................................................17
4.24 No Untrue Statement............................................................................17
4.25 Medicare and Medicaid Programs.................................................................17
(i)
4.26 Leasehold Interests............................................................................17
4.27 Power and Authority............................................................................17
ARTICLE V: ADDITIONAL REPRESENTATIONS AND WARRANTIES OFSHAREHOLDERS.............................................17
5.1 Authority......................................................................................18
5.2 Binding Effect.................................................................................18
5.3 Absence of Conflicting Agreement...............................................................18
5.4 Consents.......................................................................................18
5.5 Ownership of Company Shares....................................................................18
5.6 Investment Representation......................................................................18
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................19
6.1 Organization and Standing......................................................................19
6.2 Absence of Conflicting Agreements..............................................................19
6.3 Consents.......................................................................................19
6.4 Finders........................................................................................19
6.5 Power and Authority............................................................................19
6.6 Binding Agreement..............................................................................20
6.7 Securities and Exchange Commission Filings.....................................................20
6.8 Capital Stock..................................................................................20
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE COMPANY.....................................................20
7.1 Access to Information and Records before Closing...............................................20
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING..........................................................21
8.1 Conduct of Business Pending Closing............................................................21
8.2 Negative Covenants of the Company..............................................................21
8.3 Affirmative Covenants..........................................................................21
8.4 Pursuit of Consents and Approvals..............................................................22
8.5 Supplementary Financial Information............................................................22
8.6 Exclusivity....................................................................................23
ARTICLE IX: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.........................................................23
9.1 Representations and Warranties.................................................................23
9.2 Performance of Covenants.......................................................................23
9.3 Delivery of Closing Certificate................................................................23
9.4 Opinions of Counsel............................................................................23
9.5 Legal Matters..................................................................................23
9.6 Authorization Documents........................................................................23
9.7 Material Change................................................................................24
9.8 Approvals......................................................................................24
9.9 Delivery of Stock Purchase Options.............................................................24
9.10 Other Documents................................................................................24
(ii)
ARTICLE X: CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS....................................................24
10.1 Representations and Warranties.................................................................24
10.2 Performance of Covenants.......................................................................25
10.3 Delivery of Closing Certificate................................................................25
10.4 Opinion of Counsel.............................................................................25
10.5 Legal Matters..................................................................................25
10.6 Authorization Documents........................................................................25
10.7 Approvals......................................................................................25
10.10 Payment of Promissory Notes....................................................................25
10.11 Other Documents................................................................................26
ARTICLE XI: OBLIGATIONS OF THE PARTIES AFTER CLOSING............................................................26
11.1 Survival of Representations and Warranties.....................................................26
11.2 Indemnification by Shareholders................................................................26
11.3 Indemnification by Buyer.......................................................................27
11.4 Assertion of Claims............................................................................27
11.5 Control of Defense of Indemnifiable Claims.....................................................27
11.6 Restrictions...................................................................................28
11.7 Records........................................................................................29
ARTICLE XII: TERMINATION........................................................................................29
12.1 Termination....................................................................................29
12.2 Effect of Termination..........................................................................29
ARTICLE XIII: MISCELLANEOUS.....................................................................................30
13.1 Costs and Expenses.............................................................................30
13.2 Performance....................................................................................30
13.3 Benefit and Assignment.........................................................................30
13.4 Effect and Construction of this Agreement......................................................30
13.5 Cooperation - Further Assistance...............................................................30
13.6 Notices........................................................................................30
13.7 Waiver, Discharge, Etc.........................................................................31
13.8 Rights of Persons Not Parties..................................................................31
13.9 Governing Law..................................................................................32
13.10 Amendments, Supplements, Etc...................................................................32
13.11 Severability...................................................................................32
(iii)
SCHEDULES
Schedule 4.3 - Consent List of the Company
Schedule 4.4 - Accounts Payable Aging Schedule
Schedule 4.5(a) - Company Shares
Schedule 4.5(b) - Convertible Instruments
Schedule 4.6 - Trademarks, Service Marks and Copyrights
Schedule 4.7 - Contracts
Schedule 4.8 - Financial Statements
Schedule 4.9 - Material Changes
Schedule 4.10 - Licenses, Permits
Schedule 4.11(b) - Leases of Personal Property, Liens
Schedule 4.12 - Legal Proceedings
Schedule 4.13 - Employees
Schedule 4.15(b) - Employee Benefit Plans
Schedule 4.15(c) - COBRA
Schedule 4.16 - Insurance and Surety Agreements
Schedule 4.17 - Relationships
Schedule 4.18 - Absence of Certain Events
Schedule 4.21 - Tax Returns
Schedule 4.23 - Joint Ventures and Subsidiaries
Schedule 4.25 - Medicare and Medicaid
Schedule 4.26 - Leasehold Interests
Schedule 6.3 - Consent List of Buyer
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit 9.4 - Seller's Legal Opinion
Exhibit 9.9 - Termination and Release Agreement
Exhibit 10.4 - Buyer's Legal Opinion
(iv)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is
made as of the 8th day of November, 1996, among INTEGRATED HEALTH SERVICES,
INC., a Delaware corporation ("Buyer"), IHS ACQUISITION XXI, INC., a Delaware
corporation ("Newco"), LIFEWAY PARTNERS LLC and FRED MCCALL-PEREZ (collectively,
the "Shareholders"), and LIFEWAY, INC., a Delaware corporation (the "Company").
WHEREAS, Shareholders are the owners of capital stock (the
"Company Shares") of the Company as set forth on Schedule 4.5; and
WHEREAS, Newco is a direct wholly-owned subsidiary of Buyer;
and
WHEREAS, the Board of Directors of Buyer, Newco, and the
Company deemed it advisable to merge Newco with and into the Company (the
"Merger") pursuant to this Agreement and the Plan of Merger annexed as Exhibit A
hereto (the "Plan of Merger") in a transaction intended to qualify under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, pursuant to the Merger all Company Shares will be
converted into the right to receive the Merger Consideration as described below;
and
WHEREAS, to effectuate the foregoing the parties desire to
adopt a plan of reorganization, in accordance with the provisions of Section
368(a) of the Code.
NOW, THEREFORE, Shareholders, Newco, Buyer, and the Company,
intending to be legally bound, agree as follows:
ARTICLE I: MERGER
1.1 Merger. Subject to the terms and conditions of this
Agreement at the Effective Time of Merger (as defined hereinafter), Newco shall
be merged with and into the Company and the separate existence of Newco shall
cease.
1.2 Issuance of IHS Stock. Buyer agrees that following the
Effective Time of Merger, as defined below, it will issue IHS Stock to the
extent set forth in, and in accordance with the terms of this Agreement and the
Plan of Merger.
1.3 Taking of Necessary Action. Prior to and after the
Effective Time of Merger, subject to the provisions of this Agreement, each of
Buyer, Newco, and the Company shall take all such action as may be necessary or
appropriate in order to effect the Merger and the conversion of Company Shares
as contemplated hereunder. In case at any time after the Effective
1
Time of Merger any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Buyer with full title to the Company
Shares and Shareholders with full title to IHS Stock, the parties shall take all
such necessary action.
1.4 Assets. As of the Closing Date, the assets of the Company
(the "Assets") will include all of the tangible and intangible assets of the
Company and its subsidiaries as presently constituted, including, without
limitation, all contract rights, leasehold interests, fixed and moveable
equipment, vehicles, furnishings, tangible personal property, inventory and
supplies (other than inventory, supplies, and other assets disposed of in the
ordinary course of business, consistent with prior practice), goodwill,
tradenames, trademarks, all patient records, books and files, Certificates of
Need, Medicare and Medicaid provider agreements and numbers, provider agreements
with third party payors, telephone numbers, and to the extent permitted by law,
all permits, licenses and other governmental approvals, free and clear of all
liens, except for Permitted Liens as defined in Section 4.11 below, claims and
encumbrances. The Assets of the Company as of the Closing Date shall also
include cash, accounts receivable, and prepaid expenses.
1.5 Liabilities. At the Closing, the Company shall deliver to
Buyer the balance sheet of the Company dated as of the Closing Date on a
consolidated basis, certified by the Company's Chief Financial Officer (the
"Closing Date Balance Sheet"). As of the Closing, the Company will not have any
liabilities other than such long-term liabilities and current liabilities as are
reflected on the Closing Date Balance Sheet. For purposes of this Agreement the
term "Liability" means any claim, lawsuit, liability, obligation or debt of any
kind or nature whatsoever, whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition, and whether or not of a type which
would be reflected as a liability on a balance sheet in accordance with
generally accepted accounting principles, consistently applied, including
without limitation (i) malpractice claims asserted by patients or any other tort
claims asserted, claims for breach of contract, or any claims of any kind
asserted by patients, former patients, employees or any other party that are
based on acts or omissions occurring on or before the Closing Date; (ii) amounts
due or that may become due to Medicare or Medicaid or any other health care
reimbursement or payment intermediary on account of Medicare cost report
adjustments or other payment adjustments attributable to any period on or prior
to the Closing Date, or any other form of Medicare or other health care
reimbursement recapture, adjustment or overpayment whatsoever with respect to
any period on or prior to the Closing Date ("Excess Reimbursement Liabilities");
(iii) any accounts payable or employment or other taxes except for those current
liabilities disclosed on the Closing Date Balance Sheet, and (iv) accrued but
unpaid compensation or other benefits to any of the Company's employees, agents,
consultants or advisers, including accrued vacation except for those current
liabilities disclosed on the Closing Date Balance Sheet.
2
ARTICLE II: MERGER CONSIDERATION
2.1 Determination and Payment of Merger Consideration. The
aggregate merger consideration payable by the Buyer for the Company Shares shall
be in an amount equal to NINE HUNDRED THOUSAND ($900,000.00) DOLLARS (the
"Merger Consideration"), which amount shall be payable at the Closing, by the
delivery to certain of the Shareholders or their respective assignees of
newly-issued shares of the Common Stock, par value $.001 per share, of Buyer
(the "IHS Stock"), based upon the valuation and subject to the terms and
conditions of Section 2.2 hereof. The amounts of IHS Stock payable at the
Closing to each respective Shareholder shall be as set forth below:
Shareholder IHS Stock
Lifeway Partners, LLC $ 650,000.00
Fred McCall-Perez $ 250,000.00
2.2 IHS Stock. The Merger Consideration as well as that
portion of the Bonus Payments as set forth in Section 10.9 below and that
portion of the Promissory Notes Payment as set forth in Section 10.10 below
payable by Buyer by means of the delivery of IHS Stock shall be paid in
accordance with and subject to the following:
(a) Share Value. The number of shares of IHS
Stock issuable pursuant to Sections 2.1, 10.9 and 10.10 shall be calculated
based upon a price per share of such stock equal to the closing New York Stock
Exchange ("NYSE") price of such stock on the day before the Closing Date.
(b) Registration Rights. Buyer will use its best
efforts to cause to be prepared and filed within ninety (90) days following the
Closing Date, and will use its best efforts to have declared effective by the
Securities and Exchange Commission (the "Commission"), a registration statement
for the registration of the IHS Stock under the Securities Act of 1933, as
amended (the "Securities Act"), and Buyer shall maintain the effectiveness of
such registration statement for a period of two (2) years following the date it
became effective, except to the extent that an exemption from registration may
be available.
(c) Registration Expenses. Buyer shall bear all
reasonable expenses related to such registration. Such costs and expenses shall
include, without limitation, the fees and expenses of counsel for Buyer and of
its accountants, all other costs, fees and expenses of Buyer incident to the
preparation, printing, registration and filing under the Securities Act of the
registration statement and all amendments and supplements thereto, the cost of
furnishing copies of each preliminary prospectus, each final prospectus and each
amendment or supplement thereto to underwriters, dealers and other purchasers of
IHS Stock and the costs and expenses (including
3
fees and disbursements of counsel) incurred in connection with the qualification
of IHS Stock under the Blue Sky laws of various jurisdictions.
(d) Resale Limitations. Fred McCall-Perez
individually covenants with Buyer that he shall not sell or otherwise transfer
any shares of IHS Stock received by him pursuant to this Agreement for a period
of one (1) year after the Closing Date. All sales by Holders shall be effected
solely through Smith Barney, Inc.
(e) Registration Procedures, etc. In connection
with the registration rights granted to the Holders with respect to the IHS
Stock as provided in this Section 2.2, Buyer covenants and agrees as follows:
(i) At Buyer's expense, Buyer will keep
the registration and qualification under this Section 2.2 effective (and in
compliance with the Securities Act) by such action as may be necessary or
appropriate for a period of two (2) years, except to the extent that an
exemption from registration may be available. Buyer will immediately notify the
Holders, at any time when a prospectus relating to a registration statement
under this Section 2.2 is required to be delivered under the Securities Act, of
the happening of any event known to Buyer as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(ii) Buyer shall furnish the Holders with
such number of prospectuses as shall reasonably be requested.
(iii) Buyer shall take all necessary
action which may be required in qualifying or registering IHS Stock included in
a registration statement for offering and sale under the securities or Blue Sky
laws of such states as reasonably are requested by the Holders, provided that
Buyer shall not be obligated to qualify as a foreign corporation or dealer to do
business under the laws of any such jurisdiction.
(iv) The information included or
incorporated by reference in the registration statement filed pursuant to this
Section 2.2 will not, at the time any such registration statement becomes
effective, contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein as necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or necessary to correct any statement in any earlier filing of
such registration statement or any amendments thereto. The registration
statement will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder. Buyer shall indemnify
the Holders of IHS Stock to be sold pursuant to the registration statement,
their successors and assigns, and each person, if any, who controls such Holders
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities Exchange Act of 1934 ("Exchange Act"), against all loss, claim,
damage expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Securities Act,
4
the Exchange Act or any other statute, common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in such registration statement executed by Buyer or based upon
written information furnished by Buyer filed in any jurisdiction in order to
qualify IHS Stock under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NYSE or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by any of the
Holders expressly for use in such registration statement, any amendment or
supplement thereto or any application, as the case may be. If any action is
brought against the Holders or any controlling person of the Holders in respect
of which indemnity may be sought against Buyer pursuant to this subsection
2.2(e)(iv), the Holders or such controlling person shall within thirty (30) days
after the receipt thereby of a summons or complaint, notify Buyer in writing of
the institution of such action and Buyer shall assume the defense of such
actions, including the employment and payment of reasonable fees and expenses of
counsel (reasonably satisfactory to the Holders or such controlling person). The
Holders or such controlling person shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of the Holders or such controlling person unless (A) the
employment of such counsel shall have been authorized in writing by Buyer in
connection with the defense of such action, or (B) Buyer shall not have employed
counsel to have charge of the defense of such action, or (C) such indemnified
party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to Buyer (in which case, Buyer shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the fees and expenses of not more than one additional firm of
attorneys for the Holders and/or such controlling person shall be borne by
Buyer. Except as expressly provided in the previous two sentences, in the event
that Buyer shall not previously have assumed the defenses of any such action or
claim, Buyer shall not thereafter be liable to the Holders or such controlling
person in investigating, preparing or defending any such action or claim. Buyer
agrees promptly to notify the Holders of the commencement of any litigation or
proceedings against Buyer or any of its officers, directors or controlling
persons in connection with the resale of IHS Stock or in connection with such
registration statement.
(v) The Holders of IHS Stock to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify Buyer, its officers and directors and each
person, if any, who controls Buyer within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act against all loss, claim,
damage, or expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from information furnished in writing
by or on behalf of such Holders, or their successors or assigns for specific
inclusion in such registration statement.
(f) Notice of Sale. If the Holders desire to
transfer all or any portion of IHS Stock, the Holders will deliver written
notice to Buyer, describing in reasonable detail
5
their intention to effect the transfer and the manner of the proposed transfer.
If the transfer is to be pursuant to an effective registration statement as
provided herein, the Holders will sell the IHS Stock in compliance with the
disclosure therein and discontinue any offers and sales thereunder upon notice
from Buyer that the registration statement relating to the IHS Stock being
transferred is not "current" until Buyer gives further notice that offers and
sales may be recommenced. In the event of any such notice from Buyer, Buyer
agrees to file expeditiously such amendments to the registration statement as
may be necessary to bring it current during the period specified in Section
2.6(e) and to give prompt notice to the Holders when the registration statement
has again become current. If the Holders deliver to Buyer an opinion of counsel
reasonably acceptable to Buyer and its counsel and to the effect that the
proposed transfer of IHS Stock may be made without registration under the
Securities Act, the Holders will be entitled to transfer IHS Stock in accordance
with the terms of the notice and opinion of their counsel.
(g) Furnish Information. It shall be a condition
precedent to the obligations of the Buyer to take any action pursuant to this
Section 2.2 that the Holders shall furnish in writing to the Buyer such
information regarding themselves, the IHS Stock held by them, and the intended
method of disposition of such securities as shall be required to effect the
registration of their IHS Stock. In that connection, each Holder shall be
required to represent to the Buyer that all such information which is given is
both complete and accurate in all material respects. Such Holders shall deliver
to the Buyer a statement in writing from the beneficial owners of such
securities that they bona fide intend to sell, transfer or otherwise dispose of
such securities. Each Holder will, severally, promptly notify Buyer at any time
when a prospectus relating to a registration statement covering such Holder's
shares under this Section 2.2 is required to be delivered under the Securities
Act, of the happening of any event known to such Holder as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the statements as then existing.
(h) Investment Representations. All shares of
IHS Stock to be issued hereunder will be newly issued shares of Buyer. The
Shareholders represent and warrant to Buyer that the IHS Stock being issued
hereunder is being acquired, and will be acquired, by the Shareholders for
investment for their own accounts and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act or the applicable state securities law; the Shareholders acknowledge that
the IHS Stock constitutes restricted securities under Rule 144 promulgated by
the Commission pursuant to the Securities Act, and may have to be held
indefinitely, and the Shareholders agree that no shares of IHS Stock may be
sold, transferred, assigned, pledged or otherwise disposed of except pursuant to
an effective registration statement or an exemption from registration under the
Securities Act, the rules and regulations thereunder, and under all applicable
state securities laws. The Shareholders have the knowledge and experience in
financial and business matters, are capable of evaluating the merits and risks
of the investment, and are able to bear the economic risk of such investment.
The Shareholders have had the opportunity to make inquiries of and obtain from
representatives and employees of Buyer such other information about Buyer as
they deem necessary in connection with such investment.
6
(i) Legend. It is understood that the
certificates evidencing the IHS Stock shall bear a legend substantially as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES
ACT OF 1933 OR AN OPINION OF THE COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(j) Certain Transferees. Except in the case of
any transfer to a person in an open market transaction subsequent to the
effective date of registration of the IHS Stock, no Holder shall transfer any
shares of IHS Stock to any person or entity unless such transferee shall have
agreed in writing to be bound by the provisions applicable to the Holders under
this Article II.
ARTICLE III: THE CLOSING
3.1 Time and Place of Closing. The closing (the "Closing") of
the transactions contemplated by this Agreement shall take place on November 13,
1996, at the offices of Buyer, or at such other time and place upon which the
parties may agree. The date on which the Closing is held is hereinafter called
the "Closing Date." Subject to the conditions set forth herein, at the Closing,
Shareholders shall deliver to Buyer the Company Shares, duly endorsed or
accompanied by one or more stock powers duly endorsed, as applicable, and Buyer
shall deliver to Shareholders those stock certificates issued in the name of
Shareholders representing that number of shares of IHS Stock payable to
Shareholders as the Merger Consideration, pursuant to Section 2.1 hereof.
3.2 Filings at Closing. At the Closing Date, Buyer and the
Company shall cause the Plan of Merger or such other certificate as required to
be filed in accordance with the Delaware General Corporation Law, and each of
Buyer and the Company shall take any and all lawful actions to cause the Merger
to become effective.
3.3 Effective Time. Subject to the terms and conditions set
forth herein, including receipt of all required regulatory approvals, the Merger
shall become effective at the time the Plan of Merger or such other certificate
as required by the Delaware Secretary of State is made effective (the "Effective
Time of Merger").
7
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders hereby jointly and severally represent and
warrant to Buyer as follows:
4.1 Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Copies of the Company's Articles of Incorporation and
By-Laws, and all amendments thereof to date, have been delivered to Buyer and
are complete and correct. The Company has the power and authority to own the
property and assets now owned by it and to conduct the business presently being
conducted by it.
4.2 Absence of Conflicting Agreements. Neither the execution
or delivery of this Agreement, including all Schedules and Exhibits hereto, or
any of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by Shareholders or the Company, nor the
performance by Shareholders or the Company of the transactions contemplated
hereby and thereby, conflicts with, or constitutes a breach of or a default
under (i) the Articles of Incorporation or By-Laws of the Company; or (ii) any
applicable law, rule, judgment, order, writ, injunction, or decree of any court,
currently in effect; or (iii) any applicable rule or regulation of any
administrative agency or other governmental authority currently in effect; or
(iv) any agreement, indenture, contract or instrument to which the Company is
now a party or by which any of the assets of the Company is bound.
4.3 Consents. Except as disclosed on Schedule 4.3, no
authorization, consent, approval, license, exemption by, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by any of the Shareholders or the Company.
4.4 Assets. As of the Closing, the consolidated Assets of the
Company will include all of the tangible and intangible assets of the Company as
presently constituted, including, without limitation, cash and accounts
receivable; provided, however, that Assets shall not include inventory, supplies
and other assets disposed of in the ordinary course of business, consistent with
the prior practice of the Company's business. The quantities of inventory items
included in the Assets are reasonable in light of the present and anticipated
volume of the Company and the inventory is good, usable, merchantable, and
salable in the ordinary course of the Company, in each case, as determined by
the Company in good faith and consistent with past practice. The accounts
receivable of the Company are reflected properly on its books and records in
accordance with GAAP, and have been billed or invoiced in the ordinary course of
business consistent with past practice. Schedule 4.4 sets forth a complete and
accurate accounts payable aging schedule of the Company as of September 30,
1996. The Assets are not subject to any liens or encumbrances, except as
identified on Schedule 4.11 and expressly accepted by Buyer hereto.
8
4.5 Company Shares. Schedule 4.5(a) sets forth: a) a complete
list and description of the authorized shares of the Company, the number of
shares issued and outstanding of each class or series of such shares, and the
identity of each shareholder of the Company, in each case indicating the class
and number of shares held and the number of shares subject to any outstanding
option or warrant; and b) the outstanding promissory notes of the Company. No
shares of the Company Shares are held in the treasury of the Company. Schedule
4.5(b) sets forth a complete list and description of all options, warrants and
convertible promissory notes, and any other agreements, rights, or instruments
which are or may become exercisable for or convertible into any capital of the
Company (the "Convertible Instruments"), the number of shares issuable upon
exercise or conversion (as the case may be), and the identity of each holder of
a Convertible Instrument. Except as set forth on Schedule 4.5(b), there are no
preemptive or first refusal rights to purchase or otherwise acquire capital
shares of the Company pursuant to any provision of law or the Articles of
Incorporation or By-laws of the Company or by agreement or otherwise. On the
Closing Date, there shall not be outstanding any warrants, options, or other
rights to subscribe for or purchase from the Company any capital shares of the
Company, nor shall there be outstanding any securities convertible into or
exchangeable for such shares.
4.6 Trademarks. Schedule 4.6 sets forth a complete and
accurate list of all registered trademarks, service marks, or applications for
any of the same, copyrights, and other items of intellectual property that are
owned, possessed or used by the Company. There are no claims or proceedings
pending or, to the knowledge of the Shareholders, overtly threatened against the
Company asserting that the use of any of the aforementioned properties or rights
infringes the rights of any other person, and, to the knowledge of Shareholders,
the Company is not infringing on the intellectual property rights of any other
person.
4.7 Contracts. Schedule 4.7 sets forth a complete and correct
list of all agreements, contracts and commitments of the following type to which
the Company is a party or by which the Company or the Company's assets are bound
and as to which the Company has any outstanding material obligations as of the
date hereof (the "Contracts"):
(a) each contract or agreement for the
employment or retention of, or collective bargaining, severance or termination
agreement with, any director, officer, employee, consultant, agent or group of
employees of the Company;
(b) each profit sharing, thrift, bonus,
incentive, deferred compensation, shares option, shares purchase, severance pay,
pension, retirement, hospitalization, insurance or other similar plan, agreement
or arrangement;
(c) each agreement or arrangement for the sale
of any of the Company's assets, properties or rights outside the ordinary course
of business (by sale of assets, sale of shares, merger or otherwise) which is
currently in effect;
9
(d) each contract currently in effect which
contains any provisions requiring the Company to indemnify or act for any other
person or entity;
(e) each agreement restricting the Company from
conducting business anywhere in the world;
(f) each partnership or joint venture contract
or similar arrangement or agreement which is likely to involve a sharing of
profits or future payments with respect to the Company's business or any portion
thereof;
(g) each licensing, distributor, dealer,
franchise, sales or manufacturer's representative, agency or other similar
contract, arrangement or commitment which involves consideration of more than
$15,000;
(h) each contract under which the Company
performs services; and
(i) any other agreement which involves
consideration of more than $15,000.
Except as indicated on Schedule 4.7, each of the Contracts was
entered into and requires performance in the ordinary course of business and is
in full force and effect. Except as indicated on Schedule 4.7, the Company is
not in default under any Contract and there has not been asserted, either by or
against the Company under any Contract, any written notice of default, set-off
or claim of default. To the knowledge of the Shareholders, the parties to the
Contracts other than the Company are not in default of any of their respective
obligations under the Contracts, and there has not occurred any event which with
the passage of time or the giving of notice (or both) would constitute a default
or breach under any Contract. All amounts payable by the Company under the
Contracts are, or will at the Closing Date, be on a current basis.
4.8 Financial Statements.
(a) The unaudited balance sheet of the Company
as of September 30, 1996, and the related statements of operations and
accumulated deficit and statements of cash flows for the 9 month period then
ended, certified by an officer of the Company (the "Unaudited Interim Financial
Statements"), previously delivered to Buyer by Shareholders, to the best of
Shareholders' knowledge present fairly in all material respects the financial
condition and results of operations of the Company at and for the periods
therein specified. Such statements of operation do not contain any items of
special or nonrecurring income or expense or any other income not earned or
expense not incurred in the ordinary course of business except as expressly
specified therein or as listed as adjustments on Schedule 4.8.
(b) The unaudited balance sheet of the Company
as of December 31, 1995, and the related statement of operations and accumulated
deficit and statement of cash flows for the year then ended, previously
delivered by Shareholders to Buyer, to the best of Shareholders' knowledge
present fairly in all material respects the financial condition and results
10
of operations of the Company at and for the period therein specified. Such
statements of operation do not contain any items of special or nonrecurring
income or expense or any other income not earned or expense not incurred in the
ordinary course of business except as expressly specified therein or as listed
as adjustments on Schedule 4.8.
(c) Except as set forth on Schedule 4.8 or as
expressly set forth on the Unaudited Interim Financial Statements, the Company
has no material liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any guarantees of any obligations of any other person or entity) of
any kind or nature whether or not required by GAAP to be reflected on a
corporate balance sheet and/or the notes thereto.
4.9 Material Changes. Except as set forth on Schedule 4.9,
since the date of the Unaudited Interim Financial Statements, there has not been
any material adverse change in the condition (financial or otherwise) of the
assets, properties or operations of the Company, whether or not covered by
insurance, and during such period of time the Company has and from the date of
this Agreement through the Closing, will have, conducted its business only in
the ordinary and normal course, and made no distributions to the Shareholders
other than wages paid in the ordinary and normal course of business.
4.10 Licenses; Permits. Schedule 4.10 sets forth a description
of (a) all licenses and other governmental or other regulatory permits,
authorizations or approvals required for the operation of the Company's business
that are now in effect, including all certificates of occupancy issued with
respect to the Company's business; and (b) each other license, permit, or other
authorization that is necessary for the operation of the Company's business (a
"License" and collectively, the "Licenses"). The Licenses constitute all of the
governmental, quasi-governmental and regulatory licenses, permits and
authorizations necessary to the operation of the business of the Company and its
subsidiaries as they are operated on the date hereof. The Company has delivered
to Buyer copies of all of the Licenses. Except as set forth on Schedule 4.10,
the Company and its subsidiaries own, possess or otherwise have the exclusive
legal right to use the Licenses, free and clear of all liens, pledges, claims or
other encumbrances of any nature whatsoever. The Company is not in material
default under any such License, and the Company and its subsidiaries have not
received any notice of any material default or any other material claim or
proceeding relating to any such License, except as set forth on Schedule 4.10.
Except as set forth on Schedule 4.10, each License is in full force and effect,
and neither the Company nor any of its subsidiaries has received written notice
of any proceeding to terminate or suspend any License or of any condition or
event which, if uncured, would result in the termination or suspension of any
License. None of the Licenses are: (a) provisional, probationary, or restricted
in any way except to the extent qualified by any outstanding deficiencies or
citations, particulars of which have been set forth on Schedule 4.10; or (b)
subject to any investigation, cancellation, impairment, limitation, order,
complaint, proceeding, or suspension nor is such threatened or pending. Except
as set forth on Schedule 4.10, all Licenses are in full force and effect. No
conditions requiring changes in the operation of the Company or any of its
subsidiaries have been imposed, formally or informally, by any License issuer
during the past twenty-four (24) months. No Shareholder, director or officer,
employee or former employee of the Company, or any person, firm or corporation
other than the Company owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part in any of the Licenses.
11
4.11 Title, Condition of Personal Property.
(a) The Company has good and indefeasible title
to, or valid and subsisting leasehold interests in, all of the personal property
located at or used in connection with operation of its business, subject to no
mortgage, security interest, pledge, lien, claim, encumbrance or charge, or
restraint on transfer whatsoever other than Permitted Liens (as defined below).
No other person has any right to the use or possession of any of such property
which is owned and no currently effective financing statement with respect to
such personal property has been filed under the Uniform Commercial Code in any
jurisdiction, and the Company has not signed any such financing statement or any
security agreement authorizing any secured party thereunder to file any such
financing statement except for the Permitted Liens. All of such personal
property comprising equipment, improvements, furniture and other tangible
personal property in use at the Company, whether owned or leased, is in good
operating condition and repair, subject to normal wear and tear, and is
sufficient to enable the Company to operate its business in a manner consistent
with its operation during the immediately preceding twelve (12) months.
(b) Except as set forth on Schedule 4.11(b), no
tangible personal property used by the Company in connection with the operation
of its business is subject to a lease, conditional sale, security interest or
similar arrangement. Shareholders have delivered to Buyer a complete and correct
copy of each of the leases and other agreements listed on Schedule 4.11(b). All
of said personal property leases are valid, binding and enforceable in
accordance with their respective terms and are in full force and effect. The
Company is not in default under any of such leases and there has not been
asserted, either by or against the Company under any of such leases, any written
notice of default, set-off, or claim of default. To the best knowledge of
Shareholders, the parties to such leases other than the Company are not in
default of their respective obligations under any of such leases, and there has
not occurred any event which with the passage of time or giving of notice (or
both) would constitute such a default or breach under any of such leases.
(c) "Permitted Liens" shall mean
(i) carriers', warehouseman's,
mechanics, materialmen's, repairmen's or other like liens arising in the
ordinary course of business which are (i) not overdue for a period of more than
30 days or (ii) which are being contested in good faith and by appropriate
proceedings, provided that if such contest shall continue for more than 30 days,
the amount thereof shall be bonded or properly reserved against at the end of
such 30-day period;
(ii) deposits to secure the performance
of bids, trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
like nature incurred in the ordinary course of business;
(iii) rights of lessees under leases set
forth on Schedule 4.11(b);
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(iv) pledges or deposits in connection
with workman's compensation, unemployment insurance, and other social security
legislation; and
(v) liens described on Schedule 4.11(b).
4.12 Legal Proceedings. Other than as set forth on Schedule
4.12, there are no claims, actions, suits or proceedings or arbitrations, either
administrative or judicial, pending, or, to the knowledge of the Shareholders,
overtly threatened against or affecting the Company or the Company's ability to
consummate the transactions contemplated herein, at law or in equity or
otherwise, before or by any court or governmental agency or body, domestic or
foreign, or before an arbitrator of any kind.
4.13 Employees. Schedule 4.13 contains a complete and correct
list of the name, position, and current rate of compensation and any other
compensation arrangements or fringe benefits, of (i) each officer and management
level employee of the Company, and (ii) any consultant or agent of the Company,
that is not reflected in any agreement or document referred to in Schedule 4.7.
Except as set forth on Schedule 4.13, the Company does not have any pension,
profit sharing, or welfare benefit plan applicable to any of its employees.
Except as described on Schedule 4.13, (i) no such employee, consultant or agent
has any vested or unvested retirement benefits or other termination benefits,
and (ii) the Company has no liability for any accrued and unpaid employee
benefits (including accrued vacation and sick days) for which adequate reserves
are not reflected on the Company's September 30, 1996 balance sheet.
4.14 Collective Bargaining, Labor Contracts, Employment
Practices, Etc. During the two years prior to the Closing Date, there has been
no material adverse change in the relationship between the Company and its
employees nor any strike or material labor disturbance by such employees
affecting the Company's business and, to the knowledge of the Company, there is
no indication that such a change, strike or labor disturbance is likely. The
Company's employees are not represented by any labor union or similar
organization and the Company has no reason to believe that there are pending or
threatened any activities, the purpose of which is to achieve such
representation, of all or some of the Company's employees. Except as set forth
on Schedule 4.7 or Schedule 4.13, the Company has no collective bargaining or
other labor contracts, employment contracts, pension, profit-sharing,
retirement, insurance, bonus, deferred compensation or other employee benefit
plans, agreements or arrangements with respect to its employees. The Company is
in material compliance with the requirements prescribed by all Federal, state
and local statutes, orders and governmental rules and regulations ("Government
Requirements") applicable to any of the employee benefit plans, agreements and
arrangements identified on Schedule 4.7 and Schedule 4.13, including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Immigration Reform and Control Act, the Worker Adjustment and
Retraining Notification Act of 1988, any such Government Requirements respecting
employment determination, equal opportunity, affirmative action, employee
privacy, wrongful or unlawful termination, workers' compensation, occupational
safety and health requirements, labor management relations and unemployment
insurance, or related matters and there are no threatened or pending claims
relating thereto, in each case. In the event of termination of employment of an
employee of Company, Buyer will not, pursuant to
13
any agreement with any Shareholder or Company or by reason of any representation
made or plan adopted by any Shareholder prior to the Closing, be liable to any
employee of the Company for so-called "severance pay", parachute payments or any
other similar payments or benefits, including, without limitation,
post-employment healthcare (other than pursuant to the continuation health care
provisions of Section 4980B of the Internal Revenue Code of 1986, as amended or
Section 601 through 608 of ERISA ("COBRA") or insurance benefits.
4.15 ERISA.
(a) The Company does not maintain or make
contributions to and has not at any time in the past maintained or made
contributions to, any employee benefit plan which is subject to the minimum
funding standards of ERISA. The Company does not now maintain or make
contributions to, and has not at any time in the past maintained or made
contributions to, any multi-employer plan subject to the terms of the
Multi-employer Pension Plan Amendment Act of 1980 (the "Multi-employer Act").
(b) Schedule 4.15(b) sets forth each severance
agreement, and each plan, agreement, arrangement or plan, bonus plan, deferred
compensation agreement, employee pension, profit sharing, savings or retirement
plan, group life, health, or accident insurance or other employee benefit plan,
agreement, arrangement or commitment, including, without limitation, any
commitment arising under severance, holiday, vacation, Christmas or other bonus
plans (including, but not limited to, "employee benefit plans", as defined in
Section 3(3) of ERISA maintained by Company).
(c) Schedule 4.15(c) identifies all employees of
the Company on leave of absence eligible to receive health benefits, as required
by COBRA. Notice of the availability of COBRA coverage has been provided to all
employees of the Company on leave of absence entitled thereto, and all persons
electing such coverage are being (or have been, if applicable) provided such
coverage.
4.16 Insurance and Surety Agreements. Schedule 4.16 contains a
true and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by the Company (including but not limited to
professional liability insurance, and any state sponsored plan or program for
worker's compensation); and (b) all bonds, indemnity agreements and other
agreements of suretyship made for or held by the Company, including a brief
description of the character of the bond or agreement and the name of the surety
or indemnifying party. Schedule 4.16 sets forth for each such insurance policy
the name of the insurer, the amount of coverage, the type of insurance, the
policy number, the annual premium and a brief description of the nature of
insurance included under each such policy and of any claims made thereunder
during the past two (2) years. Such policies are owned by and payable solely to
the Company, and said policies or renewals or replacements thereof will be
outstanding and duly in force at the Closing Date. All insurance policies listed
on Schedule 4.16 are in full force and effect, all premiums due on or before the
Closing Date have been or will be paid on or before the Closing Date, the
Company has not been advised by any of its insurance carriers of an intention to
terminate or modify any such policies other than under circumstances where the
Company has received a commitment for
14
a replacement policy, nor has the Company failed to comply with any of the
material conditions contained in any such policies.
4.17 Relationships. Except as disclosed on Schedule 4.17
hereto, no Shareholder and no partner or any affiliate of any Shareholder has,
or at any time within the last two (2) years has had, a material ownership
interest in any business, corporate or otherwise, that is a party to, or in any
property that is the subject of, business relationships or arrangements of any
kind relating to the operation of the Company by which the Company will be bound
after the Closing.
4.18 Absence of Certain Events. Except as set forth on
Schedule 4.18, since the date of the Unaudited Interim Financial Statements, the
Company has not, and from the date of this Agreement through the Closing Date,
the Company will not have:
(a) sold, assigned or transferred any of its
assets or properties, except in the ordinary course of business;
(b) mortgaged, pledged or subjected to any lien,
pledge, mortgage, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, other than a Permitted Lien, any of the
Company's assets;
(c) made or suffered any amendment or
termination of any material contract, commitment, instrument or agreement other
than in the ordinary course of business;
(d) except in the ordinary course of business,
or otherwise as necessary to comply with any applicable minimum wage law,
increased the salaries or other compensation of any of its employees, or made
any increase in, or any additions to, other benefits to which any of such
employees may be entitled;
(e) failed to pay or discharge when due any
liabilities, the failure to pay or discharge which has caused or will cause any
actual material damage or give rise to the risk of a material loss to the
Company;
(f) changed any of the accounting principles
followed by it or the methods of applying such principles;
(g) entered into any material transaction other
than in the ordinary course of business;
(h) failed to collect, withhold and/or pay to
any proper governmental agency any federal, state or local income, franchise,
sales, use, withholding or similar tax that applicable law requires be
collected, withheld and/or paid;
(i) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental agency
relating to it or its property which will likely
15
have or has had a materially adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, operations, business or prospects
of the Company or any of its subsidiaries;
(j) entered into any transaction other than in
the ordinary course of business involving consideration in excess of $15,000;
and
(k) discharged, terminated, separated with, or
otherwise lost any key employees.
4.19 Compliance with Laws. The Company is in compliance with
all Governmental Requirements (as defined herein). The Company has not, within
the period of twelve months preceding the date of this Agreement, received any
written notice that the Company or any of the Assets fail to comply in any
material respect with any applicable Federal, state, local or other governmental
laws or ordinances, or any applicable order, rule or regulation of any Federal,
state, local or other governmental agency having jurisdiction over its business
("Governmental Requirements"). The Company shall report to Buyer, within five
(5) business days after receipt thereof, any written notices that the Company is
not in compliance in any material respect with any of the foregoing. Neither the
Company, nor any officer, director, employee, agent, or other representative of
Company has made, directly, or indirectly, any illegal bribes, kickbacks, or
political contributions with corporate funds, illegal payments from corporate
funds to governmental officials in their individual capacities or illegal
payments from corporate funds to obtain or retain business either within the
United States or abroad.
4.20 Finders. No broker or finder has acted for the
Shareholders or the Company in connection with the transactions contemplated by
this Agreement, and no other broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, understandings or arrangements with the Shareholders or the Company.
4.21 Tax Returns.
(a) Except as set forth in Schedule 4.21, (i)
all Tax (as defined below) returns, statements, reports and forms or extensions
with respect thereto required to be filed with any Federal, state, local or
other governmental department or court or other authority having jurisdiction
over it ("Governmental Authority") on or before the Closing Date by or on behalf
of the Company (collectively, the "Tax Returns"), have been or will be timely
filed on or before the Closing Date in accordance in all material respects with
all applicable Governmental Requirements; and (ii) the Company has timely paid
all Taxes payable by it.
(b) For purposes of this Agreement, "Tax" means
any net income, gross income, sales, use, franchise, personal, or real property
tax.
16
4.22 Encumbrances Created by this Agreement. The execution and
delivery of this Agreement, or any of the Company's Transaction Documents, does
not, and the consummation of the transactions contemplated hereby or thereby
will not, create any liens or other encumbrances on any of the Company's assets
in favor of third parties.
4.23 Subsidiaries and Joint Ventures. Schedule 4.23 sets forth
a complete list of all subsidiaries, joint ventures and partnerships in which
the Company is the record or beneficial owner of more than ten (10%) percent of
the equity interest. All of the issued and outstanding capital stock of the
subsidiaries listed on Schedule 4.23 hereto is owned of record or beneficially
by the Company or by one of the listed subsidiaries on Schedule 4.23.
4.24 No Untrue Statement. None of the representations and
warranties in this Article IV contains any untrue statement of material fact or
omits to state a material fact necessary, in light of the circumstance under
which it was made, in order to make any such representation not misleading in
any material respect.
4.25 Medicare and Medicaid Programs. The Company, to the
extent necessary to conduct the Company in a manner consistent with past
practice, is qualified for participation in the Medicare and Medicaid programs.
Except as reflected on Schedule 4.25, (a) no Shareholder or the Company has
received any notice of recoupment with respect to the Company's operations
from the Medicare or Medicaid programs, or any other third party reimbursement
source, (b) there is no basis for the assertion after the Closing Date of any
such recoupment claim against Buyer which arose out of any transactions on the
part of Company prior to the Closing or against any Shareholder for which Buyer
will be liable, and (c) to the knowledge of Shareholders and the Company, no
Medicare and Medicaid investigation, survey or audit is pending, threatened or
imminent with respect to the operation of the Company prior to the Closing.
4.26 Leasehold Interests. Schedule 4.26 hereto sets forth a
complete and correct list of all leases pursuant to which the Company or any of
its subsidiaries leases real property. Each of the Company and its subsidiaries
has valid Leasehold interests in all such real property free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever, except for
Permitted Liens. The Company has provided access to the Buyer to complete and
correct copies of the leases identified in Schedule 4.26.
4.27 Power and Authority. Company and Shareholders have all
requisite power and authority to execute, deliver, and perform this Agreement,
and as of the Closing, Company and Shareholders will have all requisite power
and authority to execute and deliver the Transaction Documents required to be
delivered by each party to the Buyer at the Closing.
ARTICLE V: ADDITIONAL REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDERS
Each Shareholder hereby severally represents and warrants to
Buyer as follows:
17
5.1 Authority. Such Shareholder has the full legal power and
authority to make, execute, deliver and perform this Agreement and the
Transaction Documents. Such execution, delivery, performance and consummation
have been duly authorized by all necessary action, corporate or otherwise, on
the part of such Shareholder, and any necessary consents of holders of
indebtedness of such Shareholder have been obtained.
5.2 Binding Effect. This Agreement and all Transaction
Documents to which such Shareholder is a party constitute the valid and binding
obligations of such Shareholder, enforceable against it in accordance with their
respective terms.
5.3 Absence of Conflicting Agreement. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by such
Shareholder, nor the performance by such Shareholder of the transactions
contemplated hereby and thereby conflicts with, or constitutes a breach of or a
default under (i) any law, rule, judgment, order, writ, injunction, or decree of
any court currently in effect applicable to such Shareholder, or (ii) any rule
or regulation of any administrative agency or other governmental authority
currently in effect applicable to such Shareholder, or (iii) any agreement,
indenture, contract or instrument to which such Shareholder is now a party or by
which any of the assets of such Shareholder is bound.
5.4 Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents by such Shareholder.
5.5 Ownership of Company Shares. Such Shareholder is the
lawful record and beneficial owner of all of the Company Shares shown as owned
by such Shareholder in Schedule 4.5(a), with good and marketable title thereto,
free and clear of all liens and encumbrances, claims and other charges thereon
of any kind. Such Shareholder has the full legal power to transfer and deliver
such Company Shares in accordance with this Agreement, and delivery of such
Company Shares to Buyer pursuant hereto will convey good and marketable title
thereto, free and clear of all liens and encumbrances, claims and other charges
thereon or any kind. On the Closing Date, there shall not be outstanding any
warrants, options, or other rights to subscribe for or purchase from the Company
any capital shares of the Company, nor shall there be outstanding any securities
convertible into or exchangeable for such shares.
5.6 Investment Representation. The IHS Stock being issued
hereunder is being acquired, and will be acquired, by such Shareholder for
investment for his own account and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act or any
applicable state securities law; Such Shareholder acknowledges that the IHS
Stock constitutes restricted securities under Rule 144 promulgated by the
Commission pursuant to the Securities Act, may have to be held indefinitely and
may not be sold, transferred,
18
assigned, pledged or otherwise disposed of except pursuant to an effective
registration statement or an exemption from registration under the Securities
Act and the rules and regulations thereunder. Such Shareholder has the knowledge
and experience in financial and business matters, is capable of evaluating the
merits and risks of the investment, and is able to bear the economic risk of
such investment. Such Shareholder has been provided with such materials as are
generally provided to shareholders of IHS and has had the opportunity to make
inquiries of and obtain from IHS representatives and employees such other
information about IHS as they deem necessary in connection with such investment.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the
Shareholders as follows:
6.1 Organization and Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Copies of the Buyer's Articles of Incorporation and By-Laws, and all
amendments thereof to date, have been delivered to Shareholders, and are
complete and correct. Buyer has the power and authority to own the property and
assets now owned by it and to conduct its business presently conducted by it.
6.2 Absence of Conflicting Agreements. Neither the
execution or delivery of this Agreement, including Buyer's Schedules and
Exhibits hereto, or any of the Transaction Documents by Buyer nor the
performance by Buyer of the transactions contemplated hereby and thereby,
conflicts with, or constitutes a breach of or a default under (i) the
Certificate of Incorporation or By-Laws of Buyer; or (ii) any applicable law,
rule, judgment, order, writ, injunction, or decree of any court, currently in
effect; or (iii) any applicable rule or regulation of any administrative agency
or other governmental authority currently in effect; or (iv) any material
agreement, indenture, contract or instrument to which the Buyer is now a party
or by which any of the assets of the Buyer is bound.
6.3 Consents. Except as set forth in Schedule 6.3, no
authorization, consent, approval, license, exemption by, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by the Buyer.
6.4 Finders. No broker or finder has acted for the Buyer in
connection with the transactions contemplated by this Agreement, and no other
broker or finder is entitled to any broker's or finder's fee or other commission
in respect thereof based in any way on agreements, understandings or
arrangements with the Buyer.
6.5 Power and Authority. Buyer has the corporate power and
authority to execute, deliver and perform this Agreement, and as of the Closing,
Buyer will have the corporate power and authority to execute and deliver the
Transaction Documents required to be delivered by it to the Company at the
Closing.
19
6.6 Binding Agreement. This Agreement has been duly executed
and delivered by Buyer. This Agreement is, and when executed and delivered by
Buyer at the Closing each of the Transaction Documents executed by Buyer will
be, the legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms.
6.7 Securities and Exchange Commission Filings. Buyer has
furnished the Company with a correct and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by Buyer with the
Commission on or after January 1, 1996 (the "SEC Documents"), which are all the
documents (other than preliminary material) that Buyer was required to file with
the Commission on or after January 1, 1996. As of their respective dates, none
of the SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statements therein, or
omitted to state any material fact required to be stated therein in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the SEC Documents complied when filed in all material
respects with the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated by
the SEC thereunder. The financial statements of the Buyer included in the SEC
Documents complied as to form in all material respects with the then applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with GAAP during
the periods involved (except as may have been indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Form 10-Q promulgated
by the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments) the consolidated financial
position of the Buyer and its consolidated subsidiaries as at the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended.
6.8 Capital Stock. Buyer's Form 10-Q filed with the Commission
with respect to the fiscal quarter ended September 30, 1996 (the "Form 10-Q"),
sets forth a true and complete description of the authorized and outstanding
shares of capital stock of Buyer as of such date. All outstanding shares of IHS
Stock are validly issued, fully paid and non-assessable and not subject to
preemptive rights. Buyer has duly authorized and reserved for issuance the IHS
Stock, and, when issued in accordance with the terms of Article II, the IHS
Stock will be validly issued, fully paid and nonassessable and free of
preemptive rights.
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE COMPANY
7.1 Access to Information and Records before Closing. Prior to
the Closing Date, Buyer may make, or cause to be made, such investigation of the
Company's financial and legal condition as Buyer deems necessary or advisable to
familiarize itself with the Company and/or matters relating to its history or
operation. The Company shall permit Buyer and its authorized representatives
(including legal counsel and accountants), to have full access to the Company's
books and records upon reasonable notice and during normal business hours, and
the Company will furnish, or cause to be furnished, to Buyer such financial and
operating data and
20
other information and copies of documents with respect to the Company's
products, services, operations and assets as Buyer shall from time to time
reasonably request. The documents to which Buyer shall have access shall
include, but not be limited to, the Company's tax returns and related work
papers since its inception and the Company shall make, or cause to be made,
extracts thereof as Buyer or its representatives may request from time to time
to enable Buyer and its representatives to investigate the affairs of the
Company and the accuracy of the representations and warranties made in this
Agreement. The Company shall cause its accountants to cooperate with Buyer and
to disclose the results of audits relating to the Company and to produce the
working papers relating thereto.
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
8.1 Conduct of Business Pending Closing. Between the date
of this Agreement and the Closing, the Company shall maintain its existence and
shall conduct its business in the ordinary course of business consistent with
past practice.
8.2 Negative Covenants of the Company. Without the prior
written approval of Buyer, which approval shall not be unreasonably withheld,
the Company shall not, between the date hereof and the Closing:
(a) cause or permit to occur any of the events
or occurrences described in Section 4.18 (Absence of Certain Events) of this
Agreement; or
(b) dissolve, merge or enter into a share
exchange with or into any other entity; or
(c) enter into any contract or agreement, or
negotiations in connection with any union or other collective bargaining
representative representing any employees at the Company without the prior
written consent of Buyer, which consent shall not be unreasonably withheld; or
(d) make any change to its by-laws or articles
of incorporation.
8.3 Affirmative Covenants. Between the date hereof and the
Closing, the Company shall:
(a) maintain the physical assets of the Company
in substantially the state of repair, order and condition as on the date hereof,
reasonable wear and tear or loss by casualty excepted;
(b) maintain in full force and effect all
Licenses currently in effect with respect to the Company unless such License is
no longer necessary for the operation of the Company;
21
(c) maintain in full force and effect the
insurance policies and binders currently in effect with respect to the Company,
or the replacements thereof, including without limitation those listed on
Schedule 4.16;
(d) utilize their reasonable efforts to preserve
intact the present business organization of the Company; keep available the
services of the Company's present employees and agents; and maintain the
Company's relations and goodwill with suppliers, employees, and any others
having business relating to the Company;
(e) maintain all of the books and records
relating to the Company in accordance with its past practices;
(f) comply in all material respects with all
provisions of the Contracts listed in Schedule 4.7 and with any other material
agreements that the Company have entered into in the ordinary course of business
since the date of this Agreement, and comply in all material respects with the
provisions of all material laws, rules and regulations applicable to the
Company's business;
(g) cause to be paid when due, all taxes,
assessments and charges or levies imposed upon them or on any of their
properties or which they are required to withhold and pay over;
(h) promptly advise Buyer in writing of the
threat or commencement against the Company of any claim, action, suit or
proceeding, arbitration or investigation that would materially adversely affect
the operations, properties, assets or prospects of the Company; and
(i) shall notify the Buyer in writing of any
event involving the Company and its subsidiaries which has had or may be
reasonably expected to have a material adverse effect on the business or
financial condition of the Company and its subsidiaries or may involve the loss
of contracts with the Company's customers.
8.4 Pursuit of Consents and Approvals. Prior to the Closing,
Buyer shall use its reasonable efforts to obtain all consents and approvals of
governmental agencies and all other parties necessary for the lawful
consummation of the transactions contemplated hereby and the lawful use, of the
Company ("Required Approvals"). The Company shall cooperate with and use its
reasonable efforts to assist Buyer in obtaining all such approvals, but shall
not be required to pay any money to third parties in order to so assist Buyer.
8.5 Supplementary Financial Information. Within twenty-five
(25) days after the end of each calendar month between the date of this
Agreement and the Closing Date, the Company shall provide, or cause to be
provided, to Buyer unaudited financial statements (including at a minimum income
statements and a balance sheet) for the month, which statements shall present
fairly, in all material respects, the results of the operations of the Company
at such
22
date and for the period covered thereby, all in accordance with generally
accepted accounting principles applied on a consistent basis.
8.6 Exclusivity. Until the earlier of Closing or the
termination of this Agreement pursuant to Section 12.1, neither the Company nor
the Shareholders, nor any of their respective affiliates, shall engage in any
discussions or negotiations directly or indirectly with any other party in
respect of the sale of the Company Shares or of substantially all of the assets
of the Company, or in respect of any merger, consolidation, or other
reorganization of the Company.
ARTICLE IX: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's obligation to consummate the purchase of the Company
Shares is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by Buyer in
writing. Upon failure of any of the following conditions, Buyer may terminate
this Agreement prior to Closing pursuant to and in accordance with Article XII
herein.
9.1 Representations and Warranties. The representations and
warranties of Shareholders in Articles IV and V shall be true and correct in all
material respects at and as of the Closing Date, as though such representations
and warranties were made at and as of such time except to the extent affected by
the transactions herein contemplated.
9.2 Performance of Covenants. Each of the Shareholders and the
Company shall have performed or complied in all material respects with their
respective agreements and covenants required by this Agreement to be performed
or complied with by it prior to or at the Closing.
9.3 Delivery of Closing Certificate. Each of the Shareholders,
and the Company by its president and chief financial officer, shall have
executed and delivered to Buyer a certificate, dated the Closing Date, upon
which Buyer may rely, certifying that the conditions contemplated by Sections
9.1 and 9.2 applicable to it have been satisfied.
9.4 Opinions of Counsel. Shareholders shall have delivered to
Buyer an opinion, dated the Closing Date, of their counsel, in the form of
Exhibit 9.4.
9.5 Legal Matters. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any governmental
authority which prevents the consummation of the transactions contemplated by
this Agreement shall have been issued and remain in effect.
9.6 Authorization Documents. Buyer shall have received a
certificate of the Secretary or other officer of the Company certifying a copy
of resolutions of its Board of Directors authorizing its execution and full
performance of the Transaction Documents and the incumbency of its officers.
23
9.7 Material Change. Since the date of this Agreement there
shall not have been any material adverse changes in the condition (financial or
otherwise) of the assets, properties or operations of the Company.
9.8 Approvals.
(a) The consent or approval of all persons necessary
for the consummation of the transactions contemplated hereby shall have been
granted, including without limitation, the Required Approvals;
(b) None of the foregoing consents or approvals (i)
shall have been conditioned upon the modification, cancellation or termination
of any material lease, contract, commitment, agreement, license, easement, right
or other authorization with respect to the Company, other than as disclosed or
approved hereunder, or (ii) shall impose on the Buyer any material condition or
provision or requirement with respect to the Company or its operations that is
more restrictive than or different from the conditions imposed upon such
operations prior to Closing.
9.9 Delivery of Stock Purchase Options. The Shareholders and
the Company shall have caused each current Company employee in possession of any
stock purchase options in the Company, and each former Company employee in
possession of vested stock purchase options in the Company (collectively, the
"Option Holders") to have delivered to the Buyer any and all stock purchase
options held by such Option Holder, together with a Termination and Release
Agreement signed by such Option Holder, substantially in the form of Exhibit 9.9
attached hereto.
9.10 Other Documents. Shareholders shall have furnished Buyer
with all other documents, certificates and other instruments required to be
furnished to Buyer by Shareholders pursuant to the terms hereof.
ARTICLE X: CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Shareholders' obligation to consummate the sale of the Company
Shares is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
10.1 Representations and Warranties. The representations and
warranties of Buyer in this Agreement shall be true at and as of the Closing
Date as though such representations and warranties were made at and as of such
time, except to the extent affected by the transactions herein contemplated.
24
10.2 Performance of Covenants. Buyer shall have performed or
complied with each of its agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing.
10.3 Delivery of Closing Certificate. Buyer shall have
delivered to Shareholders a certificate of the chief executive officer of Buyer
dated the Closing Date upon which Shareholders can rely, certifying that the
statements made in Sections 10.1 and 10.2 are true, correct and complete as of
the Closing Date.
10.4 Opinion of Counsel. Buyer shall have delivered to
Shareholders an opinion, dated the Closing Date, of Blass & Driggs, Esqs.,
counsel for Buyer, in the form of Exhibit 10.4.
10.5 Legal Matters. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any governmental
authority which prevents the consummation of the transactions contemplated by
this Agreement shall have been issued and remain in effect.
10.6 Authorization Documents. Shareholders shall have received
a certificate of the Secretary or other officer of Buyer certifying a copy of
resolutions of the Board of Directors of Buyer authorizing Buyer's execution and
full performance of the Transaction Documents and the incumbency of the officers
of Buyer.
10.7 Approvals. The Required Approvals shall have bee
granted.
10.8 Payment of Fees. Buyer shall have paid the following fees
as of the Closing Date: a) the amount of $123,582.00 to LifeWay Partners LLC,
payable in cash, as and for an advisory fee for services performed for the
Company on a cost basis; and b) the amount of $100,000.00 in payment of accrued
legal fees to Blass & Driggs, Esqs., payable in cash.
10.9 Payment of Bonuses. Buyer shall have funded the following
bonuses (the "Bonus Payments") as of the Closing Date: a) the amount of
$406,000.00 in payment of a bonus to Fred McCall-Perez, of which amount
$196,000.00 shall be payable in cash and $210,000.00 shall be payable by the
issuance of IHS Stock, based upon the valuation and otherwise issuable in
accordance with and subject to Section 2.2; and b) the amount of $37,500.00 in
payment of a bonus to John Strobeck, which amount shall be payable to John
Strobeck entirely in cash.
10.10 Payment of Promissory Notes. Buyer shall have paid the
principal balance and all of the accrued and unpaid interest under those certain
promissory notes of the Company referred to below (the "Promissory Notes
Payment"), which amount shall be payable to the holders of those promissory
notes in part in cash and in part by the issuance of IHS Stock, based upon the
valuation and otherwise issuable in accordance with and subject to Section 2.2
hereof. The amounts of cash and IHS Stock payable under this Section 10.10, and
the holders to whom these amounts shall be payable, are as follows:
25
Note Holder Note Cash Payable IHS Stock
Lifeway Partners, LLC 1) Promissory Note dated
11/17/95 in the Original
Principal Amount of
$750,000.00 $ 0 $ 750,000.00
accrued interest $ 74,836.00 $ 0
2) Promissory Note dated
8/16/96 in the Original
Principal Amount of
$375,000.00 $ 0 $ 375,000.00
accrued interest $ 9,144.00 $ 0
John Strobeck 1) Promissory Note dated
8/16/96 in the Original
Principal Amount of
$375,000.00 $ 375,000.00 $ 0
accrued interest $ 9,144.00 $ 0
10.11 Other Documents. Buyer shall have furnished Shareholders
with all documents, certificates and other instruments required to be furnished
to Shareholders by Buyer pursuant to the terms hereof.
10.12 Consulting Agreement. Buyer shall have entered into a
consulting agreement with Fred McCall-Perez, on terms and conditions as shall be
mutually acceptable to the parties thereto.
ARTICLE XI: OBLIGATIONS OF THE PARTIES AFTER CLOSING
11.1 Survival of Representations and Warranties. Except as
provided in Section 11.4, all representations, warranties, and agreements made
by each party in this Agreement or in any Schedule certificate, document or list
delivered by any such party pursuant hereto shall survive for a period of twelve
(12) months following the Closing. Notwithstanding any investigation conducted
before or after the Closing or the decision of any party to consummate the
Closing, each party hereto shall be entitled to rely and is hereby declared to
have reasonably relied upon the representations and warranties of the other
party.
11.2 Indemnification by Shareholders. Each Shareholder shall
indemnify and defend Buyer and hold it harmless against and with respect to any
and all damage, loss, liability, deficiency, cost and expense (including,
without limitation, reasonable attorney's fees and expenses) (all of the
foregoing hereinafter collectively referred to as "Loss") resulting from:
(a) any inaccuracy in any representation, or
breach of any warranty, made by such Shareholder in Article IV or V, provided
that a claim is made or an action with
26
respect thereto is initiated by Buyer against such Shareholder within 90 days
after the discovery by Buyer of such inaccuracy or breach of warranty; or
(b) the breach of any covenant or undertaking by
such Shareholder contained in this Agreement which survives the Closing and is
not waived by Buyer at or prior to the Closing, provided that a claim is made or
an action with respect thereto is initiated by Buyer against such Shareholder
within 90 days after the discovery by Buyer of the occurrence of such breach; or
(c) ownership or operation of the Company or its
subsidiaries or their businesses or assets prior to the Closing Date, including,
without limitation, any and all liabilities or obligations owed to or amounts
due or that may become due to Medicare or Medicaid or any other health care
reimbursement or payment intermediary on account of Medicare cost report
adjustments or other payment adjustment attributable to any period on or prior
to the Closing Date, or any other form of Medicare or other healthcare
reimbursement recapture, adjustment or overpayment whatsoever with respect to
any period on or prior to the Closing Date ("Excess Reimbursement Liability"),
the audit or assessment of taxes by the Federal, state or local tax authority,
and any Loss in excess of the amounts recorded on the Closing Date Balance Sheet
arising out of the legal proceedings referenced on Schedule 4.12 but excluding
any Loss arising out of any current liabilities or long-term liabilities as
reflected on the Closing Date Balance Sheet or the review of such Closing Date
Balance Sheet.
11.3 Indemnification by Buyer. Buyer shall indemnify and
defend Shareholders and hold them harmless against and with respect to any and
all Loss resulting from:
(a) any inaccuracy in any representation, or
breach of any warranty, set forth in Article VI, provided that a claim is made
or an action with respect thereto is initiated by Shareholders against Buyer
within 90 days after the discovery by the Shareholders of such inaccuracy or
breach; or
(b) the breach of any covenant or undertaking by
Buyer which survives the Closing and is not waived by Shareholders at or prior
to the Closing, provided that a claim is made or an action with respect thereto
is initiated by Shareholders against Buyer within 90 days after the discovery by
Shareholders of the occurrence of such breach.
11.4 Assertion of Claims. Any claims for indemnification under
this Article XI and any claims for breach of representations and warranties
contained herein must be asserted by written notice by a date which is one (1)
year following the Closing Date, except that any claim based upon Excess
Reimbursement Liabilities (as defined above ) or a breach of the representations
and warranties contained in Section 4.25 (Medicare and Medicaid) or Section 4.21
(Tax) may be asserted until the applicable period of limitations for audits by
the applicable Governmental Authority shall have expired.
11.5 Control of Defense of Indemnifiable Claims.
27
(a) Buyer shall give Shareholders prompt written
notice of the claim for which it seeks indemnification. Failure of the Buyer to
give such prompt notice shall not relieve the Shareholders of their
indemnification obligation, provided that such indemnification obligation shall
be reduced by any damages suffered by Shareholders resulting from a failure to
give prompt notice hereunder. The Shareholders shall be entitled to participate
in the defense of such claim. If at any time the Shareholders acknowledge in
writing that the claim is fully indemnifiable under this Agreement, they shall
have the right to assume total control of the defense of such claim at their own
expense. If the Shareholders do not assume total control of the defense of any
such claim, the Buyer agrees not to settle such claim without the written
consent of the Shareholders, which consent shall not be unreasonably withheld.
Nothing contained in this Section 11.6 shall prevent either party from assuming
total control of the defense and/or settling any claim against it for which
indemnification is not sought under this Agreement.
(b) The Shareholders shall give Buyer prompt
written notice of the claim for which they seek indemnification. Failure of the
Shareholders to give such prompt notice shall not relieve the Buyer of its
indemnification obligation, provided that such indemnification obligation shall
be reduced by any damages suffered by Buyer resulting from a failure to give
prompt notice hereunder. The Buyer shall be entitled to participate in the
defense of such claim. If at any time the Buyer acknowledges in writing that the
claim is fully indemnifiable under this Agreement, it shall have the right to
assume total control of the defense of such claim at its own expense. If the
Buyer does not assume total control of the defense of any such claim, the
Shareholders agree not to settle such claim without the written consent of the
Buyer, which consent shall not be unreasonably withheld. Nothing contained in
this Section 11.6 shall prevent either party from assuming total control of the
defense and/or settling any claim against it for which indemnification is not
sought under this Agreement.
11.6 Restrictions.
(a) From and after the Closing Date, none of the
Shareholders shall disclose, directly or indirectly, to any person outside of
Buyer's employ without the express authorization of the Buyer, any pricing
strategies or records of the Company, any proprietary data or trade secrets
owned by the Company or any financial or other information about the Company not
then in the public domain; provided, however, that Shareholders shall be
permitted to make such disclosures as may be required by law or by a court or
governmental authority.
(b) For a period of three (3) years after the
Closing Date, none of the Shareholders shall engage or participate in any effort
or act to induce any of the suppliers, associates,
employees or independent contractors of the Company to cease doing business, or
their association or employment, with the Company.
(c) For a period of three (3) years after the
Closing Date, Fred McCall- Perez shall not, directly or indirectly, be a
director of, be a partner in, or have a proprietary interest in, any person,
enterprise, partnership, association, corporation, joint venture or other
28
entity which is directly or indirectly in the business of owning, operating or
managing any entity of any type, licensed or unlicensed, which is engaged in or
provides disease state management products and services for the HIV and
cardiology markets anywhere within the United States. This provision shall not
be construed to prohibit any Shareholder from owning a beneficial interest of up
to 5% of the securities of any company subject to the reporting requirements of
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended.
(d) The Shareholders acknowledge that the
restrictions contained in this Section 11.6 are reasonable and necessary to
protect the legitimate business interests of Buyer and that any violation
thereof by any of them would result in irreparable harm to Buyer. Accordingly,
Shareholders agree that upon the violation by any of them of any of the
restrictions contained in this Section 11.6, Buyer shall be entitled to obtain
from any court of competent jurisdiction a preliminary and permanent injunction
as well as any other relief provided at law or equity, under this Agreement or
otherwise. In the event any of the foregoing restrictions are adjudged
unreasonable in any proceeding, then the parties agree that the period of time
or the scope of such restrictions (or both) shall be adjusted in such a manner
or for such a time (or both) as is adjudged to be reasonable.
Notwithstanding the foregoing, for purposes of this Section
11.6, any advertisement prepared for and disseminated to the public in general,
which advertises the services of the Company not otherwise in violation of this
Section 11.6, or advertises the need for services to be supplied to the Company,
shall not be deemed to be an inducement or solicitation with respect to any such
suppliers or independent contractors.
11.7 Records. On the Closing Date, Shareholders shall deliver,
or cause to be delivered, to Buyer all records and files not then in Buyer's
possession relating to the operation of the Company or the Subsidiaries.
ARTICLE XII: TERMINATION
12.1 Termination. This Agreement may be terminated at any
time at or prior to the Closing by:
(a) Buyer, if any condition precedent to Buyer's
obligations hereunder set forth in Article IX hereof has not been satisfied by
the Closing Date;
(b) Shareholders, if any condition precedent to
Shareholders' obligations hereunder set forth in Article X hereof has not been
satisfied by the Closing Date; or
(c) the mutual consent of Buyer and Shareholders.
12.2 Effect of Termination. If a party terminates this
Agreement because one of its conditions precedent has not been fulfilled, or if
this Agreement is terminated by mutual consent, this Agreement shall become null
and void without any liability of any party to the other.
29
ARTICLE XIII: MISCELLANEOUS
13.1 Costs and Expenses. Except as expressly otherwise
provided in this Agreement, each party hereto shall bear its own costs and
expenses in connection with this Agreement and the transactions contemplated
hereby; provided, however, that the Company shall not be charged with any of the
expenses attributable to this transaction.
13.2 Performance. In the event of a breach by any party of its
obligations hereunder, the other party shall have the right, in addition to any
other remedies which may be available, to obtain specific performance of the
terms of this Agreement, and the breaching party hereby waives the defense that
there may be an adequate remedy at law. Should any party default in its
performance, or other remedy, the prevailing party shall be entitled to its
reasonable attorneys' fees.
13.3 Benefit and Assignment. This Agreement binds and inures
to the benefit of each party hereto and its successors and proper assigns. Buyer
may not assign its interest under this Agreement to any other person or entity
without the prior written consent of Shareholders; provided, however, that Buyer
may assign its rights, duties and obligations hereunder to one or more
subsidiaries or affiliates of Buyer.
13.4 Effect and Construction of this Agreement. This Agreement
and the Exhibits, Schedules, and other agreements referenced herein, hereto
embody the entire agreement and understanding of the parties and supersede any
and all prior agreements, arrangements and understandings relating to matters
provided for herein. The captions used herein are for convenience only and shall
not control or affect the meaning or construction of the provisions of this
Agreement. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
13.5 Cooperation - Further Assistance. From time to time, as
and when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed and delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
necessary to carry out the intent and purposes of this Agreement.
13.6 Notices. All notices and demands required or permitted
hereunder shall be in writing and shall be deemed to be properly given or made
when personally delivered to the party or parties entitled to receive the notice
or when sent by certified or registered mail, postage prepaid, properly
addressed to the party or parties entitled to receive such notice at the address
stated below:
If to the Shareholders: Dr. Fred McCall-Perez
LifeWay, Inc.
1444 Biscayne Boulevard
Suite 303
Miami, FL 33132
30
LifeWay Partners LLC
8231 Bay Colony Drive
#P2101
Naples, Florida 33963
With a copy to: Kenneth I. Arvin, Esq.
Ziskind & Arvin, P.A.
Rivergate Plaza
444 Brickell Avenue, Suite 612
Miami, Florida 33131
If to the Buyer: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Marshall A. Elkins, Esq.
Integrated Health Services, Inc.
7125 Ambassador Road
Baltimore, MD 21244
Attention: Brian K. Davidson
With a copy to: Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
Attention: Michael S. Blass, Esq.
Such addresses may be changed by providing written notice as provided in this
Section 13.6.
13.7 Waiver, Discharge, Etc. This Agreement shall not be
released, discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
13.8 Rights of Persons Not Parties. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns of the parties hereto.
31
13.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, disregarding any
rules relating to the choice or conflict of laws.
13.10 Amendments, Supplements, Etc. At any time before or
after the execution and delivery of this Agreement by the parties hereto, this
Agreement may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any portion of the transactions contemplated hereby. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties.
13.11 Severability. Any provision, or distinguishable portion
of any provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 11.6 shall be
determined to be overly broad in any respect, then it should be enforceable to
the maximum extent permissible under the law. To the extent permitted by
applicable law, the parties waive any provision of law which renders a provision
hereof prohibited or unenforceable in any respect.
(SIGNATURES ON FOLLOWING PAGE)
32
IN WITNESS WHEREOF, each of the parties hereto and in the
capacity indicated below has executed this Agreement as of the day and year
first above written.
SHAREHOLDERS:
LIFEWAY PARTNERS LLC
/s/ Robert N. Elkins
----------------------------------------
Robert N. Elkins
Title:
/s/ Fred McCall-Perez
----------------------------------------
Fred McCall-Perez
COMPANY:
LIFEWAY, INC.
By:/s/ Fred McCall-Perez
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:/s/ Elizabeth B. Kelb
-------------------------------------
Name: Elizabeth B. Kelb
-----------------------------------
Title: Senior Vice President
Corporate Development
----------------------------------
NEWCO:
IHS ACQUISITION, INC.
By:/s/ Elizabeth B. Kelb
-------------------------------------
Name: Elizabeth B. Kelb
-----------------------------------
Title: Senior Vice President
Corporate Development
----------------------------------
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