Exhibit 2.1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
AND RESTRICTIVE COVENANTS
THIS AGREEMENT is made as of Sept. 25, 1998, by and among ACCUCARE MEDICAL
CORPORATION, a California corporation, having its principal place of business at
2900 Telegraph Avenue, Oakland, California 94609 (the "SELLER" or the
"CORPORATION"), ROBERT D. WALTER, MARCIA HENDRY-WALTER AND PAUL BERNOU, the sole
shareholders of Seller (the "SHAREHOLDERS" and each a "SHAREHOLDER"), INTEGRATED
OF GARDEN TERRACE, INC., a Delaware corporation (the "BUYER") and INTEGRATED
HEALTH SERVICES, INC., a Delaware corporation ("IHS").
W I T N E S S E T H :
WHEREAS, Seller operates a home respiratory care and durable medical
equipment business in the State of California (the "BUSINESS"); and
WHEREAS, Shareholders are the sole shareholders of the Seller; and
WHEREAS, Buyer is a wholly owned subsidiary of IHS; and
WHEREAS, Seller wishes to sell, and Buyer desires to purchase from Seller,
substantially all of the assets of the Business in exchange for voting shares of
the common stock, par value $.001, of IHS (the "IHS STOCK") in a transaction
intended to qualify as a "reorganization" within the meaning of ss.368(a)(1)(c)
of the Internal Revenue Code of 1986, as amended (the "CODE"), it being
contemplated by the Seller and Buyer that the Seller will thereafter, as an
integral part of the transaction, distribute the IHS Stock to the Shareholders
in complete liquidation of the Seller and dissolve; and Buyer also desires to
acquire from Seller and each Shareholder, and each of Seller and each
Shareholder desires to grant to Buyer, covenants not to compete and other
restrictive covenants as described in paragraph 17 hereof (the "RESTRICTIVE
COVENANTS"); and
WHEREAS, the consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby has been obtained,
including without limitation, all approvals of governmental authorities and
parties to any contracts to be assigned to Buyer in connection herewith.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is hereby agreed as follows:
1. Sale of Assets and Restrictive Covenants.
(a) The Assets. As of the Closing Date referred to below in paragraph
9, Seller shall sell transfer, convey and assign, free and clear of all liens,
claims, security interests, pledges, restrictions on transfer or use and other
encumbrances of any kind or nature whatsoever ("LIENS"), except for the Assumed
Liabilities (as defined in paragraph 6(b) herein), all of Seller's rights, title
and interest in, to or under:
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(i) Accounts Receivable. All of the accounts receivable of the
Business including, without limitation, all accounts receivable set forth
on the Schedule of Accounts Receivable Data attached hereto as Schedule
1(a)(i); and
(ii) Inventory; Fixed Assets. All inventory and fixed assets of
the Business, including, without limitation, all of the same set forth on
the Schedule of Inventory and Fixed Assets attached hereto as Schedule
1(a)(ii); and
(iii) Motor Vehicles. All motor vehicles of the Business,
including without limitation, all of the same set forth on the Schedule of
Motor Vehicles attached hereto as Schedule 1(a)(iii); and
(iv) Property Rights. All real property, easements and rights of
way permitting access to the Business; and
(v) Other Assets. All other assets of any kind, tangible or
intangible, real, personal or mixed, owned and used or held for use by
Seller in connection with the Business, including, without limitation, all
of the following: (A) the Patients' List of the Business, as described in
Schedule 1(a)(v)(A); (B) the telephone numbers listed on the Schedule of
Telephone Numbers and Licenses attached hereto as Schedule 1(a)(v)(B); (C)
all personal property, machinery and equipment, whether owned or leased
including, without limitation, the leasehold interests listed on Schedule
1(a)(v)(C); (D) all of Seller's prepaid assets; (E) rights under contracts,
agreements, including, without limitation, franchise agreements, and
instruments; and (F) all intangible rights of Seller of every kind and
description used in, or held for use in connection with, the operation of
the Business, including, without limitation, all intangible assets, and to
the extent permitted by applicable law, all licenses, permits and
authorizations.
(b) Excluded Assets. Notwithstanding the foregoing, the Assets shall
not include, and Seller shall not be deemed to have sold, transferred, conveyed
or assigned the following assets to Buyer: Seller's cash, Articles of
Incorporation, qualification to do business in any jurisdiction, taxpayer
identification number, minute books, stock transfer records and other documents
related specifically to Seller's corporate organization and maintenance
(collectively, "EXCLUDED ASSETS").
(c) Restrictive Covenants. Pursuant to paragraph 17 hereof, each of
Seller and each Shareholder is granting to Buyer the Restrictive Covenants.
2. Purchase Price; Method of Payment.
(a) Purchase Price. Buyer shall pay an amount for the Assets and the
Restrictive Covenants equal to Three Million Five Hundred Thousand Dollars
($3,500,000.00), less the amount of the Assumed Liabilities (as defined below in
paragraph 6), which amount of Assumed Liabilities shall be $646,500 (the
"PURCHASE PRICE"). The Purchase Price shall be allocated among the Assets and
the Restrictive Covenants in the manner set forth on the Allocation Schedule
attached hereto as Schedule 2(a), and the parties hereto expressly consent to
the allocation stated therein.
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(b) Method of Payment. At the Closing (as defined in paragraph 9),
Buyer shall pay, disburse, and deliver the Purchase Price as follows:
(i) IHS Stock having a value (using the Trade Price (as such term
is defined in paragraph 4(a)) to value such IHS Stock) equal to Three
Hundred Fifty Thousand ($350,000) Dollars (the "GENERAL ESCROW AMOUNT") and
Four Hundred Thousand ($400,000) Dollars (the "CLAW-BACK AMOUNT") (the
General Escrow Amount and the Claw-back Amount shall be referred to as the
"ESCROW FUND") shall be delivered to CoreStates Bank, N.A., as escrow agent
("Escrow Agent"), to be held by Escrow Agent during the Escrow Period (as
defined in paragraph 6(d), below) pursuant to the terms of a Escrow
Agreement, in the form attached hereto as Exhibit 2(b)(i) (the "ESCROW
AGREEMENT"). The entire Escrow Fund shall be subject to the provisions of
paragraphs 7 and 18 hereof.
(ii) IHS Stock having a value (using the Trade Price to value
such IHS Stock) equal to One Hundred Ninety Two Thousand Five Hundred
Dollars ($192,500) (the "BROKER'S FEE") shall be paid, on behalf of Seller,
to Steven Richards & Associates, Inc. (the "BROKER"), in satisfaction of
all fees and compensation due at the Closing to the Broker in connection
with the transactions contemplated by this Agreement. Buyer shall also pay
to Broker on behalf of Seller seven percent (7%) of any portion of the
General Escrow Amount and the Claw-back Amount if, when and to the extent
released to Seller, and any such payment shall be credited against the
amount of the Claw-back Amount payable to Seller. Seller represents and
warrants to Buyer that the Broker has acted as Seller's representative and
broker in connection with the transactions contemplated by this Agreement,
and authorizes and directs Buyer to withhold such sums from the Purchase
Price and disburse such sum directly to the Broker. Notwithstanding the
foregoing, IHS and Buyer shall not be required to make any such delivery to
the Broker unless the Broker shall have executed and delivered a
Confirmation Agreement in the form and substance of Exhibit 2(b)(ii)
hereto.
(iii) IHS Stock having a value (using the Trade Price to value
such IHS Stock) equal to One Million Nine Hundred Eleven Thousand Dollars
($1,911,000) (the balance of the Purchase Price), to the Shareholders.
3. Purchase Price Adjustment. The parties acknowledge that the Purchase
Price was determined using a multiple of the expected Annual Operating Profit
(as hereinafter defined) of the Business after the Closing, and such expected
Annual Operating Profit was based upon the Seller's best good faith estimate
thereof. Accordingly, if the average Annual Operating Profit during the period
commencing on September 1, 1998 and ending August 31, 2000 (the "APPLICABLE
PERIOD") shall be less than $700,000, then the Buyer shall be entitled to
receive an amount from the Seller equal to five times (5x) the amount of such
deficiency (the "CLAW-BACK PAYMENT"); provided that the Claw-back Payment shall
not exceed the Claw- back Amount. For purposes hereof, the term "ANNUAL
OPERATING PROFIT" shall be determined as set forth on Exhibit 3 attached hereto.
The parties further acknowledge that they have used their best efforts to
determine that the Purchase Price is consistent with the fair market value of
the Business and its assets as of the Closing, based in part on the projected
future revenues of the Business. The foregoing provisions of this paragraph 3
are intended solely to adjust the Purchase Price, if necessary, to reflect fair
market value and not to induce Seller or the Shareholders to refer or influence
the referral of any prospective client, customer or patient (collectively,
"PROSPECTIVE PATIENTS") to the Business or to recommend the Business to any
Prospective Patients. Accordingly, (i) prior to the Closing, Seller and the
Shareholders shall not engage in any marketing activities (including any direct
solicitation of Prospective Patients) except in the ordinary and usual course of
conducting the Business, consistent with lawful past practices, and (ii) after
the Closing, Seller and Shareholders shall not take any action, directly or
indirectly, to induce any Prospective Patients to become patients of the
Business.
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4. IHS Stock. A portion or all of the Purchase Price shall be payable by
means of the delivery of shares of IHS Stock issued to the Shareholders (in
contemplation of the liquidation and dissolution of Seller), as aforesaid, in
accordance with the following:
(a) Share Value. The number of shares of IHS Stock issuable upon
execution of this Agreement (the "EXECUTION DATE SHARE COUNT") shall be
calculated based upon a price per share of such stock equal to the average
closing New York Stock Exchange ("NYSE") price of such stock for the five (5)
trading day period immediately preceding the date which is two (2) trading days
before the date hereof (the "TRADE PRICE").
(b) Registration Rights. IHS will prepare and use its reasonable
commercial efforts to cause to be filed within one-hundred and twenty (120) days
following the Closing Date, and will use its reasonable commercial efforts to
have declared effective by the Securities and Exchange Commission (the
"COMMISSION"), a registration statement covering the resale of the IHS Stock
issued to the Shareholders in connection with this transaction, including the
shares, if any, issuable as a share adjustment pursuant to paragraph 4(c), under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), and IHS shall
maintain the effectiveness of such registration statement for a period of one
(1) year following the date it became effective (the "REGISTRATION DATE"),
except to the extent that an exemption from registration may be available.
(c) Share Adjustment. Promptly following the Share Adjustment Date (as
hereinafter defined), the number of shares deliverable as part of the Purchase
Price (including the shares delivered to the Broker, but excluding any other
shares that have previously been transferred by the Shareholders) shall be
re-calculated to be the number of shares of IHS Stock that would have been
delivered in lieu of such retained shares had the Recalculated Value (as defined
below) been used on the date hereof in lieu of the Trade Price with respect to
the portion of the Purchase Price represented by such retained shares. For
purposes hereof, the "RECALCULATED VALUE" shall mean the average closing NYSE
price for IHS Stock for the 5-trading day period ending on the Share Adjustment
Date (as defined below). If the number of shares as re-calculated under this
subparagraph (c) (the "ADJUSTED SHARE COUNT") exceeds the Execution Date Share
Count, IHS promptly shall deliver over to the Shareholders, and the Broker an
additional number of shares of IHS Stock as shall be equal to such excess, and
such additional shares shall be included in the aforementioned registration
statement by means of a pre-effective amendment thereto. If the Execution Date
Share Count exceeds the Adjusted Share Count, the Shareholders, and the Broker
promptly will return to the Buyer that number of shares of IHS Stock as shall be
equal to such excess; provided, however, that the Adjusted Share Count may not
exceed twice the Execution Date Share Count; and provided further, that the
Adjusted Share Count shall not be less than one-half the Execution Date share
Count. For purposes hereof, "SHARE ADJUSTMENT DATE" shall mean the date which is
two trading days before the Registration Date.
(d) Registration Expenses. Shareholders shall not be responsible for,
and Buyer shall bear, all of the reasonable expenses of IHS 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 Shareholders' or any transferee's failure to
comply with its obligations under this Article 4.
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(e) Resale Limitations.
The aggregate sales by the Shareholders, and Broker shall not, at
any time, exceed 75,000 shares in the aggregate during any 30 consecutive
day period, and all such sales shall be effected solely through Salomon
Smith Barney, Inc.
(f) Registration Procedures, etc. In connection with the registration
rights granted to the Shareholders with respect to the IHS Stock as provided in
this Article 4, Buyer covenants and agrees as follows:
(i) At Buyer's expense, Buyer will keep the registration and
qualification under this Article 4 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate until the
first anniversary of the Registration Date, except to the extent that an
exemption from registration may be available. Buyer will promptly notify
the Representative (as hereinafter defined), at any time when a prospectus
relating to a registration statement under this Article 4 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 Representative 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 Representative, provided that Buyer
shall not be obligated to qualify as a foreign corporation or dealer to do
business under the laws of any such jurisdiction.
(iv) The information included or incorporated by reference in the
registration statement filed pursuant to this Article 4 will not, at the
time any such registration statement becomes effective, contain any untrue
statement of a material fact, or omit to state any material fact required
to be stated therein as necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier filing of such
registration statement or any amendments thereto. The registration
statement will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder. Buyer shall
indemnify the Shareholders, their successors and assigns, and each person,
if any, who controls such Shareholder within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Securities Exchange Act of 1934, as
amended ("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 the
Shareholder 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 Shareholders or any controlling person of any
Shareholder in respect of which indemnity may be sought
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against Buyer pursuant to this subparagraph 4(f)(iv), such Shareholder 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 Shareholder or such
controlling person). Notwithstanding anything contained in the foregoing
sentence, the failure of such Shareholder or controlling person to provide
Buyer with notice of such action within thirty (30) days will not have an
adverse affect on the rights of such Shareholder or controlling person to
seek indemnity against Buyer except to the extent that Buyer is prejudiced
by the failure to give such notice. The Shareholders 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 Shareholders 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 (after notice
to Buyer) 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
Shareholders and such controlling persons shall be borne by Buyer. Except
as expressly provided in the previous sentence, in the event that Buyer
shall not previously have assumed the defenses of any such action or claim,
Buyer shall not thereafter be liable to the Shareholders or such
controlling person in investigating, preparing or defending any such action
or claim.
(v) The Shareholders, 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, arising from incorrect or
incomplete information furnished by or on behalf of such Shareholders, or
their successors or assigns for specific inclusion in such registration
statement.
(g) Notice of Sale.
(i) Prior to any proposed sale or other transfer of any
interest in any of the shares of IHS Stock issued to any Shareholder pursuant to
this Agreement, such Shareholder shall give notice (a "PROPOSED SALE NOTICE") to
Buyer of any such proposed transfer describing in reasonable detail such
Shareholder's intention to effect the proposed transfer, the manner of the
proposed transfer, the number of shares proposed to be transferred and the
mailing address and the telefacsimile number, if any, for such Shareholder. Each
Proposed Sale Notice also shall contain a certification to the effect that such
Shareholder shall comply with the volume limitations and other provisions of
this Agreement relating to the transfer of such interest in the shares. Each
Proposed Sale Notice may be sent by telefacsimile transmission to
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attention: Marc Levin, Executive Vice President -- Investor Relations
fax number: (410) 998-8714
phone number: (410) 998-8428
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with a copy to:
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, Maryland 21117
Attention: Elizabeth B. Kelly, Executive Vice President
fax number: (410) 902-2110
No Shareholder shall resell or otherwise transfer any interest in any of the
shares of IHS Stock issued to such Shareholder pursuant to this Agreement unless
such transfer shall comply with all of the provisions of this Agreement and such
Shareholder shall have received notice from Buyer's Investor Relations
Department (which notice may be given orally or by telefacsimile transmission)
that the registration statement covering such proposed transfer is effective and
"current", or, if such transfer is not to be made pursuant to a registration
statement, that Buyer has determined (with the advice of legal counsel after
receipt of the legal opinion referred to below) that the proposed transfer of
shares of IHS Stock may be made without registration under the Securities Act
and all applicable state securities laws. If an applicable Shareholder shall not
have been otherwise notified (orally, by telefacsimile transmission or by other
method) by the close of business on the third trading day following the date on
which Buyer's Investor Relations Department shall have received the applicable
Proposed Sale Notice, then the Investor Relations Department shall be deemed to
have consented to such transfer.
(ii) If the transfer is to be pursuant to an effective
registration statement as provided herein, such Shareholder will resell only in
compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer to said Shareholder 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 such registration statement as may be necessary to bring it
current and to give prompt notice to such Shareholder when the registration
statement has again become current.
(iii) If any of the Shareholders delivers to Buyer an
opinion of counsel reasonably acceptable to Buyer and its counsel in form and
substance reasonably acceptable to them and to the effect that the proposed
transfer of shares of IHS Stock may be made without registration under the
Securities Act and all applicable state securities laws, such Shareholder will,
subject to Section 3.1(e) above, be entitled to transfer said shares of IHS
Stock in accordance with the terms of the notice and opinion of their counsel.
(h) Furnish Information. It shall be a condition precedent to the
obligations of Buyer to take any action pursuant to this Article 4 that the
Shareholders and the Broker shall each furnish to 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 its IHS Stock. In that connection, each transferee of Shareholders and/or
Broker (whose shares would be included in a Registration other than transferees
pursuant to an effective registration statement) shall be required to represent
to Buyer that all such information which is given is both complete and accurate
in all material respects. The Shareholders and the Broker shall each deliver to
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 (whose shares would be included in a Registration other than
transferees pursuant to an effective registration statement) will, severally,
promptly notify Buyer at any time when a prospectus relating to a registration
statement covering such transferee's shares under this Article 4 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.
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(i) Investment Representations. The Shareholders and the Broker
represent and warrant to Buyer that the IHS Stock being issued hereunder are
being acquired, and will be acquired, by the Shareholders and the Broker for
investment for their own accounts and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act or the applicable state securities law; the Shareholders and the Broker
acknowledge that the IHS Stock constitutes restricted securities under Rule 144
promulgated by the Commission pursuant to the Securities Act, and may have to be
held indefinitely, and the Shareholders and the Broker agree that no IHS Stock
may be sold, transferred, assigned, pledged or otherwise disposed of except
pursuant to an effective registration statement or an exemption from
registration under the Securities Act, the rules and regulations thereunder, and
under all applicable state securities laws. The Shareholders and the Broker have
knowledge and experience in financial and business matters, are capable of
evaluating the merits and risks of the investment, and are able to bear the
economic risk of such investment. The Shareholders and the Broker have had the
opportunity to make inquiries of and obtain from representatives and employees
of Buyer such other information about IHS as they deem necessary in connection
with such investment.
(j) Legend. It is understood that the certificates evidencing the IHS
Stock shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION
OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.
(k) Certain Transferees. Prior to the effective date of registration
of the IHS Stock, Shareholders and the Broker shall not transfer any shares of
IHS Stock to any person or entity except as expressly permitted by this
Agreement and unless such transferee shall have agreed in writing to be bound by
the provisions applicable to the Shareholders and the Broker under this Article
4. IHS shall not unreasonably withhold its consent to the inclusion in the
registration statement covering the Shareholders' shares of IHS Stock of resales
by permitted transferees of the shares of IHS Stock acquired by them from the
Shareholders so long as such transferees (or the Shareholders) reimburse IHS for
all of its expenses and costs arising out of such inclusion.
5. Indemnity Against Creditors Claims; No Assumption of Liabilities.
Seller has requested that Buyer waive the requirements of the bulk sales and
transfer laws of the State of California. Seller and Shareholders agree to
indemnify Buyer and save and hold Buyer harmless against all Damages (as defined
in paragraph 17(c)) arising out of any claims made by creditors (including,
without limitation, any Federal, state or local taxing authority) of Seller that
relate to the Business, or that arise out of the failure to comply with any of
such laws.
6. Closing Date Liabilities.
(a) Seller and the Shareholders represent and warrant that, to the
best of Seller's and Shareholders' knowledge and belief after diligent inquiry,
all of Seller's liabilities, as of the Closing Date are listed on the Schedule
of Liabilities attached hereto as Schedule 6(a) (the "LISTED LIABILITIES"). For
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purposes of this Agreement "LIABILITIES" shall mean and include all claims,
lawsuits, liabilities, obligations or debts 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, whether or not asserted as of the date hereof, and
whether or not of a type which would be reflected as a liability on a balance
sheet (including, without limitation, federal, state and local taxes of any
nature) in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), including without limitation, any liabilities
relating to any Excluded Assets, malpractice or other tort claims, claims for
breach of contract, any claims of any kind asserted by patients, former
patients, employees and former employees of Seller or any other party that are
based on acts or omissions by Seller occurring on or before the Closing Date,
amounts due or that may become due in connection with the participation of
Seller in the Medicare or Medicaid programs or due to any other health care
reimbursement or payment intermediary, or that may be due by Seller to any other
third party payor, accounts payable, notes payable, trade payables, lease
obligations, indebtedness for borrowed money, accrued interest, and contractual
obligations. Seller and Shareholders acknowledge that the Purchase Price for the
Assets is based on the accuracy of Seller's and Shareholders' representations
and warranties contained in this Agreement, including, but not limited to,
Seller's and Shareholders' representations and warranties contained in this
paragraph 6(a).
(b) At the Closing, Buyer shall undertake to pay, discharge and
perform, as and when due, the Listed Liabilities to the extent indicated as
being assumed on Schedule 6(a) of the Seller (the "ASSUMED LIABILITIES");
provided, however, that Buyer shall not assume, be liable for, or have
responsibility for Assumed Liabilities in an aggregate amount in excess of Six
Hundred Forty Six Thousand Five Hundred ($646,500) Dollars (the "ASSUMED
LIABILITY CAP"). In the event that, at any time following the Closing Date,
Buyer shall have paid any amounts in excess of the Assumed Liability Cap, such
amount shall constitute a Liabilities Deficiency under the provisions of
paragraph 7 hereof. Except for the Assumed Liabilities, Buyer will not assume
any, and Seller shall remain liable for each, liability of Seller arising out of
any facts, circumstances, matters or occurrences existing on or prior to the
Closing Date (whether or not known) ("CLOSING DATE LIABILITIES").
(c) Without limiting the generality of the provisions of subparagraph
(a) above, Buyer shall not assume the Contracts (as hereinafter defined in
paragraph 14(b)), if any, set forth on Schedule 6(b), or any liabilities with
respect thereto.
7. Right of Offset Against the Escrow Fund.
(a) Event of Deficiency. If:
(i) Buyer pays for any liabilities in excess of the Assumed
Liabilities Cap, then Seller and the Shareholders shall, jointly and
severally, reimburse Buyer for such payment (a "LIABILITIES DEFICIENCY");
or
(ii) the aggregate value of the Corporation's collectible
accounts receivable as of the Closing Date is determined to be less than
$470,000, as determined by actual net cash collections of such receivables
during the twelve (12) month period immediately following the Closing Date,
then Seller and Shareholders, jointly and severally, shall pay to Buyer the
amount of such deficiency ("ASSET VALUE DEFICIENCY"); or
(iii) Buyer is entitled to any payment pursuant to paragraph 3
above (an "ADJUSTMENT CLAIM");
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(iv) Buyer shall be entitled to be indemnified for any Damages
pursuant to this Agreement ("INDEMNIFICATION CLAIMS", and together with any
Liabilities Deficiencies, Asset Value Deficiencies and Adjustment Claims
collectively "CLAIMS" and each, a "CLAIM"); or
then, and in any of such events, Buyer may provide written notice to Seller of
the Claim, in which case Buyer shall be entitled to recover the amount of such
Claim in accordance with the following procedure.
(b) Procedure if Seller Fails to Pay. If Seller fails to pay any Claim
in full to Buyer within ten (10) days from the date of such written notice (said
ten (10) day period hereinafter referred to as the "NOTICE PERIOD"), Buyer shall
have the right to make offset against the Escrow Fund, in accordance with the
terms and conditions of the Escrow Agreement, in amounts from time to time equal
to the amount of such Claim (subject, however, in the case of a "DISPUTE", to
the provisions of paragraph 18 hereof applicable thereto), and Seller agrees to
any such offset. Buyer's right to proceed against the Escrow Fund shall not be
exclusive of any other rights or remedies that it may have under this Agreement,
law, equity or otherwise.
(c) Escrow Period.
(i) The "ESCROW PERIOD" shall terminate twenty-four (24) months
following the Closing Date.
(ii) (A) On the first anniversary of the Closing Date, Seller
shall receive an amount equal to the Escrow Fund, less (x) the amount of any
Claims paid out of the Escrow Fund pursuant to paragraph 7(a) above, (y) any
amounts withheld pursuant to clause (iii) below, and (z) the Claw-Back Amount.
(B) The balance, if any, of the Escrow Fund remaining (the
"REMAINING ESCROW FUNDS") at the close of business on the last day of the Escrow
Period, shall be disbursed to Seller within forty-five (45) days after the last
day of the Escrow Period.
(iii) Notwithstanding anything to the contrary contained in this
subparagraph (c), if any Claim made by Buyer is in dispute at the time that any
amounts are otherwise to be disbursed to Seller, then there shall be withheld
from such amount to be disbursed and there shall be retained in the Escrow Fund,
an amount such that there will be remaining in the Escrow Fund at least one and
one-half times the amount of the Claim asserted by Buyer until the final
settlement of such Claim or Claims.
(e) Valuation of Shares. The value of any shares of IHS Stock
delivered to Buyer in respect of any Claim shall be the Recalculated Value.
(f) Sales from Escrow. At the request of the Shareholders, Buyer shall
sell any shares of IHS Stock held in the Escrow Fund in the open market pursuant
to an effective registration statement provided that Buyer shall be satisfied
that proper procedures shall be undertaken to assure Buyer that at all times the
shares of IHS Stock being sold or the proceeds thereof shall be held by the
Buyer pursuant to the Escrow Agreement, subject to no Liens.
8. Employees. It is expressly understood and agreed that Buyer's purchase
of the Assets does not involve any undertaking on the part of Buyer to retain
any of the employees of the Seller, although Buyer shall have the right to offer
employment to any such employees. Seller shall remain fully responsible for any
severance, benefits, costs or liabilities arising out of the termination by
Seller of any of its employees, all of which
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liabilities shall constitute Closing Date Liabilities. Seller and the
Shareholders shall also remain fully responsible for any benefits, costs or
liabilities incurred or accrued prior to Closing with respect to each employee
retained by Buyer.
9. Closing Date. The consummation of the transactions contemplated by this
Agreement is sometimes referred to as the "CLOSING", and the date on which such
consummation occurs, including, without limitation, the execution and delivery
of this Agreement by each of the parties hereto, is sometimes referred to as the
"CLOSING DATE". Notwithstanding the foregoing, the Effective Date for the
transactions contemplated by this Agreement shall be September 25, 1998.
10. Asset Condition and Quality. Seller and the Shareholders, jointly and
severally, represent, warrant and covenant that, as of the Closing Date, all
physical Assets of Seller are free of material defects and in good working
order, condition and repair, except for ordinary wear and tear, and conform in
all material respects with all applicable ordinances, regulations, zoning and
other laws.
11. Instruments of Conveyance and Transfer. At the Closing:
(a) Seller will deliver to Buyer such bills of sale, assignments,
motor vehicle certificates of title, and other good and sufficient instruments
of conveyance and transfer in form sufficient to sell, assign and transfer the
Assets to Buyer as of the Closing Date, such documents to contain full
warranties of title, and which documents shall be effective to vest in Buyer
good, absolute, and marketable title to the Assets of the Business being
transferred to Buyer by Seller, free and clear of all Liens, except for the
Assumed Liabilities.
(b) Simultaneously with such delivery, Seller will take all steps as
may be requisite to put Buyer in actual possession, operation and control of the
Assets to be transferred hereunder.
(c) Seller will deliver to Buyer an opinion, dated the Closing Date,
of its counsel, in substantially the form attached hereto as Schedule 11(c).
(d) Seller will deliver a certificate of its Secretary or other
officer certifying as of the Closing Date a copy of resolutions of its board of
directors and, if applicable, its stockholders, authorizing the execution,
delivery and full performance of this Agreement and the Transaction Documents
(as defined in paragraph 14(a) below), and the incumbency of its officers.
12. Sales and Transfer Taxes; Fees. All applicable sales, transfer, use,
filing and other taxes and fees that may be due or payable as a result of the
conveyance, assignment, transfer or delivery of the Assets of the Business to be
conveyed and transferred as provided herein, whether levied on Seller or Buyer,
shall be borne by Seller.
13. Restrictions on Operations of Seller. Seller and the Shareholders,
jointly and severally, represent, warrant and covenant that, except as expressly
disclosed on Schedules hereto, since the most recent Financial Statement Date
referred to in paragraph 14(o) below, through the Closing Date, there has been
no material adverse change in the condition (financial or otherwise) or
prospects of the Seller or the Business, and Seller has not:
(i) sold, assigned or transferred any Assets, except in the ordinary
course of business, consistent with past practice;
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(ii) subjected any Assets to any Liens, except in the case of
acquisitions in the ordinary course of business;
(iii) entered into any contract or transaction binding the Business
other than contracts or transactions entered into in the ordinary course of
business, consistent with past practice;
(iv) incurred any liabilities or indebtedness other than in the
ordinary course of business, consistent with past practice;
(v) except in the ordinary course of business, consistent with past
practice, or otherwise to comply with any applicable minimum wage law, paid any
bonuses, increased the salaries or other compensation of any of its employees,
or made any increase in, or any additions to, other benefits to which any of
such employees may be entitled;
(vi) discharged or satisfied any Lien or encumbrance, or satisfied,
paid or prepaid any material liabilities, other than in the ordinary course of
business consistent with past practice, or failed to pay or discharge when due
any liabilities, the failure to pay or discharge of which has caused or may
cause any actual damage or risk of loss to the Corporation or the Assets;
(vii) failed to collect any accounts receivable in the ordinary course
of business, consistent with past practice;
(viii) changed any of the accounting principles followed by it or the
methods of applying such principles;
(ix) canceled, modified or waived any debts or claims held by it, or
waived any rights of substantial value other than in the ordinary course of
business, consistent with past practice; or
(x) issued any capital stock, or declared or paid or set aside or
reserved any amounts for payment of any dividend or other distribution in
respect of any equity interest or other securities, or redeemed or repurchased
any of its capital stock or other securities, or made any payment to any of its
affiliates except for payments of compensation in the ordinary course of
business, consistent with past practice and disclosed to Buyer as such;
(xi) instituted, settled or agreed to settle any litigation, action or
proceeding before any Governmental Authority (as such term in defined in
paragraph 14(d) below) relating to it or its property or received any threat
thereof; or
(xii) entered into any material transaction other than in the ordinary
course of business, consistent with past practice.
14. Representations and Warranties by Seller and the Shareholders. As a
material inducement to Buyer to execute and perform its obligations under this
Agreement, Seller and Shareholder hereby, jointly and severally, represent and
warrant to Buyer as follows as of the Closing Date:
(a) Organization of Seller; Enforceability.
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(i) Seller is a corporation, organized, and in good standing,
respectively, in the State of California, and is qualified to do business and is
in good standing in each other State where the nature of its business or the
assets held by it requires such qualification, and has requisite corporate power
and authority to carry on its Business as presently being conducted, to enter
into this Agreement, and to carry out and perform the terms and provisions of
this Agreement. Each of this Agreement and each agreement, instrument,
certificate and document in connection with this Agreement or the transactions
contemplated hereby ("TRANSACTION DOCUMENTS") constitutes the legal, valid and
binding obligations of Seller, enforceable against it in accordance with its
respective terms, subject to and limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws and court
decisions of general application or of legal and equitable principles relating
to, limiting or affecting the enforcement of creditors' rights generally. Seller
does not have any subsidiaries.
(ii) This Agreement and each Transaction Document to which each
Shareholder is a party constitutes the legal, valid and binding obligations of
each Shareholder, enforceable against each Shareholder in accordance with its
terms, subject to and limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws and court
decisions of general application or of legal and equitable principles relating
to, limiting or affecting the enforcement of creditors' rights generally.
(b) Consents. No authorization, consent, approval, license, exemption
by, filing or registration with any Governmental Authority or of any party to
any contract, agreement, instrument, commitment, lease, indenture or
understanding (written, oral or implied) by which Seller or any of the Assets is
bound ("CONTRACTS") or by which any Shareholder or any Shareholder's assets is
bound ("SHAREHOLDER CONTRACTS") is necessary in connection with the execution,
delivery and performance of this Agreement or any of the Transaction Documents
by Seller or Shareholder.
(c) Litigation. Except as set forth on Schedule 14(c), there are no
actions, suits or proceedings affecting Seller or any of the Assets which are
pending or threatened against Seller or affecting any of its properties or
rights, at law or in equity, or before any Governmental Authority (as
hereinafter defined), nor is Seller or any of its respective officers or
directors or Shareholder aware of any facts which to them or their knowledge
might reasonably be expected to result in any such action, suit or proceeding.
(d) Compliance with Laws and Contracts. Seller is not in violation of,
or in default under: any term or provision of its Articles of Incorporation or
By-Laws; or any judgment, order, writ, injunction, decree, statute, law, rule,
regulation, directive, mandate, ordinance or guideline ("GOVERNMENTAL
REQUIREMENTS") of any Federal, state, local or other governmental or
quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES"); or of any Contract. The execution and delivery by
Seller and each Shareholder of, and the performance and compliance by each of
them with this Agreement, and the Transaction Documents and the transactions
contemplated hereby and thereby, does not and will not result in the violation
of or conflict with or constitute a default under any such term or provision or
result in the creation of any Lien on any of the properties or assets of Seller
or any Shareholder pursuant to any such term or provision or any term or
provision of any Governmental Requirement by which any Shareholder is bound or
of any Shareholder Contract.
(e) Corporate Acts and Proceedings. The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the sale and transfer of
the Assets by Seller as provided for in this Agreement, have been approved and
consented to by the Board of Directors of Seller and, if applicable, by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable Governmental Requirement by the stockholders of
Seller with regard thereto have been appropriately authorized and accomplished.
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(f) Title to Assets. Seller has good and marketable title to all of
the Assets, free and clear of all Liens except for the Assumed Liabilities.
(g) Contracts. Set forth on Schedule 14(g) hereto is a list of all
material Contracts of Seller including, without limitation, each:
(i) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or termination of or with, any
director, officer, employee, consultant, sales representative, or agent or group
of employees, or any non-competition, non-solicitation, confidentiality or
similar agreement with any such person or persons;
(ii) contract, agreement or arrangement for the acquisition or
disposition of any assets, property or rights outside the ordinary course of
business or requiring the consent of any party to the transfer and assignment of
any such assets, property or rights (by purchase or sale of assets, purchase or
sale of stock, merger or otherwise), that is executory or that was entered into
during the three (3) year period ending on the date hereof;
(iii) contract, agreement or commitment which contains any
provisions requiring the Seller or the Business to indemnify or act for any
other person or entity or to guaranty or act as surety for any other person or
entity;
(iv) contract, agreement or commitment restricting the Seller or
the Business from, or in favor of either of the Seller or the Business and
restricting any other person or entity from, conducting business anywhere in the
world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(v) partnership, joint venture or management contract or similar
arrangement, or agreement which involves a right to share profits or future
payments with respect to the Business or any portion thereof or the business of
any other person or entity;
(vi) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(vii) contract, agreement or arrangement granting a leasehold or
other interest in real property, including without limitation, subleases,
licenses and sublicenses (the "LEASES");
(viii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Seller or the Business
not covered by clause (i) above;
(ix) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(x) agreement with respect to the settlement of any litigation or
other proceeding with any third person or entity;
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(xi) agreement relating to the ownership, transfer, voting or
exercise of other rights with respect to any equity in the Seller, or any other
entity, including without limitation, registration rights agreements, voting
trust agreements and shareholder and proxy agreements;
(xii) contract, agreement or commitment to provide services or
products, or
(xiii) agreement not made in the ordinary and normal course of
business and consistent with past practice, or involving consideration in excess
of $25,000 in each case, that is not set forth in subsections (i) through (xii)
above.
To the best of Seller's and Shareholders' knowledge, no party to any
Contract other than Seller is in default under any Contract. Seller has
delivered to Buyer true and complete copies of each written Contract (or a
description of each oral Contract) requested by Buyer.
(h) Brokers. Seller has been represented solely by the Broker, and as
a result a brokerage commission payable by Seller to the Broker as set forth in
paragraph 2(b)(ii) above is due, and no broker or finder is entitled to any
additional broker's or finder's fee or other commission in respect thereof based
in any way on agreements, understandings or arrangements with Seller.
(i) Employment Contracts; Employees. There are no Contracts of
employment between Seller and any officer or other employee of the Business,
except as set forth on Schedule 14(g)(i) above. The name, position, current rate
of compensation and any vacation or holiday pay, sick pay, personal leave,
severance and any other compensation arrangements or fringe benefits, of each
current employee, sales representative, consultant and agent of the Seller,
contained on the Schedule of Personnel Payrates and Advances attached hereto as
Schedule 14(i) is accurate and complete. No employee, consultant or agent of the
Seller has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 14(i). Since the date that is two (2)
years prior to the Closing Date, there has been no material adverse change in
the relationship between the Seller and its employees, nor any strike or labor
disturbance by any of such employees affecting the Business and there is no
indication that such a change, strike or labor disturbance is likely. No
employees of the Seller are represented by any labor union or similar
organization in connection with their employment by or relationship with,
Seller, and to the knowledge of the Seller and Shareholder, there are no pending
or threatened activities the purpose of which is to achieve such representation
of all or some of such employees, and there are no threats of strikes, work
stoppages or pending grievances by any such employees. Seller is not party to
any collective bargaining or other labor contracts.
(j) Employee Benefit Plans. Except as set forth on Schedule 14(j),
Seller has no pension, bonus, profit-sharing, or retirement plans for officers
or employees of the Business, nor is Seller required to contribute to any such
plan. Without limiting the generality of the foregoing, Seller does not maintain
or make contributions to and has not at any time in the past maintained or made
contributions to any employee benefit plan which is subject to the minimum
funding standards of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or to any multi-employer plan subject to the terms of the
Multi-Employer Pension Plan Amendment Act of 1980 (the "MULTI-EMPLOYER ACT").
(k) Insurance. All inventories, buildings and fixed assets owned or
leased by the Seller are and will be adequately insured against fire and other
casualty through the Closing Date. The information contained on the Schedule of
Insurance Policies, attached hereto as Schedule 14(k), is accurate and complete.
Schedule 14(k) also sets forth any claims made under any of the insurance
policies referred to above or increases
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in premiums therefore during the past two years. True and complete copies of all
policies of fire, liability and other forms of insurance held or owned by the
Seller or otherwise in force and providing coverage for the Business or any of
the Assets (including but not limited to medical malpractice insurance, and any
state sponsored plan or program for worker's compensation) have been delivered
to Buyer. Such policies are owned by and payable solely to the Seller, and said
policies or renewals or replacements thereof will be outstanding and duly in
force at the Closing Date, and all premiums due on or before the Closing Date in
respect thereof have been paid.
(l) Disclosure. No representation or warranty by Seller or any
Shareholder in this Agreement or in any Transaction Document, contains any
untrue statement of material fact or omits to state any material fact, of which
any Shareholder or Seller or any of its officers, directors or stockholders has
knowledge or notice, required to make the statements herein or therein contained
not misleading.
(m) Officers, Directors and Shareholders of Seller. As of the Closing
Date, the Shareholders are the sole shareholders of Seller and the following
individuals are all of the officers and directors of Seller:
Name Office/Position
---- ---------------
Robert D. Walter President
Marcia Hendry-Walter Vice President/Treasurer
Paul A. Bernou Secretary
(n) Inventory and Fixed Assets. The information contained on the
Schedule of Inventory and Fixed Assets as of the most recent Financial Statement
Date, attached hereto as Schedule 1(a)(ii), is accurate and complete.
(o) Tax Returns and Financial Statements. Seller has furnished Buyer
with its tax returns (the "TAX RETURNS") for the period(s) ended September 30,
1997, and has furnished Buyer with its financial statements (the "FINANCIAL
STATEMENTS") for the periods ended September 30, 1996, September 30, 1997 and
June 30, 1998 (the "FINANCIAL STATEMENT DATES"), copies of which are attached
hereto as Schedule 14(o). The Financial Statements: (i) are in accordance with
the books and records of the Seller; (ii) fairly present the financial condition
of the Seller at such date and the results of its operations for the periods
specified; (iii) were prepared in accordance with GAAP applied on a basis
consistent with prior accounting periods; (iv) with respect to all Contracts of
the Seller, reflect adequate reserves for all reasonably anticipated losses and
costs in excess of anticipated income; and (v) with respect to any balance
sheets, disclose all of the liabilities of the Seller at the Financial Statement
Dates and include the appropriate reserves for all taxes and other accrued
liabilities, except that certain contingent liabilities, if not disclosed on
such balance sheets, shall be considered to be disclosed pursuant to this
subparagraph, if expressly disclosed on an Schedule to this Agreement. The
income statements included in the Financial Statements do not contain any items
of special or nonrecurring income or expense or any other income not earned or
expense not incurred in the ordinary course of business, consistent with past
practice, except as expressly specified therein, and such Financial Statements
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
(p) Supplemental Tax Information. Seller has furnished Buyer with its
most recent (i) tax registration certificates (if required), and (ii) tax
returns required of it by the federal government and each state or other
locality in which it conducts business, which tax returns in all instances where
applicable include, but shall not be limited to franchise taxes, federal, state
and local tangible personal property tax returns, and federal, state and local
sales tax returns, which registration certificates and tax returns are set
forth, collectively, on the Schedule of Supplemental Tax Information, attached
hereto as Schedule 14(p).
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(q) Adverse Business Developments. No notice has been received by
Seller or Shareholder of any new or substantially expanded firm or individual
engaged in a business directly competitive to Seller in its primary service area
within six (6) months before the date hereof. Neither Seller nor any Shareholder
has received, either orally or in writing, any notice specific to it of pending
or threatened adverse action with respect to any Medicare, Medicaid, private
insurance or third party payor reimbursement method, practice or allowance as to
any business activity engaged in by Seller, nor has Seller or any Shareholder
received, or been threatened with, any claim for refund specific to it in excess
of $500.00 by a Medicare or Medicaid carrier, except as disclosed in the
Schedule of Proceedings attached hereto as Schedule 14(q).
(r) Relationships. Except as disclosed on Schedule 14(r), neither
Seller, its officers, directors and employees, nor any Shareholder and no member
of any of their respective immediate families, and no person or entity which is
controlled by, under common control with, or controlling any of them (each, an
"AFFILIATE") 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 Business. Except as
disclosed on Schedule 14(r), no Affiliate of Seller or any Shareholder is
guaranteeing any obligations of the Seller.
(s) Assets Comprising the Business. The Assets are all of the tangible
and intangible properties (real, personal and mixed), including, without
limitation, all licenses, intellectual property, permits and authorizations, and
contracts that are necessary or material to the operation of the Business as now
operated. The quantities of inventory and supply items included in the Assets
are reasonable in light of the present and anticipated volume of the Business of
the Seller in the ordinary course of the business of the Seller, consistent with
past practice, as determined by the Seller in good faith and consistent with
past practice.
(t) Questionable Payments. Seller has not, and to the knowledge of the
Seller and each Shareholder, none of their Affiliates or employees have offered,
made or received any illegal or unlawful payment, bribe, kickback, political
contribution or other similar questionable payment for any referrals or
otherwise in connection with the ownership or operation of the Business,
including, without limitation, any of the same that would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended.
(u) Reimbursement Matters. Seller, 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 disclosed on
Schedule 14(u), (i) Seller nor any Shareholder has received any notice of denial
or recoupment from the Medicare or Medicaid programs, or any other third party
reimbursement source (inclusive of managed care organizations) with respect to
products or services provided by it, (ii) to Seller's and Shareholders'
knowledge, there is no basis for the assertion after the Closing Date of any
such denial or recoupment claim, and (iii) neither Seller nor any Shareholder
has received notice from any Medicare or Medicaid program or any other third
party reimbursement source (inclusive of managed care organizations) of any
pending or threatened investigations or surveys with respect to, or arising out
of, products or services provided by Seller or otherwise, and to the knowledge
of Seller and Shareholder, no such investigation or survey is pending,
threatened or imminent.
(v) Environmental Compliance. Except as disclosed on Schedule 14(v),
at all times during Seller's ownership of the Business, the Business has not
been, and currently is not, in violation of any environmental Governmental
Requirement and no notice has ever been served upon Shareholder or Seller, their
agents or representatives or any prior owner of the Business, claiming any
violation of any Governmental Requirement concerning the environmental state,
condition or quality of any real or personal property related to the Business,
or requiring or calling attention to the need for any work, repairs or
demolition on or in connection with any of the real property in order to comply
with any governmental requirement concerning the environmental or healthful
state, condition or quality of the real property.
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(w) Questionnaires. The healthcare law questionnaire heretofore
delivered to the Seller by Buyer attached hereto as Exhibit 14(w) (the
"QUESTIONNAIRE") has been fully and accurately completed and does not contain
any material misstatement of any fact and does not omit any fact that would have
to be stated in order not to render any response to such questionnaire
materially misleading.
15. Representations and Warranties of Buyer and IHS. Buyer and IHS each
represent and warrant to Seller and Shareholder that:
(a) Due Organization. Each of Buyer and IHS is a duly organized, valid
corporation under the laws of the State of Delaware.
(b) Due Authority. Each of Buyer and IHS is duly authorized by law and
corporate policy and approval to: (i) enter into this Agreement and each
Transaction Document; (ii) make all warranties and representations made by each
of them herein; and (iii) deliver all consideration provided for under the terms
hereof.
(c) Binding Authority. All signatories and agents designated as
agents/officers for Buyer and IHS for signing purposes have the authority to
bind Buyer and IHS, as the case may be, to the terms of this Agreement.
(d) Binding Agreement. This Agreement is, and when executed and
delivered by Buyer and IHS at the Closing, each of the Transaction Documents
executed by Buyer and IHS will be, the legal, valid and binding obligation of
Buyer and IHS, enforceable against Buyer and IHS in accordance with their
respective terms. Each of Buyer and IHS will continue the historic business of
the Seller or will use a significant portion of the Assets in a Business.
(e) Brokers. No broker or finder has acted for the Buyer or IHS in
connection with the transactions contemplated by this Agreement, and no broker
or finder is entitled to any broker's or finder's fee or other commission in
respect thereof based in any way on agreements, understandings or arrangements
with the Buyer or IHS.
(f) IHS Stock. IHS has duly authorized and reserved for issuance the
IHS Stock to be issued in connection herewith, and when issued in accordance
with the terms of paragraph 4, such IHS Stock will be validly issued, fully paid
and nonassessable.
(g) SEC Documents. IHS has furnished the Seller and the Shareholders
with a correct and complete copy of its report on Form 10-K for its fiscal year
ended December 31, 1997 (the"10-K"), its reports on Form 10-Q for its fiscal
quarters ended March 31, 1998 and June 30, 1998 (the"10-QS"), and its proxy
statement prepared in connection with its annual meeting held on May 22, 1998
(the "PROXY STATEMENT"). As of their respective dates, none of the 10-Ks, 10-Qs,
and Proxy Statements and no press release or other schedule or report required
by IHS to be publicly disclosed or filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act since January 1, 1998 (all
of the foregoing being the "SEC DOCUMENTS") contained any untrue statements, or
omitted to make any disclosures, which, in light of the circumstances would
render any of such documents materially misleading, and the SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Exchange Act, and the rules and regulations promulgated by
the Commission thereunder.
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(h) Absence of Conflicting Agreements. Neither the execution or
delivery of this Agreement and, as of the Closing Date, the execution and
delivery of the Transaction Documents, by Buyer nor the performance by Buyer of
the transactions contemplated hereby and thereby conflicts with, or constitutes
a breach of or a default under (a) the Certificate of Incorporation or By-laws
of Buyer, or (b) any law, rule, judgment, order, writ, injunction, or decree of
any court currently in effect applicable to Buyer, or (c) any Governmental
Requirement applicable to Buyer, or (d) any agreement, indenture, contract or
instrument to which the Buyer is now a party or by which any of the assets of
Buyer is bound.
(i) Consents. Except as set forth on Schedule 15(i), no authorization,
consent, approval, license, exemption by, filing or registration with any
Governmental Authority, is or will be necessary in connection with the
execution, delivery and performance of this Agreement or any of the Transaction
Documents by Buyer.
16. Survival of Representations and Warranties. The representations and
warranties of Seller, Shareholders, and Buyer contained in or made pursuant to
this Agreement shall survive the execution of this Agreement.
17. Restrictive Covenants.
(a) Non-Compete. Each of Seller and each Shareholder hereby agree that
until the fifth (5th) anniversary of the Closing Date (the "RESTRICTED PERIOD"),
it, he or she will not, directly or indirectly, except to the extent expressly
required pursuant to any Shareholder's obligations as an employer or contractor
of Buyer, own, manage, operate, join, control or participate, or have a
proprietary interest in, the ownership, management, operation or control, of or
be connected with, in any manner, any home health care business (including,
without limitation, the provision of respiratory medications, respiratory rental
equipment, durable medical equipment, respiratory therapy services and other
health care products and services to persons at their homes) that provides
services or products (including, without limitation, through the mail or courier
service) within fifty (50) miles of any location set forth on the Schedule of
Locations attached hereto as Schedule 17(a).
(b) Confidential Information. Certain confidential and proprietary
information is included within the Assets ("TRADE SECRETS"), including, without
limitation, with respect to some or all of the following categories of
information: (i) financial information, including but not limited to information
relating to earnings, assets, debts, prices, pricing structure, reimbursement
matters, volume of purchases or sales or other financial data whether related to
Seller or generally, or to particular products, services, geographic areas, or
time periods; (ii) supply and service information, including but not limited to
information relating to goods and services, suppliers' names or addresses, terms
of supply or service contracts or of particular transactions, or related
information about potential suppliers to the extent that such information is not
generally known to the public, and to the extent that the combination of
suppliers or use of a particular supplier, though generally known or available,
may yield advantages to the Buyer, details of which are not generally known;
(iii) marketing information, including but not limited to information relating
to details about ongoing or proposed marketing programs or agreements by or on
behalf of the Seller, sales forecasts, advertising formats and methods or
results of marketing efforts or information about impending transactions; (iv)
personnel information, including but not limited to information relating to
employees' personal or medical histories, compensation or other terms of
employment, actual or proposed promotions, hirings, resignations, disciplinary
actions, terminations or reasons therefor, training methods, performance, or
other employee information; (v) customer and patient information, including but
not limited to information relating to names, addresses or backgrounds of past,
existing or prospective clients, customers, payors, referral sources, and
patients, records of agreements and prices, proposals
-19-
or agreements between any of them and Seller, status of accounts or credit,
patients' medical histories or related information as well as customer lists;
and (vi) inventions and technological information, including but not limited to
information related to proprietary technology, trade secrets, research and
development data, processes, formulae, data and know-how, improvements,
inventions, techniques, and information that has been created, discovered or
developed, or has otherwise become known to Seller or any Shareholder, and/or in
which property rights have been assigned or otherwise conveyed to Seller, which
information has commercial value in the business in which the Seller is engaged.
Seller and each Shareholder shall hold all Trade Secrets in confidence and will
not discuss, communicate or transmit to others, or make any unauthorized copy of
or use any of the Trade Secrets; and will take all reasonable actions that Buyer
deems reasonably necessary or appropriate, to prevent unauthorized use or
disclosure of or to protect the Buyer's interest in the Trade Secrets. The
foregoing does not apply to information that by means other than deliberate or
inadvertent disclosure by Seller, any Shareholder or any of their respective
Affiliates, becomes well known to the public; or disclosure compelled by
judicial or administrative proceedings after they afford Buyer the opportunity
to obtain assurance that compelled disclosures will receive confidential
treatment.
(c) Non-Solicitation and Non-Pirating. Each of Seller and each
Shareholder hereby agrees that, during the Restricted Period it, he or she will
not, directly or indirectly, for itself, himself or herself or on behalf of any
other person, firm, entity or other enterprise: (i) solicit or in any way divert
or take away any person or entity that, prior to the Closing Date, was a
patient, client, customer, payor, referral source, facility or patient of the
Seller; or (ii) hire, entice away or in any other manner persuade any person who
was an employee, consultant, representative or agent of the Seller prior to the
Closing Date, to alter, modify or terminate their relationship with the Buyer.
(d) Necessary Restrictions. Each of Seller and each Shareholder
acknowledge that the restrictions contained in this Agreement are reasonable and
necessary to protect the legitimate business interests of the Buyer and that any
violation thereof by any of them would result in irreparable harm to the Buyer,
and that damages in the event of any such breach of this Agreement will be
difficult, if not impossible, to ascertain. Accordingly, each of the Seller and
each Shareholder agree that upon the violation of any of the restrictions
contained in this Agreement, the 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, equity, under this Agreement or otherwise,
without the necessity of posting any bond or other security whatsoever. 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 to such a manner or for such a time (or
both) as is adjudged to be reasonable.
(e) Remedies For Breach. Each of the Seller and each Shareholder
acknowledges that the covenants contained in this Agreement are independent
covenants and that any failure by the Buyer to perform its obligations under
this Agreement or any other agreement shall not be a defense to enforcement of
the covenants contained in this Agreement, including but not limited to a
temporary or permanent injunction.
-20-
18. Indemnification; Remedies.
(a) Indemnification by Seller and the Shareholders. Seller and the
Shareholders shall, jointly and severally, indemnify and hold harmless at all
times Buyer and its stockholders, directors, officers, employees, agents and
assigns, from and against any Damages (as hereinafter defined) arising out of:
(i) any inaccurate representation made by Seller or Shareholder in, pursuant to
or under this Agreement or any Transaction Document; (ii) any breach of any
warranty made by Seller or any Shareholder in, pursuant to or under this
Agreement or any Transaction Document; (iii) any breach or default in the
performance by Seller or any Shareholder of any of the covenants to be performed
by Seller or any Shareholder hereunder or in any Transaction Document; and (iv)
any Closing Date Liabilities (other than Assumed Liabilities).
(b) Indemnification by Buyer. Buyer shall indemnify and hold harmless
at all times Seller or Shareholders from and against any Damages arising out of:
(i) any inaccurate representation made by Buyer in, pursuant to or under this
Agreement; (ii) any breach of any warranty made by Buyer in, pursuant to or
under this Agreement; and (iii) any breach or default in the performance by
Buyer of any of the covenants to be performed by Buyer hereunder.
(c) Definition of Damages. The term "DAMAGES" as used herein shall
include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, settlements, penalties, and damages, including, without limitation,
counsel fees incurred in investigating or in attempting to avoid or oppose the
imposition thereof. The term "Damages" shall include, but shall not be limited
to, any Claims, (as defined in paragraph 7 hereof).
(d) Remedies.
(i) Buyer's Remedies. Seller and each Shareholder shall make
payment of any Claim made against it, him or her by no later than the last
day of the Notice Period as provided in paragraph 7(b) above.
(ii) Seller's Remedies. If Seller or Shareholders make written
request to Buyer for the payment of Damages, then Buyer shall pay to Seller
or the Shareholders the amount of Damages requested within ten (10) days
from the date that such notice is delivered to Buyer (also a "NOTICE
PERIOD").
(iii) Notice of Dispute. Notwithstanding the foregoing provisions
of this subparagraph (d), if a party (the "DEMANDING PARTY") serves a
request for payment on the other party (the "OBLIGATED PARTY"), the
Obligated Party shall have the option to provide written notice to the
Demanding Party (the "NOTICE OF DISPUTE") within the applicable Notice
Period that the Obligated Party disputes, in good faith, the validity or
amount of the Damages set out in the request for payment of Damages, and if
the affected parties cannot agree on the validity or amount of such Damages
within ten (10) days following the Notice Period, the dispute as to the
validity or amount of such claim or liability (the "DISPUTE") shall be
settled as set forth in subparagraph (e) of this paragraph 18, with the
non-prevailing party bearing the prevailing party's costs of arbitration if
such Dispute is resolved by arbitration.
-21-
(iv) Arbitration. If arbitration is required pursuant to this
paragraph 18, Buyer, on the one hand, and the affected Seller and
Shareholders, on the other hand, each shall select an arbitrator within ten
(10) business days after the Notice of Dispute is delivered; those two
arbitrators will then select a third arbitrator; and the three arbitrators
so chosen will determine the validity of the claim for Damages. If Seller
or Buyer delays in appointing an arbitrator when required, and ten (10)
days or more has elapsed, the arbitrator appointed by the other party shall
arbitrate the dispute. If the Seller and the Shareholders shall be subject
to a Dispute with Buyer and IHS, they shall, unless Buyer and IHS elect
otherwise in their sole and absolute discretion, be required to act as a
group with respect to any and all rights and obligations with respect to
the resolutions of the Dispute as provided in this paragraph 18 and
Representative shall have the authority to settle such Dispute and/or any
Claims on behalf of such group.
(e) Settlement of Disputes.
(i) Disputes Not Involving Third Parties. If a Dispute involves
claims not involving any third party, Buyer and Seller or Shareholders
shall settle the Dispute by submitting the same to binding arbitration.
(ii) Disputes Involving Claims Made by Third Parties. If a
Dispute involves claims made by one or more third parties (a "THIRD PARTY
CLAIM"), the party asserting its right to indemnification for such Third
Party Claim shall give written notice to the other party as soon as
practical after such asserting party receives notice of such Third Party
Claim; provided, however the failure to timely give such notice shall not
affect such party's right to indemnification except to the extent the party
to receive the notice is damaged by such delay. Upon such notice to Seller
or Shareholder, Buyer and Seller and/or Shareholders shall submit the
Dispute to arbitration, and the following procedures shall apply:
(A) Solely for purposes of determining the party responsible
for defending the Third Party Claim, the arbitrators shall deem such
Third Party Claim to be valid (although such consideration shall not
be an admission by any party as to any liability to any party). The
arbitrators then shall decide which party shall be liable for the
Third Party Claim if it is successfully prosecuted by such third party
or parties, and the decision of such arbitrators with respect to such
liability shall be final and binding as among the parties. (Such party
determined to be liable for such claim sometimes shall be referred to
herein as the "RESPONSIBLE PARTY".)
(B) If the Responsible Party refuses to settle (and pay the
settlement amount of) the Third Party Claim immediately, then the
Responsible Party immediately shall select one of the following two
options:
Option One: The Responsible Party, at the Responsible
Party's sole expense and risk, can assume the defense of the
Third Party Claim, provided the Responsible Party first places in
escrow, in favor of the other party, adequate collateral (as
determined by the arbitrators on consideration of all relevant
facts) to protect the other party from all Damages with respect
to such Third Party Claim (in which case the other party
immediately shall be reimbursed by the Responsible Party for any
amount the other party is required to pay with respect to such
Third Party Claim; or
-22-
Option Two: The Responsible Party, at the Responsible
Party's expense and risk, can co-defend the Third Party Claim
with the other party, with the Responsible Party also responsible
for paying all costs incurred by the other Party in connection
with such defense, including, without limitation, the legal fees
and expenses of the other party's counsel for its reasonable
involvement in such defense. If the other party is found to be
liable for any portion of such Third Party Claim, the Responsible
Party immediately shall reimburse the other party for any amount
required to be paid by the other party with respect thereto;
provided, however, if the Responsible Party selects this option,
the Responsible Party shall attempt diligently to have the other
party removed as a party to any legal action involving the Third
Party Claim (and, upon such removal, the involvement of the other
party's counsel shall cease unless requested by the Responsible
Party or the Responsible Party's counsel); and
(C) No party may settle any Third Party Claim without the
prior consent of the other parties hereto unless the settlement will
not have a material adverse effect on the other party hereto. The
parties will resolve any Dispute with respect to any such proposed
settlement in accordance with this paragraph 18.
(D) Any party responsible for defending a Third Party Claim
shall proceed with diligence and in good faith with respect thereto.
(E) Nothing contained in this paragraph 18(e)(ii) shall
prevent any party from assuming control of the defense and/or settling
any Third Party Claim against it for which indemnification is not
sought under this Agreement.
19. Use of Corporate and Fictitious Names. Seller and the Shareholders,
jointly and severally, agree to take all actions necessary to assist Buyer in
obtaining the rights to use the corporate name and any fictitious names used in
its conduct of any of the Business, including but not limited to the execution
of any assignments and consents to use such name. If Buyer attempts to use such
name, Seller shall consent to Buyer's use of such name if such consent is
required by any state, county or local governmental authority.
20. Prepaid Items; Deposits; Etc. All prepaid insurance premiums, rent and
utility deposits, and similar items paid by or owing to the Seller by any
person, shall be considered to be part of the Assets being purchased by Buyer
and, on consummation of the transactions contemplated by this Agreement, shall
be the property of Buyer.
21. Post-Closing Requirements of Seller and Buyer.
(a) Final Financial Information. Not later than sixty (60) days
following Closing, Seller, at Seller's sole cost and expense, shall deliver to
Buyer (to the attention of Gayle Lamson) "FINAL FINANCIAL INFORMATION", which
shall include:
(i) a balance sheet of Seller as of the Effective Date prepared
in accordance with
GAAP;
(ii) an income statement of Seller for the period commencing on
the date succeeding the last day of the most recent Financial Statement
Date and ending on the Effective Date which agrees with the balance sheet
submitted at Closing;
-23-
(iii) an inventory of fixed assets of Seller as of the Effective
Date which agrees with the balance sheet submitted at Closing; and
(iv) a listing of resale inventory of Seller as of the Effective
Date which agrees with the balance sheet submitted at Closing.
(v) a cash settlement summary of Seller in a form provided by
Buyer.
(b) Liabilities Deficiency. If all such Final Financial Information or
if any document, instrument or agreement required to be delivered in accordance
with paragraph 10(a), including, without limitation, original motor vehicle
certificates of title property endorsed, is not delivered to Buyer within sixty
(60) days following Closing, Seller and Shareholder shall be liable to Buyer in
an amount equal to $500.00 for each day after such sixty (60) day period until
all such Final Financial Information and such documents, instruments and
agreements are delivered to Buyer, and such liability shall constitute a
Liabilities Deficiency under the provisions of paragraph 7, above.
(c) Wells Fargo Bank Line of Credit. No later than two (2) business
days following Closing, Seller will provide Buyer with the current outstanding
balance (the "Wells Fargo Balance") of that certain Line of Credit Agreement
between Seller and Wells Fargo Bank, dated . Buyer shall pay the Wells Fargo
Balance no later than five (5) business days following the receipt from Seller
of the Wells Fargo Balance. In addition, Seller shall use its best efforts to
have UCC-3 Termination Statements filed with the Secretary of State of
California and the County Clerk in each applicable jurisdiction.
22. Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer on any person, other than the parties hereto, and
their successors, any rights or remedies under or by reason of this Agreement
other the affiliates entitled to indemnification pursuant to paragraph 18.
23. Expenses. Except as otherwise stated herein, each of the parties shall
bear all expenses incurred by them in connection with this Agreement and in
consummation of the transactions contemplated hereby in preparation thereof.
24. Notices. All notices, consents, waivers and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
properly given when personally delivered to the party or parties entitled to
receive the notice or three (3) business days after sent by certified or
registered mail, postage prepaid, or on the business day after sent by
nationally recognized overnight courier, in each case, properly addressed to the
party or parties entitled to receive such notice at the address stated below:
to Seller: c/o Robert D. Walter
P. O. Box 6564
Incline Village, Nevada 89450
to the Shareholders: Robert D. Walter
Marcia Hendry Walter
P. O. Box 6564
Incline Village, Nevada 89450
-24-
Paul A. Bernou
2610 Otis Drive
Alameda, CA 94501
with a copy to: Mark T. Schieble
Foley & Lardner
One Maritime Plaza, Sixth Floor
San Francisco, CA 94111-3404
to Buyer: c/o RoTech Medical Corporation
4506 L.B. McLeod Road, Suite F
Orlando, FL 32811
Attention: Stephen P. Griggs
with copies to: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall Elkins
and
Blass & Driggs
461 Fifth Avenue
New York, NY 10017
Attn: Andrew S. Bogen
25. Choice of Law. The laws of the State of California applicable to
contracts executed, delivered and to be fully performed in such State govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
26. Sections and Other Headings. Section, paragraph, and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
27. Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one instrument.
28. Gender. All gender employed in this Agreement shall include all
genders, and the singular shall include the plural and the plural shall include
the singular whenever and as often as may be appropriate.
29. Parties in Interest. This Agreement shall be binding on and shall inure
to the benefit of, and be enforceable by, Seller, Shareholder and Buyer and
their respective successors and assigns. Buyer shall be entitled to assign its
rights under this Agreement and the Transaction Documents after the Closing.
Seller and the Shareholders may not assign this Agreement or any of their rights
hereunder without the prior consent of Buyer.
-25-
30. Entire Agreement. This Agreement including all Schedules and Exhibits
hereto, and all Transaction Documents constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and there are no
agreements, understandings, restrictions, warranties, or representations between
the parties with respect to the subject matter hereof other than as set forth
herein or as herein provided.
31. Performance. In the event of a breach by Seller or any Shareholder of
any of their respective obligations hereunder, the Buyer 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 each of Seller and each
Shareholder hereby waives the defense that there may be an adequate remedy at
law.
32. Waiver, Discharge, Etc. This Agreement and the Transaction Documents
and the obligations hereunder and thereunder 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 or any Transaction Document 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 such Transaction Document, as the case may be, 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 or any Transaction
Document shall be held to be a waiver of any other or subsequent breach.
33. Cooperation; Further Assistance. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed or 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 purpose of this Agreement, and to vest in
Buyer good title to, possession of and control of all the Assets.
34. Joint and Several. Seller and the Shareholders shall be jointly and
severally liable for all representations, warranties and obligations, including,
without limitation, indemnification obligations, and covenants made by any of
them pursuant to this Agreement, including, without limitation, any made
pursuant to any Transaction Document. For all purposes of this Agreement, any
representation or warranty that is qualified to be "to the knowledge of Seller"
or by a requirement that Seller shall have received "notice" of any matter, or
any similar qualification shall be deemed to include the knowledge of the
Shareholder or notices to the Shareholders, as the case may be.
35. Independent Legal Counsel; Tax-Free Qualification. Seller and each
Shareholder represent and warrant that each party has had the opportunity to
seek the advice of independent legal counsel prior to signing this Agreement,
and that the Buyer has recommended to Seller and each Shareholder that such
party obtain legal counsel. In addition, Seller and each Shareholder hereby
acknowledge that the Buyer has made no representations or warranties herein with
respect to the qualification of the transactions contemplated by this Agreement
and the Transaction Documents as a "reorganization" under ss.368(a)(1)(c) of the
Code.
36. Representative. Notwithstanding anything contained herein to the
contrary, each of Seller and each Shareholder hereby designates Robert D. Walter
and each of Seller and each Shareholder hereby accepts the designation of Robert
D. Walter as the representative of the Seller and Shareholders (the
"REPRESENTATIVE") to act for and on behalf of the Seller and Shareholders as
provided in this Agreement. Each of Seller and each Shareholder shall be bound
by all actions taken or omitted by the Representative on behalf of any Seller or
Shareholder, and each of Seller and each Shareholder shall be deemed to have
received notice deemed given or payment made to the Representative in accordance
with the notice provisions of this Agreement on the date deemed given or the
date paid to the Representative, and Buyer shall be entitled to rely on all
notices and consent given, and all settlements entered into on behalf of Seller
or any Shareholder to the extent authorized pursuant
-26-
to the terms of this Agreement notwithstanding any objections made by any Seller
or Shareholder prior to, concurrently with or subsequent to the giving of any
such notice or consent or the settlement of any such matter. The Representative
may be replaced only if and when Seller and all of the Shareholders shall notify
Buyer that a new individual person (named in such notice) has been unanimously
selected by them to be to be the new Representative, in which case such new
person shall thereafter be the Representative.
37. Drafting. Buyer's counsel has drafted this Agreement and the other
Transaction Documents as a matter of convenience for the parties hereto; and the
parties hereto have carefully reviewed and negotiated the terms of this
Agreement and the Transaction Documents; and accordingly any drafting errors,
ambiguities or inconsistencies shall not be interpreted against Buyer.
[SIGNATURES ON THE FOLLOWING PAGE]
-27-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first stated above.
INTEGRATED HEALTH SERVICES, INC. BUYER:
INTEGRATED OF GARDEN
TERRACE, INC.
/s/ MARK KOVINSKY
------------------------------
By: /s/ MARK KOVINSKY By: /s/ MARK KOVINSKY
------------------------------ ---------------------------
Name: Mark Kovinsky Name: Mark Kovinsky
Title: SVP Title: SVP
SELLER:
ACCUCARE MEDICAL
CORPORATION
By: /s/ ROBERT D. WALTER
---------------------------
Name: Robert D. Walter
Title: President
SHAREHOLDERS:
/s/ ROBERT D. WALTER
------------------------------
Robert D. Walter
/s/ MARCIA HENDRY-WALTER
------------------------------
Marcia Hendry-Walter
/s/ PAUL A BERNOU
------------------------------
Paul A. Bernou
The undersigned hereby agrees to be bound by, and jointly and severally
liable with Paul A. Bernou with respect to, all of the provisions of the
preceding agreement; provided, however, that the Buyer and IHS shall have
recourse solely to the undersigned's interest, if any, in any considerations
received or to be received by Paul A. Bernou arising out of the transactions
contemplated by such agreement, and any proceeds of, or distributions made in
respect of, any of such consideration.
/s/ CARI L. BERNOU
------------------------------
Cari L. Bernou
-28-
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
State of California
} ss
County of San Francisco
On September 28, 1998, before me, David Bonner, Notary Public personally
appeared Robert D. Walter/President and Shareholder
[X] personally known to me
-- proved to me on the basis of
satisfactory evidence
to be the person(s) whose name(s)
is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in
[SEAL] his/her/their authorized capacity(ies),
DAVID BONNER and that by his/her/their signature(s)
COMMISSION #1192886 on the instrument the person(s), or the
NOTARY PUBLIC-CALIFORNIA entity upon behalf of which the
SAN FRANCISCO COUNTY person(s) acted, executed the
MY COMM. EXPIRES AUG 14, 2002 instrument.
WITNESS my hand and official seal.
/s/ David Bonner
-------------------------------------
Place Notary Seal Above Signature of Notary Public
- --------------------------------- OPTIONAL ---------------------------------
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document
DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document:_____________________________________________________
Document Date:_________________________________ Number of Pages: ______________
Signer(s) Other Than Named Above ______________________________________________
CAPACITY(IES) CLAIMED BY SIGNER
-----------------
Signer's Name: ____________________________________________ RIGHT THUMBPRINT
OF SIGNER
[ ] Individual Top of thumb here
[ ] Corporate Officer -- Title(s):_________________________
[ ] Partner -- [ ] Limited [ ] General
[ ] Attorney in Fact
[ ] Trustee
[ ] Guardian or Conservator
[ ] Other _________________________________________________
Signer is Representing: ___________________________________ ---------------
- --------------------------------------------------------------------------------
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
State of California
} ss
County of San Francisco
On September 28, 1998, before me, David Bonner, Notary Public personally
appeared Marcia Hendry-Walter.
[X] personally known to me
-- proved to me on the basis of
satisfactory evidence
to be the person(s) whose name(s)
is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in
[SEAL] his/her/their authorized capacity(ies),
DAVID BONNER and that by his/her/their signature(s)
COMMISSION #1192886 on the instrument the person(s), or the
NOTARY PUBLIC-CALIFORNIA entity upon behalf of which the
SAN FRANCISCO COUNTY person(s) acted, executed the
MY COMM. EXPIRES AUG 14, 2002 instrument.
WITNESS my hand and official seal.
/s/ David Bonner
-------------------------------------
Place Notary Seal Above Signature of Notary Public
- --------------------------------- OPTIONAL ---------------------------------
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document
DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document:_____________________________________________________
Document Date:_________________________________ Number of Pages: ______________
Signer(s) Other Than Named Above ______________________________________________
CAPACITY(IES) CLAIMED BY SIGNER
-----------------
Signer's Name: ____________________________________________ RIGHT THUMBPRINT
OF SIGNER
[ ] Individual Top of thumb here
[ ] Corporate Officer -- Title(s):_________________________
[ ] Partner -- [ ] Limited [ ] General
[ ] Attorney in Fact
[ ] Trustee
[ ] Guardian or Conservator
[ ] Other _________________________________________________
Signer is Representing: ___________________________________ ---------------
- --------------------------------------------------------------------------------
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
- --------------------------------------------------------------------------------
State of California
} ss
County of San Francisco
On September 28, 1998, before me, David Bonner, Notary Public personally
appeared Paul A Bernou.
[X] personally known to me
-- proved to me on the basis of
satisfactory evidence
to be the person(s) whose name(s)
is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in
[SEAL] his/her/their authorized capacity(ies),
DAVID BONNER and that by his/her/their signature(s)
COMMISSION #1192886 on the instrument the person(s), or the
NOTARY PUBLIC-CALIFORNIA entity upon behalf of which the
SAN FRANCISCO COUNTY person(s) acted, executed the
MY COMM. EXPIRES AUG 14, 2002 instrument.
WITNESS my hand and official seal.
/s/ David Bonner
-------------------------------------
Place Notary Seal Above Signature of Notary Public
- --------------------------------- OPTIONAL ---------------------------------
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document
DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document:_____________________________________________________
Document Date:_________________________________ Number of Pages: ______________
Signer(s) Other Than Named Above ______________________________________________
CAPACITY(IES) CLAIMED BY SIGNER
-----------------
Signer's Name: ____________________________________________ RIGHT THUMBPRINT
OF SIGNER
[ ] Individual Top of thumb here
[ ] Corporate Officer -- Title(s):_________________________
[ ] Partner -- [ ] Limited [ ] General
[ ] Attorney in Fact
[ ] Trustee
[ ] Guardian or Conservator
[ ] Other _________________________________________________
Signer is Representing: ___________________________________ ---------------
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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
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State of California
} ss
County of San Francisco
On September 28, 1998, before me, David Bonner, Notary Public personally
appeared Cari L. Bernou.
[X] personally known to me
-- proved to me on the basis of
satisfactory evidence
to be the person(s) whose name(s)
is/are subscribed to the within
instrument and acknowledged to me that
he/she/they executed the same in
[SEAL] his/her/their authorized capacity(ies),
DAVID BONNER and that by his/her/their signature(s)
COMMISSION #1192886 on the instrument the person(s), or the
NOTARY PUBLIC-CALIFORNIA entity upon behalf of which the
SAN FRANCISCO COUNTY person(s) acted, executed the
MY COMM. EXPIRES AUG 14, 2002 instrument.
WITNESS my hand and official seal.
/s/ David Bonner
-------------------------------------
Place Notary Seal Above Signature of Notary Public
- --------------------------------- OPTIONAL ---------------------------------
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document
DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document:_____________________________________________________
Document Date:_________________________________ Number of Pages: ______________
Signer(s) Other Than Named Above ______________________________________________
CAPACITY(IES) CLAIMED BY SIGNER
-----------------
Signer's Name: ____________________________________________ RIGHT THUMBPRINT
OF SIGNER
[ ] Individual Top of thumb here
[ ] Corporate Officer -- Title(s):_________________________
[ ] Partner -- [ ] Limited [ ] General
[ ] Attorney in Fact
[ ] Trustee
[ ] Guardian or Conservator
[ ] Other _________________________________________________
Signer is Representing: ___________________________________ ---------------
- --------------------------------------------------------------------------------
SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(v)(A) - Patients List of the Business
Schedule 1(a)(v)(B) - Telephone Numbers and Licenses
Schedule 2(a) - Allocation of Purchase Price
Schedule 6(a) - Closing Date Liabilities
Schedule 11(c) - Seller's Opinion
Schedule 14(c) - Litigation
Schedule 14(g) - Contracts
Schedule 14(i) - Personnel Payrates; Employee Benefits
Schedule 14(k) - Insurance
Schedule 14(o) - Tax Returns and Financial Statements
Schedule 14(p) - Supplemental Tax Information
Schedule 14(q) - Adverse Business Developments
Schedule 14(r) - Relationships
Schedule 14(u) - Reimbursement Matters
Schedule 14(v) - Environmental Compliance
Schedule 17(a) - Locations
Exhibit 2(b)(i) - Escrow Agreement
Exhibit 14(w) - Healthcare Questionnaire
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EXHIBIT 3
OPERATING PROFIT
1. General Standards.
(a) Performance. Except as otherwise expressly agreed in writing, the
parties intend that the financial and economic performance to be determined and
measured pursuant to this Exhibit "3" shall be determined solely with respect to
so much of the business operations of Corporation as consists of the business
enterprise previously conducted by the Acquired Entity (the "ACQUIRED
ENTERPRISE") before being acquired by Corporation. Accordingly, all references
herein to revenues, expenses, costs, profits, losses, and any other transaction
or activity, whether by reference to "Corporation", or in any other manner,
shall mean and refer only to so much thereof as pertains directly to the
Acquired Enterprise, unless such reference specifically provides otherwise. The
parties expressly intend all such calculations to provide a determination of the
profitability of the Acquired Enterprise, determined as if such Acquired
Enterprise at all times operated as an autonomous entity.
(b) Determination of Operating Profit. The Operating Profit to be
determined hereunder shall be calculated on a pre-tax basis in accordance with
generally accepted accounting principles, consistently applied ("GAAP"), as
further defined, limited, or explained as set forth herein.
2. Income and Cost.
(a) Income and Revenue. Income shall be accounted for on the accrual
method consistent with the prior accounting methods of the Acquired Enterprise,
and shall consist of all direct revenues, defined as all "Rental Revenue" and
"Sales Revenue", plus or minus the net change in unbilled revenue, plus or minus
gain or loss from equipment sales, plus or minus sales credits and allowances,
plus investment income.
(b) Costs and Expenses. Costs shall include the following:
(1) DIRECT EXPENSES incurred on behalf of the Acquired Enterprise
as kept on the accrual method, including salary paid to the Employees and
related payroll taxes.
(2) BAD DEBT expenses shall be the actual bad debts written off,
plus or minus the change in allowance for bad debts. For the purpose of this
calculation, the allowance for bad debts is considered equal to the amount of
all accounts receivable in excess of 120 days old.
(3) REASONABLE TRAVEL EXPENSES of employees or representatives of
ROTECH MEDICAL CORPORATION ("ROTECH") to and from its corporate offices on
behalf of the Acquired Enterprise's matters, to be allocated on a reasonable
basis.
(4) INTEREST on all or any net intercorporate borrowing from
Integrated Health Services, Inc. ("IHS") at the cost of such funds to IHS.
(5) GROUP OR CONSOLIDATED PURCHASES for items benefitting the
Acquired Enterprise purchased by IHS, RoTech or by Corporation, to be allocated
at actual cost in accordance with usage. Costs to be allocated include costs, if
any, of transportation, storage, etc.
(6) DEPRECIATION EXPENSES will be calculated on a consistent
basis as previously and historically calculated by the Acquired Enterprise.
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(7) CORPORATION'S OVERHEAD. The general, administrative, and
overhead costs of Corporation, to the extent allocable to the Acquired
Enterprise on a reasonable basis.
(c) Excluded Items. Costs and expenses for purposes of calculating
operating profits shall not include the following:
(1) BRANCH OFFICES. All start-up costs, operating profits, and
operating losses incurred by Enterprise in the initial six (6) months on the
start-up, opening, or operation of a branch office or location opened after the
date hereof shall be excluded from calculations of Operating Profits for
purposes of this Agreement.
(2) IHS/ROTECH OVERHEAD. Unless otherwise mutually agreed by the
Acquired Enterprise and Seller, IHS and RoTech corporate overhead or costs will
not beallocated to the Acquired Enterprise or considered in Operating Profits.
(3) COSTS OF ACQUIRING THE ACQUIRED ENTERPRISE. The calculation
of Operating Profits will not include cost or amortization of costs incurred in
the acquisition of the Acquired Enterprise, and any liabilities assumed by
RoTech and subsequently paid off, which will be included in the intercorporate
borrowings in paragraph 2(b)(4), above.
(d) Acquisition of Further Enterprises. Nothing contained herein shall
be deemed to affect, limit or restrict the right of RoTech or IHS to make any
acquisitions.
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