-----------------
ASSET PURCHASE AGREEMENT
DATED AS OF MAY 20, 1997
AMONG
INTEGRATED HEALTH SERVICES, INC.,
AND
SYMPHONY REHAB DYNAMICS, INC. AND SYMPHONY
RESTORATIVE THERAPY LIMITED, AS BUYERS
AND
REHAB DYNAMICS, INC.
AND
RESTORATIVE THERAPY LIMITED, AS SELLERS
AND
THE SHAREHOLDERS OF SELLERS
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TABLE OF CONTENTS
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PAGE
ARTICLE I: PURCHASE AND SALE OF ASSETS; NO ASSUMPTION OF
LIABILITIES; DESIGNATED CONTRACTS..............................................2
1.1 Assets.......................................................2
1.2 Liabilities..................................................3
1.3 Designated Contracts.........................................5
ARTICLE II: PURCHASE PRICE....................................................7
2.1 Determination and Payment of Purchase Price..................7
2.2 Allocation of Purchase Price.................................8
2.3 Working Capital Adjustments to the Purchase Price............8
2.4 IHS Stock...................................................12
2.5 Purchase Price Adjustment...................................17
ARTICLE III: THE CLOSING.....................................................23
3.1 Time and Place of Closing...................................23
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE
SHAREHOLDERS..................................................................23
4.1 Organization and Standing; Subsidiaries.....................23
4.2 Authority...................................................24
4.3 Binding Effect..............................................24
4.4 Absence of Conflicting Agreements...........................24
4.5 Consents....................................................24
4.6 Schedule of Assets and Properties...........................25
4.7 Contracts...................................................25
4.8 Financial Statements........................................27
4.9 Material Changes............................................28
4.10 Licenses; Permits; Certificates of Need.....................28
4.11 Title, Condition to Personal Property.......................28
4.12 Title, Condition of the Leased Properties...................29
4.13 Legal Proceedings...........................................30
4.14 Employees...................................................30
4.15 Collective Bargaining, Labor Contracts,
Employment Practices, etc..................................31
4.16 ERISA.......................................................31
4.17 Insurance and Surety Agreements.............................31
4.18 Relationships...............................................31
4.19 Absence of Certain Events...................................32
4.20 Compliance with Laws........................................33
(ii)
4.21 Tax Returns.................................................34
4.22 Encumbrances Created by this Agreement......................34
4.23 Questionable Payments.......................................34
4.24 Reimbursement Matters.......................................34
4.25 Questionnaire...............................................35
4.26 RSI Agreement...............................................35
4.27 Finders.....................................................35
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER AND IHS...................36
5.1 Organization and Standing...................................36
5.2 Power and Authority.........................................36
5.3 Binding Agreement...........................................36
5.4 Absence of Conflicting Agreements...........................36
5.5 Consents....................................................36
5.6 SEC Documents...............................................37
5.7 Material Changes............................................37
5.8 IHS Stock...................................................37
ARTICLE VI: INFORMATION AND RECORDS CONCERNING THE SELLERS...................37
6.1 Access to Information and Records before Closing............37
ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING.........................38
7.1 Conduct of Business Pending Closing.........................38
7.2 Negative Covenants of Sellers...............................38
7.3 Affirmative Covenants of Sellers............................38
7.4 Pursuit of Consents and Approvals...........................39
7.5 Supplementary Financial Information.........................39
7.6 Exclusivity.................................................40
7.7 Certain Permitted Transactions..............................40
ARTICLE VIII: CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND
IHS 40
---
8.1 Representations and Warranties..............................40
8.2 Performance of Covenants....................................40
8.3 Delivery of Closing Certificate.............................41
8.4 Opinions of Counsel.........................................41
8.5 Legal Matters...............................................41
8.6 Authorization Documents.....................................41
8.7 Approvals...................................................41
8.8 Bill of Sale and Assignment.................................42
8.9 Non-Competition Agreements..................................42
8.10 Employment and Consulting Agreements........................42
8.11 COBRA.......................................................42
(iii)
8.12 Assets Transferred at Closing...............................43
8.13 Change of Name..............................................43
8.14 Hart-Scott-Rodino...........................................43
8.15 Documents...................................................43
ARTICLE IX: CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
AND THE SHAREHOLDERS .........................................................44
9.1 Representations and Warranties..............................44
9.2 Performance of Covenants....................................44
9.3 Delivery of Closing Certificate.............................44
9.4 Opinions of Counsel.........................................44
9.5 Legal Matters...............................................44
9.6 Authorization Documents.....................................45
9.7 Necessary Consents..........................................45
9.8 Assignment and Assumption...................................45
9.9 Hart-Scott-Rodino Act.......................................45
9.10 Employment and Consulting Agreements........................45
9.11 Purchase Price..............................................45
9.12 Office Lease Guaranty Releases..............................45
9.13 Other Documents.............................................46
ARTICLE X: OBLIGATIONS OF THE PARTIES AFTER CLOSING..........................46
10.1 Survival of Representations and Warranties..................46
10.2 Indemnification.............................................46
10.3 Restrictions................................................48
10.4 Records.....................................................49
10.5 Audit.......................................................49
10.6 Employees...................................................49
10.7 Reimbursement Paybacks......................................49
10.8 Closing Cost Reports........................................50
ARTICLE XI: TERMINATION.......................................................50
11.1 Termination.................................................50
11.2 Effect of Termination.......................................50
ARTICLE XII: CASUALTY, RISK OF LOSS...........................................50
12.1 Casualty, Risk of Loss......................................50
ARTICLE XIII: MISCELLANEOUS..................................................51
13.1 Costs and Expenses..........................................51
13.2 Benefit and Assignment......................................51
13.3 Effect and Construction of this Agreement...................51
13.4 Cooperation - Further Assistance............................51
(iv)
13.5 Notices.....................................................52
13.6 Waiver, Discharge, Etc......................................52
13.7 Rights of Persons Not Parties...............................53
13.8 Governing Law...............................................53
13.9 Amendments, Supplements, Etc................................53
13.10 Severability................................................53
13.11 Public Announcements........................................53
(v)
SCHEDULES
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Schedule A - Bethoughtful Assets
- ----------
Schedule 1.1 - Certain Excluded Assets
Schedule 1.3(a) - Unassumed Provider Contracts
Schedule 1.3(b-1) - Selected Good Samaritan Contracts
Schedule 1.3(b-2) - Walker Contracts
Schedule 2.2 - Allocation of Purchase Price
Schedule 2.3(a) - RSI Purchase Amount
Schedule 2.5(d)-A - HDI Joint Contracts
Schedule 2.5(d)-1 - IHS Prospective Facilities
Schedule 2.5(d)-2 - RDI Prospective Facilities
Schedule 4.1(b) - Organization and Standing; Subsidiaries
Schedule 4.5 - Consents
Schedule 4.6 - Assets and Properties
Schedule 4.7(b) - Contracts
Schedule 4.8(a)(i) - Financial Statements
Schedule 4.8(a)(ii) - Adjusted Financial Statements
Schedule 4.8(b) - Non-Balance Sheet Liabilities
Schedule 4.9 - Material Changes
Schedule 4.10 - Licenses; Permits; Certificates of Need
Schedule 4.11(a) - Liens
Schedule 4.11(b) - Permitted Liens
Schedule 4.11(c) - Personal Property Leases
Schedule 4.12(b) - Real Property Leases
Schedule 4.13 - Legal Proceedings
Schedule 4.14 - Employees
Schedule 4.15 - Collective Bargaining, Labor Contracts, Employment
Practices, etc.
Schedule 4.17 - Insurance and Surety Agreements
Schedule 4.18 - Relationships
Schedule 4.19 - Absence of Certain Events
Schedule 4.20 - Compliance with Laws
Schedule 4.21(a) - Tax Returns
Schedule 4.22 - Encumbrances
Schedule 4.24 - Reimbursement Matters
Schedule 4.26 - RSI Agreements
Schedule 5.4 - Absence of Conflicting Agreements
Schedule 5.5 - Consents
Schedule 5.7 - Material Changes
Schedule 8.10 - Identified Employees
Schedule 10.2(e) - Shareholder's Percentage Interest
Schedule 10.4 - Maintenance of Records
(vi)
EXHIBITS
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Exhibit 1.3(b) - Form of Assignment of Walker & Good Samaritan
Contracts
Exhibit 2.3(d)(i) - Working Capital Escrow Agreement
Exhibit 4.25 - Questionnaire
Exhibit 4.26 - RSI Documents
Exhibit 8.8-1 - Bill of Sale
Exhibit 8.8-2 - Assignment and Assumption Agreement
Exhibit 8.9-1 - Non-Compete-Sellers
Exhibit 8.9-2 - Non-Compete-Nechas
Exhibit 8.9-3 - Non-Compete-Kessler
Exhibit 8.9-4 - Non-Compete-Favilla
Exhibit 8.10-1 - Employment Agreement-Nechas
Exhibit 8.10-2 - Employment Agreement-Kessler
Exhibit 8.10-3 - Employment Agreement-Favilla
Exhibit 8.4 - Opinion of Seller's Counsel
Exhibit 9.4 - Opinion of Buyer's Counsel
(vii)
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ASSET PURCHASE AGREEMENT
-------------------------
This Asset Purchase Agreement (the "AGREEMENT") is made as of
the 20 day of May, 1997, among Integrated Health Services, Inc., a Delaware
corporation ("IHS"), Symphony Rehab Dynamics, Inc., a Delaware corporation and a
wholly owned subsidiary of IHS ("REHAB BUYER"), Symphony Restorative Therapy,
Inc., a Delaware corporation, and a wholly owned subsidiary of IHS ("RESTORATIVE
BUYER", and together with Rehab Buyer, "BUYER"), Rehab Dynamics, Inc., a
Minnesota corporation ("REHAB"), Restorative Therapy Limited, a Minnesota
corporation ("RESTORATIVE" and together with Rehab, "SELLERS"), and David Nechas
("NECHAS") and Beth Kessler ("KESSLER", and together with Nechas, the
"SHAREHOLDERS"). Sellers and the Shareholders are sometimes referred to herein
collectively as the "GROUP" and each individually as a "GROUP PARTICIPANT" or
"GROUP MEMBER" or "PARTICIPANT OF THE GROUP".
WHEREAS, the Shareholders own all of the issued and
outstanding shares of capital stock of each Seller; and
WHEREAS, Rehab is engaged in the business (the "REHAB
BUSINESS") of providing contract rehabilitation services to patients at nursing
homes, hospitals, day activity centers, and assisted living units, as well as
through homecare and outpatient clinics (including, without limitation, speech
and language pathology, occupational therapy and physical therapy services and
staffing and consulting services relating to such services), and payment for
such services is made directly to Rehab from various payors (collectively,
"REHAB SERVICES") in the States of Minnesota and North Dakota; and
WHEREAS, Restorative also is engaged in the business (the
"RESTORATIVE BUSINESS", and together with the Rehab Business, the "BUSINESS") of
providing contract rehabilitation services to patients in various settings
(including, without limitation, speech and language pathology, occupational
therapy and physical therapy services and staffing and consulting services
related to such services), and payment for services is made pursuant to various
contractual arrangements primarily through Medicare, Part A ("RESTORATIVE
SERVICES", and collectively with the Rehab Services, the "SERVICES") in the
States of Minnesota and North Dakota; and
WHEREAS, Rehab and Restorative have an interest (the "DYNAMIC
INTEREST") in Dynamic Health Care Solutions, LLC ("DYNAMIC"); and
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WHEREAS, Buyer wishes to purchase from Sellers, and Sellers
wish to sell to Buyer, substantially all of the assets of each Seller, other
than the Dynamic Interest and other than the assets (the "BETHOUGHTFUL ASSETS")
of the Sellers related solely and directly to the operation of the Sellers'
"Bethoughtful" greeting card business (the "BETHOUGHTFUL DIVISION") as described
on Schedule A hereto, including, without limitation, the accounts receivable
arising directly and solely out of such business;
WHEREAS, pursuant to an Asset Purchase Agreement, a copy of
which is attached hereto as Exhibit 4.26 (the "RSI AGREEMENT"), dated as of
December 19, 1996, between Rehab, Restorative and Rehab Services, Inc., a
Minnesota corporation primarily involved in the business of providing
rehabilitation services in the state of Minnesota ("RSI"), Rehab and Restorative
has purchased substantially all of the assets of RSI related to its Minnesota
operations (the "RSI ASSETS") on or about December 31, 1996 (the "RSI
ACQUISITION");
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, IHS, Buyer, Sellers and the Shareholders intending to be legally
bound, agree as follows:
ARTICLE I: PURCHASE AND SALE OF ASSETS; NO ASSUMPTION OF
LIABILITIES; DESIGNATED CONTRACTS
1.1 ASSETS. Subject to the terms and conditions of this
Agreement at the Closing (as hereinafter defined in Section 3.1), and in
reliance upon the covenants, representations and warranties of IHS and Buyer,
Sellers will sell, assign and convey to Buyer free and clear of all Liens (as
such term is hereinafter defined in Section 4.11), and subject to the terms and
conditions of this Agreement and in reliance upon the covenants, representations
and warranties of Sellers and the Shareholders, Buyer will purchase and acquire
from Sellers, all of the assets of each Seller which now or hereafter comprise,
or which are now or hereafter used or held for use in connection with the
operation of, the Business (the "ASSETS"), excluding: (a) inventory and supplies
disposed of from the date hereof until Closing in the ordinary course of
business consistent with past practice and otherwise in conformity with the
obligations of Sellers and the Shareholders under this Agreement; (b) the
Dynamic Interest and all assets owned by Dynamic; (c) the Bethoughtful Assets;
(d) each Seller's Articles of Incorporation, qualification to do business in any
jurisdiction, taxpayer identification number, minute books, stock transfer
records and other documents related specifically to such Seller's corporate
organization and maintenance; (e) amounts paid, payable or that become payable
from Medicare or Medicaid or any other healthcare reimbursement or payment
intermediary or other person or entity on account of cost report adjustments or
other payment adjustments to the extent attributable to Sellers' operation of
the Business during any period on or prior to the Closing Date (including,
without limitation, any of the same which is paid to, or payable or becomes
payable from, any nursing home, hospital, other facility or other third party
pursuant to any Contract (as such term is hereinafter defined in Section 4.7) by
reason of refund, credit or payment for Reimbursement Liabilities (as such term
is hereinafter defined in Section 1.2(a) below)), or any other form of Medicare
or other healthcare
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reimbursement refund or credit for Reimbursement Liabilities, to the extent
attributable to Sellers' operation of the Business during any period on or prior
to the Closing Date ("REIMBURSEMENT PAYBACKS"); (f) except to the extent
included as Current Assets (as such term is hereinafter defined in Section
2.3(a)) on the Closing Date Balance Sheet, any prepaid expenses or refunds with
respect to any Contracts not constituting Designated Contracts (as hereinafter
defined in Section 1.3); (g) any accounts receivable due from Heritage of Edina,
together with any rights to recover costs of collection thereof (the "EDINA
RECEIVABLES"); and (h) any other specifically excluded assets as listed on
Schedule 1.1 to be retained by Sellers (collectively, "EXCLUDED ASSETS"). Except
for the Excluded Assets, the Assets will include, without limitation, all
tangible, intangible, real, personal and mixed property, OPERATIONS, POLICY AND
PROCEDURE MANUALS, LEASEHOLD INTERESTS, EQUIPMENT, FURNITURE, FIXTURES,
inventory, cash, accounts receivable, cash equivalents, notes receivable, claims
and rights under Designated Contracts, subject to Section 10.2(e), all rights of
either or both Sellers under the RSI Agreement and under all agreements,
instruments, and documents now or hereafter executed or delivered in connection
therewith (the "RSI DOCUMENTS"), all rights in collateral or other security for
obligations due to any Seller, provider agreements with third party payors, the
name "Rehab Dynamics, Inc." for use in Minnesota, the name "Restorative Therapy
Limited" for use in Minnesota and North Dakota, all other tradenames,
trademarks, service marks, patient lists and records, telephone numbers, trade
secrets, other proprietary rights or intellectual property, good will, and, to
the extent permitted by law, all permits, licenses and Medicare and Medicaid
provider numbers and other rights held by either or both Sellers with respect to
the ownership or operation of any or all of the Business, and all of each
Seller's books and records pertaining to the foregoing.
1.2 LIABILITIES.
(A) Neither Buyer nor IHS will assume any, and
Sellers shall remain liable for each, Liability of each Seller arising out of
the operation of the Business (or any part thereof) or the ownership or use of
any of the Assets existing on the Closing Date. 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 that would be reflected as a liability on a balance sheet in accordance
with generally accepted accounting principles, consistently applied, including
without limitation, the following: (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 (including, if applicable, penalties and interest) due or that may
become due to Medicare or Medicaid or any other health care reimbursement or
payment intermediary or other person or entity on account of cost report
adjustments or other payment adjustments attributable to any period on or prior
3
to the Closing Date (including, without limitation, any of the same which
becomes due to any nursing home, hospital, other facility or other third party
pursuant to any Contract (as such term is hereinafter defined in Section 4.7)
directly, by reason of offset or indemnification, or otherwise), or any other
form of Medicare or other health care reimbursement denial, recapture,
adjustment or overpayment whatsoever with respect to any period on or prior to
the Closing Date ("REIMBURSEMENT LIABILITIES"), (iii) Any obligation or
liability arising out of any Contract which is not a Designated Contract, and
(iv) Any obligation or liability arising out of the Dynamic Interest or the
Bethoughtful Assets. Without limiting the foregoing and notwithstanding anything
to the contrary contained in this Agreement, Buyer shall not assume and Sellers
shall remain liable for all Liabilities arising out of the RSI Documents. For
purposes of this Agreement, all Liabilities of either or both Sellers other than
Assumed Obligations (as hereinafter defined in Section 1.2(b) below) shall
constitute "UNASSUMED LIABILITIES". Each Seller shall pay each Unassumed
Liability when due in the ordinary course of business consistent with past
practice, unless it shall be contesting the same in good faith, in which case,
Sellers may withhold payment of such Unassumed Liability to the extent
consistent with past practice. Each Seller specifically agrees that any
obligation imposed by any applicable Governmental Requirement (as hereinafter
defined in Section 4.4 below) on the Buyer or IHS to pay depreciation recapture
will be treated, for purposes of this Agreement, as an Unassumed Liability.
Further, Sellers agree to promptly repay to Buyer and IHS any sums which they
are required to pay as depreciation recapture and reasonable fees for the legal
defense of such claimed recapture.
(B) Subject to the provisions of subsection (a)
above, at the Closing, Buyer shall assume only the following obligations (the
"ASSUMED OBLIGATIONS") and thereafter in due course fully satisfy:
(I) to the extent included as a Liability on
the Closing Date Balance Sheet (subject to adjustment in accordance with Section
2.3(c) below), all operating trade payables, operating expenses and other
current liabilities of Sellers that would be classified as current liabilities
("CURRENT LIABILITIES") on a consolidated balance sheet of Sellers as of the
Closing Date prepared in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), including all employee compensation
Liabilities existing or arising on the Closing Date, including specifically but
without limitation, accrued wages, accrued paid time off, and severance
obligations to the extent the same would constitute current liabilities as of
the Closing Date in accordance with GAAP; but excluding any current liabilities
arising out of the Bethoughtful Division or Dynamic;
(II) those obligations which arise under the
Designated Contracts (as defined in to Section 1.3 below) assigned by Sellers to
Buyer, with respect to, and only with respect to, services to be rendered or
goods to be supplied to or benefits to be conferred upon Buyer solely after the
Closing Date. Liabilities under such Designated Contracts that have accrued, or
the performance of which are due, on or prior to the Closing Date, or which are
in payment or consideration for Excluded Assets, shall remain the sole
responsibility of Sellers except to the extent they constitute Current
Liabilities;
4
(III) to the extent included as a Liability
on the Closing Date Balance Sheet (subject to adjustment in accordance with
Section 2.3(c) below), all indebtedness for borrowed money, the long-term
portion of all capitalized lease obligations, and all other liabilities of
Sellers that would be classified as long-term liabilities on a consolidated
balance sheet of Sellers and their subsidiaries other than Dynamic as of the
Closing Date prepared in accordance with GAAP, and all guaranties of any of the
foregoing ("LONG-TERM LIABILITIES"), but excluding any of the foregoing arising
out of the Bethoughtful Division; and
(IV) all Liabilities arising out of the WARN
Act (as defined in Section 10.6) (or any similar State law of Minnesota) to the
extent provided in Section 10.6.
1.3 DESIGNATED CONTRACTS.
(A) As soon as practicable after the date hereof, but
in no event later than three (3) business days after the date hereof, Buyer
shall deliver notice in writing to Sellers designating which, if any, of the
Contracts to which any Seller is a party listed on Schedule 4.7(b) hereto
pursuant to Section 4.7 of this Agreement will be assigned to and assumed by
Buyer (collectively, the "DESIGNATED CONTRACTS"). Except as set forth on
Schedule 1.3(a), each existing Provider Contract (as such term is defined in
Section 4.7(b) below) is a Designated Contract, and is sometimes referred to in
this Agreement as a "DESIGNATED PROVIDER CONTRACT" and collectively with all
such other Contracts, as the "DESIGNATED PROVIDER CONTRACTS". If within said
period of time Buyer fails to so deliver notice to Sellers, Buyer will be deemed
to have designated all of said Contracts. Subject to subsections (b) and (c)
below, to the extent Buyer makes (or is deemed to have made) any such
designation, Sellers shall at Closing be obligated to assign all of their right,
title and interest under such Designated Contracts to Buyer and Buyer shall
assume the obligations accruing after Closing under such Designated Contracts to
the extent provided in Section 1.2 above. If, after the date hereof, either
Seller shall enter into any agreement, lease, contract or commitment, whether
written or oral, with respect to the Business, or initially deliver a copy of a
Contract not previously delivered to Buyer, such Seller shall promptly notify
Buyer, in which case Buyer shall have three (3) business days from the date of
its receipt of notice thereof to elect to include such agreement, lease,
contract or commitment as a Designated Contract. Unless Buyer shall otherwise
notify Sellers on or prior to the end of such three (3) business day period,
such agreement, lease, contract or commitment shall be deemed to be a Designated
Contract.
(B)ITS AND SHALL DILIGENTLY PROCEED TO OBTAIN ANY
CONSENTS OF ANY PARTIES NECESSARY TO PERMIT THE ASSIGNMENT OF THE DESIGNATED
CONTRACTS TO BUYER, INCLUDING WITHOUT LIMITATION, EACH DESIGNATED PROVIDER
CONTRACT WITH THE EVANGELICAL LUTHERAN GOOD SAMARITAN SOCIETY OR ANY OF ITS
AFFILIATES ("GOOD SAMARITAN") IDENTIFIED ON SCHEDULE 1.3(B)-1 HERETO (EACH A
"SELECTED GOOD SAMARITAN CONTRACT") and each Designated Provider Contract with
Walker Methodist, Inc. ("WALKER") or any of its affiliates (each a "WALKER
CONTRACT"), each of which Walker Contracts, Sellers represent and warrant, is
set forth on Schedule 1.3(b)-2; provided however that each Seller shall so use
its best efforts with respect to Designated Provider Contracts other than the
Selected Good Samaritan Contracts and the Walker Contracts (the "OTHER
DESIGNATED PROVIDER CONTRACTS") only after the Closing. If any Designated
Contract (other than
5
an Other Designated Provider Contract) is not assignable and any party to such
Designated Contract fails or refuses to consent to the assignment thereof on or
before the Closing Date, Buyer shall have no liability to assume any obligations
under such Designated Contract. Moreover, if any party to any of the Walker
Contracts or to any of the Selected Good Samaritan Contracts does not
acknowledge in writing in substantially the words set forth on Exhibit 1.3(b)
hereto its agreement to the assignment of such Walker Contract or Selected Good
Samaritan Contract to Buyer on or before the Closing Date, then Buyer shall be
permitted to terminate this Agreement in accordance with Article XI hereof.
Furthermore, if any party fails or refuses to consent to the assignment of the
Office Lease, dated as of October 18, 1994, between Sellers and the Wirth
Companies (the "OFFICE LEASE") or to any other Designated Contract (other than
Other Designated Provider Contracts) that, individually or together with all
other Designated Contracts with respect to which any such consent is not
obtained, is or are material to the operation or financial condition of the
Business, the Buyer shall be permitted to terminate this Agreement in accordance
with Article XI hereof. Sellers represent and warrant that the Selected Good
Samaritan Contracts are comprised of the six (6) Provider Contracts with Good
Samaritan with respect to which Sellers were parties prior to the closing
contemplated by the RSI Purchase Agreement, and the other four (4) Selected Good
Samaritan Contracts are the four (4) highest revenue generating Provider
Contracts with respect to which RSI was a party prior to such closing of the RSI
Purchase Agreement.
(C) (i) With respect to each Contract (other than the
Designated Provider Contracts) that is not assigned by either Seller to Buyer
pursuant to this Agreement, or for which any necessary consent is not obtained
on or after the Closing, Buyer shall not unreasonably refuse to use its
reasonable commercial efforts to provide any services due or perform Sellers'
obligations (other than the payment of any penalties or other termination
obligations) under such unassigned Contract pending the termination thereof (but
in no event for more than 60 days after the Closing Date), provided that the
Group shall indemnify and hold each Buyer Indemnitee (as such term is
hereinafter defined in Section 10.2) harmless from and against any Loss (as such
term is hereinafter defined in Section 10.2) arising out of such arrangements,
including, without limitation, the performance of such services or obligations
and shall pay to Buyer the amount of compensation to which Sellers would have
been entitled for such services under, and shall make available to Buyer the
benefits to which Sellers would have been entitled as a result of the
performance of obligations under, such unassigned Contract, in each case, if the
transactions contemplated by this Agreement had not occurred.
(ii) With respect to each Designated
Provider Contract, until each consent necessary for the assignment thereof to
Buyer shall be obtained or such Designated Provider Contract is replaced by a
contract with Buyer such Designated Provider Contract shall not be deemed
assigned to Buyer, provided however that the parties shall use their best
efforts to undertake reasonable arrangements pursuant to which Buyer shall
receive the benefits of such unassigned Designated Provider Contracts and be
responsible for the obligations under such Designated Provider Contracts that
otherwise would have been assumed by Buyer pursuant to the terms of this
Agreement. Until so assigned, or replaced, each such Designated Provider
Contract
6
shall be referred to as a "PRE-ASSIGNMENT DESIGNATED PROVIDER CONTRACT" for
purposes of this Agreement and so long as a Designated Provider Contract shall
be deemed to be a Pre-Assignment Designated Provider Contract, the Group shall
indemnify and hold each Buyer Indemnitee harmless from and against any Loss in
excess of any insurance proceeds collected by Buyer in respect thereof (net of
costs of recovery and increases in premiums to the extent directly resulting
from such Loss) (other than amounts that, in the ordinary course of business,
are deducted from Net Existing Contract Revenues (as such term is defined in
Section 2.5(a) below) in connection with the determination of the One Year
EBITDA as such term is defined in Section 2.5(a)) arising out of such
arrangements, including, without limitation, out of the performance of such
services, and so long as any such arrangement shall continue, such
Pre-Assignment Designated Provider Contract shall be deemed to be an Existing
Contract (as such term is hereinafter defined in Section 2.5(d) (iii)) for
purposes of determining the One Year EBITDA. If any Pre-Assignment Designated
Provider Contract shall be assigned to Buyer, or if Buyer shall enter into a
replacement Provider Contract with the applicable other party, then such
Pre-Assignment Designated Provider Contract shall be retroactively treated as if
assigned to Buyer on the Closing Date and no Group Member shall have any
indemnification obligation with respect to any post-Closing matter arising under
such Pre-Assignment Designated Contract by reason of this clause (ii).
ARTICLE II: PURCHASE PRICE
2.1 DETERMINATION AND PAYMENT OF PURCHASE PRICE. Subject to
adjustment as provided in this Agreement, the aggregate purchase price to be
paid to Sellers for the Assets and their respective obligations under this
Agreement (the "PURCHASE PRICE") shall be THIRTY-ONE MILLION FOUR HUNDRED
THOUSAND DOLLARS ($31,400,000), and which Purchase Price shall be payable as
follows:
(A) SEVEN MILLION SIX HUNDRED FORTY THOUSAND DOLLARS
($7,640,000) plus (x) an amount equal to fifty percent (50%) of the unpaid
portion of the RSI Purchase Amount, or (y) FIVE HUNDRED AND SIXTY-TWO THOUSAND
FIVE HUNDRED DOLLARS ($562,500), whichever amount is less, shall be paid at the
Closing to Sellers in cash by wire transfer of immediately available funds to
the account designated in writing by Sellers at least one business day prior to
the Closing; and
(B) ELEVEN MILLION FOUR HUNDRED SIXTY THOUSAND
DOLLARS ($11,460,000) shall be paid at the Closing by delivery to Sellers of
newly issued shares of the Common Stock, par value $.001 per share, of IHS (the
"IHS STOCK"), based upon the valuation of such shares using as the date of
determination the Closing Date and subject to the terms and conditions of
Section 2.4 below; and
7
(C) the balance (the "CONTINGENT PAYMENT AMOUNT") of
the $31,400,000 Purchase Price shall be paid in a single installment (the
"CONTINGENT PAYMENT"), subject to offsets for Purchase Price reductions and
indemnification rights as elsewhere provided in this Agreement, on the date that
is four hundred and fifty five (455) days after the first date of the
Determination Period (as defined in Section 2.5(a) below) or the date on which
the One Year EBITDA (as hereinafter defined) shall finally be determined in
accordance with Section 2.5 below, whichever date shall be later, unless such
payment date shall be delayed as hereinafter provided. The Contingent Payment
Amount shall be payable forty percent (40%) in cash and sixty percent (60%) by
delivery of shares of IHS Stock based upon the valuation as of the Determination
Date (as hereinafter defined in Section 2.5(a)) in accordance with Section
2.4(a) below. Prior to offsetting against the Contingent Payment for Purchase
Price reductions or pursuant to indemnification rights, Buyer shall notify the
Sellers of the basis for such offset in reasonable detail. If the Sellers shall
fail to notify Buyer of their objection, if any, to all or any part of such
offset within ten (10) business days after such notice of offset is given to
Buyer, stating in reasonable detail the basis for such objection, then the
Sellers shall be irrevocably deemed to have agreed to such offset to the extent
not objected to, and such offset shall be deemed taken. If the Sellers shall
timely give such a notice of objection, then Buyer shall not be entitled to take
such offset (and shall not be required to make payment of the Contingent Payment
in respect of such claimed offset) unless and until the Sellers and Buyer shall
agree thereto in writing or, if applicable, unless and until the Settlement
Accountants shall finally determine the amount of any Purchase Price reduction
with respect to which such offset is claimed, or unless and until a court of
competent jurisdiction shall have determined in a final judgment whether or not
Buyer is entitled to such offset. If the Settlement Accountants shall determine
in connection with the determination of any claimed Purchase Price reduction
with respect to which an offset is claimed and disputed, or if such court shall
determine in such final judgment, that either the Sellers or Buyer shall have
acted in bad faith in claiming any such offset or making an objection thereto,
as the case may be, then the party that is determined to have acted in bad faith
shall pay interest at an annual rate of five percent (5%) on the amount that was
claimed for offset or objected to, in bad faith, as the case may, from the date
the notice of such offset or objection, as the case may be, was given.
2.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price as
adjusted pursuant to this Agreement (and all other capitalizable costs) shall be
allocated among the Sellers and with respect to each Seller, among the
categories of Assets, as set forth on Schedule 2.2 hereto, in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE"). Each
of the parties hereto agrees to prepare and file all tax returns (including Form
8594) in a manner consistent with such allocation and to report this transaction
for Federal and state income tax purposes in accordance with such allocation of
the Purchase Price.
2.3 WORKING CAPITAL ADJUSTMENTS TO THE PURCHASE PRICE.
(A) For the purposes of this Agreement, "CURRENT
ASSETS" shall mean the aggregate amount of all assets of the Sellers that would
be classified as current assets on the consolidated balance sheet of the Sellers
as of the Closing Date prepared in accordance with GAAP, but excluding any cash,
cash equivalents and accounts receivables of the Bethoughtful Division or
Dynamic, the Edina Receivable, and any other current assets that constitute
Excluded Assets.
8
It is understood and agreed that no Reimbursement Payback shall be included as a
Current Asset on the Closing Date Balance Sheet. As used herein, "WORKING
CAPITAL" means the amount by which Current Assets exceeds Current Liabilities.
Regardless of whether the same shall be in accordance with GAAP, the unpaid
portion of the RSI Purchase Amount (as hereinafter defined) shall not be assumed
by Buyer, shall not be included as a Current Liability or part of Long-term
Liabilities, shall constitute an Unassumed Liability (regardless of the
inclusion of the RSI Documents in the Assets), and shall be paid in full by
Sellers at Closing. Regardless of whether the same shall be in accordance with
GAAP, the amount of principal due from Sellers to Park National Bank as of the
Closing Date that would have been treated as long-term liabilities in accordance
with GAAP had Sellers been negotiating to renew and extend for two (2) years the
term thereof, shall be treated as Long-term Liabilities as of the Closing Date
for purposes of this Agreement. The purchase price heretofore, now or hereafter
paid or payable in respect of the RSI Assets or otherwise under any of the RSI
Documents (including, without limitation, any amounts payable in respect of
non-competition agreements, consulting agreements and accelerated earn-out
payments) and all costs and expenses incurred by Sellers in connection with
completing the transactions contemplated by the RSI Agreement is sometimes
referred to in this Agreement as the "RSI PURCHASE AMOUNT". Sellers represent
and warrant that Schedule 2.3(a) accurately sets forth the RSI Purchase Amount,
including each item constituting a portion thereof, and said Schedule 2.3(a)
sets forth the amounts heretofore paid.
(B) At the Closing, Sellers shall deliver to Buyer
the consolidated balance sheet of Sellers as of the Closing Date (excluding any
Excluded Assets and any Unassumed Liabilities), certified by each Seller to be
its best good faith estimate of such balance sheet as of the Closing (the
"CLOSING DATE BALANCE SHEET").
(I) The Purchase Price payable to the
Sellers shall be reduced if the Closing Date Balance Sheet discloses that the
consolidated Working Capital of Sellers as of the Closing Date (the "ESTIMATED
WORKING CAPITAL") is less than the Required Working Capital (as hereinafter
defined). "REQUIRED WORKING CAPITAL" means $5,600,000. In such event, the amount
of the Purchase Price payable to the Sellers at the Closing shall be reduced by
an amount, on a dollar-for-dollar basis, equal to the amount by which the
Estimated Working Capital is less than such Required Working Capital.
(II) The Purchase Price payable to the
Sellers shall be increased if the Closing Date Balance Sheet discloses that the
Estimated Working Capital is greater than the Required Working Capital. In such
event, the amount of the Purchase Price payable to the Sellers at the Closing
shall be increased by an amount, on a dollar-for-dollar basis, equal to the
amount by which the Estimated Working Capital is greater than such Required
Working Capital.
(III) The Purchase Price payable to the
Sellers shall be decreased if the Closing Date Balance Sheet discloses that the
estimated amount of Long-term Liabilities as of the Closing Date (the "ESTIMATED
LONG-TERM LIABILITIES") is greater than $1,300,000 (the "MAXIMUM LONG-TERM
LIABILITIES"). In such event, the amount of the Purchase Price payable to
9
the Sellers at the Closing shall be decreased by an amount, on a
dollar-for-dollar basis, equal to the amount by which the Estimated Long-term
Liabilities is greater than such Maximum Long-term Liabilities.
(C) Buyer shall complete, at its own expense, a
review of the Working Capital as of the Closing Date (the "CLOSING DATE WORKING
CAPITAL") and the Long-term Liabilities as of the Closing Date (the "CLOSING
DATE LONG-TERM LIABILITIES"), and, Buyer shall deliver to Sellers its written
report (the "WORKING CAPITAL REVIEW") setting forth the amount of such Closing
Date Working Capital and Closing Date Long- term Liabilities as confirmed or
determined in accordance with such review within one hundred eighty (180) days
after the Closing Date. Buyer shall, upon reasonable request, provide Sellers
with copies of, or, in the discretion of Buyer, access to the source materials
used by it to prepare the Working Capital Review, in which case, such access
shall be at a location no greater than thirty (30) miles from Sellers' current
location, shall be under reasonable conditions, and Sellers shall be permitted
to copy such documents at Sellers' sole cost and expense. If Buyer shall not
have completed such a Working Capital Review and delivered a copy thereof to
Sellers within one hundred eighty (180) days following the Closing Date, Buyer
shall be deemed to conclusively have accepted the determination of the Estimated
Working Capital and Estimated Long-term Liabilities as set forth on the Closing
Date Balance Sheet, and such determination shall become final and shall not be
subject to further review, challenge or adjustment, absent fraud. If there shall
be discovered any Liability that should have been included as a Current
Liability or Long-term Liability on the Closing Date Balance Sheet but that was
not so included, then Buyer, in its sole discretion, may elect to assume such
Liability, in which case such Liability shall be included as a Current Liability
or Long-term Liability, as the case may be, in the determination of Closing Date
Working Capital or Closing Date Long-term Liabilities, as the case may be, or to
not assume such Liability, in which case such Liability shall be an Unassumed
Liability and shall not be included as a Current Liability in the determination
of Closing Date Working Capital, or as a Closing Date Long-term Liability.
(I) If the Working Capital Review is timely
prepared and delivered to Sellers and it discloses that the Closing Date Working
Capital was less than the Estimated Working Capital, then the Purchase Price
shall be deemed to have been decreased by the amount of such deficiency except
to the extent that the amount of such deficiency shall be subject to a Delay
Payment Notice (as hereinafter defined), in which case no such adjustment shall
be made in respect of such disputed portion until such disputed portion shall be
finally determined as set forth below.
(II) If the Working Capital Review is timely
prepared and delivered to Sellers and it discloses that the Closing Date Working
Capital was greater than the Estimated Working Capital, then the Purchase Price
shall be deemed to have been increased by the amount of such excess except to
the extent that the amount of such excess shall be subject to a Delay Payment
Notice, in which case no such adjustment shall be made in respect of such
disputed portion until such disputed portion shall be finally determined as set
forth below.
10
(III) If the Working Capital Review is
timely prepared and delivered to Sellers and it discloses that the Closing Date
Long-term Liabilities were greater than the greater of (x) the Maximum Long-term
Liabilities or (y) the Estimated Long-term Liabilities, then the Purchase Price
shall be deemed to have been decreased by the amount of such excess except to
the extent that the amount of such excess shall be subject to a Delay Payment
Notice, in which case no such adjustment shall be made in respect of such
disputed portion until such disputed portion shall be finally determined as set
forth below. If the Estimated Long-term Liabilities exceeded Maximum Long-term
Liabilities and the Closing Date Long-term Liabilities (as finally determined in
accordance with this subsection (c)) are less than the Estimated Long- term
Liabilities, then the Purchase Price shall be deemed to have been increased by
the difference between the Estimated Long-term Liabilities and the greater of:
(x) the Maximum Long-term Liabilities, and (y) the Closing Date Long-term
Liabilities, except to the extent that the amount of such difference shall be
subject to a Delay Payment Notice, in which case no such adjustment shall be
made in respect of such disputed portion until such disputed portion shall be
finally determined as set forth below.
(IV) If Sellers shall dispute the amount set
forth in the Working Capital Review, they shall give notice to Buyer (a "DELAY
PAYMENT NOTICE") within fifteen (15) days after delivery to them of the Working
Capital Review that the disputed portion of the payment should not then be made
and setting forth in reasonable detail their objections and the basis therefor,
in which case the parties shall meet and in good faith attempt to resolve any
disagreements within fifteen (15) days after delivery to Buyer of the Delay
Payment Notice. If the parties are unable to resolve such disagreements within
such time period, the disagreements shall be referred to a "Big Six" accounting
firm selected by mutual agreement of Sellers, on the one hand, and Buyer, on the
other hand (or if the parties cannot agree on such selection, then a "Big Six"
accounting firm, other than KPMG Peat Marwick LLP, selected by lot) (the
"SETTLEMENT ACCOUNTANTS"), and the determination of the Settlement Accountants
of the Closing Date Working Capital and Closing Date Long-term Liabilities shall
be final and shall not be subject to further review, challenge, or adjustment,
absent fraud. The Settlement Accountants shall be directed to use their best
efforts to reach a determination not more than forty-five (45) days after such
referral. The costs and expenses of the services of the Settlement Accountants
shall be borne by the party against whom the Settlement Accountants shall rule;
provided that if the Settlement Accountants shall not clearly rule against any
party, then such costs and expenses shall be borne equally by Sellers, on the
one hand, and Buyer, on the other hand.
(D) (I) If the Purchase Price is increased as
provided in Section 2.3(b), the amount of the increase shall be paid by
delivery, within two (2) business days after the Closing, of IHS Stock (valued
as of the Closing Date in accordance with Section 2.4(a) below) or in cash, or
in such combination thereof as Buyer, in its sole discretion shall determine,
into an interest-bearing escrow account (the "ESCROW ACCOUNT") pursuant to an
Escrow Agreement in the form of Exhibit 2.3(d)(i) (the "WORKING CAPITAL ESCROW
AGREEMENT") among the parties hereto and with an escrow agent acceptable to all
of the parties hereto (the "ESCROWEE"), and upon final determination of the
Closing Date Working Capital and Closing Date Long-term Liabilities in
accordance with Section 2.3(c), the amount of such increase (as the same may be
adjusted to take into consideration any further increases or decreases in the
Purchase Price pursuant to this Section 2.3) (plus all interest and income
earned thereon) shall be paid to Sellers from the Escrow
11
Account, in the same proportion of cash and stock as was paid into the Escrow
Account at Closing (as adjusted for any sale of Escrowed Shares by the Escrowee
in accordance with the terms of the Working Capital Escrow Agreement), within
fifteen (15) days after the final determination of the amount due, with any
additional amount in excess of the amount paid out of the Escrow Account (less
interest or income earned and included in such payment) to be paid in cash or in
shares of IHS Stock (valued using a date of determination as of the Closing in
accordance with Section 2.4(a) below), or in such combination thereof as Buyer,
in its sole discretion shall determine.
(II) If the Purchase Price is decreased as
provided in Section 2.3(b)(i) or (b)(iii) or 2.3(c)(i) or (c)(iii), the amount
of the decrease shall be paid by Sellers as follows: All payments of decreases
in the Purchase Price required pursuant to Section 2.3(b)(i) or (b)(iii) shall
be paid into the Escrow Account, and all payment of decreases in the Purchase
Price required to be paid as a result of a further adjustment to the Purchase
Price pursuant to Section 2.3(c)(i) or (c)(iii) shall be paid to Buyer out of
the Escrow Account (together with all interest and income earned thereon) and/or
directly from Sellers, and in each case, shall be paid in any combination of
cash and/or shares of IHS Stock (valued as of the Closing Date in accordance
with Section 2.4(a) below) as Sellers shall determine in their sole discretion;
provided, however, that in no event shall Sellers select a combination that will
have the result that Buyer shall have paid less than sixty percent (60%) of the
Purchase Price (excepting therefrom the amount by which the cash portion of the
Purchase Price is increased in respect of the unpaid portion of the RSI Purchase
Amount in accordance with Section 2.1(a) above) by delivery of shares of IHS
Stock (except that Sellers may make such payment with a greater percentage of
shares of IHS Stock to the extent that Sellers are returning shares of IHS Stock
previously delivered to them or the Escrowee in respect of any previous increase
in Purchase Price to the extent that such shares increased the percentage of
such shares included in such Purchase Price increase to a percentage greater
than sixty percent (60%)).
(E) The Group shall indemnify and hold each Buyer
Indemnitee harmless from and against any Loss arising out of the failure to
collect all or any part of any account receivable included in the Current Assets
to the extent that such failure arises out of any matter that would have been a
Reimbursement Liability, and from and against any Loss arising out of any
Reimbursement Liability with respect to all or part of any such account
receivable that actually is collected prior to the occurrence of the
Reimbursement Liability related thereto.
2.4 IHS STOCK.
(A) As set forth in Section 2.1(b) above, but subject
to Sections 2.3(d) above, a portion of the Purchase Price shall be payable by
means of the delivery to Sellers of IHS Stock based upon a price per share of
such stock equal to the average closing New York Stock Exchange ("NYSE") price
of such stock for the thirty (30) trading day period ending on the date which is
two (2) trading days prior to the applicable date of determination (the "MARKET
VALUE PER SHARE"); provided that if the closing NYSE price of the IHS Stock on
the trading day immediately preceding the Closing Date is either more than
fifteen percent (15%) less than, or fifteen percent (15%) greater than, the
average closing NYSE price of such stock for such thirty (30) trading day
period, then each of the Sellers and Buyer shall have the right to terminate
this
12
Agreement, with the effect set forth in Article XI hereof as if terminated under
Section 11.1(c), by giving the other notice thereof on the date that would have
been the Closing Date if this Agreement were not so terminated.
(B) RESALE LIMITATIONS. All sales of IHS Stock issued
pursuant to this Agreement shall be effected solely through Smith Barney, Inc.
(provided that such fees are reasonable and customary), as broker, and after an
effective registration pursuant to subsection (f) below, sales by Sellers and,
if applicable, their pre- registration transferees, including Transferees (as
defined in Section 2.4(e) below), of such shares shall not at any time, in the
aggregate, exceed one hundred thousand (100,000) shares during any thirty (30)
day period. Delivery by Sellers of shares of IHS Stock to Transferees, or to IHS
or Buyer as payment for adjustments to the Purchase Price or pursuant to
indemnification obligations, shall not be considered in applying the resale
limitations set forth herein.
(C) INVESTMENT REPRESENTATIONS. All shares of IHS
Stock to be issued hereunder will be newly issued shares of IHS. Sellers and the
Shareholders represent and warrant that the IHS Stock being issued hereunder is
being acquired, and will be acquired, by Sellers for investment for their own
accounts or for the account of any Transferee to whom transfer of any of such
shares is expressly permitted in accordance with this Agreement, and not with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "SECURITIES ACT") or any
applicable state securities law. Sellers and each Shareholder acknowledge that
the IHS Stock constitutes restricted securities under Rule 144 promulgated by
the Securities and Exchange Commission (the "COMMISSION") pursuant to the
Securities Act, and may have to be held indefinitely, and each of them agrees
that such shares shall not 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 and the rules and
regulations thereunder. Sellers and each Shareholder 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. Sellers and each Shareholder acknowledge that they have been
provided with such materials as are generally provided to shareholders of IHS
and have had the opportunity to make inquiries of and obtain from
representatives and employees of IHS such other information about IHS as they
deem necessary in connection with such investment.
(D) LEGENDS. It is understood that, prior to sale of
any shares of IHS Stock pursuant to an effective registration pursuant to
subsection (f) below, the certificates evidencing such shares of IHS Stock shall
bear the following (or a similar) legend (in addition to any legends which may
be required in the opinion of IHS's counsel by the applicable securities laws of
any state), and upon sale of such shares pursuant to such an effective
registration, new certificates shall be issued for the shares sold without such
legends except as otherwise required by law:
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,
13
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.
(E) TRANSFERS. Upon prior notice to IHS, Sellers
shall be permitted to transfer any of the shares of IHS Stock acquired by them
pursuant to this Agreement and the registration rights related thereto to any of
the Shareholders or to Michael C. Favilla ("FAVILLA") (each a "TRANSFEREE") in
accordance herewith, provided that said transfers shall be made in compliance
with all applicable securities laws. Prior to an effective registration pursuant
to subsection (f) below, as a condition to any transfer of shares of IHS Stock
(other than any such transfer to any Transferee), if IHS shall request, Sellers
shall cause an opinion of legal counsel (such opinion and legal counsel to be
reasonably acceptable to IHS) to be delivered to IHS upon which IHS and its
legal counsel may rely to the effect that such transfer may be made in
compliance with all applicable securities laws. Upon such transfer the acquiring
Transferee shall be deemed to have made each of the representations and
warranties set forth in subsection (c) above with respect to himself or herself,
as of the date of such transfer, and he or she shall be bound by the provisions
of this Agreement relating to such transferred shares, including without
limitation, the resale limitations set forth in subsection (b) above and all of
the obligations relating to the registration of the shares. Transferees, other
than Shareholders, may be required (as a condition precedent to permitting any
transfer) by IHS to execute such documents as are necessary to evidence such
representations and warranties contained in this Section 2.4 and to bind them to
the provisions of this Section 2.4 of this Agreement relating to such
transferred shares. No such transfer shall release any Seller or Shareholder
from any of its obligations under this Agreement relating to such transferred
shares or otherwise.
(F) REGISTRATION OF IHS STOCK. IHS will cause to be
prepared, filed and will use its best efforts to have declared effective by the
Commission within ninety (90) days following the Closing Date, a registration
statement for the registration under the Securities Act of the IHS Stock issued
to Sellers pursuant to this Agreement, and IHS shall maintain the effectiveness
of such registration statement for a period of two (2) years following the date
on which it becomes effective, or for so long as any Seller (or any Transferee)
shall own any of the IHS Stock issued pursuant to this Agreement, whichever
shall occur first, in each case except to the extent that an exemption from
registration may be available.
(G) REGISTRATION PROCEDURES, ETC. In connection with
the registration rights granted to Sellers and Shareholders with respect to the
IHS Stock as provided in this Section 2.4, the following shall apply:
(I) IHS will promptly notify Sellers at any
time when a prospectus relating to a registration statement covering any
Sellers' shares under this Section 2.4 is required to be delivered under the
Securities Act, of the happening of any event known to IHS 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
14
circumstances then existing, and, to the extent required by applicable law, IHS
shall promptly prepare and file with the SEC as appropriate a supplement or
amendment to such prospectus so that, as thereafter timely delivered to the
purchaser of any IHS Stock such prospectus shall not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(II) IHS shall furnish Sellers with such
number of prospectuses as shall reasonably be requested, and Sellers agree to
comply with the prospectus delivery requirements of the Securities Act in
connection with any sale of IHS Stock by either of them.
(III) Subject to subsection (h) below, IHS
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 Sellers, provided that IHS 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 2.4 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. With respect to sales
of IHS Stock sold in accordance with the provisions of this Section 2.4 pursuant
to the registration statement, IHS shall indemnify Sellers and the Transferees,
and each person, if any, who controls Sellers within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Securities Exchange Act of 1934, as amended
(the "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, the Exchange Act or any other statute, common law or
otherwise, based upon a sale by them pursuant to any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
executed by IHS or based upon a sale by them pursuant to written information
furnished by IHS 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, NASDAQ, 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 IHS by any Seller or any Transferee 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 any Seller or
any controlling person of any Seller or any Transferee in respect of which
indemnity may be sought against IHS pursuant to this subsection, such Seller or
such controlling person or such Transferee shall within thirty (30) days after
the receipt thereof of a summons or
15
complaint, notify IHS in writing of the institution of such action and IHS shall
assume the defense of such action, including the employment and payment of
reasonable fees and expenses of counsel. After twenty (20) business days notice
thereof to IHS, any Seller or any such controlling person or any such Transferee
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 such Sellers or
such controlling persons or such Transferee unless (A) the employment of such
counsel shall have been authorized in writing by IHS in connection with the
defense of such action, or (B) IHS shall not have employed counsel to have
charge of the defense of such action or (C) IHS shall have failed to undertake
and reasonably pursue the defense of such action, or (D) such indemnified party
or parties shall have reasonably concluded that there may be material defenses
available to it or them which are different from or additional to those
available to IHS (in which case, IHS 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 Sellers, such controlling person and such Transferees shall be
borne by IHS, provided that such law firm shall be reasonably acceptable to IHS.
Except as expressly provided in the previous sentence, in the event that any
Seller, any such controlling person or any such Transferee assumes control of
the defense of any such action or claim, IHS shall not thereafter be liable to
indemnify such Seller or any such controlling person or such Transferee in
investigating, preparing or defending, or otherwise in respect of any such
action or claim. IHS agrees promptly to notify Sellers of the commencement of
any litigation or proceedings against IHS or any of its officers, directors or
controlling persons in connection with the resale of IHS Stock or in connection
with such registration statement with respect to which any such party shall be
entitled to indemnification hereunder. If the indemnification provided for in
this Section 2.4 is held by a court of competent jurisdiction to be unavailable
to any Seller or any controlling person of any Seller or any Transferee with
respect to any loss, liability, claim, damage or expense referred to herein,
then IHS in lieu of indemnifying any Seller or any controlling person of any
Seller or any Transferee hereunder, shall contribute to the amount paid or
payable by any Seller or any controlling person of such Seller or any such
Transferee hereunder, as a result of such loss, liability, claim, damage,
expense or liability in such proportion as is appropriate to reflect the
relative fault of IHS on the one hand and of such Seller or any controlling
person of such Seller or any Transferee on the other hand in connection with the
statements or omissions which resulted in such loss, liability, claim, damage,
expense, or liability, as well as any other relevant equitable considerations.
The relative fault of IHS and of such Seller or any controlling person of such
Seller or any Transferee shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by IHS or by
such Seller or any controlling person of such Seller or any Transferee and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(V) Sellers and any Transferee who proposes
to sell IHS Stock pursuant to a registration statement, shall severally, and not
jointly, indemnify IHS and Buyer, their respective officers, directors and
advisers, and each person, if any, who controls IHS or Buyer within the meaning
of ss.15 of the Securities Act or ss.20(a) of the Exchange Act against all
16
loss, claim, damage, 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, insofar as such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue or alleged untrue statement of any material fact
contained in a registration statement, a prospectus, or any amendment or
supplement thereto filed by IHS in accordance with this Agreement, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in a registration statement, a prospectus, a filing, or any
amendment or supplement thereto filed in accordance with this Agreement in
reliance upon and in conformity with written information furnished to IHS by
such Seller, or any such Transferee, or its, his or her respective successors or
assigns.
(H) REGISTRATION EXPENSES. Sellers shall not be
responsible for, and Buyer shall bear, all of the expenses of the Buyer related
to such registration and Buyer's other obligations under this Section 2.4
including, without limitation, the fees and expenses of its counsel and
accountants, all of its other costs, fees and expenses 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 fees and disbursements of its
counsel) incurred in connection with the qualification of IHS Stock under the
Blue Sky laws of various jurisdictions. Where any action or inaction by any
Seller or Transferee shall cause unreasonable increases in any of such costs,
Buyer and IHS shall not be responsible for, and Sellers shall pay for all of,
such costs. Buyer also shall pay or reimburse Sellers for the reasonable legal
fees and costs of one law firm to represent Sellers in connection with the
preparation of the registration statement. Buyer, however, shall not be required
to pay underwriter's or brokerage discount, commissions or expenses, or to pay
any costs and expenses in excess in the aggregate of $20,000 for Blue Sky
qualifications of Sellers' (and any Transferee's) IHS Stock, or to pay any costs
or expenses arising out of any Seller's or any Transferee's failure to comply
with its obligations under this Section 2.4.
(I) NOTICE OF SALE. If any Seller (or any of
its Transferees) desires to transfer all or any portion of its, his or her IHS
Stock, it, he or she will deliver written notice to IHS, describing in
reasonable detail its intention to effect the transfer and the manner of the
proposed transfer.
2.5 PURCHASE PRICE ADJUSTMENT.
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(A) The parties acknowledge that the Purchase Price
was determined based upon the Sellers' best good faith estimate that the One
Year EBITDA (as hereinafter defined) to be derived during the twelve (12) month
period commencing on the first day of the calendar month following the calendar
month in which the Closing occurs (the last day thereof being referred to herein
as the "DETERMINATION DATE" and such period being the "DETERMINATION PERIOD")
from the Business multiplied by five (5x) would be at least $31,400,000.
Accordingly, if (x) the actual One Year EBITDA multiplied by five (5x) is less
than (y) Sellers' aforesaid estimate of at least $31,400,000, then the parties
agree that the Purchase Price shall be reduced by such deficiency; provided,
however, that the reduction in Purchase Price pursuant to this Section 2.5 shall
not exceed an amount equal to (x) $14,360,000 minus (y) the portion of the RSI
Purchase Amount paid by Sellers after the date hereof.
(B) As soon as practicable, but in no event later
than ninety (90) days after the Determination Date, Buyer shall deliver to
Sellers a statement (the "EBITDA CALCULATION STATEMENT") showing the One Year
EBITDA (the "EBITDA CALCULATION"). Buyer shall provide the Sellers copies of, or
access to the work papers and similar materials used in connection with the
preparation of the EBITDA Calculation Statement. Sellers shall have thirty (30)
days following their receipt of the EBITDA Calculation Statement within which to
deliver to Buyer a written notice of objection thereto (an "OBJECTION NOTICE"),
which Objection Notice shall (x) set forth Sellers' determination of the EBITDA
Calculation and (y) specify in reasonable detail Sellers' basis for objection,
in which case the parties shall meet and in good faith attempt to resolve any
disagreements within thirty (30) days after delivery to Buyer of the Objection
Notice. If the parties are unable to resolve such disagreements within such time
period, the disagreements shall be referred to the Settlement Accountants, and
the determination of the Settlement Accountants shall be final and binding on
the parties hereto, and shall not be subject to further review, challenge, or
adjustment, absent fraud. The Settlement Accountants shall be directed to use
their best efforts to reach a determination not more than forty-five (45) days
after such referral. The costs and expenses of the services of the Settlement
Accountants shall be borne by the party against whom the Settlement Accountants
shall rule; provided that if the Settlement Accountants shall not clearly rule
against any party, then such costs and expenses shall be borne equally by
Sellers, on the one hand, and Buyer, on the other hand. The failure by Sellers
to deliver an Objection Notice within such thirty (30)-day period shall
constitute the Sellers' acceptance of the EBITDA Calculation, which shall
thereupon become conclusive and binding on all parties hereto, and shall not be
subject to further review, challenge, or adjustment, absent fraud.
(C) If the Purchase Price is decreased as provided in
this Section 2.5, the amount of the decrease shall be paid promptly by Sellers
to Buyer, and in any event by no later than the third day after the amount of
such decrease shall be finally determined. Such payment shall be made first by
offsetting against the Contingent Payment in accordance with Section 2.1(c)
above, then to the extent necessary, by return of shares of IHS Stock (valued as
of the Determination Date in accordance with Section 2.4(a) above) and/or cash
(as determined by Sellers and the Shareholders in their sole and absolute
discretion); provided, however, that in no event shall Sellers select a
combination that will have the result that Buyer shall have paid less than sixty
percent (60%) of the
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Purchase Price (excepting therefrom the amount be which the cash portion of the
Purchase Price is increased in respect of the unpaid portion of the RSI Purchase
Amount in accordance with Section 2.1(a) above) by delivery of shares of IHS
Stock (except that Sellers may make such payment with a greater percentage of
shares of IHS Stock to the extent that Sellers are returning shares of IHS Stock
previously delivered to them or the Escrowee in respect of any previous increase
in Purchase Price to the extent that such shares increased the percentage of
such shares included in such Purchase Price increase to a percentage greater
than sixty percent (60%)).
(D) For purposes of this Agreement, the term "ONE
YEAR EBITDA" shall mean the sum of (x) fifty percent (50%) of the Aggregate
Joint Contract EBITDA (hereinafter defined) for the Determination Period plus
(y) one hundred percent (100%) of the Existing Contract EBITDA (hereinafter
defined) for the Determination Period.
(I) After the Closing, IHS (through its
subsidiary, Symphony Rehabilitation Services No. 4, Inc. ("SYMPHONY REHAB")) and
Buyer shall jointly pursue new Provider Contracts, and the parties hereby
acknowledge that the reason for the inclusion of the Joint Contracts
(hereinafter defined) in the determination of the One Year EBITDA is the
parties' expectation that such agreements will result, in a substantial way,
from the goodwill purchased by Buyer from Sellers pursuant to the terms of this
Agreement. The "AGGREGATE JOINT CONTRACT EBITDA" for the Determination Period
shall mean the result (without duplication) of the following items that are
attributable to the Joint Contracts for the Determination Period: (v) the Net
Joint Contract Revenues (hereinafter defined), minus (w) the Direct Joint
Contract Expenses (hereinafter defined), minus (x) a reserve for doubtful
accounts (including any matters that arise with respect to Services provided
during the Determination Period that would have constituted Reimbursement
Liabilities had they arisen on or prior to Closing ("POST-CLOSING REIMBURSEMENT
LIABILITIES")), minus (y) an amount equal to seven and one-half percent (7.5%)
of the Net Joint Contract Revenues (in lieu of the actual amount of corporate
overhead). "NET JOINT CONTRACT REVENUES" shall mean all amounts billed (as
adjusted for rate changes, discounts given and contractual allowances with
respect to the Services provided) with respect to bona fide Services provided
pursuant to Joint Contracts during the Determination Period. "DIRECT JOINT
CONTRACT EXPENSES" means expenses that can be identified specifically with, or
traced to delivery of, Services provided pursuant to a Joint Contract during
such Determination Period, including without limitation, compensation of
supervisory and management personnel to the extent revenues attributable to a
Joint Contract are generated as a result of the presence of such supervisory or
management personnel. Direct Joint Contract Expenses do not include any
allocation of overhead expenses pertaining to the operation of IHS or any of its
subsidiaries as a whole, including without limitation, Symphony Rehab and Buyer.
Except as otherwise expressly set forth in this clause (i), Aggregate Joint
Contract EBITDA, Net Joint Contract Revenues and Direct Joint Contract Expenses
shall be determined in accordance with GAAP. For purposes of this Agreement, the
term "JOINT CONTRACT" means any Provider Contract with any or all of the three
(3) Health Dimensions, Inc. facilities listed on Schedule 2.5(d) - A hereto (the
"HDI JOINT CONTRACTS") and each Provider Contract that is entered into after the
Closing Date with respect to the provision of Services in the States of
Minnesota or North Dakota and each Provider Contract entered into after the
Closing Date with Good Samaritan or Walker
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(other than RDI Prospective Contracts and Existing Contracts), excluding the
following: (1) the Existing Contracts; (2) each of the Provider Contracts to
which IHS or any of its subsidiaries is a party immediately prior to the
Closing; (3) each Provider Contract with any of the facilities identified on
Schedule 2.5(d)-1 hereto (other than the HDI Joint Contracts) with respect to
which a binding written agreement (or a written letter of intent to enter into a
binding written agreement) is executed and delivered by the parties thereto
within forty-five (45) days after the Closing Date (the "IHS PROSPECTIVE
FACILITIES"); (4) each Provider Contract with any of the facilities identified
on Schedule 2.5(d)-2 hereto with respect to which a binding written agreement
(or a written letter of intent to enter into a binding written agreement) is
executed and delivered by the parties thereto within forty-five (45) days after
the Closing Date (the "RDI PROSPECTIVE FACILITIES"); (5) each Provider Contract
that is acquired after the Closing Date pursuant to an acquisition of the
capital stock or assets of any business, or pursuant to any similar transaction
(including acquisitions by way of mergers or employment agreement purchases);
and (6) any renewal, modification, restatement, amendment or replacement of any
of such foregoing excluded Provider Contracts. Sellers may include prospective
Provider Contracts with Good Samaritan or Walker Facilities for Services not
located in Minnesota or North Dakota on Schedule 2.5(d)-2 on the additional
condition that such Provider Contracts will become Existing Contracts only if
Buyer will provide all of the Services under such Provider Contracts for such
facilities. Upon Closing, Buyer shall deliver to Sellers a list, including the
names and addresses of the other parties thereto, of each Provider Contract for
Services in the States of Minnesota or North Dakota to which IHS or any of its
subsidiaries is a party immediately prior to the Closing.
(II) For purposes of this Agreement, the
term "EXISTING CONTRACT EBITDA" for the Determination Period shall mean the
result (without duplication) of the following items that are attributable for
the Determination Period: (u) the Net Existing Contract Revenues (hereinafter
defined), minus (v) all Direct Existing Contract Expenses attributable to the
Existing Contracts, minus (w) a reserve for doubtful accounts (including
Post-closing Reimbursement Liabilities) with respect to the Net Existing
Contract Revenues, minus (x) all indirect expenses of Buyer, minus (y) fifty
percent (50%) of all Synergy Savings (defined below), plus (z) fifty percent
(50%) the amount of all Buyer Synergy Savings (as defined below). "NET EXISTING
CONTRACT REVENUES" shall mean all amounts billed (as adjusted for rate changes,
discounts given and contractual allowances with respect to the Services
provided) with respect to bona fide Services provided pursuant to Existing
Contracts during the Determination Period. "DIRECT EXISTING CONTRACT EXPENSES"
means expenses that can be identified specifically with, or traced to delivery
of, Services provided pursuant to Existing Contracts during such Determination
Period, including without limitation, compensation of supervisory and management
personnel to the extent revenues attributable to an Existing Contract are
generated as a result of the presence of such supervisory or management
personnel. Direct Existing Contract Expenses and indirect expenses of Buyer do
not include any allocation of expenses pertaining to the operation of IHS or any
of its subsidiaries as a whole (other than allocations of Buyer expenses),
including without limitation, Symphony Rehab, except to the extent created by
Synergy Savings. "SYNERGY SAVINGS" shall mean the amount by which any expense,
including indirect expenses of Buyer, reflected in the Existing Contract EBITDA
for the Determination Period shall be reduced by reason of any services, assets
or resources
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provided to the Business by IHS or any of its subsidiaries or affiliates (other
than Buyer). Except as otherwise expressly set forth in this clause (ii),
Existing Contract EBITDA, Net Existing Contract Revenues, Direct Existing
Contract Expenses and Synergy Savings shall be determined in accordance with
GAAP. For purposes of this Agreement, the term "EXISTING CONTRACT" means each
Designated Provider Contract (other than the HDI Joint Contracts), each Provider
Contract with any RDI Prospective Facility (subject to the time limits and, in
the case of applicable Good Samaritan and Walker Facilities, the other
conditions, set forth in clause (i) above), and any renewal, modification,
restatement, amendment or replacement of any of such Existing Contracts by
Buyer, IHS or any of its other subsidiaries.
(III) To the extent after determination of
the One Year EBITDA it shall be discovered that the reserve for any
Reimbursement Liability used in determining Aggregate Joint Contract EBITDA or
Existing Contract EBITDA shall have been greater or lesser than the amount of
the actual Post-closing Reimbursement Liability, then the amount of the
reduction of the Purchase Price required by this Section 2.5 shall be
recalculated using the correct amount of the Post-closing Reimbursement
Liability, and promptly thereafter Sellers on the one hand, or Buyer on the
other hand, shall make to the other any payment required by such adjustment;
subject, however, to the limitations on the Purchase Price and Purchase Price
reductions set forth in subsection (a) above If there shall be any claim for any
such Post-closing Reimbursement Liability, Buyer will contest or appeal such
claim (using at least the same standard of care as it would apply to contests or
appeals with respect to reimbursement liabilities in general) in accordance with
the procedures set forth in Buyer's manual; provided, however, that if there
shall be no procedure set forth in Buyer's manual with respect to any type of
Post-closing Reimbursement Liability, then Buyer shall diligently pursue such
appeal in good faith. Buyer may, in its sole and absolute discretion, at any
time discontinue any such contest or appeal prior to the final determination
thereof after all administrative appeals shall have been taken (a "FINAL
DETERMINATION"); provided, however, that if Buyer intends to discontinue any
such appeal or contest prior to Final Determination, then Buyer must provide
Sellers with reasonably prior written notice of such intent and of the current
status of the appeal or contest, and upon request of Sellers, Buyer shall assign
to Sellers all of its right, title and interest to contest and appeal such
Post-Closing Reimbursement Liability on behalf of and in the name of Buyer; it
being understood, however, that any recovery with respect to any such
Post-closing Reimbursement Liability shall belong to Buyer (other than Sellers'
pro rata share of any attorney fees and costs recovered in connection with such
appeal). Buyer may, in its sole discretion, elect not to so assign any of its
right, title and interest to contest and appeal any such Post-closing
Reimbursement Liability, in which case, the otherwise appealable or contestable
portion thereof shall not reduce the One Year EBITDA.
(IV) If there shall be a proposal by
Symphony Rehab, Buyer or any Shareholder or Favilla to use any services, assets
or resources of Buyer for the benefit of Symphony Rehab, then the person or
entity making such proposal shall notify the President of Symphony Rehab, on the
one hand, or one of the Shareholders or Favilla, on the other hand, of such
proposal. The parties shall, prior to any implementation of such proposal,
promptly meet in good faith to determine if and how any savings to Symphony
Rehab arising out of such use ("BUYER SYNERGY SAVINGS") will be included in the
calculation of One Year EBITDA.
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(V) During the Determination Period and
until final determination of the EBITDA Calculation, after all objection,
resolution or Settlement Accountant determination periods have elapsed, IHS and
its subsidiaries shall permit Sellers and their authorized representatives
(including legal counsel and accountants) to have access (upon reasonable notice
and during normal business hours) to their books and records to the extent
reasonably necessary to arrive at the final determination of the EBITDA
Calculation. Such access shall be subject to restrictions substantially similar
to those set forth in Section 10.3 hereof. Such books and records shall contain
full and correct entries in all material respects of all dealings and
transactions affecting the One Year EBITDA. In addition, Symphony Rehab and
Buyer shall furnish to Sellers copies of: (A) a profit and loss statement with
respect to the
Existing Contracts and the Joint Contracts (individually and in the aggregate)
for each calendar month and for the portion of the Determination Period ending
on the last date of calendar month then ended (as soon as available and in any
event within 30 days after the end of each calendar month during the
Determination Period); (B) an accounts receivable aging report (showing billing
and cash receipts) with respect to each account receivable arising out of any
Existing Contract or Joint Contract (as soon as available and in any event
within 30 days after the end of each calendar month during the Determination
Period); and (C) a preliminary statement of Net Joint Contract Revenues, Direct
Joint Contract Expenses, reserve accruals for Joint Contracts, and Synergy
Savings (if any) and Buyer Synergy Savings (if any), in the aggregate and by
Joint Contract for the quarterly fiscal period then ended (as soon as available
and in any event within 30 days after the end of each of the quarterly periods
(ending on successive three month periods) during the Determination Period). All
of the foregoing reports shall be in reasonable detail and shall be certified by
Symphony Rehab to be its best good faith estimate thereof.
(VI) During the Determination Period, Buyer
and the Joint Contracts shall be reasonably operated by Symphony Rehab so as not
to divert earnings to periods after the Determination Period or to incur
expenses during the Determination Period in an effort to reduce the One Year
EBITDA, and such business shall be operated in the ordinary course not
inconsistent with past practice, except as may be necessary to address clinical
or ethical requirements or as required by prudent business practice. Moreover,
the President of Symphony Rehab shall regularly consult with and seek the input
of, and shall be reasonably accessible to, the Shareholders and Favilla with
respect to the operation of Buyer and the Joint Contracts. Without limiting the
foregoing, the Shareholders and Favilla shall be notified a reasonable amount of
time in advance of any material planned action by Buyer or Symphony Rehab in
connection with the operation of Buyer or the Joint Contracts that is not in the
ordinary course of business not inconsistent with past practice, and if such
action is then taken over the written objection of any two of the following
individuals: (x) either or both Shareholders and/or (y) Favilla on the basis
that such action is not in the ordinary course of business and may have a
material adverse effect on the One Year EBITDA (such writing to set forth in
reasonable detail the basis of such objection), then the parties shall negotiate
in good faith to appropriately adjust the determination of the One Year EBITDA
to take into account the merits of such objection, and if the parties are unable
to arrive at such an adjustment, then the adjustment, if any, shall be
determined by the Settlement Accountants in accordance with Section 2.5(b)
above; it being understood that the Settlement Accountants shall be directed to
determine the amount of the adjustment based on what the One Year EBITDA likely
would have been had such action not been taken.
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ARTICLE III:THE CLOSING
3.1 TIME AND PLACE OF CLOSING.
(A) The closing (the "CLOSING") of the transactions
contemplated by this Agreement shall take place by mail through escrow
arrangements satisfactory to the parties hereto on the day that is one business
day after all of the conditions to closing set forth in this Agreement shall
have been satisfied or waived, but, subject to Sections 8.14 and 9.9 below, in
no event later than June 20, 1997, or at such other time and place upon which
the parties may agree. The date on which the Closing is held is hereinafter
referred to as the "CLOSING DATE."
(B) If prior to or on the Closing Date, Buyer shall
have the right to terminate this Agreement by reason of the occurrence of any of
the events specified in Section 1.3(b), then Buyer and Sellers may, but shall
not be required to, extend the Closing Date for up to an additional sixty (60)
days to provide time to obtain the consents or approvals contemplated thereby.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE SHAREHOLDERS
For purposes of any representation, warranty or certification
made in or pursuant to this Agreement, the Group's knowledge shall be deemed to
include the knowledge of Favilla. Sellers and the Shareholders hereby jointly
and severally represent and warrant as follows:
4.1 ORGANIZATION AND STANDING; SUBSIDIARIES.
(A) Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
Copies of each such corporation's Certificate of Incorporation and By-laws and
all amendments thereof to date, have been delivered to Buyer, and are complete
and correct. Each such corporation 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. Each such corporation is qualified (or is in the process of
qualifying to, and prior to the Closing, will be qualified) to do business as a
foreign corporation in each state where the ownership of its assets or the
conduct of its business makes such qualification necessary.
(B) Except as set forth on Schedule 4.1(b), no Seller
has any equity interest or investment in any other corporation, limited
liability company, partnership, joint venture or other entity or association.
Schedule 4.1(b) sets forth a complete list of all subsidiaries, joint ventures
and partnerships in which any Seller is the record or beneficial owner of five
(5%) percent or more of the equity interest. All of the issued and outstanding
capital stock or other equity interest of the entities, if any, listed on
Schedule 4.1(b) hereto is owned of record and beneficially by the listed Seller
or by one of the listed wholly-owned subsidiaries except as listed on Schedule
4.1(b).
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4.2 AUTHORITY.
(A) Each Seller has the full corporate power and
authority to make, execute, deliver and perform this Agreement including all
Schedules and Exhibits hereto, and the other agreements, instruments,
certificates and documents required or contemplated hereby or thereby to be
executed or delivered by it, (collectively the "SELLER TRANSACTION DOCUMENTS")
and all of the transactions contemplated hereby and thereby. Such execution,
delivery, performance and consummation have been duly authorized by all
necessary action, corporate or otherwise, on the part of each Seller, its
shareholders and all necessary consents of holders of indebtedness of each
Seller have been obtained or will be obtained on or prior to Closing.
(B) Each Shareholder has the full legal power and
capacity to make, execute, deliver and perform this Agreement including all
applicable Schedules and Exhibits hereto, and the other agreements, instruments,
certificates and documents required or contemplated hereby or thereby to be
executed or delivered by him or her ("SHAREHOLDER TRANSACTION DOCUMENTS", and
collectively with the Seller Transaction Documents, the "GROUP TRANSACTION
DOCUMENTS"), and all of the transactions contemplated hereby and thereby. Such
execution, delivery, performance and consummation have been or will be made in
the exercise of each such Shareholder's free will and volition, and any
necessary consents of holders of indebtedness of such Shareholders have been
obtained or will be obtained on or prior to Closing.
4.3 BINDING EFFECT. This Agreement and the Group Transaction
Documents executed by any Seller or Shareholder constitute the legal, valid and
binding obligations of such Seller or such Shareholder, as the case may be,
enforceable against it, him or her, as the case may be, in accordance with their
respective terms.
4.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution
or delivery of this Agreement or any of the Group Transaction Documents by any
Group Participant nor the performance by any Group Participant of the
transactions contemplated hereby and thereby, conflicts with, or constitutes a
breach of or a default under or the termination of (a) in the case of each
Seller, its Articles of Incorporation or By-laws; or (b) any judgment, order,
writ, injunction, or decree of any court applicable to any Group Participant; or
(c) any applicable laws, ordinances, orders, rules or regulations ("GOVERNMENTAL
REQUIREMENTS") of any Federal, state, local or other governmental or
quasi-governmental agency, bureau, board, administrator, court, commission,
department, instrumentality, body or other authority having jurisdiction over
it, him or her ("GOVERNMENTAL AUTHORITIES"); or (d) any agreement, indenture,
contract or instrument to which any Group Participant is now a party or by which
any of them or any of the Assets is bound.
4.5 CONSENTS. Except as set forth on Schedule 4.5 and Schedule
4.10, no authorization, consent, approval, license, exemption by filing or
registration with any Governmental Authority, is or will be necessary in
connection with any Group Participant's entry into, execution, delivery and
performance of this Agreement or any of the Group Transaction Documents, or for
the consummation of the transactions contemplated hereby and thereby.
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4.6 SCHEDULE OF ASSETS AND PROPERTIES. Set forth on Schedule
4.6 are complete and accurate lists of all of the following items of Assets to
the extent material as of the date of this Agreement as follows:
(A) all machinery, vehicles and equipment, office
equipment, furniture and supplies owned or leased by either Seller and any other
items of personal property (not otherwise set forth on a schedule hereto) that
comprise or are otherwise used by either Seller in connection with any part of
the Business; and
(B) all patents, trademarks, service marks,
copyrights, or applications for any of the same, franchises, rights and other
authorizations (other than consents as set forth on Schedule 4.5 and Licenses as
set forth on Schedule 4.10 hereof), if any, and any other item of intellectual
property owned, possessed or used by either Seller or any other person in the
operation of any of the Business, other than Bethoughtful Assets and the assets
of Dynamic (the "PROPRIETARY RIGHTS"). Schedule 4.6 sets forth any of the
foregoing items which have been registered under any state or federal statute.
All of the Proprietary Rights of Seller are fully and freely assignable by it,
and are free and clear of all Liens.
4.7 CONTRACTS.
(A) Schedule 4.7(b) sets forth a complete and correct
list of all material agreements, leases, contracts and commitments whether
written or oral, relating to the Business or to which either Seller is a party
or by which any Seller or any of the Assets are bound (the "CONTRACTS"). For
purposes of this Agreement, unwritten "at will" employment agreements with
individual employees shall not be deemed to be Contracts. The Group has
delivered, or prior to Closing will deliver, to Buyer true, complete and correct
copies of each written Contract and a written description of each oral Contract.
The Contracts were entered into and require performance in the ordinary course
of business and are in full force and effect. Except as set forth on Schedule
4.7(b), no Seller is in default under any Contract, and, except as set forth on
Schedule 4.7(b), there has not been asserted, either by or against any Seller
under any Contract, any notice (written or oral) of default, set-off or claim of
default. Except as set forth on Schedule 4.7(b), to the knowledge of the Group,
the parties to the Contracts other than Sellers are not in default of any of
their respective obligations under any of 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 except for past
due accounts receivable due to Sellers as set forth on the aged accounts
receivables listing attached hereto as Schedule 4.7(b), which listing is true
and complete as of the date that is ten (10) days prior to the date hereof.
Schedule 4.7(b) lists all amounts payable or receivable under each of the
Contracts as of the date hereof, and such Schedule 4.7(b) will at the Closing
Date, be revised to be true as of such Closing Date. Except as set forth in
Schedule 4.7(b), the Contracts are freely and fully assignable to Buyer without
the consent of the remaining parties thereto. Except as set forth on Schedule
4.7(b), no Group Participant has received notice (oral or written) or has
knowledge that any of the Contracts will be terminated within ninety (90) days
from the Closing Date by any party thereto pursuant to any provision thereof
permitting any such party to terminate such Contract with or without cause.
25
(B) Except as listed in Schedule 4.7(b), no Seller is
a party to or liable in connection with and no Seller has granted any written or
express, oral or implied:
(I) contract, agreement or commitment for
the employment or retention of, or collective bargaining, severance or
termination of or with, any director, officer, employee, consultant or agent or
group of employees or any non-competition, confidentiality or similar agreement
with any such person or persons;
(II) agreement or arrangement for the sale
of any of its assets, property or rights outside the ordinary course of business
or requiring the consent of any party to the transfer and assignment of any such
assets, property or rights (by sale of assets, sale of stock, merger or
otherwise);
(III) contract which contains any provisions
requiring either Seller to indemnify or act for any other person or entity or to
guaranty or act as surety for any other person or entity or that requires any
person or entity to indemnify any other person or entity for any obligation of
any Seller or to guaranty or act as a surety for any other person or entity;
(IV) agreement restricting any Seller or any
other person or entity from conducting business anywhere in the world for any
period of time or restricting its, his or her use or disclosure of any
confidential or proprietary information;
(V) partnership, joint venture or management
contract or similar arrangement or agreement which involves a right to share
profits or future payments with respect to the business of either Seller or any
portion thereof or the business of any other person or entity;
(VI) agreement with any nursing home, day
activity center, assisted living unit, hospital, home care or outpatient clinic,
or other facility with respect to the provision of Rehab Services or Restorative
Services to patients or residents ("PROVIDER CONTRACTS");
(VII) licensing, distributor, dealer,
franchise, sales or manufacturer's representative, agency or other similar
contract, arrangement or commitment; or
(VIII) agreement, other than a lease set
forth in a Provider Contract, granting a leasehold or other interest in real
property (the "LEASES");
(IX) profit sharing, thrift, bonus,
incentive, deferred compensation, stock option, stock purchase, severance pay,
pension, retirement hospitalization, insurance or other similar plan, agreement
or arrangement applicable to any employee, consultant or agent to Seller not
covered by clause (i) above;
26
(X) contract, agreement, lease, license,
understanding or arrangement with the Bethoughtful Division or Dynamic; or
(XI) except as set forth in clauses (i)
through and including (x) above, agreement not made in the ordinary and normal
course of business and consistent with past practice or involving consideration
in excess of $25,000 except as set forth in Schedule 4.17.
4.8 FINANCIAL STATEMENTS.
(A) (I) Attached hereto as Schedule 4.8(a)(i) are the
unaudited consolidated financial statements of Sellers for the fiscal years
ending December 31, 1994, the audited consolidated financial statements of
Sellers for the fiscal year ending December 31, 1995, and the unaudited
consolidated financial statements of Sellers for the fiscal year ending December
31, 1996, and the unaudited consolidated financial statements of Sellers for
each month, commencing with the month beginning January 1, 1996 and ending on
March 31, 1997 (the "FINANCIAL STATEMENTS"). The Financial Statements (including
any related notes thereto) are true and correct in all material respects and
present fairly the financial condition and results of operations of Sellers on a
consolidated basis as, at and for the periods therein specified and were
prepared in accordance with GAAP except as expressly set forth on Schedule 4.8
(a)(i). The books of account of each Seller from which the Financial Statements
were prepared accurately and in all material respects reflect all of the items
of income and expense, assets, liabilities and accruals of Sellers on a
consolidated basis. The income statements included in the Financial Statements
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, and such financial statements
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
(II) Attached hereto as Schedule 4.8(a)(ii)
are the unaudited consolidated financial statements of Sellers for each fiscal
month beginning June 1, 1996 and ending on March 31, 1997, in each case,
adjusted to exclude therefrom the results of operations and the effect of the
Bethoughtful Division and Dynamic Interest (the "ADJUSTED FINANCIAL
STATEMENTS"). The Adjusted Financial Statements (including any related notes
thereto) are true and correct in all material respects and present fairly the
financial condition and results of operations of Sellers on a consolidated basis
after adjustment to exclude the results of operations and the effect of the
Bethoughtful Division and Dynamic Interest as, at and for the periods therein
specified and were prepared in accordance with GAAP except as expressly set
forth on Schedule 4.8(a)(ii).
(B) The unaudited consolidated balance sheet
contained in the Financial Statements as at December 31, 1996 (the "BALANCE
SHEET") reflects all liabilities as of the date thereof, and no Seller has any
Liabilities that are not reflected thereon, except for such current Liabilities
as have been incurred since the date of the Balance Sheet in the ordinary course
of business consistent with past practice and Liabilities listed on Schedule
4.8(b). To the best
27
knowledge of the Group, except as disclosed on Schedule 4.8(b), there is no
basis for the assertion against either Seller of any Liability of any nature or
in any amount (other than current or scheduled Liabilities as aforesaid) not
fully reflected or reserved against in the Balance Sheet.
4.9 MATERIAL CHANGES. Except as noted on Schedule 4.9 or as
expressly noted as such on Schedule 4.19 hereto, between the date of the Balance
Sheet and the date hereof there has not been any material adverse change in the
condition (financial or otherwise), of the assets (taken as a whole), properties
or operations of either Seller, and each Seller has conducted its business only
in the normal course, consistent with past practice.
4.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 4.10
sets forth a description of (a) each license and all other permits and approvals
of Governmental Authorities relating to the operation of any part of the
Business heretofore obtained and that is now in effect, including, without
limitation, certifications for participation or enrollment in, and all provider
contracts and numbers with respect to, all Medicare and Medicaid programs and
other third party reimbursement sources, and all other approvals required for
capital reimbursement; and (b) each other license, permit, easement, right or
other authorization that is necessary for the operation of any part of the
Business (collectively, the "LICENSES"). Seller has delivered to Buyer true,
correct and complete copies of all of the Licenses and the applications
therefor. Schedule 4.10 also sets forth a description of each accreditation of
the Business, copies of which Sellers have delivered to Buyer. Sellers or, to
the extent described on Schedule 4.10, Sellers' employees, own, possess or have
the legal right to use the Licenses, free and clear of all Liens other than as
set forth on Schedule 4.10. No Seller, and no licensed employee of any Seller,
is in default under, and no Seller has received any notice of any claim or
default or any other claim or proceeding relating to, any such License. The
Sellers are fully and completely licensed by all appropriate Governmental
Authorities to carry on all aspects of the Business. Except to the extent
described on Schedule 4.10, no shareholder, director or officer, employee or
former employee of either Seller, or any other person, firm or entity owns or
has any proprietary, financial or other interest, direct or indirect, in whole
or in part in any such License owned, possessed or used in the operation of any
aspect of the Business.
4.11 TITLE, CONDITION TO PERSONAL PROPERTY.
(A) Except as otherwise specifically set forth
herein, each Seller has good and marketable title to all of the personal
property comprising the Assets, subject to no liens, claims, security interests,
mortgages, pledges, charges, easements, rights of setoff, restraints on
transfers, restrictions on use, options, conditional sale agreements, subleases,
sublicenses and encumbrances of any kind or nature whatsoever, other than
Permitted Liens ("LIENS"). Except for Permitted Liens, no person other than the
applicable Seller has any right to the use or possession of any of such
property, and, except as set forth on Schedule 4.11(a), no currently effective
financing statement with respect to such personal property has been filed in any
jurisdiction, and, except as set forth on Schedule 4.11(a), no Seller has signed
any such financing statement or any security agreement authorizing any secured
party thereunder to file any such
28
financing statement. Except with respect to Permitted Liens, all such financing
statements will be removed at or prior to Closing. Since its formation, each
Seller has conducted its business activities only under the corporation and/or
trade names set forth in Section 1.1 hereto. All of such personal property
comprising equipment, improvements, furniture and other tangible personal
property, whether owned or leased, is in good operating condition and repair
except for normal wear and tear in the ordinary course of business, and is
functioning in the manner and for the purpose for which it was intended and is
in compliance with (and the operation thereof is in compliance with) all
applicable Governmental Requirements. The Assets, including without limitation,
the personal property referred to above, the inventory included therein, and the
Leased Properties, Contracts, Proprietary Rights and Sellers' Medicare and
Medicaid certification and provider numbers are sufficient and suitable to
enable Buyer to operate the Business in the ordinary and usual manner as
conducted by Sellers.
(B) "PERMITTED LIENS" means:
(I) each lien or encumbrance set forth on
Schedule 4.11(b) hereto;
(II) carriers', warehouseman's, mechanics,
materialmen's, repairmen's or other like liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days;
(III) 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, provided that each such
deposit shall be included in the Assets and shall not exceed $15,000 in any one
case, or $75,000 in the aggregate; and
(IV) pledges or deposits in connection with
worker's compensation, unemployment insurance, and other social security
legislation.
(C) Except as set forth on Schedule 4.11(c), no
tangible personal property used by any Seller in connection with the operation
of the Business is subject to a lease, conditional sale, or similar arrangement.
Schedule 4.11(c) sets forth a true, complete and correct copy of each of the
personal property leases relating to the Business as to which any Seller is a
party (together with all modifications or amendments thereto), the annual rental
and unexpired lease term thereby and all the information set forth thereon is
true, complete and correct.
4.12 TITLE, CONDITION OF THE LEASED PROPERTIES.
(A) No Seller owns any real property or, other than
the Leases, has a leasehold or other interest in any real property. The
applicable Seller has a valid leasehold interest, free and clear of all Liens,
in each of the properties covered by the Leases (the "LEASED PROPERTIES").
29
(B) Except as set forth on Schedule 4.12(b), there
are no leases, subleases or other agreements of any Seller as lessor or
sublessor, granting any third party the right to use or occupy any of the Leased
Properties and, except as set forth on Schedule 4.12(b), to the knowledge of the
Group, no person, firm or entity has any ownership interest (other than the
landlord thereunder) or option or right of first refusal to acquire any
ownership interest in any of the Leased Properties.
(C) The operations and use by each Seller of the
buildings and other improvements comprising any of the Leased Properties (the
"IMPROVEMENTS") comply with and do not violate in any material respect the
applicable lease or any zoning, building or similar law, ordinance, order or
regulation or any statement of occupancy issued for or in respect of the
Business. There has been no violation by either Seller or, to the Group's
knowledge, any of their predessors-in-interest, of any Governmental Requirement
affecting any of the Leased Properties and no written notice of any such
violation has been issued by any Governmental Authority. To the Group's
knowledge, the Improvements and all of their systems, including without
limitation, the heating, ventilating and air condition systems, and the
plumbing, electrical, mechanical and drainage systems, and roofs are in good
operating condition, repair and working order (except for normal wear and tear
which has not had a material adverse effect on the condition thereof), and have
passed all previous safety and/or licensing inspections.
4.13 LEGAL PROCEEDINGS. Other than as set forth on Schedule
4.13, there are no disputes, claims, actions, suits or proceedings, arbitrations
or investigations, either administrative or judicial, pending, or, to the
Group's knowledge, threatened or contemplated, nor, to the Group's knowledge, is
there any basis therefor, against or affecting either Seller or any of the
Assets or either Seller's rights therein or the ability of any Group Participant
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, including, without limitation, any
of the foregoing relating to the infringement of proprietary rights. No
Participant of the Group has received any requests for information with respect
to the transactions contemplated hereby from any Governmental Authority.
4.14 EMPLOYEES. Schedule 4.7(b) and Schedule 4.14 together
contain a true, complete and correct list of the name, position, current rate of
compensation and any vacation or holiday pay, sick pay, personal leave and any
other compensation arrangements or fringe benefits, of each current employee,
consultant and agent of Seller (together with a description of any specific
arrangements or rights concerning such persons that are not reflected in any
agreement or document referred to in Schedule 4.7(b). Each Seller is in
compliance with all Governmental Requirements applicable to any of the employee
benefit plans, agreements and arrangements identified on Schedule 4.7(b),
including, without limitation, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). No such employee, consultant or commission agent has
any vested or unvested retirement benefits or other termination benefits, except
as described on Schedule 4.7(b). The Balance Sheet contains an adequate reserve
for vacation, sick leave, severance and all other employee-related accruals.
30
4.15 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT
PRACTICES, ETC. During the two (2) years prior to the Closing Date, there has
been, to the knowledge of the Group, no material adverse change in the
relationship between either Seller and any two or more employees acting together
materially affecting either Seller, nor has there been any strike or labor
disturbance by any of such employees affecting the Business and there is no
indication that such a change, strike or labor disturbance is likely. No
employees of either Seller are represented by any labor union or similar
organization in connection with their employment by or relationship with, any
Seller, and to the Group's knowledge there are no pending or threatened
activities the purpose of which is to achieve such representation of all or some
of such employees. To the Group's knowledge there are no threats of strikes,
work stoppages or pending grievances by any past or present employees of either
Seller that could have a material adverse effect on the operations of the
Business or the financial condition of either Seller. Except as set forth on
Schedule 4.15, no Seller has any collective bargaining or other labor contracts.
4.16 ERISA. No Seller maintains or makes contributions to and
no Seller has 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. No Seller maintains or makes contributions to or has 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").
4.17 INSURANCE AND SURETY AGREEMENTS. Schedule 4.17 contains a
true and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by any Seller or otherwise in force and providing
coverage for the Business or any of the Leased Properties or Assets (including
but not limited to medical malpractice insurance, and any state sponsored plan
or program for worker's compensation); (b) all bonds, indemnity agreements and
other agreements of suretyship made for or held by any Seller or otherwise in
force and relating to the Business or any of the Leased Properties or Assets,
including a brief description of the character of the bond or agreement, the
name of the surety or the indemnifying party. Schedule 4.17 sets forth a
certificate of insurance for each such insurance policy, and true and complete
copies of each such insurance policy have been delivered to Buyer. Schedule 4.17
also sets forth a description of any claims made thereunder during the past two
years. Such policies are owned by Sellers, 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 4.17 are, and through the Closing Date
shall remain, in full force and effect. No Seller has been advised by any of its
insurance carriers of an intention to terminate or modify any such policies or
materially increase the premiums under any such policies.
4.18 RELATIONSHIPS. Except as disclosed on Schedule 4.18, no
officer, director or employee of either Seller, no Shareholder, no member of any
Shareholder's immediate family, and no person or entity which is controlled by,
under common control with or controlling any of them (each, an "AFFILIATE") has,
and at no time within the last two (2) years, while having such status as an
Affiliate, 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 Business.
31
4.19 ABSENCE OF CERTAIN EVENTS. Except as set forth on
Schedule 4.9 or Schedule 4.19, since the date of the Balance Sheet, no Seller
has:
(A) sold, assigned, transferred or disposed of any of
its assets or properties, except in the ordinary course of business consistent
with past practice and replaced with Assets (other than Contracts) of at least
the same quality, type and quantity having an aggregate value at least equal to
the aggregate value of the items sold or otherwise disposed of;
(B) mortgaged, pledged or subjected to any Lien of
any nature whatsoever any of the other than Permitted Liens;
(C) sold or assigned, or made or suffered any
termination of, any Contract, or made or suffered any amendment of any Contract
except for amendments of Contracts made in the ordinary course of business
consistent with past practice and which would not affect earnings in excess of
five percent (5%) of the revenues under such Contract or otherwise be material,
and no Seller has received notice (written or oral) or has knowledge that any
Contract has been terminated or will be terminated or modified or amended (as
aforesaid);
(D) except in the ordinary course of business,
consistent with past practice, or otherwise 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) discharged or satisfied any Lien or encumbrance,
or paid any material Liabilities, other than in the ordinary course of business
consistent with past practice, or failed to pay or discharge when due any
Liabilities, the failure to pay or discharge of which has caused or may cause
any actual damage or risk of loss to any Seller or its Business or the Assets;
(F) incurred any Liabilities other than trade
payables and other operating liabilities which would be reflected on the date
incurred as current liabilities on a balance sheet of the applicable Seller in
accordance with GAAP, in each case in the ordinary course of business consistent
with past practice;
(G) changed any of the accounting principles followed
by it or the methods of applying such principles;
(H) canceled, modified or waived any debts or claims
held by it, other than in the ordinary course of business consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business; or
(I) except as disclosed in a written notice to Buyers
as of the date hereof, declared or paid or set aside or reserved any amounts for
payment of any dividend or other distribution in respect of any shareholder
interest or other securities, or redeemed or
32
repurchased or agreed to redeem or repurchase any shareholder interest or other
securities, or made any payment to any Affiliate except for payments of
compensation in the ordinary course of business consistent with past practice
and disclosed to Buyer as such;
(J) failed to collect, withhold and/or pay to any
proper governmental agency or authority, any federal, state or local income,
franchise, sales, use, withholding or similar tax required by applicable law to
be so collected, withheld and/or paid;
(K) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental body relating
to it or its property or received any threat thereof which could have or has had
a materially adverse effect on either Seller's condition (financial or
otherwise), properties, assets, liabilities, operations, business or prospects;
or
(L) entered into any material transaction other than
in the ordinary course of business consistent with past practice.
4.20 COMPLIANCE WITH LAWS.
(A) Except as set forth on Schedule 4.20, each Seller
is in compliance with all Governmental Requirements applicable to any or all of
it, its Assets and the operation of the Business. No Seller has received any
claim or notice that any of the Leased Properties or Assets is not in compliance
with any applicable Governmental Requirements. The Group shall report to Buyer,
within five (5) days after its receipt thereof, any written or oral claims or
notices that any of the Leased Properties or Assets are not in compliance with
any of the foregoing. The Business does not in any aspect constitute the
practice of medicine or any other regulated industry that a corporation may not
conduct in any state in which any Seller conducts business.
(B) At all times, each Seller has complied, and is
complying in all respects with all environmental and related Governmental
Requirements applicable to it, its Leased Properties, all other real properties
used by it in the operation of the Business, and its Assets, including, but not
limited to, the Resource Conservation and Recovery Act of 1976, as amended, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, the Federal Water Pollution Control Act, as amended by the Clean Water
Act, and subsequent amendments, the Federal Toxic Substances Control Act, as
amended, with respect to the environmental or healthful state, condition or
quality of any property (collectively "ENVIRONMENTAL LAWS"). The foregoing
representation and warranty applies to all aspects of the operation of the
Business and the use and ownership of the Assets including, but not limited to,
the use, handling, treatment, storage, transportation and disposal of any
hazardous, toxic or infectious waste, material or substance or (including
Medical Waste) and petroleum products, material or waste whether performed on
any of the Leased Properties or at any other location. No notice from any
Governmental Authority has ever been served upon either Seller, or any of its
agents or representatives claiming any violation of any Environmental Law, or
requiring or calling attention to the need for any work, repairs, or demolition,
on or in connection with any of such properties in order to comply with any
Environmental Law.
33
4.21 TAX RETURNS.
(A) Except as set forth in Schedule 4.21(a), (i) all
Tax (as defined below) returns, statements, reports and forms required to be
filed with any Governmental Authority on or before the Closing Date by or on
behalf of each Seller (collectively, the "RETURNS"), have been or will be filed
on or before the Closing Date in accordance with all applicable Government
Requirements, and true and complete copies of all Returns with respect to income
or sales or use for any period during the three-year period ending on the date
hereof have been delivered to Buyer; (ii) as of the time of filing, the Returns
correctly reflected or will correctly reflect the material facts regarding the
income, business, assets, operations, activities and status of each Seller and
any other information required to be shown therein; and (iii) each Seller has
timely paid all Taxes other than as are being protested by Sellers in good faith
and as are described on Schedule 4.21(a).
(B) "TAX" (including, with correlative meaning, the
terms "TAXES" and "TAXABLE") means any net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits tax, alternative or add-on minimum tax, customs duty or other
tax, fee assessment or charge of any kind whatsoever, together with any interest
and any penalty, addition to tax or additional amount imposed by any
Governmental Authority.
4.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. Except as set
forth on Schedule 4.22, neither the execution and delivery of this Agreement nor
the execution and delivery of any of the Group Transaction Documents creates,
and the consummation of the transactions contemplated hereby or thereby will not
create, any Liens on any of the Assets in favor of third parties.
4.23 QUESTIONABLE PAYMENTS. No Seller, no shareholder,
director, officer, controlling person or employee of either Seller, and no
Affiliate of any Seller, (a) has used any corporate funds of either Seller to
make any illegal or unlawful payment to any officer, employee, representative,
agent of any government, or to any political party or official thereof,
including, without limitation, any of same that would violate the Foreign
Corrupt Practices Act of 1977, as amended; or (b) has made or received any
illegal payment, bribe, kickback, political contribution or other similar
payment in consideration for or to induce any referrals or recommendations.
4.24 REIMBURSEMENT MATTERS. Except as disclosed on Schedule
4.24, (a) no Seller and, to the Group's knowledge, no nursing home, hospital or
other facility with respect to which either Seller provides services has
received any notice of denial or recoupment from the Medicare or Medicaid
programs, or any other third party reimbursement source (inclusive of managed
care organizations) with respect to products or services provided by either
Seller, (b) to the Group's knowledge, there is no valid basis for any such
denial or recoupment claim, and (c) no Seller and, to the Group's knowledge, no
nursing home, hospital or other facility with respect to which either Seller
provides services has received notice from any Medicare or Medicaid
34
program or any other third party reimbursement source (inclusive of managed care
organizations) of any pending or threatened investigations or surveys
specifically with respect to, or arising out of, products or services provided
by either Seller, and to the Group's knowledge, no such investigation or survey
is pending, threatened or imminent. Attached hereto as Schedule 4.24 are true,
correct and complete copies of all Medicare cost reports relating to the
Business submitted for the last three (3) full reporting periods ending on
December 31, 1993, 1994 and 1995, and a copy of the estimated annual cost report
for the cost report period ending December 31, 1996, and if one has been
prepared, the estimated interim quarterly cost report prepared internally for
the first fiscal quarter of 1997. The information contained in such reports is
true, correct and complete in all respects, and with respect to the report for
the period ending December 31, 1996 and, if applicable, the first fiscal quarter
of 1997 is true, correct and complete to the best knowledge of the Group
Participants and is subject to further adjustments before final submission.
Except as described on Schedule 4.24, each such Medicare cost report was timely
filed with the appropriate Governmental Authority.
4.25 QUESTIONNAIRE. The healthcare law questionnaire
heretofore delivered to Sellers by Buyer (the "QUESTIONNAIRE") and attached
hereto as Exhibit 4.25 has been fully and accurately completed and will not
contain any material misstatement of any fact and does not omit any fact that
would have to be stated in order not to render any response to such
Questionnaire materially misleading.
4.26 RSI AGREEMENT. Sellers have satisfied (and as of the
Closing Date will have satisfied) in full all of their obligations to the other
parties to the RSI Documents (the "RSI SELLERS") arising out of the RSI
Documents that are due or are to be performed on or prior to the date hereof (or
the Closing Date, as the case may be) other than as set forth on Schedule 4.26
hereto, Sellers have not breached any of their representations or warranties or
covenants arising out of any of the RSI Documents, and the RSI Sellers have not,
to the Group's knowledge breached any of their representations, warranties or
covenants under any RSI Document. Attached hereto as Exhibit 4.26 is a true and
complete copy of the RSI Agreement and each other RSI Document. The transactions
contemplated by the RSI Documents are in compliance with all applicable
Governmental Requirements.
4.27 FINDERS. No broker or finder has acted for any Group
Participant in connection with the transactions contemplated by this Agreement
other than RDI Group (the "Broker"), and other than the Broker, no 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 any Participant of the Group.
35
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER AND IHS
Buyer and IHS, jointly and severally, represent and warrant to
the Group as follows:
5.1 ORGANIZATION AND STANDING. Each of Buyer and IHS has been
duly incorporated and is validly existing in good standing under the laws of the
State of Delaware. Each such corporation 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. Each such corporation is qualified (or is in the process of
qualifying to, and prior to the Closing will be qualified) to do business as a
foreign corporation in each state where the ownership of its assets or the
conduct of its business makes such qualification necessary.
5.2 POWER AND AUTHORITY. Each of IHS and Buyer has the
corporate power and authority to make, execute, deliver and perform this
Agreement including all Schedules and Exhibits hereto and all of the
transactions contemplated hereby and thereby and all of the instruments and
agreements required to be delivered by it to the Group at the Closing
(collectively the "BUYER/IHS TRANSACTION DOCUMENTS") and all of the transactions
contemplated hereby and thereby. Such execution, delivery, performance and
consummation have been duly authorized by all necessary action, corporate or
otherwise, on the part of each such corporation, its shareholders and all
necessary consents of holders of indebtedness of each such corporation have been
obtained.
5.3 BINDING AGREEMENT. This Agreement has been duly executed
and delivered by each of IHS and Buyer. This Agreement is, and when executed and
delivered by Buyer or IHS, as the case may be, at the Closing, each of the
Buyer/IHS Transaction Documents executed by Buyer or IHS, as the case may be,
will be, the legal, valid and binding obligation of Buyer or IHS, as the case
may be, enforceable against Buyer or IHS, as the case may be, in accordance with
their respective terms.
5.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution
or delivery of this Agreement or any of the Buyer/IHS Transaction Documents by
Buyer or IHS, as the case may be, nor the performance by Buyer or IHS, as the
case may be, of the transactions contemplated hereby and thereby, conflicts
with, or constitutes a breach of or a default under or the termination of (a)
the Articles of Incorporation or By-Laws of Buyer or IHS, as the case may be; or
(b) any applicable judgment, order, writ, injunction, or decree of any court; or
(c) any applicable Governmental Requirement of any Governmental Authorities; or
(d) except as set forth on Schedule 5.4 hereto, any agreement, indenture,
contract or instrument to which Buyer or IHS, as the case may be, is now a party
or by which any of them or any of their respective assets are bound.
5.5 CONSENTS. Except as set forth on Schedule 4.5 or Schedule
5.5, no authorization, consent, approval, license, exemption by filing or
registration with any Governmental Authority, is or will be necessary in
connection with the entry by Buyer or IHS into, execution, delivery and
performance of this Agreement or any of their respective Buyer/IHS Transaction
Documents, or for the consummation of the transactions contemplated hereby and
thereby.
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5.6 SEC DOCUMENTS. IHS has furnished Sellers and the
Shareholders with a correct and complete copy of its report on Form 10-K for its
fiscal years ended December 31, 1996, its proxy statement prepared in connection
with its annual meeting held on May 23, 1996, and each press release or other
schedule or report required by it to be publicly disclosed or filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act
since January 1, 1997 (the "SEC DOCUMENTS"). As of their respective dates, none
of the SEC Documents contained any untrue statements, or omitted to make any
disclosures, which, in light of the circumstances would render any of such
documents materially misleading, and the SEC Documents complied when filed in
all material respects with the then applicable requirements of the Exchange Act,
and the rules and regulations promulgated by the Commission thereunder. Since
January 1, 1997, IHS has made all filings with the SEC and all public
disclosures required to be made by it in accordance with the Exchange Act.
5.7 MATERIAL CHANGES. Except as noted on Schedule 5.7 hereto,
between the date of the balance sheet included in the Form 10-K for the fiscal
year ended December 31, 1996 and the date of this Agreement, there has not been
any material adverse change in the condition (financial or otherwise), of the
assets, properties or operations of IHS.
5.8 IHS STOCK. Upon delivery to Sellers in accordance with the
terms of this Agreement, each share of IHS Stock shall be duly authorized,
validly issued, and nonassessable.
ARTICLE VI: INFORMATION AND RECORDS CONCERNING THE SELLERS
6.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING. Prior to
the Closing Date, Buyer may make, or cause to be made, such investigation of
each Seller's financial and legal condition as Buyer deems necessary or
advisable to familiarize itself with such Seller and/or matters relating to its
history or operation. Each Seller shall permit Buyer and its authorized
representatives (including legal counsel and accountants), to have full access
to each Seller's books and records in the possession or under the effective
control of any Group Participant upon reasonable notice and during normal
business hours, and Seller will furnish, or cause to be furnished, to Buyer such
financial and operating data and other information and copies of documents with
respect to such Seller'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, each Seller's tax returns and
related work papers since its inception (to the extent in the possession or
control of any Group Participant on or after the date hereof) and each Seller
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 each Seller and the accuracy of
the representations and warranties made in this Agreement. Each Seller shall use
its best efforts to cause Seller's accountants to cooperate with Buyer and to
disclose and make available to Buyer all books and records and the results of
audits relating to such Seller and to produce the working papers relating
thereto. Sellers will, subject to mutually acceptable conditions and schedules,
permit Buyer (or its representatives) to meet with and interview Seller's
employees and representatives that are responsible for the responses to, or have
information with respect to, the questions set forth on the Questionnaire.
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ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
7.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of
this Agreement and the Closing, each Seller shall maintain its existence and
shall conduct its business in good faith and in the ordinary course consistent
with past practice.
7.2 NEGATIVE COVENANTS OF SELLERS. Without the prior written
approval of Buyer, which approval shall not be unreasonably withheld, no Seller
shall between the date hereof and the Closing (or the earlier termination of
this Agreement):
(A) cause or permit to occur any of the events or
occurrences described in Section 4.19 (Absence of Certain Events) of this
Agreement; or
(B) dissolve or reorganize, or merge or consolidate
or enter into a share membership interest exchange with or into any other
entity; or
(C) make any change to its by-laws or articles of
incorporation; or
(D) sell or dispose of any Assets other than
supplies, inventory and obsolete equipment sold, consumed or used in the usual
and ordinary course of business and consistent with past practice; such Seller
shall replace all items thus disposed of with Assets of at least the same
quality, type and quantity having an aggregate value at least equal to the
aggregate value of the items sold or otherwise disposed of; or
(E) perform, take or fail to take any action or incur
or permit to exist any of the acts, transactions, events or occurrences of a
type which would have been inconsistent with the representations, warranties and
covenants set forth in this Agreement had the same occurred prior to the date
hereof; or
(F) enter into any agreement, contract, commitment,
lease or instrument including, without limitation, agreements with nursing
homes, hospitals and other facilities for the provision of Rehab Services or
Restorative Services, except for agreements, in each case which are entered into
in the ordinary and customary course of business with unrelated third parties on
customary terms and conditions and for customary prices as disclosed to Buyer;
or
(G) take any action that would prevent any Group
Participant from consummating the transactions contemplated by this Agreement.
7.3 AFFIRMATIVE COVENANTS OF SELLERS. Between the date hereof
and the Closing, each Seller shall:
(A) maintain the Assets in substantially the state of
repair, order and condition as on the date hereof, reasonable wear and tear or
loss by insured casualty excepted;
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(B) maintain in full force and effect all Licenses
currently in effect with respect to either Seller or the Business;
(C) maintain in full force and effect the insurance
policies and binders currently in effect with respect to each Seller, or
replacements thereof approved by Buyer (such approval not to be unreasonably
withheld);
(D) use its reasonable efforts to preserve intact its
present business operations and organization; keep available the services of its
present employees and agents; and maintain its relations and good will with
patients, suppliers, vendors, employees, and any others having business relating
to it;
(E) maintain all of the books and records relating to
each Seller in accordance with its past practices;
(F) comply in all material respects with all
provisions of all Contracts and with any other material agreements that either
Seller has entered into after the date hereof, and comply in all material
respects with the provisions of all Governmental Requirements applicable to
either Seller, the Assets or the Business;
(G) cause to be paid when due, all Taxes imposed upon
it or on any of its properties or which it is required to withhold and pay over;
and
(H) promptly advise Buyer in writing of: (i) the
threat (oral or written) or commencement against or by either Seller of any
claim, action, suit or proceeding, arbitration or investigation that could
materially adversely effect Seller's operations, properties, assets or
prospects; or (ii) any actual or threatened (oral or written) termination of any
Contract.
7.4 PURSUIT OF CONSENTS AND APPROVALS. Promptly upon execution
of this Agreement, Buyer shall diligently proceed to use all reasonable efforts
to obtain, at its own cost and expense, all Required Approvals (as hereinafter
defined). Sellers shall diligently cooperate with and use their reasonable
efforts to assist Buyer in obtaining all such approvals.
7.5 SUPPLEMENTARY FINANCIAL INFORMATION. Within twenty (20)
days after the end of each calendar month between the date of this Agreement and
the Closing Date, each Seller shall provide to Buyer unaudited financial
statements (including at a minimum income statements, a balance sheet and a
statement of cash flows) for such month then ended that shall present fairly the
results of the operations of such Seller (exclusive of the Bethoughtful Division
and Dynamic operations) at such date and for the period covered thereby, all in
accordance with GAAP (except as otherwise expressly stated therein), in each
case, certified as true and correct by such Seller.
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7.6 EXCLUSIVITY. Until the earlier of Closing or the
termination of this Agreement pursuant to Section 11.1, no Seller nor any
Shareholder, nor any of their respective Affiliates, shall enter into any
agreement, commitment or understanding with respect to, or engage in any
discussions or negotiations directly or indirectly with, or encourage or respond
to any solicitations from, any other party with respect to the sale of the
Assets, or in respect of the sale of any shares of capital stock in either
Seller.
7.7 CERTAIN PERMITTED TRANSACTIONS. Notwithstanding anything
to the contrary contained in Sections 7.1, 7.2 or 7.3, Sellers shall be
permitted to pay cash bonuses to employees, make cash distributions to
stockholders of Sellers, make intercompany transfers of assets and liabilities
between Sellers, and to renegotiate (and make up-front cash payments to the
employees under) the Employment Agreements identified pursuant to Section
4.7(b)(i), in each case, subject to the following: the individual or aggregate
affect of the foregoing transactions shall not: (a) reduce Estimated Closing
Date Working Capital or the Closing Date Working Capital below the Required
Working Capital and shall not increase the Estimated Long-term Liabilities or
the Closing Date Long-term Liabilities above the Maximum Long-term Liabilities;
(b) shall not reduce the amount of cash included in the Current Assets below
$75,000; and (c) shall not have a material adverse affect on the Business or the
Assets (in the aggregate). Sellers shall give Buyer reasonable prior notice of
any such intended transaction. The non-competition and confidentiality
provisions set forth in the Employment Agreements referred to above shall not be
waived without the prior consent of Buyer, which consent shall not unreasonably
be withheld, delayed or conditioned.
ARTICLE VIII: CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND IHS
The obligations of Buyer and IHS to consummate the
transactions contemplated by this Agreement to occur at the Closing are 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 or IHS in writing.
Upon failure of any of the following conditions, Buyer or IHS may terminate this
Agreement prior to Closing pursuant to and in accordance with Article XI herein.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Seller and each Shareholder made under this Agreement and
under each Group Transaction Document 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; provided, however, that the
representation and warranty contained in Section 4.9 and any other
representation or warranty that is modified by a "materiality" exception, shall
be true in all respects.
8.2 PERFORMANCE OF COVENANTS. Each Seller and each Shareholder
shall have performed or complied in all material respects with their respective
agreements and covenants required by this Agreement and each Group Transaction
Document to be performed or complied with by it, her or him prior to or at the
Closing; provided, however, that to the extent compliance with any covenant is
modified by a "materiality" exception, such covenant shall have been complied
with in all respects.
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8.3 DELIVERY OF CLOSING CERTIFICATE. The President of each
Seller and each Shareholder shall have executed and delivered to Buyer and IHS a
certificate, dated the Closing Date, upon which Buyer and IHS may rely,
certifying that the conditions set forth in Sections 8.1 and 8.2 have been
satisfied.
8.4 OPINIONS OF COUNSEL. The Group shall have delivered to
Buyer and IHS an opinion, dated the Closing Date, of its counsel, in such form
and substance as attached hereto as Exhibit 8.4, provided that as to any factual
matters such counsel may rely on its actual knowledge and the truth and accuracy
of the representations and warranties made by the Group contained in this
Agreement, the Group Transaction Documents and certificates supplied to such
counsel by the Group and Governmental Authorities.
8.5 LEGAL MATTERS. No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person or Governmental Authority that questions the enforceability,
validity or legality of this Agreement or the transactions contemplated hereby,
including, without limitation, Buyer's proposed use of the Assets.
8.6 AUTHORIZATION DOCUMENTS. Buyer and IHS shall have received
a certificate of the Secretary or other authorized officer of each Seller
certifying a copy of resolutions of its Board of Directors and shareholders
authorizing such Seller's execution and full performance of this Agreement and
the Group Transaction Documents to which such Seller is a party and the
incumbency of its officers.
8.7 APPROVALS.
(A) With the exception of required consents from
parties to Designated Contracts, the consent or approval of all persons and
Governmental Authorities necessary for the consummation of the transactions
contemplated hereby shall have been granted, and each license, permit and
approval of each Governmental Authority having jurisdiction thereof necessary
for Buyer to operate the Business shall have been issued or granted to Buyer
(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 Business, or (ii) shall impose on
Buyer or IHS any condition or provision or requirement with respect to Buyer,
IHS or the Business that is more restrictive than or different from that imposed
by such Governmental Authority prior to Closing.
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8.8 BILL OF SALE AND ASSIGNMENT. Each Seller shall have
executed and delivered to Buyer a Bill of Sale (each, a "BILL OF SALE") and an
Assignment and Assumption Agreement (each, an "ASSIGNMENT AND ASSUMPTION")
respectively in the forms of Exhibits 8.8-1 and 8.8-2.
8.9 NON-COMPETITION AGREEMENTS. Each Seller, each Shareholder
and Favilla shall have entered into a Non-competition, Non-solicitation and
Confidentiality Agreement in the respective forms of Exhibits 8.9-1, 8.9-2,
8.9-3 and 8.9.4 (each a "NON- COMPETITION AGREEMENT"), for no further
consideration, with Buyer, pursuant to which it, he or she shall agree that
after the Closing Date for the period set forth below (the "NON-COMPETE
PERIOD"), it, he or she will not, directly or indirectly, for itself, himself,
or herself, or on behalf of any other person, firm, entity or other enterprise,
be employed by, be an officer, director or manager of, act as a consultant for,
be a partner in, have a proprietary interest in, or loan money to any person,
enterprise, partnership, association, corporation, joint venture or other entity
which is directly or indirectly in the business of owning, operating or managing
any contract rehabilitation business, licensed or unlicensed, competitive with
any of those of Buyer, or any of its Affiliates, located in the States of
Minnesota or North Dakota. The Non-Competition Agreements shall not prohibit the
ownership of less than 2% of the issued and outstanding stock of any competitive
business whose stock is listed on a national securities exchange or traded on
the NASDAQ national market system. Each Non-Competition Agreement also shall
contain confidentiality and non-solicitation provisions. The Non-Compete Period
shall be five (5) years from the Closing Date in the case of Sellers, and in the
case of each Shareholder, shall terminate five (5) years from the date that his
or her employment or consulting agreement with Buyer shall terminate, and in the
case of Favilla, shall terminate three (3) years from the date that his
employment agreement with Buyer shall terminate.
8.10 EMPLOYMENT AND CONSULTING AGREEMENTS. Buyer shall have
entered into an employment agreement and/or consulting agreement with each of
the Shareholders and Favilla in the respective forms of Exhibits 8.10-1, 8.10-2
and 8.10-3 respectively, and with such other employees as identified by Buyer on
Schedule 8.10 hereto in form and substance satisfactory to Buyer and each such
person. Such employment and consulting agreements shall contain confidentiality,
non-competition and non-solicitation provisions reasonably satisfactory to
Buyer. It is expressly agreed that Buyer shall not assume or be liable for any
"phantom stock" or similar obligation in favor of Favilla; it being understood
and agreed that Sellers shall pay any such amounts to him when and as the same
become due.
8.11 COBRA. Each Seller shall have given all notices, made all
offers, paid and collected all premiums, obtained all group health plan
coverage, and performed all other actions mandated by Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), and which is
required to be given, made, paid, obtained, and performed as a result of the
Closing under this Agreement.
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8.12 ASSETS TRANSFERRED AT CLOSING. Except as otherwise
provided concerning Designated Contracts, each Seller shall have delivered or
caused to be delivered to Buyer possession of the Assets (or the right to obtain
possession on demand). Each Seller shall also execute and deliver to Buyer at
Closing such UCC financing statements as shall be necessary or appropriate to
record the assignment to Buyer of all recorded security interests held by either
Seller as secured party. All Assets shall be free and clear of all Liens, other
than Permitted Liens. Without limiting the generality of the foregoing, UCC-3
termination statements or releases shall have been executed and delivered by RSI
to Buyer covering all effective financing statements in favor of RSI (or its
successors or assigns) covering any of the Assets, and all funds, if any, held
by RSI (or its successors or assigns) pursuant to any escrow arrangements, but
only to the extent payable to Sellers and included as Current Assets for
purposes of Section 2.3(c) with respect to the transactions contemplated by the
RSI Purchase Agreement shall have been released from such escrow arrangements
and delivered to Buyer.
8.13 CHANGE OF NAME. Each Seller shall have taken such
reasonable steps as Buyer shall have requested to change its name so as not to
include any tradenames or service names included in the Assets.
8.14 HART-SCOTT-RODINO ACT. All applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "H-S-R ACT")
shall have expired or been terminated, and no action shall have been taken or
formal protest made by the United States Department of Justice (the "DOJ") or
the Federal Trade Commission (the "FTC") or any other person or entity to
prohibit the transactions contemplated by this Agreement by reason of a claimed
violation of any antitrust laws. Without limiting the foregoing, no obligation
arising out of the H-S-R Act shall have been imposed on Symphony Rehab or
Sellers to divest any material portion of its business by reason of the
transactions contemplated by this Agreement. The parties shall have until June
20, 1997, to satisfy the foregoing condition, and if the foregoing condition
shall not have been satisfied by such date, either party may elect to terminate
this Agreement for failure to satisfy this condition in accordance with Article
XI hereof; provided, however, that if, on or prior to June 20, 1997, the DOJ or
the FTC shall have made a second request for additional information or if any
other action shall have been taken or formal protest made by the DOJ, the FTC or
any other person to prohibit the transactions contemplated by this Agreement (or
to require the divestiture of any material portion of the business of Symphony
Rehab or Sellers), in each case by reason of any antitrust law, with respect to
the transactions contemplated hereby, the parties' respective rights to
terminate as provided above shall not be exercisable until August 4, 1997.
8.15 DOCUMENTS. Each Seller and each Shareholder shall have
furnished Buyer and IHS with all other documents, certificates and other
instruments required to be furnished to Buyer or IHS by such Group Participant
pursuant to the terms hereof.
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ARTICLE IX: CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
AND THE SHAREHOLDERS
The obligations of Sellers and the Shareholders to consummate
the transactions contemplated hereby to occur at the Closing are 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 Sellers in writing. Upon failure of
any of the following conditions, Sellers may terminate this Agreement prior to
Closing pursuant to and in accordance with Article XI herein.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and IHS made under this Agreement and under each Buyer/IHS
Transaction Document 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; provided, however, that to the extent any representation
or warranty is modified by a "materiality" exception such representation or
warranty shall be true in all respects.
9.2 PERFORMANCE OF COVENANTS. Each of Buyer and IHS shall have
performed or complied in all material respects with their respective agreements
and covenants required by this Agreement and each Buyer/IHS Transaction Document
to be performed or complied with by it prior to or at the Closing; provided,
however, that to the extent compliance with any covenant is modified by a
"materiality" exception, such covenant shall have been complied with in all
respects.
9.3 DELIVERY OF CLOSING CERTIFICATE. An authorized officer of
each of Buyer and IHS shall have executed and delivered to Sellers and the
Shareholders a certificate, dated the Closing Date, upon which Sellers and
Shareholders may rely, certifying that the conditions set forth in Sections 9.1
and 9.2 have been satisfied.
9.4 OPINIONS OF COUNSEL. Buyer and IHS shall have delivered to
Sellers and the Shareholders an opinion, dated the Closing Date, of its counsel,
in such form and substance (as attached hereto as Exhibit 9.4, provided that as
to any factual matters such counsel may rely on its actual knowledge and the
truth and accuracy of the representations and warranties made by Buyer and IHS
contained in this Agreement, the Buyer/IHS Transaction Documents and
certificates supplied to such counsel by representatives of IHS and Buyer and of
Governmental Authorities.
9.5 LEGAL MATTERS. No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person or Governmental Authority that questions the enforceability,
validity or legality of this Agreement or the transactions contemplated hereby.
44
9.6 AUTHORIZATION DOCUMENTS. Each Seller and Shareholder shall
have received a certificate of the Secretary or other authorized officer of
Buyer and of IHS certifying a copy of resolutions of its Board of Directors
authorizing its execution and full performance of this Agreement and the
Buyer/IHS Transaction Documents to which it is a party and the incumbency of its
officers.
9.7 NECESSARY CONSENTS. The consent or approval of all
Governmental Authorities necessary for the consummation of the transactions
contemplated hereby shall have been granted.
9.8 ASSIGNMENT AND ASSUMPTION. Buyer shall have executed and
delivered to each Seller an Assignment and Assumption Agreement.
9.9 HART-SCOTT-RODINO ACT. All applicable waiting periods
under the H-S- R Act shall have expired or been terminated, and no action shall
have been taken or formal protest made by the DOJ or FTC or any other person or
entity to prohibit the transactions contemplated by this Agreement by reason of
a claimed violation of any antitrust laws. Without limiting the foregoing, no
obligation arising out of the H-S-R Act shall have been imposed on Sellers to
divest any material portion of their business by reason of the transactions
contemplated by this Agreement. The parties shall have until June 20, 1997, to
satisfy the foregoing condition, and if the foregoing conditions shall not have
been satisfied by such date, either party may elect to terminate this Agreement
for failure to satisfy this condition in accordance with Article XI hereof;
provided, however that if, on or prior to June 20, 1997, the DOJ or the FTC
shall have made a second request for additional information or if any other
action shall have been taken or formal protest made by the DOJ, FTC or any other
person to prohibit the transactions contemplated by this Agreement (or to
require the divestiture of any material portion of the business of Sellers) in
each case, by reason of any antitrust law, with respect to the transactions
contemplated hereby, the parties' respective rights to terminate as provided
above shall not be exercisable until August 4, 1997.
9.10 EMPLOYMENT AND CONSULTING AGREEMENTS. Buyer shall have
executed and delivered employment agreements and/or consulting agreements with
each Shareholder and Favilla in the forms of Exhibits 8.10-1, 8.10-2 and 8.10-3,
respectively.
9.11 PURCHASE PRICE. Buyer and IHS shall have tendered payment
in full of the Purchase Price to Sellers according to the terms of this
Agreement.
9.12 OFFICE LEASE GUARANTY RELEASES. Each Shareholder shall
have been released from his or her personal guaranty of any obligations under
the Office Lease that Buyer assumes pursuant to this Agreement, or IHS and Buyer
shall have agreed to indemnify such Shareholders from any such Liability assumed
by Buyer under such Office Lease.
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9.13 OTHER DOCUMENTS. Buyer and IHS shall have furnished each
Seller and Shareholder with all documents, certificates and other instruments
required to be furnished to any of them by Buyer or IHS pursuant to the terms
hereof.
ARTICLE X: OBLIGATIONS OF THE PARTIES AFTER CLOSING
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each party in this Agreement and in each
Schedule and Transaction Document shall survive 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.
10.2 INDEMNIFICATION.
(A) Each Seller and each Shareholder jointly and
severally shall indemnify and defend Buyer and IHS and each of their respective
shareholders, directors, officers, employees, agents and advisors, and each of
their respective successors and assigns ("BUYER INDEMNITEES") against and with
respect to any and all damages, losses, claims, liabilities, deficiencies, costs
and expenses (including, without limitation, reasonable attorney's fees and
expenses) (all of the foregoing hereinafter collectively referred to as "LOSS")
resulting from (i) any misrepresentation, breach of warranty, or failure to
fulfill any agreement or covenant on the part of any Group Participant under
this Agreement or any Group Transaction Document; (ii) any Taxes resulting from
the operation of the Business or ownership of any of the Assets for any period
ending on or before the Closing Date; (iii) all Reimbursement Liabilities; (iv)
any Loss relating to any Unassumed Liability of Seller or other Group
Participant; (v) any Loss arising out of any bulk transfer act (whether relating
to liabilities in general or taxes or otherwise); (vi) any Loss arising out of
the noncompliance of either Seller with COBRA or any like statute; and (vii) any
and all actions, suits, proceedings, demands, assessments, judgments,
settlements (to the extent approved by Sellers, such approval not to be
unreasonably withheld, delayed or conditioned) costs and legal and other
expenses incident to any of the foregoing.
Without limiting the foregoing, the Group hereby represents
and warrants to Buyer and IHS that it has complied with any and all bulk
transfer act or similar procedures applicable to the transactions herein
contemplated to the extent they exist and are applicable.
(B) Buyer and IHS jointly and severally covenant and
shall defend, hold harmless and indemnify each Group Participant and each of
their respective shareholders, directors, officers, employees, agents and
advisors, and each of their respective successors and assigns ("GROUP
INDEMNITEES") against and with respect to any and all Losses resulting from: (i)
any misrepresentation, breach of warranty, or failure to fulfill any agreement
or covenant on the part of Buyer or IHS under this Agreement or any Buyer/IHS
Transaction Document, (ii) any Assumed Obligation, (iii) any Loss resulting from
Buyer's operation of the Business after the
46
Closing Date and not arising out of any breach of any representation or warranty
or covenant of any Group Participant, and (iv) any and all actions, suits,
proceedings, demands, assessments, judgments, settlements (to the extent
approved by IHS, such approval not to be unreasonably withheld, delayed or
conditioned) costs and legal and other expenses incident to any of the
foregoing.
(C) Any claim under this Section 10.2 for
indemnification for any breach of a representation or warranty or of any
covenant required to be satisfied on or prior to Closing must be asserted by
written notice by the first anniversary of the Closing Date, except that any
claim by any Buyer Indemnitee for indemnification arising out of a breach of any
of the representations and warranties of any of the Group Participants for any
tax matter may be asserted any time prior to expiration of the applicable
statute of limitations for the assertion of the related tax claim by the
government, and any such claim based on Reimbursement Liability may be brought
any time prior to a date which is thirty (30) days following expiration of the
applicable audit period for such liability. The foregoing time limitations shall
not apply to any indemnification obligation of any person or entity pursuant to
Section 2.4 (g) (v) hereof or with respect to any representation or warranty as
to the legal, valid, binding effect of, and enforceability of, any
Non-competition Agreement.
(D) Any Buyer Indemnitee shall be entitled (but shall
not be obligated) to offset against the Contingent Payment in accordance with
Section 2.1(c), any amount due to it by reason of any Group Participant's
obligations under this Section 10.2 hereof, including, without limitation, their
obligations to indemnify Buyer and IHS for any failure to make any payments
arising out of Purchase Price adjustments.
(E) If and to the extent that Buyer or IHS is
actually compensated by any Group Participant by reason of indemnification or
Purchase Price adjustment pursuant to this Agreement for any Loss incurred by it
arising out of any breach of any representation, warranty or covenant by RSI, or
if and to the extent Sellers or any Shareholder suffer any Loss with respect to
which there is a right to indemnification, under any RSI Document, at the
request of such Group Participant, Buyer shall in its sole discretion, either
seek, on behalf of such Group Participant, to enforce its rights to collect the
amount of such damages under such RSI Document with respect to such breach, or
assign to such Group Participant, Buyer's right to seek such enforcement of such
rights.
(F) Notwithstanding any other provision of this
Agreement, the aggregate indemnification obligations of the Group Participants,
on the one hand, and IHS and Buyer, on the other hand, shall not exceed an
amount equal to the Purchase Price (after all adjustments actually made), and no
Shareholder shall be required to indemnify any individual or combination of
Buyer Indemnitees for Losses in excess, in the aggregate, of an amount equal to
such Shareholder's percentage interest in the Purchase Price as set forth on
Schedule 10.2(e) hereto.
47
(G) Notwithstanding any other provision of this
Agreement, the Group Participants on the one hand, and IHS and Buyer, on the
other hand, shall not have any obligation to indemnify the other party hereto
for any Losses incurred by it or them unless, until and to the extent the
aggregate amount of such Losses equals or exceeds $50,000; provided, however,
that the foregoing shall not apply to any obligations with respect to payments
of, or adjustments to, the Purchase Price, including without limitation,
adjustments under Sections 2.5 or 10.7 hereto.
(H) Absent actual fraud, the indemnification rights
and remedies of the parties as set forth in this Agreement shall be the sole
remedy for compensation for Losses of the parties after the Closing. The
foregoing shall not apply to remedies for breaches of covenants after the
Closing.
10.3 RESTRICTIONS.
(A) From and after the Closing Date, no Group
Participant shall disclose, directly or indirectly, to any person or entity, or
make use of, without the express authorization of IHS and Buyer, any non-public
pricing strategies or records of either Seller, any proprietary data or trade
secrets owned by either Seller, Buyer or IHS or any financial or other
information about any of them ("CONFIDENTIAL INFORMATION"); provided that the
foregoing restrictions shall not apply to any information which:
(I) is or becomes generally known to the
public through no wrongful act on the part of any Seller or Shareholder; or
(II) is or becomes known to the disclosing
party on a non- confidential basis from a third party without restriction and
without breach of this Agreement; or
(III) is approved for release by written
authorization signed by Buyer; or
(IV) is required to be disclosed in
accordance with applicable law; provided, however, prior to making any such
disclosure the party required to make such disclosure shall provide Buyer with
prompt notice of such requirement to enable Buyer to seek an appropriate
protective order and such party will use its best efforts to preserve the
confidentiality of such information and will disclose only that portion of the
information as is required to be disclosed.
(B) Each Group Participant acknowledges that the
restrictions contained in this Section 10.3 are reasonable and necessary to
protect the legitimate business interests of Buyer and IHS, and that any
violation thereof by any of them would result in irreparable harm to Buyer and
IHS. Accordingly, each Group Participant agrees that upon the violation by any
of them of any of the restrictions contained in this Section 10.3, Buyer and IHS
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.
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(C) Until Closing, or earlier termination of this
Agreement, the provisions of Paragraph 12 of the Letter of Intent among the
parties hereto (the "LETTER OF INTENT") dated as of January 9, 1996, and as
extended from time to time, shall survive.
10.4 RECORDS. On the Closing Date, each Seller shall use its
best efforts to deliver, or cause to be delivered, to Buyer all records and
files (other than Excluded Assets) not then in such Seller's possession relating
to the operation of the Business. Following the Closing, Buyer shall provide
either Seller and either Shareholder with access during business hours upon
reasonable prior notice (not less than two (2) business days), to such of its
financial records relating to the operation of the Business prior to the Closing
Date as such Seller or Shareholder shall reasonably request in connection with
the preparation by it, him or her of any tax returns, the collection of any
accounts receivable owned by any Seller, payment, investigation and defense of
Unassumed Liabilities, and as otherwise reasonably consented to by Buyer. Such
records shall be maintained and for the duration as required by applicable law.
Buyer also shall maintain all records relating to the business Sellers acquired
from RSI to the extent such records are delivered by Sellers to Buyer and are
required to be maintained by the RSI Documents as set forth on Schedule 10.4
hereof.
10.5 AUDIT. Following Closing, each Seller will cooperate with
and assist Buyer in a review of the financial statements of such Seller. Buyer
may, at its own expense, have an audit performed of such financial statement,
and each Seller and Shareholder will cooperate in the performance of such audit.
10.6 EMPLOYEES. In reliance on Sellers' representations and
warranties contained in Section 4.14, Buyer agrees (for the benefit of Sellers;
it being expressly understood that no Employees shall be third party
beneficiaries of this Section 10.6) to make offers of employment to
substantially all persons who are employees of Sellers on the date hereof and
who continue to be employees of either Seller immediately prior to the Closing
("EMPLOYEES"). Any Employee on short term disability or long term disability
shall be offered employment by Buyer only when and to the extent that such
Employee would have been entitled to reemployment under Sellers' applicable
written leave of absence or other written employment policies relating to the
Business. Buyer agrees to assume any liability arising out of any failure to
give any required notices to appropriate persons with respect to any employment
loss that may arise as a result of or following the sale contemplated by this
Agreement under the Worker Adjustment and Retraining Notification Act (the "WARN
ACT") and any other applicable similar state notification laws of the State of
Minnesota, except to the extent that any notifications are required by reason of
actions taken by Sellers.
10.7 REIMBURSEMENT PAYBACKS. Each Group Participant shall
reasonably cooperate with Buyer with respect to any action with respect to the
collection of any Reimbursement Payback that could materially interfere with
Buyer's relationship with the person, entity or Governmental Authority from whom
such Reimbursement Payback shall be due; provided, however, that the foregoing
shall not cause any Group Participant to forfeit any Reimbursement Payback.
49
10.8 CLOSING COST REPORTS. Promptly following the Closing,
Rehab shall prepare and file a correct and complete Medicare cost report for the
interim period ending on the Closing Date in accordance with all applicable
Governmental Requirements.
ARTICLE XI: TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time
at or prior to the time of Closing by:
(A) Buyer, if any condition precedent to the
obligations of Buyer or IHS hereunder, including without limitation those
conditions set forth in Article VIII hereof, have not been satisfied by the
Closing Date or pursuant to Section 12.1 if any portion of the Assets is damaged
or destroyed as a result of fire, other casualty or from any reason whatsoever
or pursuant to Section 1.3(b) or Section 2.4(a);
(B) Sellers, if any condition precedent to the
obligations of the Group hereunder, including without limitation, those
conditions set forth in Article IX hereof, have not been satisfied by the
Closing Date or pursuant to Section 2.4(a);
(C) the mutual consent of Buyer and Sellers.
11.2 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, or if it is terminated pursuant
to Section 1.3(b), Section 2.4(a), or Section 12.1, this Agreement shall become
null and void without any liability of any party to the other; provided,
however, that if such termination is by reason of the breach by any party of any
of its representations, warranties or obligations under this Agreement, the
other party shall be entitled to be indemnified for any Losses incurred by it by
reason thereof in accordance with Section 10.2 hereof (and for such purposes
such Section 10.2 shall survive the termination of this Agreement). Furthermore,
nothing in this Section 11.2 shall affect Buyer's or Sellers' right to specific
performance of the obligations of the Group or of IHS and Buyer at Closing
hereunder.
ARTICLE XII: CASUALTY, RISK OF LOSS
12.1 CASUALTY, RISK OF LOSS. Sellers shall bear the risk of
all loss or damage to any of the Assets from all causes which occur prior to the
Closing. If at any time prior to the Closing any portion of the Assets is
damaged or destroyed as a result of fire, other casualty or for any reason
whatsoever, Sellers shall immediately give notice thereof to Buyer. Buyer shall
have the right, in its sole and absolute discretion, within ten (10) days of
receipt of such notice, to (1) elect not to proceed with the Closing and
terminate this Agreement, or (2) proceed to Closing and consummate the
transactions contemplated hereby and receive any and all insurance proceeds
received or receivable by any Group Members on account of any such casualty.
Nothing contained in this Section 12.1 shall limit or adversely affect the right
of Buyer and IHS to receive
50
indemnification for any Losses incurred by either of them by reason of any
breach by any Group Participant of any representation, warranty or obligation
under this Agreement in accordance with Section 10.2 hereof (and for such
purposes such Section 10.2 shall survive the termination of this Agreement).
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. The Group shall pay all fees and other amounts, if any, due to the
Broker. The Group shall pay all sales, transfer, recording, stamp and like taxes
payable in connection with any of the transactions contemplated by this
Agreement, and shall timely and truthfully complete and file any filings or
returns necessary in connection therewith. Buyer and IHS shall bear the cost of
obtaining the legal opinions referred to in Section 8.4(b) hereto, and the fees
payable in respect of any H-S-R Act filing. All of the Group's obligations under
this Section 13.1 shall constitute Unassumed Liabilities.
13.2 BENEFIT AND ASSIGNMENT. This Agreement binds and inures
to the benefit of each party hereto and its successors and assigns. Prior to
Closing, Buyer may not assign its interest under this Agreement to any other
person or entity without the prior written consent of Sellers; provided,
however, that prior to Closing Buyer may assign together its entire rights,
duties and obligations hereunder to one or more subsidiaries or affiliates of
IHS, except that no such assignment shall operate to relieve IHS of its
obligations hereunder. Sellers and the Shareholders may not assign their rights
or obligation under this Agreement without the prior consent of Buyer, which
consent shall not unreasonably be withheld.
13.3 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement
and the Exhibits, Schedules and the Transaction Documents 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, including, without limitation, the Letter of Intent, except to the
extent set forth in Section 10.3(c) hereto. The captions used herein do not
constitute part of this Agreement, 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.
13.4 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
requested or necessary to carry out the intent and purposes of this Agreement,
and to vest in Buyer good title to, possession of and control of all of the
Assets.
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13.5 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 two (2) business days after being sent by certified or registered mail,
postage prepaid, or the on the next business day if sent for next day delivery
by a nationally recognized overnight courier, in either case, properly addressed
to the party or parties entitled to receive such notice at the address stated
below:
If to any Group Participant: to or in care of:
Rehab Dynamics, Inc.
4001 Stinson Blvd., N.E.
Apache Medical Suite 100
Minneapolis, Minnesota 55421
Attention: Beth Kessler and David Nechas
With a copy to: Siegel, Brill, Greupner & Duffy, P.A.
1300 Washington Square
100 Washington Avenue South
Minneapolis, Minnesota 55401
Attention: Joel H. Jensen, Esq.
If to Buyer or IHS: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall A. Elkins, General Counsel
and
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Brian Davidson, Executive Vice President
With a copy to: Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
Attention: Andrew S. Bogen, Esq.
Such addresses may be changed by providing written notice as provided in this
Section 13.5.
13.6 WAIVER, DISCHARGE, ETC. This Agreement and the
Transaction Documents and the obligations hereunder and thereunder shall not be
released, discharged, abandoned, changed, waived or modified in any manner,
except by an instrument in writing executed by Sellers, if any Group Participant
is to be the party to be charged, and by Buyer, if Buyer or IHS
52
is to be the party to be charged. 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.
13.7 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, and other than the
Buyer Indemnitees and Group Indemnitees pursuant to Section 10.2 hereto.
13.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Minnesota
applicable to contracts executed, delivered and to be fully performed in such
State, disregarding any contrary rules relating to the choice or conflict of
laws.
13.9 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
Sellers on behalf of the Group Members and by Buyer on behalf of Buyer and IHS.
13.10 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 10.3 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.
13.11 PUBLIC ANNOUNCEMENTS. Any general public announcements
or similar media publicity with respect to this Agreement or the transactions
contemplated herein shall be at such time and in such manner as IHS and Sellers
shall jointly determine prior to Closing, or as shall be determined by IHS at or
after the Closing; provided that nothing herein shall prevent
53
either party, upon as much prior notice as shall be possible under the
circumstances to the other, from making such written announcements as such
party's counsel may consider advisable in order to satisfy the party's legal and
contractual obligations in such regard.
13.12 JOINT AND SEVERAL. All obligations, representations,
warranties, covenants and agreements of any Group Participant under this
Agreement or any of the Group Transaction Documents shall be the joint and
several obligations, representations, warranties, covenants and agreements of
all of the Group Participants. All obligations, representations, warranties,
covenants and agreements of Rehab Buyer, Restorative Buyer or IHS under this
Agreement or any of the Buyer/IHS Transaction Documents shall be the joint and
several obligations, representations, warranties, covenants and agreements of
Rehab Buyer, Restorative Buyer and IHS.
[SIGNATURES ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties hereto and in the
capacity indicated below has executed this Agreement as of the day and year
first above written.
INTEGRATED HEALTH SERVICES, INC.
BY:/s/ Elizabeth B. Kelly
----------------------------------
ITS:Executive Vice President-Corporate Development
----------------------------------------------
SYMPHONY REHAB DYNAMICS, INC.
BY:/s/ Elizabeth B. Kelly
----------------------------------
ITS:Executive Vice President-Corporate Development
----------------------------------------------
SYMPHONY RESTORATIVE THERAPY LIMITED
BY:/s/ Elizabeth B. Kelly
----------------------------------
ITS:Executive Vice President-Corporate Development
----------------------------------------------
REHAB DYNAMICS, INC.
BY: /s/ David Nechas
---------------------------------
ITS: President
--------------------------------
RESTORATIVE THERAPY LIMITED
BY:/s/ David Nechas
----------------------------------
ITS:President
---------------------------------
/s/ David Nechas
- -------------------------------------
David Nechas
/s/ Beth Kessler
- -------------------------------------
Beth Kessler
55