-----------------------------
STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 29, 1997
AMONG
INTEGRATED HEALTH SERVICES, INC.
AND
APS AMERICA, INC.
AND
RAYMOND A. MIRRA, JR.,
JAMES KUO,
EDWARD KRAMM,
AND
SIRROM CAPITAL CORPORATION
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TABLE OF CONTENTS
PAGE
ARTICLE I: SALE AND PURCHASE OF COMPANY STOCK.................................1
1.1 Sale and Purchase of Company Stock...........................1
ARTICLE II: PURCHASE PRICE....................................................1
2.1 Determination and Payment of Purchase Price..................1
2.2 Adjustments to the Purchase Price............................2
2.3 Liabilities..................................................3
ARTICLE III: IHS STOCK........................................................3
3.1 IHS Stock....................................................3
ARTICLE IV: THE CLOSING.......................................................8
4.1 Time and Place of Closing....................................8
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
COMPANY...............................................................8
5.1 Organization and Standing of the Company.....................8
5.2 Absence of Conflicting Agreements............................8
5.3 Consents.....................................................9
5.4 Company Stock................................................9
5.5 Assets.......................................................9
5.6 Trademarks..................................................10
5.7 Contracts...................................................10
5.8 Financial Statements........................................11
5.9 Material Changes............................................12
5.10 Licenses; Permits; Certificates of Need.....................12
5.11 Title, Condition of Personal Property.......................12
5.12 Legal Proceedings...........................................14
5.13 Employees...................................................14
5.14 Collective Bargaining, Labor Contracts, Employment
Practices, Etc..............................................14
5.15 ERISA.......................................................15
5.16 Insurance and Surety Agreements.............................15
5.17 Relationships...............................................16
5.18 Absence of Certain Events...................................16
5.19 Compliance with Laws........................................17
5.20 Finders.....................................................17
5.21 Tax Returns.................................................17
5.22 Encumbrances Created by this Agreement......................17
5.23 Subsidiaries and Joint Ventures.............................17
(i)
5.24 No Untrue Statement.........................................17
5.25 Medicare and Medicaid Programs..............................18
5.26 Leasehold Interests.........................................18
5.27 Power and Authority.........................................18
5.28 Binding Effect..............................................18
5.29 Questionnaires..............................................18
5.30 Questionable Payments.......................................18
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLERS .......................19
6.1 Authority...................................................19
6.2 Binding Effect..............................................19
6.3 Absence of Conflicting Agreements...........................19
6.4 Consents....................................................19
6.5 Ownership of Company Stock..................................19
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER.........................19
7.1 Organization and Standing...................................19
7.2 Power and Authority.........................................20
7.3 Binding Agreement...........................................20
7.4 Absence of Conflicting Agreements...........................20
7.5 Consents....................................................20
7.6 Material Changes............................................20
7.7 Finders.....................................................20
7.8 Capital Stock...............................................20
7.10 Compliance with Laws........................................21
7.11 Questionable Payments.......................................21
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE OTHER
PARTIES..............................................................21
8.1 Buyer's Access to Information and Records before Closing....21
8.2 Sellers' and Company's Access to Information and Records
Before Closing..............................................22
ARTICLE IX: OBLIGATIONS OF THE PARTIES (OTHER THAN SIRROM) UNTIL
CLOSING..............................................................22
9.1 Conduct of Business Pending Closing.........................22
9.2 Negative Covenants of the Company and its Subsidiaries......22
9.3 Affirmative Covenants.......................................22
9.4 Pursuit of Consents and Approvals...........................23
9.5 Exclusivity.................................................24
(ii)
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.......................24
10.1 Representations and Warranties..............................24
10.2 Performance of Covenants....................................24
10.3 Delivery of Closing Certificate.............................24
10.4 Opinion of Counsel..........................................24
10.5 Legal Matters...............................................24
10.6 Authorization Documents.....................................25
10.7 Material Change.............................................25
10.8 Approvals...................................................25
10.9 Employment Agreement........................................25
10.10 Consents....................................................25
10.11 Estimated Closing Date Balance Sheet........................25
10.12 Company's Subsidiaries and Options..........................25
10.13 Cost and Expenses...........................................26
10.14 Resignation of Company Boards of Directors and Officers.....26
10.15 Affiliated Company..........................................26
10.16 Lien Releases...............................................26
10.17 Other Documents.............................................26
ARTICLE XI: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS.....................26
11.1 Representations and Warranties..............................26
11.2 Performance of Covenants....................................26
11.3 Delivery of Closing Certificate.............................26
11.4 Opinion of Counsel..........................................27
11.5 Legal Matters...............................................27
11.6 Authorization Documents.....................................27
11.7 Employment Agreement........................................27
11.8 Material Change.............................................27
11.9 Other Documents.............................................27
ARTICLE XII: SURVIVAL AND INDEMNIFICATION....................................27
12.1 Survival of Representations and Warranties..................27
12.2 Indemnification by Sellers..................................27
12.3 Indemnification by Buyer....................................28
12.4 Assertion of Claims.........................................28
12.5 Indemnity Basket............................................29
12.6 Control of Defense of Indemnifiable Claims..................29
12.7 Restrictions................................................30
12.8 Records.....................................................31
ARTICLE XIII: TERMINATION....................................................31
13.1 Termination.................................................31
13.2 Effect of Termination.......................................31
(iii)
ARTICLE XIV: MISCELLANEOUS...................................................31
14.1 Costs and Expenses..........................................31
14.2 Performance.................................................31
14.3 Benefit and Assignment......................................32
14.4 Effect and Construction of this Agreement...................32
14.5 Cooperation - Further Assistance............................32
14.6 Notices.....................................................32
14.7 Waiver, Discharge, Etc......................................33
14.8 Rights of Persons Not Parties...............................33
14.9 Governing Law...............................................34
14.10 Amendments, Supplements, Etc................................34
14.11 Severability................................................34
14.12 Counterparts................................................34
14.13 Arbitration.................................................34
14.14 Public Announcements........................................34
(iv)
SCHEDULES & EXHIBITS
Schedule 2.1(b) - Allocation among Sellers
Schedule 5.3 - Consent List of Sellers
Schedule 5.4 - Company Stock
Schedule 5.6 - Trademarks
Schedule 5.7 - Contracts
Schedule 5.8(a) - Unaudited Financial Statement
Schedule 5.8(b) - Unaudited Interim Financial Statements
Schedule 5.8(c) - Material Liabilities
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses, Permits, Certificates of Need
Schedule 5.11(a) - Liens on Personal Property
Schedule 5.11(b) - Leases of Personal Property
Schedule 5.12 - Legal Proceedings
Schedule 5.13 - Employees
Schedule 5.15 (b) - Employee Benefit Plans
Schedule 5.15 (c) - Employees on Leave of Absence
Schedule 5.16 - Insurance and Surety Agreements
Schedule 5.17 - Relationships
Schedule 5.18 - Absence of Certain Events
Schedule 5.19 - Compliance with Laws
Schedule 5.21 - Tax Returns
Schedule 5.23 - Subsidiaries, Joint Ventures, etc.
Schedule 5.25 - Medicare and Medicaid Programs
Schedule 6.5 - Ownership of Company Stock
Exhibit 5.29 - Questionnaire
Exhibit 10.4 - Opinion of Sellers' Counsel
Exhibit 10.9 - Employment Agreement
Exhibit 11.4 - Opinion of Buyer's Counsel
(v)
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STOCK PURCHASE AGREEMENT
--------------------------
This Stock Purchase Agreement (the "Agreement") is made as of the 29th day
of August, 1997, among SIRROM CAPITAL CORPORATION ("Sirrom"), RAYMOND A. MIRRA,
JR., JAMES KUO, and EDWARD KRAMM (the said individuals, together with Sirrom,
being collectively referred to herein as the "Sellers", and each individually,
the "Seller"), and INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
("Buyer"), and APS AMERICA, INC., a Delaware corporation (the "Company").
WHEREAS, the Company is in the business of providing infusion services,
including without limitation, blood fractions services and chronic infusion
therapies (the "Business" or "Services"); and
WHEREAS, the Sellers are the owners or holders of all of the issued and
outstanding shares of the capital stock of the Company (the "Company Stock");
and
WHEREAS, Buyer wishes to acquire the Company Stock from the Sellers, and
the Sellers wish to sell the Company Stock to Buyer, in accordance with the
terms and conditions hereinafter set forth.
NOW, THEREFORE, Sellers, Buyer, and Company intending to be legally bound,
agree as follows:
ARTICLE I: SALE AND PURCHASE OF COMPANY STOCK
1.1 SALE AND PURCHASE OF COMPANY STOCK. Subject to the terms and conditions
of this Agreement, at the Closing (as hereinafter defined), Buyer shall acquire
from the Sellers, and the Sellers shall sell, assign, transfer and convey to
Buyer, the Company Stock. The number of shares of Company Stock (and the class
or series of such shares) being sold by each Seller is set forth on Schedule 5.4
hereto.
ARTICLE II: PURCHASE PRICE
2.1 DETERMINATION AND PAYMENT OF PURCHASE PRICE.
(A) Subject to adjustment pursuant to Section 2.2 hereof, the aggregate
purchase price to be paid by Buyer to the Sellers for the Company Stock (the
"Purchase Price"), shall be TWO MILLION AND 00/100 (2,000,000.00) DOLLARS,
payable at the Closing by the delivery of newly issued shares of the Common
Stock, par value $.001, of Buyer (the "IHS Stock").
(B) The Purchase Price payable to the Sellers at the Closing, after
taking into account the adjustments in Section 2.2, below, shall be allocated
among the Sellers on the basis set forth on Schedule 2.1(b).
2.2 ADJUSTMENTS TO THE PURCHASE PRICE.
(A) At the Closing, the Company shall deliver a certificate signed by its
Chief Financial Officer certifying the amount of the Company's aggregate working
capital (as defined herein) as of the Closing Date on a consolidated basis (the
"Estimated Closing Date Working Capital"). In the event that the Estimated
Closing Date Working Capital is less than zero (the "Minimum Working Capital"),
the Purchase Price payable to the Sellers at Closing will be reduced on a
dollar-for-dollar basis by an amount equal to the amount of such deficiency in
cash. For the purposes hereof, "working capital" means the excess of current
assets over current liabilities, as determined in accordance with generally
accepted accounting principles, consistently applied ("GAAP"); provided that
current liabilities shall include any deferred taxes resulting from the
conversion of the Company as of the Closing Date from an S-corporation to a
C-corporation. Additionally, at the Closing, the Company shall deliver to Buyer
the balance sheet of the Company on a consolidated basis dated as of the Closing
Date, certified by the Company's Chief Financial Officer to be his or her best
good faith estimate thereof (the "Estimated Closing Date Balance Sheet"). In the
event that the Estimated Closing Date Balance Sheet discloses that the aggregate
amount of the Company's long-term liabilities as determined in accordance with
GAAP exceeds zero, the Purchase Price payable to the Sellers at Closing will be
reduced by an amount equal to the amount of such excess. For the purposes
hereof, "long-term liability" means any liability that would be set forth as a
long-term liability on a balance sheet in accordance with GAAP; provided that
long-term liabilities shall include any deferred taxes resulting from the
conversion of the Company as of the Closing Date from an S-corporation to a
C-corporation, except that in no event will the same deferred tax amount be
included as both a current liability and long-term liability.
(B) As soon as is reasonably practicable, but in any event within ninety
(90) days following the Closing Date, Buyer shall complete a review of the
Company's Estimated Closing Date Balance Sheet. If such review reveals that the
Company's working capital as of the Closing Date was less than the lesser of (i)
the Minimum Working Capital, and (ii) the Estimated Closing Date Working
Capital, the Purchase Price shall be deemed to have been reduced by the amount
of such deficiency, and the Sellers shall pay over to Buyer cash in an amount
equal to such deficiency. Furthermore, if such review reveals the aggregate
amount of the Company's long-term liabilities as of the Closing Date exceeded
the greater of (w) zero, or (x) the amount of the Company's long-term
liabilities as indicated on the Estimated Closing Date Balance Sheet, the
Purchase Price shall be deemed to have been reduced by the amount of such
excess, and the Sellers shall deliver over to Buyer cash in an amount equal to
such excess. If there shall be any dispute regarding the calculation of the
working capital as of the Closing Date or the amount of long-term liabilities as
of the Closing Date, such dispute shall be submitted to a mutually acceptable
"big six" accounting firm other than KPMG Peat Marwick LLP and Deloitte & Touche
LLP (the "Accountants") for final resolution and the party against whom the
Accountants shall rule shall pay the costs and expenses of the Accountants in
connection therewith.
2
2.3 LIABILITIES. As of the Closing Date, the Company will not have any
Liabilities other than such long-term liabilities and current liabilities as are
reflected on the Estimated Closing Date Balance Sheet. For purposes of this
Agreement the term "Liability" means any claim, lawsuit, liability, obligation
or debt of any kind or nature whatsoever, whether absolute, accrued, due, direct
or indirect, contingent or liquidated, matured or unmatured, joint or several,
whether or not for a sum certain, whether for the payment of money or for the
performance or observance of any obligation or condition, and whether or not of
a type which would be reflected as a liability on a balance sheet in accordance
with GAAP, including, without limitation (i) malpractice claims asserted by
patients or any other tort claims asserted, claims for breach of contract, or
any claims of any kind asserted by patients, former patients, employees or any
other party that are based on acts or omissions occurring on or before the
Closing Date; (ii) amounts due or that may become due to Medicare or Medicaid or
any other health care reimbursement or payment intermediary on account of
Medicare cost report adjustments or other payment adjustments attributable to
any period on or prior to the Closing Date, or any other form of Medicare or
other health care reimbursement recapture, adjustment or overpayment whatsoever,
including fines and penalties, with respect to any period on or prior to the
Closing Date ("Excess Reimbursement Liabilities"); (iii) any accounts payable or
employment or other taxes; and (iv) accrued but unpaid compensation or other
benefits to any of the Company's employees, agents, consultants or advisers,
including accrued vacation.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. The entire Purchase Price equal to TWO MILLION ($2,000,000)
DOLLARS shall be payable by means of the delivery to the Sellers of IHS Stock in
accordance with the following:
(A) SHARE VALUE. The number of shares of IHS Stock issuable at Closing
pursuant to Section 2.1(b) shall be calculated based upon a price per share of
such stock equal to the average closing NYSE price of such stock for the thirty
(30) trading day period immediately preceding the date which is two (2) trading
days before the Closing Date.
(B) REGISTRATION RIGHTS. Buyer will prepare and use its best efforts to
cause to be filed and declared effective by the Securities and Exchange
Commission (the "Commission") within ninety (90) days following the Closing
Date, a registration statement for the registration under the Securities Act of
1933 (the "Securities Act") of the IHS Stock issued to Sellers pursuant to this
Agreement, and Buyer shall maintain the effectiveness of such registration
statement for a period of one (1) year following the date on which it becomes
effective (the "Registration Date"), or until no Seller 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 would allow
Sellers to sell all of their stock without restrictions (other than as set forth
in Section 3.1(d), below) is available.
3
(C) REGISTRATION EXPENSES. Sellers shall not be responsible for, and
Buyer shall bear, all of the reasonable expenses of Buyer related to such
registration 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. Buyer, however, shall not be required to
pay underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs or expenses arising out of Sellers' or any transferee's failure to comply
with its obligations under this Article III.
(D) RESALE LIMITATIONS. All resales of IHS Stock issued pursuant to this
Agreement shall be effected solely through Smith Barney Inc., as broker, and
sales by Sellers and, if any, their transferees of such shares (other than
transferees acquiring shares pursuant to market transactions through Smith
Barney Inc. and in accordance with this subsection (d)), shall not at any time,
in the aggregate, exceed Thirty Thousand (30,000) shares during any thirty (30)
day period.
(E) REGISTRATION PROCEDURES, ETC. In connection with the registration
rights granted to the Sellers with respect to the IHS Stock as provided in this
Section 3.1, Buyer covenants and agrees as follows:
(I) At Buyer's expense, Buyer will keep the registration and
qualification under this Section 3.1 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate until the
Registration Date or for a period of one (1) year following the date on which
the registration becomes effective, in each case except to the extent that an
exemption from registration may be available. Buyer will immediately notify the
Sellers, at any time when a prospectus relating to a registration statement
under this Section 3.1 is required to be delivered under the Securities Act, of
the happening of any event known to Buyer as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(II) Buyer shall furnish the Sellers with such number of prospectuses
as shall reasonably be requested.
(III) Buyer shall take all necessary action which may be required in
qualifying or registering IHS Stock included in a registration statement for
offering and sale under the securities or Blue Sky laws of such states as
reasonably are requested by the Sellers, provided that Buyer shall not be
obligated to qualify as a foreign corporation or dealer to do business under the
laws of any such jurisdiction.
4
(IV) The information included or incorporated by reference in the
registration statement filed pursuant to this Section 3.1 will not, at the time
any such registration statement becomes effective, contain any untrue statement
of a material fact, or omit to state any material fact required to be stated
therein as necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or necessary to correct
any statement in any earlier filing of such registration statement or any
amendments thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder. Buyer shall indemnify the Sellers of IHS Stock to be sold pursuant
to the registration statement, their successors and assigns, and each person, if
any, who controls such Sellers within the meaning of ss.15 of the Securities Act
or ss.20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), against all
loss, claim, damage expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Securities Act, the Exchange
Act or any other statute, common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement executed by Buyer or based upon written information
furnished by Buyer filed in any jurisdiction in order to qualify IHS Stock under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, NYSE or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to Buyer by any of the Sellers expressly for use in such
registration statement, any amendment or supplement thereto or any application,
as the case may be. If any action is brought against the Sellers or any
controlling person of the Sellers in respect of which indemnity may be sought
against Buyer pursuant to this subsection 3.1(e)(iv), the Sellers or such
controlling person shall within thirty (30) days after the receipt thereby of a
summons or complaint, notify Buyer in writing of the institution of such action
and Buyer shall assume the defense of such actions, including the employment and
payment of reasonable fees and expenses of counsel (reasonably satisfactory to
the Sellers or such controlling person). The Sellers or such controlling person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the Sellers or
such controlling person unless (A) the employment of such counsel shall have
been authorized in writing by Buyer in connection with the defense of such
action, or (B) Buyer shall not have employed counsel to have charge of the
defense of such action, or (C) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to Buyer (in which case,
Buyer shall not have the right to direct the defense of such action on behalf of
the indemnified party or parties), in any of which events the fees and expenses
of not more than one additional firm of attorneys for the Sellers and/or such
controlling person shall be borne by Buyer. Buyer agrees promptly to notify the
Sellers of the commencement of any litigation or proceedings against Buyer or
any of its officers, directors or controlling persons in connection with the
resale of IHS Stock or in connection with such registration statement.
5
(V) The Sellers of IHS Stock to be sold pursuant to a registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify Buyer, its officers and directors and each person, if any, who
controls Buyer within the meaning of ss.15 of the Securities Act or ss.20(a) of
the Exchange Act against all loss, claim, damage, or expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Securities Act, the Exchange Act or any other statute, common law or
otherwise, to the extent arising from information furnished by or on behalf of
such Sellers, or their successors or assigns for specific inclusion in such
registration statement.
(F) NOTICE OF SALE. If the Sellers desire to transfer all or any portion
of IHS Stock, the Sellers will deliver written notice to Buyer, describing in
reasonable detail their intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Sellers will sell the IHS Stock
in compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer that the registration statement relating to
the IHS Stock being transferred is not "current" until Buyer gives further
notice that offers and sales may be recommenced. In the event of any such notice
from Buyer, Buyer agrees to file expeditiously such amendments to the
registration statement as may be necessary to bring it current during the period
specified in Section 3.1(e) and to give prompt notice to the Sellers when the
registration statement has again become current. If the Sellers deliver to Buyer
an opinion of counsel reasonably acceptable to Buyer and its counsel and to the
effect that the proposed transfer of IHS Stock may be made without registration
under the Securities Act, the Sellers will be entitled to transfer IHS Stock in
accordance with the terms of the notice and opinion of their counsel.
(G) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Buyer to take any action pursuant to this Article III that
the Sellers shall furnish to the Buyer such information regarding themselves,
the IHS Stock held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of their IHS Stock.
In that connection, each transferee of any Seller shall be required to represent
to the Buyer that all such information which is given is both complete and
accurate in all material respects. Such Sellers shall deliver to the Buyer a
statement in writing from the beneficial owners of such securities that they
bona fide intend to sell, transfer or otherwise dispose of such securities. Each
transferee will, severally, promptly notify IHS at any time when a prospectus
relating to a registration statement covering such transferee's shares under
this Section 3.1 is required to be delivered under the Securities Act, of the
happening of any event known to such transferee as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the statements as then existing.
6
(H) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be issued
hereunder will be newly issued shares of Buyer. The Sellers represent and
warrant to Buyer that the IHS Stock being issued hereunder is being acquired,
and will be acquired, by the Sellers for investment for their own accounts and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act or the applicable state securities law;
the Sellers acknowledge that the IHS Stock constitutes restricted securities
under Rule 144 promulgated by the Commission pursuant to the Securities Act, and
may have to be held indefinitely, and the Sellers agree that no shares of IHS
Stock may be sold, transferred, assigned, pledged or otherwise disposed of
except pursuant to an effective registration statement or an exemption from
registration under the Securities Act, the rules and regulations thereunder, and
under all applicable state securities laws. The Sellers have the knowledge and
experience in financial and business matters, are capable of evaluating the
merits and risks of the investment, and are able to bear the economic risk of
such investment. The Sellers have had the opportunity to make inquiries of and
obtain from representatives and employees of Buyer such other information about
Buyer as it deems necessary in connection with such investment. Buyer will file
all Exchange Act Reports on a timely basis, including any permitted extensions.
(I) LEGEND. It is understood that, prior to sale of any shares of IHS
Stock pursuant to an effective registration pursuant to subsection (b) above,
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, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE SECURITIES
ACT OF 1933 OR AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT.
(J) CERTAIN TRANSFEREES. Prior to the effective date of registration of
the IHS Stock, no transferee shall transfer any shares of IHS Stock to any
person or entity unless such transferee shall have agreed in writing to be bound
by the provisions applicable to the Sellers under this Article III.
7
ARTICLE IV: THE CLOSING
4.1 TIME AND PLACE OF CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement shall be held as promptly as
practicable, but not more than seven (7) business days following the
satisfaction of all conditions precedent specified in this Agreement, including
receipt of all necessary regulatory approvals, unless duly waived by the party
entitled to satisfaction thereof. The Closing shall take place at the offices of
the Buyer, or at such other time and place upon which the parties may agree. The
date on which the Closing is held is hereinafter called the "Closing Date."
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
COMPANY
The Company and the Sellers (other than Sirrom) hereby jointly and
severally represent and warrant to Buyer as follows (it being understood that,
for the purposes of this Article V, except where the context would otherwise
require "Company" shall be deemed to refer collectively to the Company and any
subsidiaries listed on Schedule 5.23 and "to the knowledge of the Company" shall
be deemed to refer collectively to the Company's knowledge and the Sellers'
knowledge):
5.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Copies of the Company's Articles of Incorporation and
By-Laws, and all amendments thereof to date, have been delivered to Buyer and
are complete and accurate. The Company has the power and authority to own the
property and assets now owned by it and to conduct the business presently being
conducted by it. The Company is qualified to do business as a foreign
corporation in each state where the ownership of its assets or the conduct of
its business renders such qualification necessary.
5.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or delivery of
this Agreement including all Schedules and Exhibits hereto, or any of the other
instruments and documents required or contemplated hereby and thereby
("Transaction Documents") by Sellers and the Company, nor the performance by
Sellers and the Company of the transactions contemplated hereby and thereby,
conflicts with, or constitutes a breach of or a default under (i) the Articles
of Incorporation or By-Laws of the Company; or (ii) any applicable law, rule,
judgment, order, writ, injunction, or decree of any court, currently in effect,
provided that the consents set forth in Schedule 5.3 are obtained prior to the
Closing; or (iii) any applicable rule or regulation of any administrative agency
or other governmental authority currently in effect; or (iv) any material
agreement, indenture, contract or instrument to which the Company is now a party
or by which any of the assets of the Company is bound.
8
5.3 CONSENTS. Except as set forth in Schedule 5.3, no authorization,
consent, approval, license, exemption by, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by any of the Sellers or the Company.
5.4 COMPANY STOCK. Schedule 5.4 sets forth a complete list and description
of the authorized capital stock of the Company, the number of shares issued and
outstanding of each class or series of such capital stock, and the identity of
each Seller of the Company, in each case indicating the class and number of
shares held. No shares of the Company Stock are held in the treasury of the
Company. The Sellers are the record owners of all of the issued and outstanding
shares of the Company Stock and all of such stock is duly authorized, validly
issued, and fully paid and non-assessable. On the Closing Date, there will be no
preemptive or first refusal rights to purchase or otherwise acquire from the
Company or Sellers shares of capital stock of the Company pursuant to any
provision of law or the Articles of Incorporation or By-Laws of the Company or
by agreement or otherwise. On the Closing Date there shall not be outstanding
any warrants, options, or other rights to subscribe for or purchase from any of
the Company any shares of capital stock of the Company, nor shall there be
outstanding any securities convertible into or exchangeable for such shares. The
shares of Company Stock indicated on Schedule 5.4 as being owned by the Sellers
constitute all of the issued and outstanding shares of the capital stock of the
Company.
5.5 ASSETS. As of the Closing Date, the consolidated assets of the Company
(the "Assets") will include its ownership interest in all of its current
operating subsidiaries, as well as all of the tangible and intangible assets
necessary to operate the Business of the Company and its subsidiaries as
presently constituted, including, without limitation, all contract rights,
leasehold interests, fixed and moveable equipment, vehicles, furnishings,
tangible personal property, inventory and supplies (other than inventory,
supplies, and other assets disposed of in the ordinary course of business,
consistent with prior practice), goodwill, trade names, trademarks, all patient
records, books and files, Certificates of Need, Medicare and Medicaid provider
agreements and provider numbers, provider agreements with third party payors,
telephone numbers, and to the extent permitted by law, all permits, licenses and
other governmental approvals. The Assets of the Company as of the Closing Date
shall also include cash, accounts receivable, and prepaid expenses. The Assets
shall not include inventory, supplies and other assets disposed of in the
ordinary course of business, consistent with the prior practice of the Company's
business. The quantities of inventory items included in the Assets are
reasonable in light of the present and anticipated volume of the Company's
business and the inventory is good, usable, merchantable, and salable in the
ordinary course of the Company's business, in each case, as determined by the
Company in good faith and consistent with past practice. The accounts receivable
of the Company are reflected properly on its books and records in accordance
with GAAP, and have been billed or invoiced in the ordinary course of business
consistent with past practice. The Assets are not subject to any Liens (as
defined in Section 5.11), except for Permitted Liens (as defined in Section
5.11).
9
5.6 TRADEMARKS. Schedule 5.6 sets forth a complete and accurate list of all
trademarks, service marks, or applications for any of the same, copyrights, and
other items of intellectual property that are owned, possessed or used by the
Company. There are no claims or proceedings pending or, to the knowledge of the
Company, overtly threatened against the Company asserting that the use of any of
the aforementioned properties or rights infringes the rights of any other
person, and, to the knowledge of any of the Sellers and Company, the Company is
not infringing on the intellectual property rights of any other person.
5.7 CONTRACTS. Schedule 5.7 sets forth a complete and accurate list of all
agreements, contracts and commitments of the following type to which the Company
is a party or by which the Company or any of the Company's assets is bound or as
to which the Company has any outstanding material obligations as of the date
hereof (the "Contracts"):
(A) each contract or agreement for the employment or retention of, or
collective bargaining, severance or termination agreement with, any director,
officer, employee, consultant, agent or group of employees of the Company;
(B) each profit sharing, thrift, bonus, incentive, deferred compensation,
stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement;
(C) each agreement or arrangement for the purchase or sale of any of the
Company's assets, properties or rights outside the ordinary course of business
(by purchase or sale of assets, purchase or sale of stock, merger or otherwise)
which is currently in effect which involves consideration of more than $25,000;
(D) each contract currently in effect which contains any provisions
requiring the Company to indemnify or act for, or guarantee the obligation of,
any other person or entity;
(E) each agreement restricting the Company from conducting business
anywhere in the world;
(F) each partnership or joint venture contract or similar arrangement or
agreement which involves a sharing of profits or future payments with respect to
the Company's business or any portion thereof;
(G) each licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency, purchasing, supply, and rebate or other
similar contract, arrangement or commitment which involves consideration of more
than $15,000;
(H) each contract under which the Company performs the Services which
involves consideration of more than $15,000;
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(I) each lease of real property; or
(J) any other agreement not made in the ordinary and normal course of
business which involves consideration of more than $15,000.
Except as indicated on Schedule 5.7, each of the Contracts was entered into
and requires performance in the ordinary course of business and is in full force
and effect. The Company is not in material default under any Contract and there
has not been asserted, either by or against the Company under any Contract, any
written notice of default, set-off or claim of default. To the knowledge of the
Company, the parties to the Contracts other than the Company are not in material
default of any of their respective obligations under the Contracts, and there
has not occurred any event which with the passage of time or the giving of
notice (or both) would constitute a material default or material breach under
any Contract. All amounts payable under the Contracts are, or will at the
Closing Date, be on a current basis. Except as set forth on Schedule 5.7, the
change of control in the Company to Buyer will not be deemed an assignment of,
or require consent under, any Contract.
5.8 FINANCIAL STATEMENTS.
(A) The unaudited consolidated balance sheet of the Company as of
December 31, 1996, and the related statements of operations for the year then
ended, annexed hereto as Schedule 5.8(a) (the "Unaudited Financial Statement"),
presents fairly in all material respects the financial condition and results of
operations of the Company at and for the period then ended specified and were
prepared in accordance with GAAP.
(B) The unaudited consolidated monthly statements of operations and cash
flows of the Company for each calendar month since January 1, 1997, and the
unaudited consolidated Balance Sheet of the Company as of July 31, 1997, annexed
hereto as Schedule 5.8(b) (the "Unaudited Interim Financial Statements"),
present fairly in all material respects the financial condition and results of
operations of the Company at and for the periods therein specified (except for
normal year-end adjustments and such statements do not contain footnote
disclosure) and were prepared in accordance with GAAP.
(C) Except as set forth on Schedule 5.8(c) or as expressly set forth on
the Unaudited Interim Financial Statements, the Company has no material
non-recurring or extraordinary income or expense reduction not identified
therein or material liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any guarantees of any obligations of any other person or entity) of
any kind or nature whether or not required by GAAP to be reflected on a
consolidated balance sheet and/or the notes thereto, except for current trade
payables incurred since the date of the Unaudited Interim Financial Statements
in the ordinary course of business consistent with past practice.
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5.9 MATERIAL CHANGES. Except as noted on Schedule 5.9, between the date of
the Unaudited Financial Statement and the date of this Agreement, there has not
been any material adverse change in the condition (financial or otherwise) of
the Company or any damage or destruction of any of the Company's Assets or its
place of business by fire or other casualty, whether or not covered by
insurance, and during such period of time the Company has conducted its business
in the ordinary and normal course. Sellers have identified and communicated to
Buyer all material information with respect to this transaction.
5.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 5.10 sets forth a
description of (a) all material licenses and other governmental or other
regulatory permits, authorizations or approvals required for the operation of
the Company's business that are now in effect, including all certificates of
occupancy issued with respect to the Company's business; and (b) all
Certificates of Need issued with respect to the Company and its subsidiaries
that are now in effect; (a "License" and collectively, the "Licenses"). The
Licenses constitute all of the material governmental, quasi-governmental and
regulatory licenses, permits and authorizations necessary to the operation of
the businesses of the Company and its subsidiaries as they are operated on the
date hereof. The Company has delivered to Buyer copies of all of the Licenses.
The Company and its subsidiaries own, possess or otherwise have the exclusive
legal right to use the Licenses (subject to the terms thereof), free and clear
of all liens, pledges, claims or other encumbrances of any nature whatsoever.
The Company is not in material default under any such License, and the Company
and its subsidiaries have not received any notice of any material default or any
other material claim or proceeding relating to any such License. Each License is
in full force and effect, and neither the Company nor any of its subsidiaries
has received written notice of any proceeding to terminate or suspend any
License or of any condition or event which, if uncured, would result in the
termination or suspension of any License. None of the Licenses are: (a)
provisional, probationary, or restricted in any way except to the extent
qualified by any outstanding deficiencies or citations, particulars of which
have been set forth on Schedule 5.10; or (b) subject to any investigation,
cancellation, impairment, limitation, order, complaint, proceeding, or
suspension nor is such threatened or pending. No Seller, director or officer,
employee or former employee of the Company, or any person, firm or corporation
other than the Company owns or has any proprietary, financial or other interest,
direct or indirect (other than through the Company), in whole or in part in any
of the Licenses.
5.11 TITLE, CONDITION OF PERSONAL PROPERTY.
(A) Except for the liens listed and described on Schedule 5.11(a), the
Company has good and marketable title to all of the personal property owned by
the Company and located at their places of business or used in connection with
the operation of its businesses, subject to no mortgage, security interest,
pledge, lien, claim, encumbrance or charge, or restraint on transfer whatsoever
(the "Liens") other than Permitted Liens (as defined below) and except for
personal property leased by the Company as set forth on Schedule 5.11(b). No
other person has any right to the use or possession of any of such property
which is owned and, except as set forth on Schedule 5.11(a), no currently
effective financing statement with respect to such personal property has been
12
filed under the Uniform Commercial Code in any jurisdiction, and the Company has
not signed any such financing statement or any security agreement authorizing
any secured party thereunder to file any such financing statement. All of such
personal property comprising equipment, improvements, furniture and other
tangible personal property in use by the Company, whether owned or leased, is in
good operating condition and repair, subject to normal wear and tear, and is
sufficient to enable the Company to operate its business in a manner consistent
with its operation during the immediately preceding twelve (12) months.
(B) Except as set forth on Schedule 5.11(b), no tangible personal
property used by the Company in connection with the operation of its business is
subject to a lease, conditional sale or similar arrangement. The Company has
delivered to Buyer a complete and correct copy of each of the leases and other
agreements listed on Schedule 5.11(b). The Company has a valid leasehold
interest in all of the property covered by any leases included on Schedule
5.11(b). All of said personal property leases are valid, binding and enforceable
in accordance with their respective terms and are in full force and effect,
subject to bankruptcy, insolvency, and other similar laws or equitable
principles affecting the enforcement of creditors rights generally. The Company
is not in material default under any of such leases and there has not been
asserted, either by or against the Company under any of such leases, any written
notice of default, set-off, or claim of default. To the best knowledge of
Sellers and the Company, the parties to such leases other than the Company are
not in default of their respective obligations under any of such leases, and
there has not occurred any event which with the passage of time or giving of
notice (or both) would constitute such a default or breach under any of such
leases.
(C) "Permitted Liens" shall mean:
(I) carriers', warehouseman's, mechanics, materialmen's, repairmen's
or other like liens arising in the ordinary course of business which are (i) not
overdue for a period of more than 30 days or (ii) which are being contested in
good faith and by appropriate proceedings, provided that if such contest shall
continue for more than 30 days, the amount thereof shall be bonded or properly
reserved against at the end of such 30-day period;
(II) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of like nature incurred in
the ordinary course of business;
(III) rights of lessors under leases set forth on Schedule 5.11(b);
(IV) pledges or deposits in connection with worker's compensation,
unemployment insurance, and other social security legislation.
(V) taxes not yet due or those taxes being contested.
13
5.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 5.12, there are
no claims, actions, suits or proceedings or arbitrations, either administrative
or judicial, pending, or, to the knowledge of the Company, overtly threatened
against or affecting the Company, or the Company's ability to consummate the
transactions contemplated herein, at law or in equity or otherwise, before or by
any court or governmental agency or body, domestic or foreign, or before an
arbitrator of any kind.
5.13 EMPLOYEES. Attached hereto as Schedule 5.13 is the payroll report of
the Company dated as of August 10, 1997, indicating the names, positions, and
compensation of each of its employees. All of such information is materially
correct as of such date and there has been no material change since then. To the
knowledge of Sellers and Company, none of the employees, while in the employ of
the Company, has ever had his or her professional license or certification
denied, suspended, revoked, terminated, or voluntarily relinquished under threat
of disciplinary action, or has ever been restricted in any way from performing
the duties he or she is to provide for the Company, and there is no proceeding
pending, or threatened, pursuant to which any of the foregoing may occur.
5.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES, ETC.
During the two years prior to the Closing Date, there has been no material
adverse change in the relationship between the Company and its employees nor any
strike or material labor disturbance by such employees affecting the Company's
business and, to the knowledge of the Company, there is no indication that such
a change, strike or labor disturbance is threatened. The Company's employees are
not represented by any labor union or similar organization and the Company has
no reason to believe that there are pending or threatened any activities, the
purpose of which is to achieve such representation, of all or some of the
Company's employees. Except as set forth on Schedule 5.7 or Schedule 5.15(b),
the Company has no collective bargaining or other labor contracts, employment
contracts, pension, profit-sharing, retirement, insurance, bonus, deferred
compensation or other employee benefit plans, agreements or arrangements with
respect to their employees. The Company is in material compliance with the
requirements prescribed by all Federal, state and local statutes, orders and
governmental rules and regulations ("Government Requirements") applicable to any
of the employee benefit plans, agreements and arrangements identified on
Schedule 5.7 and Schedule 5.15(b), including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Immigration
Reform and Control Act, the Worker Adjustment and Retraining Notification Act of
1988, any such Government Requirements respecting employment determination,
equal opportunity, affirmative action, employee privacy, wrongful or unlawful
termination, workers' compensation, occupational safety and health requirements,
labor management relations and unemployment insurance, or related matters and
there are no threatened or pending claims relating thereto, in each case. In the
event of termination of employment of an employee of the Company, the Company
will not, after the Closing, pursuant to any agreement with any Seller or the
Company or by reason of any representation made or plan adopted by any Seller or
the Company prior to the Closing, be liable to any employee of the Company for
so-called "severance pay", parachute payments or any other similar payments or
benefits, including, without limitation, post-employment healthcare (other than
pursuant to the continuation health care provisions of Section 4980B of the
Internal Revenue Code of 1986, as amended or Section 601 through 608 of ERISA
("COBRA")), insurance benefits, accrued vacation and sick days, except as
properly accrued for on the Estimated Closing Date Balance Sheet in accordance
with GAAP.
14
5.15 ERISA.
(A) The Company does not maintain or make contributions to and have not
at any time in the past maintained or made contributions to, any employee
benefit plan which is subject to the minimum funding standards of ERISA. The
Company does not now maintain or make contributions to, and has not at any time
in the past maintained or made contributions to, any multi-employer plan subject
to the terms of the Multi-employer Pension Plan Amendment Act of 1980 (the
"Multi-employer Act").
(B) Schedule 5.15(b) sets forth each severance agreement, and each plan,
agreement or arrangement, bonus plan, deferred compensation agreement, employee
pension, profit sharing, savings or retirement plan, group life, health, or
accident insurance or other employee benefit plan, agreement, arrangement or
commitment, including, without limitation, any commitment arising under
severance, holiday, vacation, Christmas or other bonus plans (including, but not
limited to, "employee benefit plans", as defined in Section 3(3) of ERISA
maintained by the Company for any employees of the Company, or with respect to
which the Company has liability with respect to any employees of the Company, or
make or have an obligation to make contributions on behalf of employees of the
Company ("Plans").
(C) Schedule 5.15(c) identifies all employees of the Company on leave of
absence eligible to receive health benefits, as required by COBRA. Notice of the
availability of COBRA coverage has been provided to all employees of the Company
on leave of absence entitled thereto, and all persons electing such coverage are
being (or have been, if applicable) provided such coverage.
5.16 INSURANCE AND SURETY AGREEMENTS. Schedule 5.16 contains a true and
accurate list of: (a) all policies of fire, liability and other forms of
insurance held or owned by the Company (including but not limited to medical
malpractice insurance, and any state sponsored plan or program for worker's
compensation); and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by the Company, including a brief description of the
character of the bond or agreement and the name of the surety or indemnifying
party. Schedule 4.16 sets forth for each such insurance policy the name of the
insurer, the amount of coverage, the type of insurance, the policy number, the
annual premium and a brief description of the nature of insurance included under
each such policy and of any claims made thereunder during the past two years.
Such policies are owned by and payable solely to the Company, and said policies
or renewals or replacements thereof will be outstanding and duly in force at the
Closing Date. All insurance policies listed on Schedule 5.16 are in full force
and effect, all premiums due on or before the Closing Date have been or will be
paid, financed or accrued on or before the Closing Date. The Company has not
been advised by any of its insurance carriers of an intention to terminate or
modify any such policies other than under circumstances where the Company has
received a commitment for a replacement policy, nor has the Company failed to
comply with any of the material conditions contained in any such policies.
15
5.17 RELATIONSHIPS. Except as disclosed on Schedule 5.17 hereto, none of
the Sellers and no controlling Seller, partner or any affiliate of any Seller
has, or at any time within the last two (2) years has had, a material ownership
interest in any business, corporate or otherwise, that is a party to, or in any
property that is the subject of, business relationships or arrangements of any
kind relating to the operation of the Company or its businesses.
5.18 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 5.18, since
the date of the Unaudited Financial Statement, the Company has not, and from the
date of this Agreement through the Closing Date the Company will not have:
(A) sold, assigned or transferred any of their assets or properties,
except in the ordinary course of business;
(B) mortgaged, pledged or subjected to any lien, pledge, mortgage,
security interest, conditional sales contract or other encumbrance of any nature
whatsoever, other than a Permitted Lien, any of the Company's assets;
(C) made or suffered any termination of any Services contract;
(D) sold or assigned, or made or suffered any termination of any
Contract, or made or suffered any modification or amendment of any Contract
except for terminations, modifications and amendments of Contracts made in the
ordinary course of business consistent with past practice and which would not
adversely affect earnings or otherwise be material, and the Sellers and Company
have not received notice (written or oral) and have no knowledge that any
Contract has been terminated or will be terminated or modified or amended (as
aforesaid);
(E) except in the ordinary course of business, or otherwise as necessary
to comply with any applicable minimum wage law, increased the salaries or other
compensation of any of their employees, or made any increase in, or any
additions to, other benefits to which any of such employees may be entitled;
(F) failed to pay or discharge when due any liabilities, the failure to
pay or discharge which has caused or will cause any actual damage or give rise
to the risk of a loss to the Company;
(G) changed any of the accounting principles followed by the Company or
the methods of applying such principles; and
(H) entered into any transaction other than in the ordinary course of
business involving consideration in excess of $15,000.
16
5.19 COMPLIANCE WITH LAWS. The Company is in compliance in all material
respects with all Governmental Requirements (as defined herein). Except for
notices of non-compliance as to which the Company has taken corrective action
acceptable to the applicable governmental agency, and as set forth in Schedule
5.19, the Company has not, within the period of twelve months preceding the date
of this Agreement, received any written notice that the Company or any of the
Assets fail to comply in any material respect with any applicable Federal,
state, local or other governmental laws or ordinances, or any applicable order,
rule or regulation of any Federal, state, local or other governmental agency
having jurisdiction over their businesses ("Governmental Requirements"). The
Company shall report to Buyer, within five (5) business days after receipt
thereof, any written notices that the Company is not in compliance in any
material respect with any of the foregoing.
5.20 FINDERS. No broker or finder has acted for the Sellers or the Company
in connection with the transactions contemplated by this Agreement, and no other
broker or finder is entitled to any broker's or finder's fee or other commission
in respect thereof based in any way on agreements, understandings or
arrangements with the Sellers or the Company.
5.21 TAX RETURNS.
(A) Except as set forth in Schedule 5.21, (i) all Tax (as defined below)
returns, statements, reports and forms or extensions with respect thereto
required to be filed with any Federal, state, local or other governmental
department or court or other authority having jurisdiction over it
("Governmental Authority") on or before the Closing Date by or on behalf of the
Company (collectively, the "Tax Returns"), have been or will be timely filed on
or before the Closing Date in accordance in all material respects with all
applicable Governmental Requirements; and (ii) the Company has timely paid all
Taxes payable by them.
(B) For purposes of this Agreement, "Tax" means any net income, gross
income, sales, use, franchise, personal, employment, pension or real property
tax.
5.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and delivery of
this Agreement, or any of the Company's Transaction Documents, does not, and the
consummation of the transactions contemplated hereby or thereby will not, create
any liens or other encumbrances on any of the Company's assets in favor of third
parties.
5.23 SUBSIDIARIES AND JOINT VENTURES. Schedule 5.23 sets forth a complete
list of all subsidiaries, joint ventures and partnerships in which the Company
is a record or beneficial owner. All of the issued and outstanding capital stock
of the subsidiaries listed on Schedule 5.23 hereto is owned of record or
beneficially by the Company or by one of the listed subsidiaries on Schedule
5.23.
5.24 NO UNTRUE STATEMENT. The representations and warranties made pursuant
to this Agreement taken as a whole do not contain any untrue statement of
material fact or omit to state a material fact necessary, in light of the
circumstance under which it was made, in order to make the representations not
misleading in any material respect.
17
5.25 MEDICARE AND MEDICAID PROGRAMS. The Company, to the extent necessary
to conduct its business in a manner consistent with past practice, is qualified
for participation in the Medicare and Medicaid programs. Except as reflected on
Schedule 5.25, (a) no Seller or the Company has received any notice of
recoupment with respect to the Company's operations from the Medicare or
Medicaid programs, or any other third party reimbursement source, (b) there is
no basis for the assertion after the Closing Date of any such recoupment claim
against Buyer, Company or any Seller which arose out of any transactions on the
part of the Company prior to the Closing or against any Seller for which Buyer
will be liable, and (c) to the knowledge of Sellers and the Company, no Medicare
and Medicaid investigation, survey or audit is pending, threatened or imminent
with respect to the operation of the Company prior to the Closing.
5.26 LEASEHOLD INTERESTS. Each of the Company and its subsidiaries has
valid leasehold interests in all real property, subject to leases identified on
Schedule 5.7(i), free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever, except for Permitted Liens.
5.27 POWER AND AUTHORITY. The Company has all requisite power and authority
to execute, deliver and perform this Agreement, and as of the Closing, the
Company and Sellers will have all requisite power and authority to execute and
deliver the Transaction Documents required to be delivered by each party to the
Buyer at the Closing.
5.28 BINDING EFFECT. This Agreement and all Transaction Documents executed
by the Company constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms.
5.29 QUESTIONNAIRES. The health care law questionnaire heretofore delivered
to the Company by Buyer (the "Questionnaire") will be attached hereto as Exhibit
5.29 and will as of the Closing Date have been accurately completed and will not
contain any material misstatement of any fact and will not omit any fact that
would have to be stated in order not to render any response to such
questionnaire materially misleading.
5.30 QUESTIONABLE PAYMENTS. The Company nor any shareholder, director,
officer, controlling person or employee of Company, and no affiliate of any
Company, (a) has used any corporate funds of Company 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 questionable payment for any
referrals or recommendations or otherwise in connection with the operation of
the Company's business.
18
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers, each as to himself, hereby severally represents and
warrants to Buyer as follows:
6.1 AUTHORITY. Such Seller has the full legal power and authority to make,
execute, deliver and perform this Agreement and the Transaction Documents. Such
execution, delivery, performance and consummation has been duly authorized by
all necessary action, corporate or otherwise, on the part of such Sellers, and
any necessary consents of holders of indebtedness of such Seller have been
obtained.
6.2 BINDING EFFECT. This Agreement and all Transaction Documents executed
by such Seller constitute the legal, valid and binding obligations of Seller,
enforceable against such Seller in accordance with their respective terms.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or delivery of
this Agreement or any of the Transaction Documents by such Seller nor the
performance by such Seller of the transactions contemplated hereby and thereby
conflicts with, or constitutes a breach of or a default under (i) any law, rule,
judgment, order, writ, injunction, or decree of any court currently in effect
applicable to such Seller, or (ii) any rule or regulation of any administrative
agency or other governmental authority currently in effect applicable to such
Seller, or (iii) any material agreement, indenture, contract or instrument to
which such party is now a party or by which any of the assets of such Seller is
bound.
6.4 CONSENTS. No authorization, consent, approval, license, exemption by,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary in connection with the execution, delivery and performance of this
Agreement or any of the Transaction Documents by such Seller.
6.5 OWNERSHIP OF COMPANY STOCK. Except as disclosed on Schedule 6.5 hereto,
such Seller is the lawful record and beneficial owners of all of the Company
Stock shown as owned by such Seller in Schedule 5.4, with good and indefeasible
title thereto, free and clear of all liens and encumbrances, claims and other
charges thereon of any kind. Such Seller has the full legal power to transfer
and deliver such Company Stock in accordance with this Agreement, and delivery
of such Company Stock to Buyer pursuant hereto will convey good and indefeasible
title thereto, free and clear of all liens and encumbrances, claims and other
charges thereon or any kind.
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the Sellers as follows:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
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7.2 POWER AND AUTHORITY. Buyer has the corporate power and authority to
execute, deliver and perform this Agreement, and as of the Closing, Buyer will
have the corporate power and authority to execute and deliver the Transaction
Documents required to be delivered by it to the Sellers at the Closing.
7.3 BINDING AGREEMENT. This Agreement and all Transaction Documents
executed by Buyer constitute the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms.
7.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or delivery of
this Agreement or any of the Transaction Documents by Buyer nor the performance
by the Buyer of the transactions contemplated hereby and thereby conflicts with,
or constitutes a breach of or a default under (i) the formation documents of the
Buyer, or (ii) any law, rule, judgment, order, writ, injunction, or decree of
any court currently in effect applicable to Buyer, or (iii) any rule or
regulation of any administrative agency or other governmental authority
currently in effect applicable to Buyer, or (iv) any material agreement,
indenture, contract or instrument to which the Buyer is now a party or by which
any of the assets of the Buyer is bound.
7.5 CONSENTS. No authorization, consent, approval, license, exemption by,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary in connection with the execution, delivery and performance of this
Agreement or any of the Transaction Documents by Buyer.
7.6 MATERIAL CHANGES. Since the Form 10-Q (as defined below), there has not
been any material adverse change in the condition (financial or otherwise) of
the Buyer or any material damage or destruction of any of the Buyer's material
assets or its place of business by fire or other casualty, whether or not
covered by insurance, and during such period of time the Buyer has conducted its
business in the ordinary and normal course. Buyer is willing to make itself
available to identify and communicate to Sellers all material information with
respect to any fact or condition that is reasonably likely to adversely affect
the future prospects (financial or otherwise) of the Buyer.
7.7 FINDERS. No broker or finder has acted for the Buyer in connection with
the transactions contemplated by this Agreement, and no other broker or finder
is entitled to any broker's or finder's fee or other commission in respect
thereof based in any way on agreements, understandings or arrangements with the
Buyer.
7.8 CAPITAL STOCK. Buyer's Form 10-Q filed with the Commission with respect
to the fiscal quarter ended June 30, 1997 (the "Form 10-Q"), sets forth a true
and complete description of the authorized and outstanding shares of capital
stock of Buyer as of such date. All outstanding shares of IHS Stock are validly
issued, fully paid and non-assessable and not subject to preemptive rights.
Buyer has duly authorized and reserved for issuance the IHS Stock, and, when
issued in accordance with the terms of Article III, the IHS Stock will be
validly issued, fully paid and nonassessable and free and clear of preemptive
rights, liens, encumbrances, claims and other charges thereon.
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7.10 COMPLIANCE WITH LAWS. The Buyer is in compliance in all material
respects with all Governmental Requirements (as defined in Section 5.19) except
where the failure to be in compliance could reasonably be expected to have a
material adverse effect on the Buyer and its subsidiaries collectively. Except
for notices of non-compliance as to which the Buyer has taken corrective action
acceptable to the applicable governmental agency or which would not reasonably
be expected to have a material adverse effect on the Buyer and its subsidiaries
collectively, the Buyer has not, within the period of twelve months preceding
the date of this Agreement, received any written notice that the Buyer or any of
the assets fail to comply in any material respect with any applicable Federal,
state, local or other governmental laws or ordinances, or any applicable order,
rule or regulation of any Federal, state, local or other governmental agency
having jurisdiction over their businesses.
7.11 QUESTIONABLE PAYMENTS. Neither the Buyer nor any shareholder,
director, officer, controlling person or employee of Buyer, and no affiliate of
Buyer, (a) has used any corporate funds of Buyer 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 questionable payment for any referrals or
recommendations or otherwise in connection with the operation of the Buyer's
business which could reasonably be expected to have a material adverse effect on
the Buyer and its subsidiaries collectively.
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE OTHER
PARTIES
8.1 BUYER'S ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING. Prior to the
Closing Date, Buyer may make, or cause to be made, such investigation of the
Company's (it being understood that, for the purpose of this Article VIII,
"Company" shall be deemed to refer collectively to the Company and its
subsidiaries listed on Schedule 5.23) financial and legal condition as Buyer
deems necessary or advisable to familiarize itself with the Company and/or
matters relating to its history or operation. The Company shall permit Buyer and
its authorized representatives (including legal counsel and accountants), to
have full access to the Company's books and records upon reasonable notice and
during normal business hours, and the Company will furnish, or cause to be
furnished, to Buyer such financial and operating data and other information and
copies of documents with respect to the Company's products, services, operations
and assets as Buyer shall from time to time reasonably request. The documents to
which Buyer shall have access shall include, but not be limited to, the
Company's tax returns and related work papers since their inception; and the
Company shall make, or cause to be made, extracts thereof as Buyer or their
representatives may request from time to time to enable Buyer and their
representatives to investigate the affairs of the Company and the accuracy of
the representations and warranties made in this Agreement. The Company shall
cause their accountants to cooperate with Buyer and to disclose the results of
audits relating to the Company and to produce the working papers relating
thereto. Without limiting any
21
of the foregoing, it is agreed that Buyer will have full access to any and all
agreements between and among the previous and current shareholders regarding
their ownership of shares or the management or operation of the Company.
8.2 SELLERS' AND COMPANY'S ACCESS TO INFORMATION AND RECORDS BEFORE
CLOSING. Prior to the Closing Date, Buyer shall make available to Sellers and
Company any public information related to Buyer and provide access to the senior
management of Buyer.
ARTICLE IX: OBLIGATIONS OF THE PARTIES (OTHER THAN SIRROM) UNTIL
CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing, the Company and its subsidiaries shall maintain their existence
and shall conduct their businesses in the customary and ordinary course of
business consistent with past practice.
9.2 NEGATIVE COVENANTS OF THE COMPANY AND ITS SUBSIDIARIES. Without the
prior written approval of Buyer, neither the Company nor any of its subsidiaries
shall, between the date hereof and the Closing:
(A) cause or permit to occur any of the events or occurrences described
in Section 5.18 (Absence of Certain Events) of this Agreement;
(B) dissolve, merge or enter into a share exchange with or into any other
entity;
(C) enter into any contract or agreement with any union or other
collective bargaining representative representing any employees without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld;
(D) sell off any Assets other than in the ordinary course of business; or
(E) make any change to their by-laws or articles of incorporation.
9.3 AFFIRMATIVE COVENANTS. Between the date hereof and the Closing, the
Company and each of its subsidiaries shall:
(A) maintain their businesses in substantially the same state of repair,
order and condition as on the date hereof consistent with past practices,
reasonable wear and tear or loss by casualty excepted;
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(B) maintain in full force and effect all material Licenses currently in
effect with respect to their businesses unless such License is no longer
necessary for the operation of the Company and its subsidiaries;
(C) maintain in full force and effect the insurance policies and binders
currently in effect, or the replacements thereof, including without limitation
those listed on Schedule 5.16;
(D) utilize their reasonable efforts to preserve intact the present
business organization of the Company and its subsidiaries; keep available the
services of the Company's and its subsidiaries' present employees and agents;
and maintain the Company's and its subsidiaries' relations and goodwill with
suppliers, employees, affiliated medical personnel and any others having
business relating to the Company and its subsidiaries;
(E) maintain all of the books and records in accordance with their past
practices;
(F) comply in all material respects with all provisions of the Contracts
listed in Schedule 5.7 and with any other material agreements that the Company
and its subsidiaries have entered into in the ordinary course of business since
the date of this Agreement, and comply in all material respects with the
provisions of all material laws, rules and regulations applicable to the
Company's and its subsidiaries' businesses;
(G) cause to be paid when due, all taxes, assessments and charges or
levies imposed upon them or on any of their properties for which they are
required to withhold and pay over other than their being contested in good
faith;
(H) promptly advise Buyer in writing of the threat or commencement
against the Company and its subsidiaries of any claim, action, suit or
proceeding, arbitration or investigation or any other event that would
materially adversely affect the operations, properties, assets or prospects of
the Company and its subsidiaries;
(I) notify the Buyer in writing of any event involving the Company and
its subsidiaries which has had or may be reasonably expected to have a material
adverse effect on the business or financial condition of the Company and its
subsidiaries or may involve the loss of contracts which involve revenues of more
than $15,000 per year individually or $100,000 per year in the aggregate with
any of the Company's or its subsidiaries' customers; and
9.4 PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, Buyer shall
use its reasonable efforts to obtain all consents and approvals of governmental
agencies and all other parties necessary for the lawful consummation of the
transactions contemplated hereby and the lawful use, occupancy and enjoyment of
the Company's and its subsidiaries' businesses by Buyer in accordance herewith
("Required Approvals"). The Company and its subsidiaries shall cooperate with
and use their reasonable efforts to assist Buyer in obtaining all such
approvals.
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9.5 EXCLUSIVITY. Until the earlier of Closing or the termination of this
Agreement pursuant to Section 13.1, the Company nor any Seller, nor any of their
respective affiliates, representatives or brokers 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, lease or
management of any of the Assets, or in respect of the sale of any shares of
capital stock in the Company.
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's obligations to consummate the purchase of the Company Stock is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Buyer in writing. Upon
failure of any of the following conditions, Buyer may terminate this Agreement
pursuant to and in accordance with Article XIII herein.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Company and Sellers made pursuant to this Agreement shall be true and correct in
all material respects at and as of the Closing Date, as though such
representations and warranties were made at and as of such time (except a
representation made as of a specified date shall be true and accurate in all
material respects as of that date) except to the extent affected by the
transactions herein contemplated.
10.2 PERFORMANCE OF COVENANTS. Each of the Sellers and the Company shall
have performed or complied in all material respects with their respective
agreements and covenants required by this Agreement to be performed or complied
with by it prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. Each of the Sellers and the Company
shall have executed and delivered to Buyer a certificate of its president, dated
the Closing Date, upon which Buyer may rely, certifying that the conditions
contemplated by Sections 10.1 and 10.2 applicable to it have been satisfied.
10.4 OPINION OF COUNSEL. Each Seller (other than Sirrom) and the Company
shall have delivered to Buyer an opinion, dated the Closing Date, of their
counsel, in substantially the form attached hereto as Exhibit 10.4.
10.5 LEGAL MATTERS. No preliminary or permanent injunction or other order
(including a temporary restraining order) of any governmental authority which
prevents the consummation of the transactions contemplated by this Agreement
shall have been issued and remain in effect.
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10.6 AUTHORIZATION DOCUMENTS. Buyer shall have received a certificate of
the Secretary or other officer of the Company certifying as of the Closing Date
a copy of Resolutions of its Board of Directors authorizing its execution and
full performance of the Transaction Documents and the incumbency of its
officers.
10.7 MATERIAL CHANGE. Since the date of the Unaudited Financial Statement
there shall not have been any material adverse change in the condition
(financial or otherwise) of the assets, properties or operations of the Company
and its subsidiaries.
10.8 APPROVALS.
(A) The consent or approval of all persons necessary for the consummation
of the transactions contemplated hereby shall have been granted, including
without limitation, the Required Approvals;
(B) None of the foregoing consents or approvals (i) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, contract, commitment, agreement, license, easement, right or other
authorization with respect to the Company's and its subsidiaries' businesses,
other than as disclosed or approved hereunder, or (ii) shall impose on the Buyer
any material condition or provision or requirement with respect to the Company's
and its subsidiaries' businesses or their operation that is more restrictive
than or different from the conditions imposed upon such operation prior to
Closing.
10.9 EMPLOYMENT AGREEMENT. Raymond A. Mirra, Jr. shall have executed and
delivered to Buyer his employment agreement in the form of Exhibit 10.9 hereto
(the "Employment Agreement").
10.10 CONSENTS. Buyer shall have received the written consent to assignment
from each of those parties with whom the Company or its subsidiaries has a
Contract as listed on Schedule 5.7, where such consent is required by reason of
the change of control of the Company and its subsidiaries contemplated under
this Agreement.
10.11 ESTIMATED CLOSING DATE BALANCE SHEET. Sellers (other than Sirrom) and
Company shall have delivered the Estimated Closing Date Balance Sheet to Buyer.
10.12 COMPANY'S SUBSIDIARIES AND OPTIONS. Each of the subsidiaries of the
Company as of the Closing Date will be one hundred (100%) percent owned by the
Company and there shall not be outstanding as of the Closing Date any options,
warrants or rights for the purchase of any capital stock of the subsidiaries of
the Company.
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10.13 COST AND EXPENSES. The Sellers (other than Sirrom) shall have paid
all costs, fees and expenses (including without limitation, filing fees,
transfer taxes, stamp taxes, legal fees and broker, audit and appraisal fees)
incurred by the Company or any of its subsidiaries in connection with the
transactions contemplated by this Agreement.
10.14 RESIGNATION OF COMPANY BOARDS OF DIRECTORS AND OFFICERS. Each
director and officer of the Company and each of its subsidiaries shall have
submitted his or her resignation to be effective no later than the Closing Date.
10.15 AFFILIATED COMPANY. Buyer shall have closed its acquisition
simultaneously with Ambulatory Pharmaceutical Services, Inc. and each of its
respective shareholders.
10.16 LIEN RELEASES. Healthcare Partners Funding, Inc. and Sirrom Capital
shall each have released their liens against the assets of the Company and its
subsidiaries and the Company shall have delivered to Buyer such releases and UCC
termination statements necessary to evidence that such releases have occurred.
10.17 OTHER DOCUMENTS. The Sellers (other than Sirrom) and the Company
shall have furnished Buyer with all other documents, certificates and other
instruments required to be furnished to Buyer by the Sellers and the Company
pursuant to the terms hereof.
ARTICLE XI: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Sellers' obligation to consummate the sale of the Company Stock is subject
to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Sellers in writing. Upon
failure of any of the following conditions, Sellers may terminate this Agreement
pursuant to and in accordance with Article XIII herein:
11.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer in this Agreement shall be true and correct in all material respects at
and as of the Closing Date as though such representations and warranties were
made at and as of such time (except a representation made as of a specified date
shall be true and accurate in all material respects as of that date) except to
the extent affected by the transactions herein contemplated.
11.2 PERFORMANCE OF COVENANTS. Buyer shall have performed or complied with
each of its agreements and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
11.3 DELIVERY OF CLOSING CERTIFICATE. Buyer shall have delivered to Sellers
a certificate of an executive vice president of Buyer dated the Closing Date
upon which Sellers can rely, certifying that the conditions contemplated by
Sections 11.1 and 11.2 applicable to it have been satisfied.
26
11.4 OPINION OF COUNSEL. Buyer shall have delivered to Sellers an opinion,
dated the Closing Date, of Blass & Driggs, Esqs., counsel for Buyer, in the form
attached as Exhibit 11.4.
11.5 LEGAL MATTERS. No preliminary or permanent injunction or other order
(including a temporary restraining order) of any governmental authority which
prevents the consummation of the transactions contemplated by this Agreement
shall have been issued and remain in effect.
11.6 AUTHORIZATION DOCUMENTS. Sellers shall have received a certificate of
the Secretary or other officer of Buyer certifying a copy of Resolutions of the
Board of Directors of Buyer authorizing Buyer's execution and full performance
of the Transaction Documents and the incumbency of the officers of Buyer.
11.7 EMPLOYMENT AGREEMENT. The Buyer shall have entered into the Employment
Agreement with Raymond A. Mirra, Jr.
11.8 MATERIAL CHANGE. Since the Form 10-Q, there shall not have been any
material adverse change in the condition (financial or otherwise) of the assets,
properties or operations of Buyer.
11.9 OTHER DOCUMENTS. Buyer shall have furnished Sellers with all
documents, certificates and other instruments required to be furnished to
Sellers by Buyer pursuant to the terms hereof.
ARTICLE XII: SURVIVAL AND INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Absent fraud, all
representations and warranties made by each party in this Agreement and in each
Schedule and Transaction Document shall survive the Closing Date and for a
period of one (1) year after the Closing, notwithstanding any investigation at
any time made by or on behalf of the other party, provided that the
representations and warranties contained in Section 5.30 (Questionable
Payments), Section 5.25 (Medicare and Medicaid) and Section 5.21 (Tax), shall
survive until thirty (30) days after the applicable period of limitations for
audits by the applicable Governmental Authority shall have expired, including
extensions for any necessary appeals. All representations and warranties related
to any claim asserted in writing prior to the expiration of the applicable
survival period shall survive (but only with respect to such claim) until such
claim shall be resolved and payment in respect thereof, if any is owing, shall
be made.
12.2 INDEMNIFICATION BY SELLERS. The Sellers (and the Company unless there
shall be a Closing), jointly and severally, shall indemnify and defend Buyer and
hold it harmless against and with respect to any and all damage, loss,
liability, deficiency, cost and expense (including, without limitation,
reasonable attorney's fees and expenses) (all of the foregoing hereinafter
collectively referred to as "Loss") resulting from any of the following,
provided that, for the purpose of this Section 12.2, "Sellers" shall not include
Sirrom Capital Corporation:
27
(A) any inaccuracy in any representation or certification, or breach of
any warranty, made by the Sellers or Company pursuant to this Agreement; or
(B) the breach of any covenant or undertaking made by the Sellers or
Company in this Agreement; or
(C) the ownership or operation of the Company or its subsidiaries or its
business or assets prior to the Closing Date, including, without limitation, (i)
any Excess Reimbursement Liabilities (as defined in Section 2.4); (ii) any Taxes
resulting from the operation of the business of the Company or ownership of any
of the Assets for any period ending on or before the Closing Date; (iii) any
Loss arising out of the noncompliance of the Company with COBRA or any like
statute; (iv) any claim of the type that would be covered by a standard
liability insurance policy, including without limitation, professional
liability, malpractice, general liability, automobile liability, worker's
compensation or employer's liability insurance, arising out of the operation of
the Company's business prior to the Closing Date, including payments of any
deductibles applicable to the aforesaid policies; and (v) any and all actions,
suits, proceedings, demands, assessments, judgments, settlements (to the extent
approved by the Company, such approval not to be unreasonably withheld, delayed
or conditioned), costs and legal expenses incident to any of the foregoing; but
excluding current liabilities and long-term liabilities that are reflected on
the Estimated Closing Date Balance Sheet or that otherwise are taken into
account in any adjustment to the Purchase Price under Section 2.2.
12.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend Sellers and
hold them harmless against and with respect to any and all Loss resulting from:
(A) any inaccuracy in any representation or certification, or breach of
any warranty, made by Buyer pursuant to this Agreement; or
(B) the breach of any covenant or undertaking made by Buyer in this
Agreement; or
(C) the ownership or operation of the Company or its subsidiaries or its
business or assets on and after the Closing Date.
12.4 ASSERTION OF CLAIMS. Any claims for indemnification under Sections
12.2(a) or 12.3(a) must be asserted by written notice by a date which is no
later than one (1) year following the Closing Date, except that any claim based
upon a breach of the representations and warranties contained in Section 5.30
(Questionable Payments), Section 5.25 (Medicare and Medicaid) or Section 5.21
(Tax) may be asserted until thirty (30) days after the applicable period of
limitations for audits by the applicable Governmental Authority shall have
expired, including extensions for any necessary appeals.
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12.5 INDEMNITY BASKET. Notwithstanding any other provisions of this Article
XII, no claim for indemnification made under Sections 12.2(a) or 12.3(a) shall
be made unless and until Buyer or Sellers, as the case may be, have incurred
Loss in excess of Fifty Thousand ($50,000) Dollars in the aggregate, in which
case, the party seeking indemnification shall be entitled to assert claims
including such initial Fifty Thousand ($50,000) Dollars.
12.6 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS.
(A) Each indemnified party (each, an "Indemnitee") shall give the
indemnifying party (the "Indemnitor") prompt notice of each claim for which it
seeks indemnification. Failure to give such prompt notice shall not relieve any
Indemnitor of its indemnification obligation, provided that such indemnification
obligation shall be reduced by any damages the Indemnitor demonstrates it has
suffered resulting from a failure to receive prompt notice hereunder. The
Indemnitors shall be entitled to participate in the defense of such claim. If at
any time the Indemnitor acknowledges in writing that the claim is fully
indemnifiable by it under this Agreement, and, if requested by the Indemnitee,
the Indemnitor posts adequate bond or security, the Indemnitor shall have the
right to assume control of the defense (but not the settlement) of such claim at
its own expense; unless (i) Indemnitee shall have been authorized in writing by
the Indemnitor to defend such action with counsel of its own choice in
connection with the defense of such action, or (ii) the Indemnitor shall not
have employed counsel to have charge of the defense of such action within twenty
(20) days after the date of notice of the claim for which indemnification is
sought is given to the Indemnitor or (iii) the Indemnitor shall have failed to
undertake and reasonably pursue the defense of such action, or (iv) the
Indemnitee 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 the Indemnitor. If any event described in clauses (i) through (iv)
above shall occur, then the Indemnitor shall not have the right to direct the
defense of such action on behalf of the Indemnitee with counsel of its own
choice, and the reasonable fees and expenses of the Indemnitee shall be borne by
the Indemnitor, provided that such counsel shall be reasonably acceptable to the
Indemnitor. If the Indemnitors do assume control of the defense of any such
claim in accordance with the foregoing, then: (x) the Indemnitor shall not
defend the claim for which indemnification is being sought in any manner that
would likely have a material adverse effect on the Indemnitee or on any
relationship that the Indemnitee may have with any customers, vendors, suppliers
or others, and (y) the Indemnitee shall not settle such claim without the
written consent of the Indemnitor, which consent shall not be unreasonably
withheld, delayed or conditioned. Nothing contained in this Section 12.6 shall
prevent either party from assuming control of the defense and/or settling any
claim against it for which indemnification is not sought under this Agreement.
(B) Notwithstanding anything to the contrary contained in this Agreement,
if there shall be any claim for Excess Reimbursement Liabilities with respect to
which Buyer shall be seeking indemnification, Buyer will have the sole right to
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 its customary procedures diligently and in good
faith. Buyer may, in its sole and absolute discretion, at any time
29
discontinue any such contest or appeal or enter into a settlement with respect
thereto prior to the final determination thereof (a "Final Determination");
provided, however, that if it intends to discontinue or settle any such appeal
or contest prior to Final Determination, then it must provide Sellers with
reasonable prior written notice of such intent and of the current status of the
appeal or contest or proposed settlement, and will consult with Sellers in good
faith with respect thereto.
12.7 RESTRICTIONS.
(A) From and after the Closing Date, none of the Sellers shall disclose,
directly or indirectly, to any person outside of Buyer's employ without the
express authorization of the Buyer, any patient lists, customer lists, pricing
strategies, customer files, or patient files and records of the Company and its
subsidiaries, any proprietary data or trade secrets owned by the Company and its
subsidiaries or any financial or other information about the Company and its
subsidiaries not then in the public domain; provided, however, that Sellers
shall be permitted to make such disclosures as may be required by law or by a
court or governmental authority.
(B) After the Closing Date, none of the Sellers shall engage or
participate in any effort or act to induce any of the customers, physicians,
suppliers, associates, employees or independent contractors of the Company and
its subsidiaries to cease doing business, or their association or employment,
with the Company and its subsidiaries.
(C) No Seller (which, for the purposes of this Section 12.7(c) shall be
deemed not to include Sirrom) shall, for a period of five (5) years after the
Closing Date, directly, or indirectly, for or on behalf of himself or herself or
any other person, firm, entity or other enterprise, be employed by, be a
director or manager of, act as a consultant for, be a partner in, have a
proprietary interest in, give advice to, loan money to or otherwise associate
with, in a business fashion, 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 entity of any type, licensed
or unlicensed, which , anywhere within the United States, (i) is engaged in or
provides the Services , (ii) compounds or dispenses pharmaceutical admixtures
for intravenous therapies to patients at sites other than hospitals, (iii)
provides medical supplies, equipment or non-professional services usually and
customarily associated with the provision of intravenous therapies to patients,
or (iv) provides professional nursing services usually and customarily rendered
with the provision of intravenous therapies, provided that nothing in this
Section 12.7(c) shall restrict any Seller from having any involvement with a
nursing agency business.
(D) The Sellers acknowledge that the restrictions contained in this
Section 12.7 are reasonable and necessary to protect the legitimate business
interests of Buyer and that any violation thereof by any of them would result in
irreparable harm to Buyer. Accordingly, Sellers agree that upon the violation by
any of them of any of the restrictions contained in this Section 12.7, Buyer
shall be entitled to obtain from any court of competent jurisdiction a
preliminary and permanent injunction as well as any other relief provided at law
or equity, under this Agreement or otherwise. In the event any of the foregoing
restrictions are adjudged unreasonable in any proceeding, then the parties agree
that the period of time or the scope of such restrictions (or both) shall be
adjusted in such a manner or for such a time (or both) as is adjudged to be
reasonable.
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12.8 RECORDS. On the Closing Date, Sellers and Company shall deliver, or
cause to be delivered, to Buyer all records and files not then in Buyer's
possession relating to the operations of the Company and its subsidiaries.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time at or prior
to the Closing by:
(A) Buyer, if any condition precedent to Buyer's obligations hereunder,
including without limitation those conditions set forth in Article X hereof,
have not been satisfied by the Closing Date;
(B) Sellers, if any condition precedent to the obligations of any Seller
or the Company hereunder, including without limitation those conditions set
forth in Article XI hereof, have not been satisfied by the Closing Date; or
(C) the mutual consent of Buyer and Sellers.
13.2 EFFECT OF TERMINATION. If a party terminates this Agreement because
one of its conditions precedent has not been fulfilled, or if this Agreement is
terminated by mutual consent, this Agreement shall become null and void without
any liability of any party to the other; 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 Article XII hereof (and for such purposes such
Article XII shall survive the termination of this Agreement). Further, nothing
in this Section 13.2 shall affect Buyer's right to specific performance of the
obligations of the Company and Sellers at Closing hereunder.
ARTICLE XIV: MISCELLANEOUS
14.1 COSTS AND EXPENSES. Except as expressly otherwise provided in this
Agreement, Buyer and Sellers shall bear their own costs and expenses in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that no such costs and expenses shall be charged to the
Company and its subsidiaries; and provided further that the reasonable costs and
expenses of Sirrom shall be borne by the remaining Sellers.
14.2 PERFORMANCE. In the event of a breach by any party of its obligations
hereunder, the other party shall have the right, in addition to any other
remedies which may be available, to obtain specific performance of the terms of
this Agreement, and the breaching party hereby waives the defense that there may
be an adequate remedy at law. Should any party default in its performance, or
other remedy, the prevailing party shall be entitled to its reasonable
attorneys' fees.
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14.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the benefit
of each party hereto and its successors and proper assigns. Neither Buyer nor
Sellers may assign their interests under this Agreement to any other person or
entity without the prior written consent of the other parties; provided,
however, that Buyer may assign its rights, duties and obligations hereunder to
one or more subsidiaries or affiliates of Buyer; and further provided that in
the instance of such assignment Buyer shall guaranty the performance of its
assignee hereunder.
14.4 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and the
Exhibits and Schedules hereto embody the entire agreement and understanding of
the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein. The captions used herein
are for convenience only and shall not control or affect the meaning or
construction of the provisions of this Agreement. This Agreement may be executed
in one or more counterparts, and all such counterparts shall constitute one and
the same instrument.
14.5 COOPERATION - FURTHER ASSISTANCE. From time to time, as and when
reasonably requested by Buyer after the Closing, the other parties will (at the
expense of the Buyer) 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.
14.6 NOTICES. All notices 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 within five
(5) days when sent by certified or registered mail, postage prepaid, or 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 the Company: APS America, Inc.
9812 Pflum Road
Lenexa, Kansas 66215
If to the Sellers: Raymond A. Mirra, Jr.
2932 North Atlantic Boulevard
Fort Lauderdale, FL 33308
James Kuo
890 Wises Mill Road
Philadelphia, PA 19128
Ted Kramm
8909 W. 131st Street
Overland Park, Kansas 66213
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John Harrison
Sirrom Capital
500 Church Street, Suite 200
Nashville, TN 37219
with a copy to: Alexander Bono, Esq.
Blank, Rome, Comisky & McCauley
2000 Logan Square
Philadelphia, PA 19103
Attn: J. Patrick Murphy
J. Patrick Murphy
Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanoogo, TN 37402
If to the Buyer: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Brian K. Davidson
Elizabeth B. Kelly
cc: Marshall A. Elkins, General Counsel
with a copy to: Michael S. Blass, Esq.
Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Floor
New York, NY 10017
14.7 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
14.8 RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this Agreement
shall be deemed to create rights in persons not parties hereto, other than the
successors and proper assigns of the parties hereto.
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14.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, disregarding any
rules relating to the choice or conflict of laws.
14.10 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after the
execution and delivery of this Agreement by the parties hereto, this Agreement
may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. This Agreement may not be amended except by an
instrument in writing signed by each of the parties.
14.11 SEVERABILITY. Any provision, or distinguishable portion of any
provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 12.7 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.
14.12 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all of which shall together
constitute one and the same instrument.
14.13 ARBITRATION. Any dispute or controversy between any of the parties
hereto pertaining to the performance or interpretation of this Agreement shall
be settled by binding arbitration pursuant to the rules of the American
Arbitration Association. The cost of such proceeding shall be shared equally by
all parties thereto, and each such party shall bear its own costs incurred as a
result of its participation in any such arbitration.
14.14 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 Buyer and Raymond A. Mirra,
Jr. shall determine; provided that nothing herein shall prevent 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.
[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.
COMPANY:
APS AMERICA, INC.
WITNESS:
By:/s/ By:/s/
---------------------------- -----------------------------
Its: President
SELLERS:
WITNESS:
By:/s/ /s/
---------------------------- --------------------------------
Raymond A. Mirra, Jr.
WITNESS:
By: /s/
---------------------------- --------------------------------
James Kuo
WITNESS:
By:/s/ /s/
---------------------------- --------------------------------
Edward Kramm
SIRROM CAPITAL CORPORATION
By:/s/
-----------------------------
Its:
----------------------------
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:/s/
-----------------------------
Executive Vice President
Corporate Development
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