Exhibit 2.1
STOCK PURCHASE AGREEMENT
by and between
PCI Holding Corp.
a Delaware corporation,
and
CHEMED CORPORATION
a Delaware corporation
Dated as of May 8, 2002
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF STOCK ........................................ 1
1.1 SALE AND PURCHASE OF THE ACQUIRED STOCK .......................... 1
1.2 PURCHASE PRICE ................................................... 1
1.3 PAYMENT OF PURCHASE PRICE; ESCROW ................................ 1
1.4 POST-CLOSING PURCHASE PRICE ADJUSTMENT ........................... 2
SECTION 2. CLOSING ........................................................... 4
2.1 GENERAL .......................................................... 4
2.2 CLOSING TRANSACTIONS ............................................. 4
SECTION 3. SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER ............... 4
3.1 ORGANIZATION AND CORPORATE POWER ................................. 4
3.2 AUTHORIZATION OF TRANSACTIONS .................................... 5
3.3 CAPITALIZATION ................................................... 6
3.4 ABSENCE OF CONFLICTS ............................................. 6
3.5 FINANCIAL STATEMENTS AND RELATED MATTERS ......................... 7
3.6 ABSENCE OF CERTAIN DEVELOPMENTS .................................. 7
3.7 TAXES ............................................................ 8
3.8 PROPRIETARY RIGHTS ............................................... 9
3.9 LITIGATION; PROCEEDINGS .......................................... 10
3.10 BROKERS .......................................................... 11
3.11 GOVERNMENTAL LICENSES AND PERMITS; SURVEYS ....................... 11
3.12 EMPLOYEES ........................................................ 12
3.13 EMPLOYEE BENEFIT MATTERS ......................................... 12
3.14 INSURANCE ........................................................ 14
3.15 OFFICERS AND DIRECTORS; BANK ACCOUNTS ............................ 15
3.16 COMPLIANCE WITH LAWS ............................................. 15
3.17 ENVIRONMENTAL MATTERS ............................................ 15
3.18 CONTRACTS ........................................................ 16
3.19 ABSENCE OF UNDISCLOSED LIABILITIES ............................... 18
3.20 REAL PROPERTY .................................................... 18
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TABLE OF CONTENTS
(continued)
Page
3.21 AFFILIATE TRANSACTIONS ........................................... 18
3.22 TANGIBLE PERSONAL PROPERTY ....................................... 19
3.23 MEDICARE, MEDICAID ............................................... 19
3.24 COMPLIANCE WITH HEALTHCARE LAWS .................................. 21
3.25 HIPAA ............................................................ 22
3.26 ACCOUNTS RECEIVABLE .............................................. 22
3.27 LITIGATION ACCRUAL ............................................... 22
3.28 DISCLOSURE ....................................................... 22
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER ....................... 23
4.1 ORGANIZATION AND CORPORATE POWER ................................. 23
4.2 AUTHORIZATION OF TRANSACTION ..................................... 23
4.3 NO VIOLATION ..................................................... 23
4.4 GOVERNMENTAL AUTHORITIES AND CONSENTS ............................ 23
4.5 LITIGATION ....................................................... 23
4.6 BROKERS .......................................................... 24
SECTION 5. PRE-CLOSING COVENANTS OF SELLER ................................... 24
5.1 AFFIRMATIVE COVENANTS OF SELLER .................................. 24
5.2 NEGATIVE COVENANTS OF SELLER ..................................... 25
5.3 RESERVED ......................................................... 27
5.4 ACCESS ........................................................... 27
5.5 CONDITIONS ....................................................... 27
5.6 COVENANTS COVERING COMPETING TRANSACTIONS FOR THE ACQUIRED
COMPANIES; RELATED MATTERS ...................................... 27
5.7 INTERCOMPANY ACCOUNTS ............................................ 28
5.8 HART-SCOTT-RODINO ACT AND OTHER RELATED GOVERNMENTAL APPROVALS ... 28
SECTION 6. PRE-CLOSING COVENANTS OF PURCHASER ................................ 29
6.1 COVENANTS OF PURCHASER ........................................... 29
SECTION 7. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE .................... 29
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES ....................... 29
7.2 PERFORMANCE ...................................................... 29
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TABLE OF CONTENTS
(continued)
Page
7.3 NO MATERIAL ADVERSE CHANGE ...................................... 30
7.4 REQUIRED APPROVALS .............................................. 30
7.5 NO INJUNCTION ................................................... 30
7.6 CLOSING DELIVERABLES ............................................ 30
7.7 FINANCING ....................................................... 31
7.8 NEW JERSEY PROPERTIES ........................................... 31
7.9 DUE DILIGENCE ................................................... 32
7.10 PRIORITY CARE SETTLEMENT ........................................ 32
7.11 BENEFIT PLAN .................................................... 32
SECTION 8. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE ...................... 32
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES ...................... 32
8.2 PERFORMANCE ..................................................... 32
8.3 REQUIRED APPROVALS .............................................. 32
8.4 NO INJUNCTION ................................................... 32
8.5 CLOSING DELIVERABLES ............................................ 32
8.6 NO MATERIAL ADVERSE CHANGE ...................................... 33
SECTION 9. TERMINATION OF AGREEMENT ......................................... 33
9.1 RIGHT TO TERMINATE AGREEMENT .................................... 33
9.2 EFFECT OF TERMINATION ........................................... 34
SECTION 10. INDEMNIFICATION RELATED MATTERS; TAXES ........................... 35
10.1 EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS ......... 35
10.2 INDEMNIFICATION BY SELLER ....................................... 35
10.3 TAX MATTERS ..................................................... 38
10.4 THIRD PARTY REIMBURSEMENT ....................................... 41
SECTION 11. SECTION 11. ADDITIONAL COVENANTS ................................. 42
11.1 COVENANT OF SELLER NOT TO COMPETE: NONSOLICITATION .............. 42
11.2 CONFIDENTIALITY ................................................. 42
11.3 INSURANCE ....................................................... 43
11.4 RESERVED ........................................................ 43
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TABLE OF CONTENTS
(continued)
Page
11.5 BONUSES ......................................................... 43
11.6 CAFETERIA PLAN .................................................. 43
11.7 DIVISIBILITY .................................................... 43
SECTION 12. SECTION 12. MISCELLANEOUS PROVISIONS ............................. 44
12.1 TIME OF ESSENCE ................................................. 44
12.2 COMPLIANCE WITH LAWS ............................................ 44
12.3 PUBLICITY ....................................................... 44
12.4 ACCESS OF SELLER TO BOOKS AND RECORDS ........................... 44
12.5 EXPENSES ........................................................ 44
12.6 GOVERNING LAW ................................................... 44
12.7 NOTICES ......................................................... 44
12.8 TABLE OF CONTENTS AND HEADINGS .................................. 45
12.9 ASSIGNMENT ...................................................... 45
12.10 PARTIES IN INTEREST ............................................. 45
12.11 SEVERABILITY .................................................... 45
12.12 ENTIRE AGREEMENT ................................................ 46
12.13 WAIVER .......................................................... 46
12.14 AMENDMENTS ...................................................... 46
12.15 INTERPRETATION OF AGREEMENT ..................................... 46
12.16 COUNTERPARTS .................................................... 46
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into as of
May 8, 2002, by and between PCI Holding Corp., a Delaware corporation
("PURCHASER"), and Chemed Corporation, a Delaware corporation ("SELLER").
Certain capitalized terms used in this Agreement are defined on EXHIBIT A.
RECITALS
A. Seller, through its subsidiaries listed on the ACQUIRED COMPANIES
SCHEDULE, is engaged in the business of permanent placement and temporary
staffing of nursing personnel and the direct delivery of home health care
services.
B. Seller, either directly or through a wholly owned subsidiary, owns
100% of the issued and outstanding Capital Stock of each of the companies listed
on the ACQUIRED COMPANIES SCHEDULE (collectively, the "ACQUIRED COMPANIES").
C. Purchaser wishes to purchase all of the Capital Stock of the
ACQUIRED COMPANIES (the "ACQUIRED STOCK") from Seller on the terms and subject
to the conditions set forth in this Agreement, and Seller wishes to sell to
Purchaser on the terms and subject to the conditions set forth in this
Agreement, all of the Acquired Stock.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, and covenants, which are to be made and
performed by the respective parties, Purchaser and Seller hereby agree as
follows:
SECTION 1. SALE AND PURCHASE OF STOCK
1.1 SALE AND PURCHASE OF THE ACQUIRED STOCK. At the Closing (as
defined in Section 2.1 hereof), Seller shall sell to Purchaser, and Purchaser
shall purchase from Seller, all of the issued and outstanding Acquired Stock in
accordance with this Agreement.
1.2 PURCHASE PRICE. The purchase price payable by Purchaser for the
Acquired Stock (the "PURCHASE PRICE") shall be Seventy Million Dollars
($70,000,000.00), which shall be subject to adjustment as set forth herein.
1.3 PAYMENT OF PURCHASE PRICE; ESCROW. At the Closing, Purchaser shall
(a) pay to Seller an amount equal to the Purchase Price minus the sum of the
Indemnity Escrow Amount (as defined below), and (b) deposit with the Escrow
Agent $5,000,000.00 to be used to satisfy any liabilities governed by Section
10.4 (the "Indemnity Escrow Amount"). The Indemnity Escrow Amount shall be held
by the Escrow Agent in accordance with the terms of an Indemnity Escrow
Agreement, providing for a release of $2,500,000 less the sum of (i) any pending
claims and (ii) any disbursements from the Indemnity Escrow Amount by Escrow
Agent on the one (1) year
anniversary of the Closing Date and a release of the balance of the Indemnity
Escrow Amount together with interest thereon (net of pending claims) on the
second (2nd) anniversary of the Closing Date. The parties agree to share all
fees and costs of the Escrow Agent. Any payment received by Purchaser from the
Escrow Agent shall be reflected on the Closing Date Balance Sheet as satisfying
the associated liability
1.4 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) CLOSING DATE BALANCE SHEET; CALCULATION OF THE NET WORKING
CAPITAL ADJUSTMENT. Within forty-five (45) days following the Closing Date,
Purchaser shall cause the Acquired Companies to prepare and deliver to Seller
the Closing Date Balance Sheet, which will reflect the Initial Net Working
Capital. One hundred eighty (180) days following the Closing Date (the
"REALIZATION DATE"), Purchaser shall cause the Acquired Companies to prepare and
deliver to Seller a calculation of the Net Working Capital Adjustment, if any.
Following the Closing and until such time as any dispute arising under Section
1.4(b) is finally resolved, each of Purchaser and Seller shall provide the other
party and any independent auditors of such other party with access at all
reasonable times to the properties, books, records, work papers (including those
of the parties' respective accountants, subject to customary limitations) and
personnel of the other for purposes of preparing and reviewing the Closing Date
Balance Sheet, the Adjusted Net Working Capital, and the Net Working Capital
Adjustment and for the matters contemplated by this Section 1.4.
(b) DISPUTES. Seller shall have thirty (30) days after delivery to
it by Purchaser of each of the Closing Date Balance Sheet and the Net Working
Capital Adjustment during which to notify Purchaser of any good faith dispute of
any item contained in the Closing Date Balance Sheet or the Net Working Capital
Adjustment, which notice shall set forth in reasonable detail the basis for such
dispute. In the event that Seller shall so notify Purchaser of any such dispute
on or before the last day of such 30-day period, Purchaser and Seller and their
respective accountants shall negotiate in good faith to resolve such dispute as
promptly as possible. If Purchaser and Seller and their respective accountants
are unable to resolve any such dispute within 30 days of Seller's delivery of
such notice (the "Negotiation Period"), such dispute shall be resolved by a
nationally recognized accounting firm selected by mutual agreement (the
"INDEPENDENT ACCOUNTING FIRM"), which shall make its determination as promptly
as practicable, and such determination shall be final and binding on the
parties. The Independent Accounting Firm shall, acting as experts and not as
arbitrators, determine in a manner consistent with this Agreement, and only with
respect to the remaining differences so submitted, whether and to what extent,
if any, the Closing Date Balance Sheet or the Net Working Capital Adjustment
calculation requires adjustment; PROVIDED, HOWEVER, the parties shall endeavor
to have the Independent Accounting Firm conduct a single review of the matters
specified in this paragraph (b) in the event there is, or it is reasonably
likely that there will be, a dispute concerning the Closing Date Balance Sheet,
and the Net Working Capital Adjustment. If Seller and Purchaser cannot agree on
the identity of the Independent Accounting Firm within ten (10) working days of
the end of the Negotiation Period, Seller and Purchaser shall each, within
fifteen (15) working days of the end of the Negotiation Period, submit to their
respective accountants the name of an accounting firm
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which does not at the time provide services to the Acquired Companies, Seller,
or Purchaser or any of their Affiliates, and the Independent Accounting Firm
shall be selected from these two firms by the respective accountants of the
parties. If Purchaser or Seller shall fail to submit the name of an accounting
firm prior to the end of such fifteen (15) working day period, then the
accounting firm named by the other party shall automatically become the
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated by the Independent Accounting
Firm to Seller and Purchaser in direct proportion to the positive or negative
differential between the Independent Accounting Firm's final determination of
the Closing Date Balance Sheet and Net Working Capital Adjustment and the
determinations of such items by each respective party. The Closing Date Balance
Sheet and the Net Working Capital Adjustment calculation, as modified by
resolution of any disputes, if any, by Purchaser and Seller or by the
Independent Accounting Firm, shall be deemed final and binding on the parties on
the earliest of: (i) the failure of Seller to notify Purchaser of a dispute
within 30 days after the delivery of the Net Working Capital Adjustment
calculation to Seller; (ii) the resolution of any disputes regarding the Net
Working Capital calculation by Purchaser and Seller and their respective
accountants; and (iii) the resolution of any dispute regarding the Net Working
Capital Adjustment pursuant to this Section by the Independent Accounting Firm
(the "DETERMINATION DATE").
(c) PAYMENT AND ASSIGNMENT. (i) If (i) the Net Working Capital
Adjustment is greater than zero or (ii) the Initial Net Working Capital is less
than $26,922,306 then within five (5) business days after the Determination
Date, Seller shall pay to Purchaser an amount equal to the greater of (iii) the
Net Working Capital Adjustment or (iv) the positive difference between
$26,922,306 and the Initial Net Working Capital, together with interest thereon
at the applicable federal rate, calculated from the Closing Date to the date of
payment. If the Initial Net Working Capital is more than $26,922,306, then
within five (5) business days after the Determination Date, Purchaser shall pay
to Seller an amount equal to the positive difference between the Initial Net
Working Capital and $26,922,306, together with interest thereon at the
applicable federal rate, calculated from the Closing Date to the date of
payment.
(ii) If any amount of the accounts receivable total line item
listed on the Closing Date Balance Sheet (net of reserves) remains unpaid on the
Realization Date, such unpaid amount shall at Purchaser's option be either
assigned, as of the Realization Date or the Determination Date, whichever is
later, by Purchaser or the Acquired Companies, as applicable, to Seller or
retained by Purchaser for collection on behalf of the Seller. Prior to
assignment of such account receivable items, Purchaser agrees to use reasonable
collection efforts consistent with past practices. In connection with any such
assignment, Purchaser or the Acquired Companies, as applicable, shall promptly
execute all documents, agreements and certificates that are necessary to effect
any such assignment to Seller.
(d) Purchaser agrees to return any sums received by Purchaser from any
Governmental Program (as defined below) which payment relates to the pending
claims and appeals for certain Medicare cost reports set forth on the MEDICARE
AND MEDICAID COST REPORT SCHEDULE attached hereto. Seller and the Acquired
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Companies agree that except as set forth in the Disclosure Schedule as to open
cost reports under Section 3.23(a), no cost reports will be reopened without
Purchaser's consent. The parties agree that (i) Purchaser shall have no
responsibility to collect such items or pursue such appeals; (ii) no compromise
or settlement of any such cost report or appeal which will affect any services
rendered or cost report filed after the Closing shall be made without
Purchaser's prior consent; and (iii) Purchaser shall have no obligation to
return any such sums unless they are specifically identified as payments related
to such pending claims and appeals.
SECTION 2. CLOSING
2.1 GENERAL. The closing of the transactions contemplated by Section 1
(the "CLOSING") shall be held at the offices of McDermott, Will & Emery, 28
State Street, Boston, Massachusetts 02109, or some other mutually agreeable
location, at 10:00 a.m. on the date two (2) business days following the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the parties will take at the Closing itself), or at such
other place, time and/or date as may be jointly designated by Purchaser and
Seller. By mutual agreement of the parties, the Closing may take place by
conference call and facsimile with exchange of original signatures by overnight
mail.
2.2 CLOSING TRANSACTIONS. Subject to the conditions set forth in this
Agreement, the parties shall consummate the following transactions (the "CLOSING
TRANSACTIONS") at the Closing:
(a) Seller shall sell and transfer to Purchaser or its designees the
Acquired Stock, free and clear of all Liens and Encumbrances, by delivering to
Purchaser or its designees, one or more certificates representing the Acquired
Stock, duly endorsed in blank (or accompanied by duly executed stock powers) and
otherwise in form acceptable for transfer on the books of the Acquired
Companies;
(b) Purchaser shall pay the Purchase Price as contemplated by
Section 1.2; and
(c) Seller and Purchaser shall deliver the certificates and other
documents and instruments required to be delivered by or on behalf of such Party
under Section 7 and Section 8 of this Agreement, as applicable.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as disclosed in any of the disclosure schedules to be
delivered by Seller to Purchaser within 10 days of the date of this Agreement in
form and substance satisfactory to Purchaser (collectively, "DISCLOSURE
SCHEDULE"), Seller represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND CORPORATE POWER.
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(a) The "ORGANIZATION SCHEDULE" attached hereto contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
incorporation or organization, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
or equity holder and the number of shares or other equity interests held by
each), determined as of the date hereof. Except as set forth on the ORGANIZATION
SCHEDULE, none of the Acquired Companies owns or holds the right to acquire any
Capital Stock in any other Person. Seller is validly existing and in good
standing as a corporation under the laws of the State of Delaware, and has all
necessary corporate power to perform its obligations under the Transaction
Documents.
(b) Each Acquired Company is a company duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, with full corporate or organizational power and
authority, as appropriate, to conduct the business as it is now being conducted
and to own or use the properties and assets that it purports to own or use. Each
Acquired Company is duly qualified to do business as a foreign company and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(c) Seller has delivered to Purchaser correct and complete copies of
the certificate of incorporation and bylaws (or equivalent governing documents)
of each Acquired Company, which documents reflect all amendments made thereto at
any time before the date hereof. Correct and complete copies of the minute books
containing the records of meetings of the stockholders and board of directors
(or equivalent parties), the stock certificate books, and the stock record books
of the Acquired Companies have been furnished to Purchaser. None of the Acquired
Companies is in default under or in violation of any provision of its
certificate of incorporation or by-laws (or equivalent governing documents).
3.2 AUTHORIZATION OF TRANSACTIONS. Seller and each Acquired Company has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby and to carry out their respective
obligations hereunder and thereunder (except as provided in the following
sentence). The board of directors of Seller shall have duly approved the
execution and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby at its May 20, 2002 Board of Directors Meeting
(and provided evidence thereof to Purchaser). No other corporate proceedings on
the part of Seller or any Acquired Company are necessary to approve and
authorize the execution and delivery of the Transaction Documents to which it is
a party and, the performance of their respective obligations thereunder or the
consummation of the transactions contemplated thereby. All Transaction Documents
to which Seller or any Acquired Company is a party have been duly executed and
delivered by Seller and/or such Acquired Company and constitute the valid and
binding agreements of Seller and/or such Acquired Company, enforceable against
Seller and/or such Acquired Company in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, and as limited by general principles of equity
that restrict the availability of equitable remedies.
3.3 CAPITALIZATION. The authorized Capital Stock of each Acquired Company
consists of the number and type of shares or other interests (and par values)
set forth opposite such Acquired Company's name on the ORGANIZATION SCHEDULE.
The ORGANIZATION SCHEDULE lists the number and class or series of shares of
Capital Stock presently issued and outstanding for each Acquired Company. All of
the issued and outstanding Capital Stock of the Acquired Companies have been
duly authorized, are validly issued, fully paid and nonassessable, and are held
of record and owned beneficially by the Persons and in the manner described on
the ORGANIZATION SCHEDULE, free and clear of all Liens and Encumbrances, and are
not subject to, nor were they issued in violation of, any preemptive rights or
rights of first refusal. The delivery of certificates at the Closing
representing the Acquired Stock in the manner provided in Section 2.2 will
transfer to Purchaser or its designees, directly or indirectly, good and valid
title to the Acquired Stock, which constitutes all of the outstanding capital
stock of or other ownership interests in each Acquired Company, in each case,
free and clear of all Liens and Encumbrances. There are no outstanding or
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights, participation rights, preemptive rights or other
agreements or commitments to which Seller or any Acquired Company is a party or
which are binding upon Seller or any Acquired Company providing for the
issuance, disposition, or acquisition of any Acquired Company's Capital Stock
(other than this Agreement). There are no outstanding or authorized stock
appreciation, phantom stock, or similar rights with respect to any Acquired
Company. There are no voting trusts, proxies, or any other agreements or
understandings with respect to the voting of the Capital Stock of any Acquired
Company. No Acquired Company is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its Capital
Stock.
3.4 ABSENCE OF CONFLICTS. Except as set forth on the "CONFLICTS SCHEDULE"
attached hereto, the execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby by
Seller and/or any Acquired Company do not and shall not (a) conflict with or
result in any breach of any of the terms, conditions or provisions of, (b)
constitute (with or without notice or lapse of time or both) a default under,
(c) result in a violation of, (d) give any third party the right to modify,
terminate or accelerate any obligation under, (e) result in the creation of any
Lien or Encumbrance upon the Capital Stock (including, without limitation, the
Acquired Stock) or any Lien or Encumbrance (excluding Permitted Encumbrances)
upon the assets of any Acquired Company by any Person, or (f) require, to the
extent not already obtained, any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any Person or any
court or administrative or other governmental body or agency under: (1) the
certificate of incorporation or by-laws (or equivalent governing documents) of
Seller or any of the Acquired Companies; (2) any indenture, mortgage, lease,
loan agreement or other material agreement or material instrument to which
Seller or any of the Acquired Companies or their respective assets or properties
is bound or affected; (3) any law, statute, rule or regulation to which Seller
or
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any of the Acquired Companies is subject; or (4) any judgment, order or decree
to which Seller or any Acquired Company is subject.
3.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
Attached hereto as the "FINANCIAL STATEMENTS SCHEDULE" are copies of:
(i) an unaudited combined balance sheet as of March 31, 2002 (the "LATEST
BALANCE SHEET") and the related unaudited combined statement of income and cash
flows for the Acquired Companies; and (ii) an unaudited balance sheet and
statement of income and cash flows as of and for the fiscal year ended December
31, 2001, for the Acquired Companies (the "UNAUDITED STATEMENTS" and
collectively, the "FINANCIAL STATEMENTS"). Except as set forth on the FINANCIAL
STATEMENTS SCHEDULE, each of the Financial Statements is accurate and complete
in all respects, is consistent with the Acquired Companies' books and records
(which, in turn, are accurate and complete in all material respects), presents
fairly the Acquired Companies' financial condition and results of operations as
of the times and for the periods referred to therein, and has been prepared in
accordance with GAAP, consistently applied (except, in the case of the Latest
Balance Sheet, for footnotes and end-of-year adjustments which will not in the
aggregate be material).
3.6 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the execution and delivery
of the Transaction Documents and the transactions to take place pursuant hereto
on or before the Closing Date, since March 31, 2002, there has not been any
Material Adverse Change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
Material Adverse Change. Without limiting the foregoing, except as set forth on
the attached "DEVELOPMENTS SCHEDULE," since March 31, 2002, neither Seller
(solely with respect to the Acquired Companies) nor any of the Acquired
Companies has:
(a) subjected any portion of the properties or assets of any Acquired
Company to any Lien or Encumbrance (other than Permitted Encumbrances);
(b) entered into, amended or terminated any lease, contract, agreement
or commitment applicable to any Acquired Company, or taken any other action or
entered into any other transaction applicable to any Acquired Company other than
in the Ordinary Course of Business;
(c) declared, set aside or paid outside of the Ordinary Course of
Business any dividends or made any other distributions (whether in cash or in
kind) with respect to any shares (or other interests) of the Capital Stock of
any Acquired Company;
(d) made any capital expenditures or commitments for capital
expenditures on behalf of any Acquired Company except for amounts less than
$50,000;
(e) (i) entered into or modified any employment or independent
contractor arrangement providing for either (a) the payment of aggregate annual
compensation (including the maximum amount allocable under any bonus arrangement
or stock or option grant program) in excess of $100,000 or (b) the making of any
payment
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(including but not limited to, bonus, severance or stock grant) which is payable
on a Change of Control; (ii) increased the salary, wages or other compensation
of any officer or employee of any Acquired Company whose annual salary is, or
after giving effect to such change would be, $100,000 or more; (iii) established
or modified with respect to any Acquired Company any of the (x) targets, goals,
pools or similar provisions in respect of any fiscal year under any Benefit
Plan, employment contract or other employee compensation arrangement or (y)
salary ranges, increase guidelines or similar provisions in respect of any
Benefit Plan, employment contract or other employee compensation arrangement; or
(iv) adopted, entered into, amended, modified or terminated (partial or
complete) any Benefit Plan except to the extent required by applicable law;
(f) (i) incurred, either directly or on behalf of an Acquired Company,
any indebtedness in an aggregate principal amount exceeding $100,000 (net of any
amounts discharged during such period), or (ii) voluntarily purchased,
cancelled, prepaid or completely or partially discharged in advance of a
scheduled payment date with respect to, or waived any right of any Acquired
Company under, any indebtedness of or owing to any Acquired Company (in either
case other than any indebtedness of any Acquired Company owing to another
Acquired Company);
(g) made any change in the accounting policies of any Acquired Company;
(h) received any correspondence from any governmental agency or body,
the Center for Medicare and Medicaid Services ("CMS") or any Medicare
intermediary thereof or any Medicaid authority, or intermediary thereof, the
effect of which is to notice any (i) investigation, program integrity review,
utilization analysis, or audit of any Acquired Company cost report or (ii)
reopening of any cost report relating to a period prior to the Closing Date
which has been finally settled or (iii) any termination, suspension, impairment
or restriction with respect to participation in any Government Program (as
defined below) or other third party payor; or
(i) committed to do any of the foregoing.
3.7 TAXES. Except as set forth on the attached "TAXES SCHEDULE":
(a) All Tax Returns with respect to each Acquired Company that were
required to be filed prior to the date hereof have been timely filed and all
such Tax Returns required to be filed prior to the Closing will be timely filed,
and all of those Tax Returns were, or will be, true, correct and complete in all
material respects;
(b) all Taxes due and payable have been paid by each Acquired Company
or will be paid by the appropriate due date and no amount of such Taxes is
delinquent;
(c) no deficiency for any amount of Tax in excess of $50,000 which has
not been resolved has been asserted or assessed in writing by a taxing authority
against any of the Acquired Companies, and Seller has no Knowledge that any such
written assessment or asserted Tax liability shall be made;
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(d) there is no action, suit, taxing authority proceeding or audit now
in progress, pending or, to the Knowledge of Seller, threatened in writing
against or with respect to any of the Acquired Companies;
(e) there is not currently in force with respect to any of the Acquired
Companies any (A) waiver of any statute of limitations relating to Taxes, (B)
agreement to any extension of the period for assessment or collection of Taxes
or (C) power of attorney relating to Taxes;
(f) none of the Acquired Companies is a party to or bound by any Tax
allocation, sharing, indemnity or similar agreement or arrangement with any
Person with respect to the Acquired Companies and none of the Acquired Companies
has any current or potential contractual obligation to indemnify any other
Person with respect to Taxes regarding the Acquired Companies;
(g) none of the Acquired Companies has any obligation to make any
payment that could be non-deductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign Tax law);
(h) no written claim has been made and delivered by a taxing authority
in a jurisdiction where any of the Acquired Companies does not pay Taxes or file
Tax Returns that Seller or any Acquired Company is or may be subject to Taxes
assessed by such jurisdiction;
(i) each of the Acquired Companies has withheld and paid over all Taxes
required to have been withheld and paid over in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third party
relating to the Acquired Companies;
(j) the TAXES SCHEDULE contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which Seller and/or each of the
Acquired Companies files Tax Returns relating to the Acquired Companies; there
are no other jurisdictions in which Tax Returns are required to be filed;
(k) none of the Acquired Companies has any liability for Taxes under
Treasury Regulations section 1.1502-6 or any similar state, local or foreign
provision; and
(l) Seller is the common parent of the affiliated group (as defined in
Code section 338(h)(5)) of which the Acquired Companies are members. This
affiliated group files consolidated federal income tax returns.
3.8 PROPRIETARY RIGHTS.
(a) The "PROPRIETARY RIGHTS SCHEDULE" attached hereto contains a
complete and accurate list of all Proprietary Rights owned, licensed or used by
any of the Acquired Companies and the name of the record owner thereof,
including (i) patented and registered Proprietary Rights owned or used by any of
the Acquired Companies, (ii) pending patent applications and applications for
registrations of other
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Proprietary Rights filed by or on behalf of or owned by any of the Acquired
Companies, (iii) unregistered trade names, Internet domain names, web sites and
corporate names owned or used by Seller or any of its Affiliates (excluding the
Acquired Companies) solely with respect to any of the Acquired Companies and
(iv) material unregistered trademarks, service marks and logos and the computer
software owned or used by Seller or any of its Affiliates (excluding the
Acquired Companies) solely with respect to any of the Acquired Companies. The
PROPRIETARY RIGHTS SCHEDULE contains a complete and accurate list of all
licenses and other rights granted by Seller or any of the Acquired Companies to
any third party with respect to any Proprietary Rights, in each case identifying
the subject Proprietary Rights, the terms of such license or other right and the
expiration date, if any, thereof. Except as set forth on the PROPRIETARY RIGHTS
SCHEDULE, the Acquired Companies own, free of all Liens and Encumbrances (except
Permitted Encumbrances), all right, title and interest to, or have the right to
use pursuant to a valid license, all of the Proprietary Rights set forth on the
PROPRIETARY RIGHTS SCHEDULE and the Proprietary Rights set forth thereon
constitute all of the Proprietary Rights useful or necessary for the operation
of the Acquired Companies as presently conducted. Except as set forth on the
PROPRIETARY RIGHTS SCHEDULE, the loss or expiration of any Proprietary Rights or
related group of Proprietary Rights owned or used by any of the Acquired
Companies has not had a Material Adverse Effect on the Acquired Companies and
such a loss or expiration of Proprietary Rights is not pending or, to the
Knowledge of Seller, threatened in writing.
(b) Except as set forth on the PROPRIETARY RIGHTS SCHEDULE, (i) all of
the Proprietary Rights owned or used by the Acquired Companies are valid and
enforceable and have not been misused, and no claim by any third party
contesting the validity, enforceability, use or ownership of any such
Proprietary Rights has been made, is currently outstanding or has been
threatened in writing, and, to Seller's Knowledge, there are no grounds for the
same; (ii) neither Seller nor any of the Acquired Companies has received any
written notices of invalidity, infringement or misappropriation from any third
party with respect to any such Proprietary Rights; (iii) neither Seller nor any
of the Acquired Companies has interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Proprietary Rights of any third
parties; and (iv) no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Rights of
the Acquired Companies.
(c) The transactions contemplated by this Agreement shall have no
Material Adverse Effect on the Acquired Companies' rights, title and interest in
and to any of their respective Proprietary Rights. Each of the Acquired
Companies has taken all necessary actions to maintain and protect their
respective material Proprietary Rights and shall continue to maintain and
protect those rights prior to the Closing so as to not affect the validity or
enforcement of such Proprietary Rights. The owners of any Proprietary Rights
that are licensed to any Acquired Company (other than third party off-the-shelf
computer software) have taken all necessary actions to maintain and protect such
Proprietary Rights.
3.9 LITIGATION; PROCEEDINGS. Except as set forth on the "LITIGATION
SCHEDULE" attached hereto, there are no (i) actions, suits, complaints, charges
in
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writing, proceedings, orders, investigations or claims pending or threatened in
writing or, to Seller's Knowledge, otherwise, against or affecting any of the
Acquired Companies (or pending or threatened in writing against or affecting any
of the officers, directors, or branch managers of any of the Acquired Companies
with respect to the business of the Acquired Companies) at law or in equity, or
before or by any federal, state, municipal or other governmental court,
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (including, without limitation, any actions, suits, complaints,
charges, proceedings or investigations with respect to the transactions
contemplated by this Agreement) or (ii) outstanding orders, laws, rules or
regulations restraining, enjoining, prohibiting or otherwise making illegal the
purchase and sale of the Acquired Stock pursuant to this Agreement. Except as
set forth on the LITIGATION SCHEDULE, none of the Acquired Companies is subject
to any grievance arbitration proceedings under collective bargaining agreements
or otherwise or, any governmental investigations or inquiries. Except as set
forth on the LITIGATION SCHEDULE, none of the Acquired Companies is subject to
any judgment, order or decree of any court or other governmental agency (or
settlement enforceable therein).
3.10 BROKERS. Except as set forth on the "BROKERAGE SCHEDULE" attached
hereto but not in limitation of the following sentence in this Section 3.10,
neither Seller nor any of the Acquired Companies has retained any broker or
finder in connection with any of the transactions contemplated by this
Agreement, and Seller has not incurred or agreed to pay, or taken any other
action that would entitle any Person to receive, any brokerage fee, finder's fee
or other similar fee or commission with respect to any of the transactions
contemplated by this Agreement. Neither Purchaser nor any of the Acquired
Companies shall have any liability for any commission, fee, cost or other
payment arising in connection with the retention of any broker or finder,
including without limitation the fees and costs of Credit Suisse First Boston.
3.11 GOVERNMENTAL LICENSES AND PERMITS; SURVEYS. The "PERMITS
SCHEDULE" attached hereto contains a listing and summary description of all
Licenses used in the conduct of the business of the Acquired Companies as
presently conducted (including, without limitation, Licenses owned or possessed
by any of the Acquired Companies). Except as indicated on the PERMITS SCHEDULE,
the Acquired Companies own or possess all right, title and interest in and to
all of the Licenses that are necessary or useful to conduct their business as
presently conducted. Each of the Acquired Companies is in compliance with the
terms and conditions of such Licenses and neither Seller nor any Acquired
Company has received any notices that an Acquired Company is in violation of or
default under (or with the giving of notice or lapse of time or both, would be
in violation of or in default under) any of the terms or conditions of such
Licenses. Each of the Acquired Companies has taken all necessary action to
maintain such Licenses. No loss or expiration of any such License is pending or
has been threatened in writing or, to Seller's Knowledge, otherwise, other than
expiration in accordance with the terms thereof. Except as indicated on the
PERMITS SCHEDULE, all of the Licenses shall survive the transactions
contemplated hereby. Seller has previously delivered to Purchaser true, correct
and complete copies of any state licensing survey reports received by the
Acquired Companies in the three (3) year period prior to the Closing Date, as
well as any statements of deficiencies and plans of correction in connection
with such reports. The Acquired
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Companies have taken all required steps to correct all deficiencies referenced
in such surveys, such corrections have been accepted by the applicable License
issuer and a description of any uncorrected deficiency is set forth in the
Permits Schedule attached hereto. The most current State licensing survey did
not require any expenditures aggregating in excess of One Thousand Dollars
($1,000) be made or result in revenue reductions of in excess of One Thousand
Dollars ($1,000) in order to ensure continued licensure. The Acquired Companies
are in compliance in all material respects with applicable laws and regulations
of all appropriate health care facility licensing agencies, federal, state,
county or local governmental authorities and regulatory agencies.
3.12 EMPLOYEES. Except as set forth on the "EMPLOYEES SCHEDULE" attached
hereto, (a) to Seller's knowledge, no employee and no group of employees or
independent contractors of any of the Acquired Companies has any plans to
terminate his, her or its employment or relationship as an independent
contractor with any of the Acquired Companies other than in the Ordinary Course
of Business and (b) none of the Acquired Companies is party to an employment or
independent contractor agreement providing for severance or other payment upon
early termination or expiration or Change of Control. Except as set forth on the
EMPLOYEES SCHEDULE, each of the Acquired Companies has complied in all material
respects with, and remains in compliance in all material respects with, all
applicable laws relating to the employment of personnel and labor. Except as set
forth on the EMPLOYEES SCHEDULE, none of the Acquired Companies is a party to or
bound by any collective bargaining agreement, nor has such party experienced any
strikes, grievances, unfair labor practices claims or other material employee or
labor disputes. None of the Acquired Companies has engaged in any unfair labor
practice. Except as set forth on the EMPLOYEES SCHEDULE, Seller has no Knowledge
of any organizational effort presently being made or which has been threatened
in writing by or on behalf of any labor union with respect to any employees of
any of the Acquired Companies. None of the Acquired Companies has implemented
any plant closing, mass layoff, collective dismissals or reductions as those
terms are defined in the Worker Adjustment Retraining and Notification Act of
1988, as amended ("WARN"), or any similar state or local law or regulation, and
no layoffs that could implicate such laws or regulations will have been
implemented before Closing without advance notification to Purchaser.
3.13 EMPLOYEE BENEFIT MATTERS.
(a) The "BENEFIT PLANS SCHEDULE" attached hereto lists each Employee
Plan or Benefit Arrangement that at any time has covered current or former
employees or independent contractors at the Acquired Companies to which the
Seller or its ERISA Affiliates contributes to, ever has contributed to or ever
has been required to contribute to (collectively, the "Business Employees").
Employee Plans and Benefit Arrangements are referred to collectively as the
"BENEFIT PLANS."
Neither Seller nor any of its ERISA Affiliates contributes to, ever
has contributed to, or otherwise has an unsatisfied obligation at any time
under:
(i) a Multiemployer Plan that is subject to withdrawal liability.
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(ii) a pension plan covered at any time under Title IV or ERISA
or has any liability under any such plan.
(iii) any Employee Plan or Benefit Arrangement providing
medical, health, or life insurance or other welfare-type benefits to any
individuals beyond termination of services with Seller and its Affiliates (other
than in accordance with Section 4980B) of the Code ("COBRA").
(b) Each Benefit Plan (and each related trust and insurance
contract) set forth on the BENEFIT PLANS SCHEDULE (i) complies in form and in
operation in all material respects with the requirements of applicable laws and
regulations, including, without limitation, ERISA and the Code and the
nondiscrimination rules thereof, (ii) has received or will have received prior
to the Closing Date all contributions, premiums or payments required by any
Benefit Plan with respect to all periods through the Closing Date, and (iii)
with respect to each Benefit Plan which is intended to be qualified under
section 401(a) of the Code, has been amended on a timely basis in compliance
with the Code and, except as set forth on the BENEFIT PLANS SCHEDULE, has either
received from the Internal Revenue Service a favorable determination letter
which considers the terms of such Benefit Plan as amended and nothing has
occurred or is expected to occur through the Closing Date that caused or could
cause the revocation of such favorable determination letter or the imposition of
any penalty or tax.
(c) Except as set forth on the BENEFIT PLANS SCHEDULE, all required
reports and descriptions (including Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan Descriptions) with respect to the Benefit Plans set
forth on the BENEFIT PLANS SCHEDULE have been properly and timely filed with the
appropriate government agency and distributed to participants as required.
Seller, solely with respect to the Acquired Companies, each of the Acquired
Companies and each ERISA Affiliate have complied in all material respects with
the requirements of COBRA.
(d) With respect to each Benefit Plan set forth on the BENEFIT PLANS
SCHEDULE, (i) there have been no prohibited transactions as defined in Section
406 of ERISA or Section 4975 of the Code, (ii) no fiduciary (as defined in
Section 3(21) of ERISA) has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of such Benefit Plans, and (iii) no actions,
investigations, suits or claims with respect to any Benefit Plan, any trustee or
fiduciary thereof, Seller, any Acquired Company or any ERISA Affiliate, any
director, officer or employee thereof or the assets of any trust of the Benefit
Plans thereof (other than non-material routine claims for benefits) are pending
and neither Seller nor any Acquired Company has Knowledge of any facts which
would give rise to or could reasonably be expected to give rise to any such
actions, investigations, suits or claims.
(e) None of Seller, solely with respect to the Acquired Companies,
any of the Acquired Companies or any ERISA Affiliate has incurred or has any
reason to expect that it will incur, any material liability to the Pension
Benefit Guaranty Corporation (other than routine premium payments ) or otherwise
under Title IV of ERISA (including any withdrawal liability) or under the Code
with respect to any employee pension benefit
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plan (as defined in Section 3(2) of ERISA) that Seller, solely with respect to
the Acquired Companies, any of the Acquired Companies or any ERISA Affiliate
maintains or ever has maintained or to which any of them contributes, ever has
contributed or ever has been required to contribute to.
(f) Except as set forth on the BENEFIT PLANS SCHEDULE, each individual
who has received compensation for the performance of services on behalf of any
Acquired Company has been properly classified as an employee or independent
contractor in accordance with applicable laws.
(g) None of Seller, the Acquired Companies or any ERISA Affiliate
maintains any Benefit Plan which provides benefits to any employee or former
employee (or to their beneficiaries or dependents) of the Acquired Companies
employed outside the United States.
(h) Except as disclosed on the BENEFITS PLANS SCHEDULE, the
consummation of the transactions contemplated by this Agreement will not give
rise to any liability, including, without limitation, liability for severance
pay, unemployment compensation, termination pay or withdrawal liability or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due to any employee, director or shareholder of the Acquired
Companies (whether current, former or retired) or their beneficiaries solely by
reason of such transactions or by reason of a termination following such
transactions. Except as disclosed on the BENEFITS PLAN SCHEDULE, neither Seller,
solely with respect to the Acquired Companies, nor any Acquired Company has any
unfunded liabilities pursuant to any Benefit Plan concerning an Acquired Company
that is not intended to be qualified under Section 401(a) of the Code and that
is an employee pension benefit plan within the meaning of Section 3(2) of ERISA,
a nonqualified deferred compensation plan or an excess benefit plan.
(i) The Seller represents that the only Benefits Plan not sponsored by
the Acquired Companies that covers the Business Employees is the Chemed
Corporation Flexible Benefits Plan described in Section 11.6 below.
3.14 INSURANCE. The "INSURANCE SCHEDULE" contains a true and complete list
(including the names and addresses of the insurers, the expiration dates
thereof, the annual premiums and payment terms thereof and a brief description
of the interests insured thereby) of all liability, property, workers'
compensation, professional liability, errors and omissions, directors' and
officers' liability, crime, surety, fiduciary and other insurance policies and
bonding arrangements currently in effect (together with a two year claims
history) that insure the business, operations or employees of the Acquired
Companies or affect or relate to the ownership, use or operation of the Business
or any of the assets and properties of the Acquired Companies and that (i) have
been issued to any Acquired Company or (ii) have been issued to any Person
(other than any Acquired Company) for the benefit of the Business or any
Acquired Company. Except as set forth on the INSURANCE SCHEDULE, the insurance
coverage provided by the policies described in clause (i) above will not
terminate or lapse by reason of the transactions contemplated by this Agreement.
Except as set forth on the INSURANCE SCHEDULE,
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each policy listed on the INSURANCE SCHEDULE is valid and binding and in full
force and effect, no premiums due on or prior to the Closing Date thereunder
have not been paid and none of Seller, any Acquired Company or the Person to
whom such policy has been issued has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder. Except as
set forth on the INSURANCE SCHEDULE, neither Seller nor any of the Acquired
Companies has received notice that any insurer under any policy referred to in
this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause.
3.15 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The "OFFICERS, DIRECTORS AND
BANK ACCOUNTS SCHEDULE" attached hereto lists all officers and directors of each
of the Acquired Companies, and all bank accounts, safety deposit boxes and lock
boxes (designating each authorized signatory with respect thereto) for each of
the Acquired Companies and all Persons having signatory power with respect
thereto.
3.16 COMPLIANCE WITH LAWS. Except as set forth on the "COMPLIANCE SCHEDULE"
attached hereto, the operations of the Business have, and each of the Acquired
Companies has, complied in all material respects with and is in compliance in
all material respects with all applicable laws, regulations and ordinances of
foreign, federal, state and local governments and all agencies thereof which are
applicable to it or to which such Acquired Companies may otherwise be subject,
and no claims have been filed against any Acquired Companies, or Seller (solely
concerning the Acquired Companies), alleging a violation of any such laws or
regulations, and none of the Acquired Companies or Seller has received written
notice of any such past or present violations nor, has the Business or any
Acquired Company been the subject of any inquiry or investigation by any
governmental or regulatory authority regarding any such present or past failure.
Except as set forth on the COMPLIANCE SCHEDULE, Seller (solely concerning the
Acquired Companies) and the Acquired Companies have complied in all material
respects with all laws, regulations and ordinances of federal, state and local
governments and all agencies thereof applicable to present or former employees
(or any Person found to be a present or former employee), employees' collective
bargaining representatives, job applicants or any association or group of such
Persons, of any Acquired Company, including without limitation any provisions
thereof relating to terms and conditions of employment, wages, hours, the
payment of social security and similar taxes and occupational safety and health.
3.17 ENVIRONMENTAL MATTERS. Except as set forth on the "ENVIRONMENTAL
SCHEDULE" attached hereto, each of the Acquired Companies has complied in all
material respects, and is currently in compliance in all material respects, with
Environmental and Safety Requirements. Except as set forth on the ENVIRONMENTAL
SCHEDULE, none of the Acquired Companies nor Seller has received any oral or
written notice, report or information regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and Safety
Requirements which relate to any Acquired Company or any Acquired Company's
properties or facilities. Without limiting the generality of the foregoing, each
of the Acquired Companies has obtained and complied with, and are currently in
compliance with, all permits, licenses and other authorizations that may be
required pursuant to any Environmental and Safety
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Requirements for the use and occupancy of the properties and facilities and the
operation of their business. None of the properties or facilities operated or
leased by the Acquired Companies contains any chemicals, pollutants or
substances in, on, over, under or at it, in concentrations which would be
reasonably likely to result in the imposition of liability or obligations on the
Acquired Companies for the investigation, corrective action, remediation or
monitoring at those properties and facilities. The Acquired Companies have not
contractually, or by operation of law, including the Environmental and Safety
Requirements, or otherwise assumed or succeeded to any environmental liabilities
or obligations of any predecessors or any other Person or entity.
3.18 CONTRACTS.
(a) Except as specifically contemplated by this Agreement and except
as set forth on the "CONTRACTS SCHEDULE" attached hereto, neither Seller (only
with respect to the Acquired Companies) nor any of the Acquired Companies is a
party to or bound by any:
(i) collective bargaining agreement or contact with any labor
union or any bonus, pension, profit sharing, retirement or any other form of
deferred compensation plan or any stock purchase, stock option, hospitalization
insurance or similar plan or practice, whether formal or informal;
(ii) contract for the internal employment of any officer,
individual employee or other person on a full-time or part-time basis providing
annual compensation in excess of $100,000;
(iii) change of control or severance agreement or similar
arrangement;
(iv) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a Lien or Encumbrance on any of
its assets;
(v) contract under which any of the Acquired Companies has
advanced or loaned any other Person amounts in the aggregate exceeding $50,000,
other than trade credit extended in the Ordinary Course of Business;
(vi) agreement with respect to the lending or investing of
funds;
(vii) guaranty of any obligation, other than endorsement made
for collection and guarantees of obligation of an Acquired Company pursuant to
any Lease;
(viii) management, consulting, advertising, marketing, promotion,
technical services, advisory or other contract or other similar arrangement
relating to the design, marketing, promotion, management or operation of the
Acquired Companies involving payments in excess of $200,000 per year;
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(ix) lease or agreement under which it is lessee of, or holds
or operates, any personal property owned by any other Person calling for payment
in excess of $100,000 annually;
(x) lease or agreement under which it is lessor of or permits
any third party to hold or operate any property, real or personal, owned or
controlled by it calling for payments in excess of $100,000 per year;
(xi) agreement or group of related agreements with the same
Person for the purchase of products or services under which the annual expense
of such products and services has a price in excess of $200,000;
(xii) contracts relating to (A) the future disposition or
acquisition of any assets or properties of the Acquired Companies, other than
dispositions or acquisitions in the Ordinary Course of Business, and (B) any
business combination;
(xiii) contracts that incur indebtedness or incur or suffer to
exist any Lien;
(xiv) contracts arising solely out of an acquisitive or
dispositive transaction (A) obligating an Acquired Company to make, or provide
for, indemnification or (B) to which indemnification is provided to an Acquired
Company or Seller (only with respect to and directly involving any Acquired
Company); and
(xv) contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of an Acquired Company to engage in
any business or compete with any Person concerning any business or prohibiting
or limiting the ability of any Person to compete with the Business or an
Acquired Company.
(b) The CONTRACTS SCHEDULE contains a complete and accurate list of
the contracts or agreements with any customer of Seller which was responsible
for revenue in excess of $250,000 in 2001 with respect to the Acquired
Companies. Except as disclosed on the CONTRACTS SCHEDULE, since December 31,
2001, no such customer has (i) ceased purchases from the Acquired Companies or
the Business or (ii) materially reduced its purchases from the Acquired
Companies or the Business (other than as a result of fluctuations that are
customary in the Ordinary Course of Business). Except as disclosed on the
CONTRACTS SCHEDULE, to the Knowledge of Seller, no such customer is threatened
with bankruptcy or insolvency.
(c) Except as disclosed on the CONTRACTS SCHEDULE: (i) no contract
required to be disclosed on the CONTRACTS SCHEDULE and no other material
contract or commitment has been materially breached or canceled by the Acquired
Companies; (ii) each of the Acquired Companies has performed all of the material
obligations required to be performed by them in connection with the contracts
required to be disclosed on the CONTRACTS SCHEDULE and no Acquired Company is in
default (whereby such default is continuing and has not been cured) under or in
breach of any such contracts, and no event has occurred which with the passage
of time of the giving of notice or both, would result in such a continuing
material default or breach thereunder; (iii) each
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material agreement including any contract required to be disclosed on the
CONTRACTS SCHEDULE, is legal, valid, binding, enforceable and in full force and
effect; and (iv) except as disclosed on the CONTRACTS SCHEDULE, none of the
Acquired Companies is, or has received notice that it is, in violation or breach
of or default under any such contract (or with notice or lapse of time or both,
would be in violation or breach of or default under any such contract).
3.19 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
"UNDISCLOSED LIABILITIES SCHEDULE" attached hereto, no Acquired Company has any
liabilities except: (i) obligations under executory contracts described on the
CONTRACTS SCHEDULE; (ii) liabilities reflected or reserved for on the
liabilities side of the Latest Balance Sheet; (iii) liabilities which have
arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business or otherwise in accordance with the terms and conditions of this
Agreement; or (iv) liabilities not to exceed $25,000 for any individual
liability or $100,000 in the aggregate for all liabilities.
3.20 REAL PROPERTY. All real property leased, used or occupied by the
Acquired Companies (the "LEASES") is identified on the "REAL ESTATE SCHEDULE"
and no other real property is used for the conduct of the Business. The Acquired
Companies do not own any real property.
(a) Except as disclosed on the REAL ESTATE SCHEDULE, each Acquired
Company has a valid and subsisting leasehold estate in and the right to quiet
enjoyment of the real properties subject to the Leases in accordance with the
terms thereof. Each Lease is a legal, valid and binding agreement, enforceable
in accordance with its terms, of such Acquired Company and of each other Person
that is a party thereto, and except as set forth on the REAL ESTATE SCHEDULE,
there is no, and neither Seller nor any Acquired Company has received notice of
any, default (or any condition or event which, after notice or lapse of time or
both, would constitute a default) thereunder. None of the Acquired Companies
owes any brokerage commissions with respect to any such leased space.
(b) Except as disclosed on the REAL ESTATE SCHEDULE, the improvements
on the real property which are subject to the Leases are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, are adequate and suitable for the purposes for which they are
presently being used and, to the Knowledge of Seller, there are no condemnation
or appropriation proceedings pending or threatened against any of such real
property or the improvements thereon.
3.21 AFFILIATE TRANSACTIONS. Except as disclosed on the "AFFILIATED
TRANSACTIONS SCHEDULE" attached hereto, (i) there are no intercompany
liabilities between an Acquired Company, on the one hand, and Seller, any
Affiliate of Seller or any Insider, (ii) neither Seller, any Affiliate of Seller
or any Insider provides or causes to be provided to an Acquired Company any
assets, services or facilities and (iii) neither Seller, any Affiliate of Seller
or any Insider is party to any agreement, contract or commitment or transaction
with any Acquired Company.
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3.22 TANGIBLE PERSONAL PROPERTY. The Acquired Companies are in possession
of and have good title to, or have valid leasehold interests in or valid rights
under contract to use, all tangible personal property used in the conduct of the
Business, including all tangible personal property reflected on the Latest
Balance Sheet and tangible personal property acquired since December 31, 2001
other than property disposed of since such date in the Ordinary Course of
Business. All such tangible personal property is free and clear of all Liens and
Encumbrances, other than Permitted Encumbrances, and is in good working order
and condition, ordinary wear and tear excepted, and its use complies in all
material respects with all applicable laws.
3.23 MEDICARE, MEDICAID. Patient Care Medical Services, Inc., (New Jersey)
Priority Care, Inc. (Connecticut), Patient Care Medical Services, Inc. (Ohio),
Patient Care, Inc.-Illinois Dell Healthcare, Inc., and Georgia Nursing Services,
Inc. (the "Participating Companies") are the only Acquired Companies eligible to
receive payment without restriction under Title XVIII of the Social Security Act
("Medicare") and Title XIX of the Social Security Act ("Medicaid') and are each
a "provider" with valid and current provider agreements and with one or more
provider numbers with the federal Medicare and applicable state Medicaid and
successor programs (the "Government Programs") through intermediaries. A true
and correct copy of each such agreement has been previously delivered to
Purchaser by Seller and is listed in the CONTRACTS SCHEDULE. Each of the
Participating Companies is in compliance with the conditions of participation
for the Government Programs in all material respects. There is not pending, nor
to Seller's knowledge threatened, any proceeding or investigation under the
Government Programs involving Seller or any of the Participating Companies.
Seller has previously delivered to Purchaser true, correct and complete copies
of the Participating Companies' most recent Medicare and Medicaid certification
survey reports, including any statements of deficiencies and plans of
correction, and any statements of deficiencies against the Participating
Companies in the last three (3) years, and the Participating Companies'
corrective action plans related thereto. Seller has taken all necessary steps to
correct all deficiencies, all of which have been accepted by such Government
Program and a description of any uncorrected deficiency is shown in the PERMITS
SCHEDULE. The most recent Medicare and Medicaid certification survey report did
not require expenditures or revenue reductions aggregating in excess of Ten
Thousand Dollars ($10,000) for each of the Participating Companies or $20,000 in
the aggregate for all Participating Companies in order to ensure continued
participation in the Medicare and Medicaid programs.
(a) The Participating Companies have timely filed, caused to be timely
filed and, as to reports due after the Closing, shall timely file, all cost
reports and other reports of every kind whatsoever that are required, by law, by
written or oral contracts, or otherwise, to have been filed or made with respect
to the purchase of services by third party payors, including but not limited to
Government Programs and other insurance carriers, and all such reports are or
will be complete and accurate when filed. The Participating Companies are and
have been in compliance with filing requirements with respect to required cost
reports of the Participating Companies, and such reports do not claim, and none
of the Participating Companies has received, payment or reimbursement in excess
of the amount provided or allowed by applicable law or any applicable agreement,
except where excess reimbursement was noted on the cost report. True and correct
copies
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of all such reports for the three (3) most recent fiscal years of the
Participating Companies have been made available to Purchaser. There are no
claims, actions or appeals pending before any commission, board or agency,
including any fiscal intermediary or carrier, federal, state or local
governmental body or entity, or the CMS (or its predecessor, HCFA), with respect
to any Government Program cost reports or claims filed on behalf of the
Participating Companies, on or before the date of this Agreement. The MEDICARE
AND MEDICAID COST REPORT SCHEDULE indicates which of such cost reports have been
audited by the fiscal intermediary and finally settled, and contains a brief
description of any and all notices of program reimbursement, proposed or pending
audit adjustments, disallowances, appeals of disallowances, and any and all
other unresolved claims or disputes, in connection with any audit, review or
inquiry with respect to such cost reports. There are no facts or circumstances
which may reasonably be expected to give rise to any material disallowance under
any such cost reports. No validation review or program integrity review related
to the operation of the Participating Companies, or the consummation of the
transactions contemplated by this Agreement, or related to any of the Acquired
Companies, has been conducted by any commission, board, or agency in connection
with the Government Programs, and to Seller's knowledge, no such reviews are
scheduled, pending or threatened against or affecting the Participating
Companies or the consummation of the transaction contemplated by this Agreement.
None of the Acquired Companies is a party to any Corporate Integrity Agreement
or any similar governmentally required and/or supervised compliance plan and no
Acquired Company is or has been in discussions to enter into such an agreement
or plan and, to Seller's Knowledge, no Acquired Company has been threatened with
the imposition of any such agreement or plan as a condition to continued
participation in any Government Program.
(b) All billing practices of the Acquired Companies to all third party
payors, including the Government Programs and private insurance companies, have
been in compliance with all applicable laws, regulations and policies of such
third party payors and Government Programs, and neither Seller nor the Acquired
Companies have billed or received any payment or reimbursement in excess of
amounts allowed by law.
(c) No employee or independent contractor of Seller or any of its
affiliates (whether an individual or entity) or of any Acquired Company, has
been excluded from participating in any federal health care program (as defined
in 42 U.S.C. (S)1320a-7b(f)) and none of the Acquired Companies, or Seller's or
the Acquired Companies' or any of their affiliates' officers, directors, agents
or managing employees (as such term is defined in 42 U.S.C. (S)1320a-5(b), has
been excluded from Medicare or any federal health care program (as defined in 42
U.S.C. (S)1320a-7b(f)) or been subject to sanction pursuant to 42 U.S.C.
(S)1320a-7a or 1320a-8 or been convicted of a crime described at 42 U.S.C.
(S)1320a-7b.
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3.24 COMPLIANCE WITH HEALTHCARE LAWS.
(a) Seller and the Acquired Companies are in full compliance in
all respects with all applicable laws, rules, regulations (including, without
limitation, applicable health care laws, rules and regulations, including those
relating to the payment or receipt of illegal remuneration, including 42 U.S.C.
(S)1320a-7b(b) (the Medicare/Medicaid anti-kickback statute), 42 U.S.C. 1395nn
(the Stark Statute), 42 U.S.C. (S)1320a-7a, 42 U.S.C. (S)1320a-7b(a), 42 U.S.C.
(S)1320a-7b(c) and any applicable state laws governing kickbacks and matters
similar to such federal statutes (collectively, the "Fraud and Abuse Laws"),
ordinances or orders of any court or federal, state, county, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, environmental protection laws and regulations,
civil rights laws, fire codes, confidentiality laws, record and document
maintenance laws, zoning ordinances, building, occupancy and use restrictions,
and public and occupational health and safety codes), and Seller has not
received any notice, written or otherwise, of noncompliance with respect
thereto. All financial records, patient records and other documents required to
be maintained by the Acquired Companies have been continuously maintained for a
period of at least seven (7) years from the date of creation of such document.
(b) Neither Seller (solely with respect to the Acquired
Companies) nor any Acquired Company, nor any partner, member, director, officer
or employee of Seller or any Acquired Company, nor any agent acting on behalf of
or for the benefit of any of the foregoing, has directly or indirectly (i)
offered, paid or received any remuneration, in cash or in kind, to, or made any
financial arrangements with, any past, present or potential customers, past or
present suppliers, patients, medical staff members, contractors or third party
payors of Seller, or any Acquired Company in order to obtain business or
payments from such persons other than in the ordinary course of business; (ii)
given or agreed to give, received or agreed to receive, or is aware that there
has been made or that there is any agreement to make, any gift or gratuitous
payment of any kind, nature or description (whether in money, property or
services) to any customer or potential customer, supplier or potential supplier,
contractor, third party payor or any other person; (iii) made or agreed to make,
or is aware that there has been made or that there is any agreement to make, any
contribution, payment or gift of funds or property to, or for the private use
of, any governmental official, employee or agent where either the contribution,
payment or gift or the purpose of such contribution, payment or gift is or was
illegal under the laws of the United States or under the laws of any state or
local governmental entity having jurisdiction over such payment, contribution or
gift; (iv) established or maintained any material unrecorded fund or asset for
any purpose or made any misleading, false or artificial entries on any of its
books or records for any reason; or (v) made, or agreed to make, or is aware
that there has been made or that there is any agreement to make, any payment to
any person with the intention or understanding that any part of such payment
would be used for any purpose other than that described in the documents
supporting such payment.
(c) Neither Seller nor any Acquired Company, nor any partner,
member, director, officer or employee of Seller or any of its affiliates, is a
party to any
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contract, lease agreement or other arrangement (including but not limited to any
joint venture or consulting agreement) related to Seller or any Acquired Company
with any physician, health care facility, hospital, nursing facility, assisted
living facility or other Person who is in a position to make or influence
referrals to or otherwise generate business for Seller with respect to any of
the Acquired Companies, to provide services, lease space, lease equipment or
engage in any other venture or activity (collectively, "Referral Source
Agreements") that is prohibited by law.
3.25 HIPAA. HIPAA SCHEDULE lists and describes all plans and other
efforts of Seller solely with respect to the Acquired Companies to comply with
the Health Insurance Portability and Accountability Act ("HIPAA") including the
final regulations promulgated thereunder, whether such plans and efforts have
been put in place or are in process. HIPAA SCHEDULE should include but not be
limited to any privacy compliance plan of Seller in place or in development, and
any plans, analyses or budgets relating to information systems including but not
limited to necessary purchases, upgrades or modifications to effect HIPAA
compliance.
3.26 ACCOUNTS RECEIVABLE. All accounts receivable of each Acquired
Company are reflected properly on such Acquired Company's books and records, are
valid receivables and, to Sellers' Knowledge, are subject to no setoffs,
counterclaims, or Liens or Encumbrances, are current and collectible, and should
be collected in accordance with their terms at their recorded amounts (subject
only to the reserve for bad debts, as set forth on the Latest Balance Sheet as
adjusted for the passage of time through the Closing Date), in accordance with
the past custom practice and practice of such Acquired Company.
3.27 LITIGATION ACCRUAL. As of December 31, 2001 the Acquired Companies
had accrued the amount of $1,806,500 (the "LITIGATION ACCRUAL") on their
December 31, 2001 Balance Sheet to cover future payments for claims incurred
prior thereto under their primary insurance casualty program. Seller agrees
that, in the event the Acquired Companies are required to make payments,
including claims, settlements, deductibles, and expenses, with respect to any
insured lawsuit or claim, arising out of, in connection with or relating to,
events occurring prior to the Closing Date that exceed, in the aggregate, the
Litigation Accrual in effect on such date, Seller will reimburse Purchaser to
the extent of such excess first out of the Threshold Amount (to the extent
available) and then directly from Seller within ten (10) days of receipt of
written submittal by Purchaser.
3.28 DISCLOSURE. None of the representations and warranties contained
in this Section 3 nor any statement made in any schedule, exhibit, certificate
or other document furnished to Purchaser contains, or will contain, any untrue
statement of a material fact or omit, or will omit, to state any material fact
necessary in order to make the statements and information contained in this
Section 3 not misleading. There is no fact within the Knowledge of Seller which
has not been disclosed herein or in writing by them to the Purchaser and which
materially adversely affects, or in the future is reasonably expected to
materially adversely affect the business, properties, assets or condition,
financial or otherwise of any Acquired Company.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as disclosed in the DISCLOSURE SCHEDULE, Purchaser represents
and warrants to Seller as follows:
4.1 ORGANIZATION AND CORPORATE POWER. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all necessary corporate power and authority to enter into
the Transaction Documents to which Purchaser is a party and to perform its
obligations hereunder and thereunder.
4.2 AUTHORIZATION OF TRANSACTION. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby to which
Purchaser is a party have been duly and validly authorized by all requisite
corporate or organizational action on the part of Purchaser, and no other
corporate or organizational proceedings on their part are necessary to authorize
the execution, delivery or performance of this Agreement. This Agreement
constitutes, and each of the other agreements contemplated hereby to which
Purchaser is a party shall when executed constitute, a valid and binding
obligation of Purchaser, enforceable in accordance with their terms.
4.3 NO VIOLATION. Purchaser is not subject to or obligated under its
certificate of incorporation or by-laws (or equivalent governing documents) or
any applicable material law, rule or regulation of any governmental authority,
or any agreement or instrument, or any license, franchise or permit, or any
order, writ, injunction or decree, that would be breached or violated by
Purchaser's execution, delivery or performance of the Transaction Documents to
which Purchaser is a party.
4.4 GOVERNMENTAL AUTHORITIES AND CONSENTS. Purchaser is not required to
submit any notice, report or other filing (except in connection with the
applicable requirements of the HSR Act) with any governmental authority in
connection with the execution or delivery by Purchaser of the Transaction
Documents to which Purchaser is a party or the consummation of the transactions
contemplated hereby or thereby. No consent, approval or authorization of any
governmental or regulatory authority (except in connection with the applicable
requirements of the HSR Act) or any other party or Person is required to be
obtained by Purchaser in connection with its execution, delivery and performance
of the Transaction Documents to which Purchaser is a party or the transactions
contemplated hereby or thereby.
4.5 LITIGATION. There are no material actions, suits, proceedings or
orders pending or, to Purchaser's Knowledge, threatened against or affecting
Purchaser at law or in equity, or before or by any federal, state, municipal or
other governmental court, department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that would adversely affect Purchaser's
ability to perform its obligations under the Transaction Documents to which
Purchaser is a party or the consummation of the transactions contemplated hereby
or thereby.
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4.6 BROKERS. Neither Purchaser nor any of Purchaser's Affiliates has
retained any broker or finder in connection with any of the transactions
contemplated by this Agreement, and neither Purchaser nor any of Purchaser's
Affiliates has incurred or agreed to pay, or taken any other action that would
entitle any Person to receive, any brokerage fee, finder's fee or other similar
fee or commission with respect to any of the transactions contemplated by this
Agreement.
SECTION 5. PRE-CLOSING COVENANTS OF SELLER
Seller agrees that, between the date of this Agreement and the
Closing Date:
5.1 AFFIRMATIVE COVENANTS OF SELLER. Seller covenants and agrees that,
from the date of this Agreement and until the Closing or the date, if any, on
which this Agreement is earlier terminated pursuant to Section 9.1 hereof,
unless Purchaser otherwise consents in writing Seller shall cause each of the
Acquired Companies to:
(a) conduct the business and operations of the Acquired Companies
only in the Ordinary Course of Business;
(b) keep in full force and effect the corporate existence of the
Acquired Companies and all rights, franchises and Proprietary Rights relating or
pertaining to the Acquired Companies and to cause its current insurance (or
reinsurance) policies not to be modified, canceled or terminated or any of the
coverage thereunder to lapse other than in the Ordinary Course of Business and
consistent with past practices.
(c) carry on the business of the Acquired Companies in the Ordinary
Course of Business and to keep the business organizations and properties of the
Acquired Companies intact in the Ordinary Course of Business, including business
operations, physical facilities, working conditions and employees and
relationships with lessors, licensors, suppliers and customers and others having
business relations with it;
(d) maintain the assets of the Acquired Companies in ordinary
repair, order and condition (normal wear and tear excepted) consistent with
historical needs, replace in accordance with reasonable business practices its
inoperable, worn out or obsolete assets with assets of good quality consistent
with prudent practices and current needs and, in the event of a casualty, loss
or damage to any of such assets or properties prior to the Closing Date in
excess of $10,000 in the aggregate (whether or not such casualty, loss or damage
is covered by insurance), either repair or replace such damaged property or use
the proceeds of such insurance in such other manner as mutually agreed upon by
Seller and Purchaser;
(e) encourage all employees of the Acquired Companies to continue
their employment with the Acquired Companies or Purchaser or its Subsidiaries
after the Closing;
(f) maintain the books, accounts and records of the Acquired
Companies in accordance with past custom and practice as used in the preparation
of the Financial Statements;
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(g) cooperate with Purchaser and use reasonable best efforts to
cause the conditions to Purchaser's obligations to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all Required Approvals necessary to consummate the transactions
contemplated hereby (including, without limitation, all approvals under the HSR
Act);
(h) maintain the existence of and protect all Proprietary Rights
used by the Acquired Companies;
(i) maintain the existence of and protect all of governmental
permits, licenses, approvals and other authorizations of the Acquired Companies;
(j) comply with all applicable laws, ordinances, and regulations
in the operation of the Acquired Companies and promptly following receipt
thereof, give Purchaser copies of any notice received from any governmental or
regulatory authority or other Person alleging violation thereof; and
(k) cooperate with Purchaser in its reasonable investigation of
the business, assets and properties of the Acquired Companies and permit
Purchaser and its employees, agents, accounting, legal and other authorized
representatives, upon reasonable notice and at reasonable hours, to discuss the
affairs, finances and accounts of any of the Acquired Companies with the
officers, partners, key employees and independent accountants of the Acquired
Companies.
5.2 NEGATIVE COVENANTS OF SELLER. Seller covenants and agrees that,
from the date of this Agreement and until the Closing or the date, if any, on
which this Agreement is earlier terminated pursuant to Section 9.1 hereof unless
Purchaser otherwise consents in writing Seller shall cause each of the Acquired
Companies to not:
(a) (i) make any loans, enter into any non-arm's length
transaction with any Insider, (ii) make or grant any increase in any Acquired
Company's employee's, officer's or consultant's compensation outside of the
Ordinary Course of Business, or (iii) adopt or modify any target performance
goals which would have the effect of increasing compensation specified in clause
(ii) above;
(b) enter into, modify, amend or terminate any (i) employment or
independent contractor agreement providing for the payment of severance or other
amounts upon early termination, expiration, or Change of Control; (ii) any other
contract, agreement or transaction, other than in the Ordinary Course of
Business and at arm's length, with any unaffiliated Person or any Insider or
waive, release or assign any material rights or claims thereunder; or (iii) any
Benefit Plan (except as required to comply with applicable laws and regulations
or pursuant to Section 7.11);
(c) cause any properties, assets, rights or interests related
primarily to the Acquired Companies prior to the date hereof to become primarily
used by or primarily related to Seller or any Subsidiary of Seller (excluding
the Acquired Companies);
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(d) amend the certificates or articles of incorporation or
by-laws (or other comparable corporate charter documents) of any of the Acquired
Companies or take any action with respect to any such amendment or any
reorganization, liquidation or dissolution of any such corporation;
(e) authorize, issue, sell or otherwise dispose of any shares of
Capital Stock of, securities convertible into shares of Capital Stock of,
ownership interests in or any option with respect to, any Acquired Company, or
modify or amend any right of any holder of outstanding shares of Capital Stock
of, ownership interest in or option with respect to any Acquired Company;
(f) directly or indirectly redeem, purchase or otherwise acquire
any Capital Stock of, ownership interest in or any option with respect to any
Acquired Company;
(g) acquire, lease or dispose of any tangible assets or
properties of any Acquired Company or the Business other than such amounts that
in the aggregate do not exceed $50,000;
(h) violate, breach or default under or take or fail to take any
action that (with or without notice or lapse of time or both) would constitute a
violation or breach of, or default under, any term or provision of any license
held or used by any Acquired Company or any contract to which any Acquired
Company is a party or by which any of their respective assets and properties is
bound;
(i) (i) incur indebtedness of more than $20,000 or (ii)
voluntarily purchase, cancel, prepay or otherwise provide for a complete or
partial discharge in advance of a scheduled payment date with respect to, or
waive any right of an Acquired Company under, any indebtedness of or owing to
any Acquired Company (in either case other than indebtedness of any Acquired
Company owing to any Acquired Company);
(j) enter into change of control, severance agreements or similar
arrangements;
(k) split, combine or reclassify any of shares of Capital Stock
of any Acquired Company or issue or authorize the issuance of any other
securities in respect of, in lieu of, or in substitution for such shares of
Capital Stock of any Acquired Company;
(l) acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any Person;
(m) make any payments outside of the Ordinary Course of Business;
(n) except as required by GAAP, make any change in accounting
methods, principles or practices;
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(o) settle any pending or threatened claim, action or proceeding,
other than insured matters, brought by any Person (other than full and
unconditional settlements which do not admit liability and only require payments
of less than $17,500);
(p) enter into any agreement to lease real property; or
(q) agree in writing or otherwise take any of the actions
described in Section 5.2.
5.3 RESERVED.
5.4 ACCESS. Subject to the provisions of the Confidentiality
Agreement and Section 6, Seller shall, after receiving advance notice from
Purchaser, give Purchaser reasonable access (during normal business hours) to
the books, records, properties, facilities and contracts of the Acquired
Companies for the purpose of enabling Purchaser to further investigate and
inspect, at Purchaser's sole expense, the business, properties, facilities,
financial condition and prospects, operations and legal affairs of the Acquired
Companies.
5.5 CONDITIONS. Seller shall use its best efforts to ensure that the
conditions set forth in Section 7 and Section 8.3 are satisfied on a timely
basis.
5.6 COVENANTS COVERING COMPETING TRANSACTIONS FOR THE ACQUIRED
COMPANIES; RELATED MATTERS.
(a) From the date hereof until the termination of this Agreement,
Seller (and its Affiliates) will not, and Seller (and its Affiliates) will
ensure that their respective officers, directors, employees, investment bankers,
attorneys, accountants and other agents do not, directly or indirectly: (i)
initiate, solicit or encourage, or take any action to facilitate any inquiries
or the making of, any offer or PROPOSAL (as defined below) which constitutes or
is reasonably likely to lead to any PROPOSAL, or (ii) engage in negotiations or
discussions with, or provide any non-public information or data concerning the
Acquired Companies or the Business to, any Person (other than Purchaser or any
of its Affiliates or representatives) relating to any PROPOSAL whether made
before or after the date of this Agreement. Seller may not withdraw, qualify or
modify, or propose to withdraw, qualify or modify, its position with respect to
this Agreement and the transactions contemplated hereby or approve or recommend,
or propose to approve or recommend any PROPOSAL, or enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
with respect to any PROPOSAL. Seller agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any PROPOSAL INTEREST (as
defined below). Seller agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 5.6. At any time prior to the earlier
of the Closing and the termination of this Agreement, Seller shall notify
Purchaser as promptly as practicable, and in any event not later than the next
business day, of any inquiries, expressions of interest, requests for
information, PROPOSALS or offers received by Seller
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or any of Seller's representatives relating to a PROPOSAL (a "PROPOSAL
INTEREST") indicating, in connection with such notice, the name of the Person
indicating such PROPOSAL Interest and the material terms and conditions of any
PROPOSALS or offers.
(b) As used in this Agreement, "PROPOSAL" shall mean (1) any
proposal for a merger, consolidation or other business combination concerning
the Acquired Companies or Seller, (2) any proposal or offer to acquire in any
manner, directly or indirectly, any part of the assets or Capital Stock of any
or all of the Acquired Companies or Seller, and (3) any proposal or offer with
respect to any recapitalization or restructuring concerning either of the
Acquired Companies or Seller or any proposal or offer with respect to any other
transaction similar to any of the foregoing relating to any of the Acquired
Companies or Seller;
(c) Neither Seller's Board of Directors nor any committee thereof
shall (i) approve or recommend, or propose to approve or recommend, a Proposal
or (ii) cause Seller or its Affiliates to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement with
respect to a Proposal.
5.7 INTERCOMPANY ACCOUNTS. Immediately prior to the Closing, Seller
shall cause: (i) all intercompany accounts (including liabilities of the
Acquired Companies to the Seller) that exist immediately prior to the Closing
between any Acquired Company, on the one hand, and Seller or any of its
subsidiaries on the other hand; and (ii) at the request of Purchaser, any
intercompany accounts between the Acquired Companies that exist immediately
prior to the Closing, to be canceled, contributed and/or liquidated on terms
reasonably satisfactory to Purchaser without any post-Closing payment or
obligation on the part of Seller or its Subsidiaries and without any cost,
liability, expense or obligation on the part of the Acquired Companies following
the Closing Date.
5.8 HART-SCOTT-RODINO ACT AND OTHER RELATED GOVERNMENTAL APPROVALS.
Seller shall timely file the "Premerger Notification Report" and other filings
and notices required to be made by Seller pursuant to the Antitrust Improvements
Act (the "HSR Act"), and pursuant to any applicable state laws, as a result of
the transactions contemplated by this Agreement. All such notices, filings and
reports to be filed or submitted by Seller as a result of the transactions
contemplated by this Agreement shall be in a form prepared or approved by
Purchaser. Seller shall further cooperate with Purchaser in the prompt
preparation of any filings required by Purchaser under such laws. If the Federal
Trade Commission or United States Department of Justice challenges, objects to,
prohibits, enjoins or fails to provide any consents or approvals required for
the sale of the ACQUIRED STOCK, or any portion thereof, by Seller to Purchaser,
then Purchaser may elect, in its sole discretion, to appeal such objection,
prohibition or injunction, and Seller shall assist Purchaser with such
opposition, notwithstanding any other provision herein to the contrary. Seller
and Purchaser shall each bear one-half of the aggregate costs, expenses and fees
associated with any such appeal. In that event, the Closing Date shall be
extended to such time as all appeals that may be taken by Purchaser of such
actions shall have been successfully completed. In the event of a final,
nonappealable adjudication by a court of competent jurisdiction enjoining the
transactions contemplated by this Agreement under the antitrust laws of the
United States
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or any state with jurisdiction over the properties or business of any of the
Acquired Companies or, in the event Purchaser elects not to appeal such
injunction or other governmental objection or prohibition, then this Agreement
may be cancelled by Purchaser at its sole option by giving written notice to
Seller, and both parties shall thereupon be released from any and all
obligations and liability related to this Agreement.
SECTION 6. PRE-CLOSING COVENANTS OF PURCHASER
6.1 COVENANTS OF PURCHASER. Purchaser agrees that, between the date of
this Agreement and the Closing Date, Purchaser shall:
(a) cooperate with Seller and use its reasonable best efforts to
cause the conditions to Seller's obligation to close to be satisfied (including,
without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases and terminations);
(b) cooperate with Seller and use reasonable best efforts to
obtain all Required Approvals necessary to consummate the transactions
contemplated hereby (including, without limitation, all approvals under the HSR
Act); and
(c) shall not interfere in any manner with the business or
operations of the Acquired Companies or with the performance of any of the
Acquired Companies' employees.
6.2 CONDITIONS. Purchaser shall use its best efforts to attempt to
ensure that the conditions set forth in Section 7 and Section 8.3 are satisfied
on a timely basis.
SECTION 7. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE
The obligation of Purchaser to purchase the Acquired Stock and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Closing Date, of the following
conditions (any of which may be waived by Purchaser in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties set forth in Section 3 hereof shall be true and correct in all
respects as of the Closing Date as though made on and as of such date except to
the extent that through the passage of time or occurrence of events occurring in
the Ordinary Course of Business such representations and warranties are altered
in a manner not adverse to the Business or Purchaser.
7.2 PERFORMANCE. Seller shall have performed and complied with, in
all material respects, all obligations, covenants and agreements required by
this Agreement to be performed by Seller on or before the Closing Date.
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7.3 NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of the Audited Statements with respect to the Acquired
Companies (taken as a whole), their properties, financial condition or
prospects.
7.4 REQUIRED APPROVALS. The applicable waiting periods, if any, under
the HSR Act shall have expired or been terminated and any other governmental
filings, authorizations and approvals that are required for the consummation of
the Closing including, but not limited to, state licensure, Medicaid and
Medicare change of ownership approval (the "REQUIRED APPROVALS"), shall have
been obtained. Further, Purchaser shall have received approvals, consents or
commitments from Medicare, Medicaid, other third party payors and the fiscal
intermediary of the Participating Companies for its continued participation in
each program and providing that there shall be no material interruptions in
program payments. Notwithstanding the foregoing, in the event Purchaser
determines in its sole discretion to obtain a new provider number and a new
provider contract with Medicare (as opposed to taking an assignment of Seller's
provider number and/or contract), it shall be a condition to Purchaser's
obligation to consummate the transactions contemplated hereby that Purchaser
shall have been granted such new provider number and entered into such new
provider contract with Medicare with respect to appropriate Participating
Companies.
7.5 NO INJUNCTION. There shall not be in effect, as of the Closing
Date, any (i) injunction or binding order of any court or other tribunal having
jurisdiction over Seller or Purchaser that prohibits or makes illegal the
purchase of the Acquired Stock by Purchaser and there shall not be pending or
threatened on the Closing Date any action, suit or proceeding by any
governmental or regulatory authority which could reasonably be expected to
result in the issuance of any such order, or (ii) law or regulation that is
enacted or adopted in final form, that prohibits or makes illegal the purchase
of the Acquired Stock by Purchaser.
7.6 CLOSING DELIVERABLES. On or prior to the Closing Date, Seller
shall have delivered to Purchaser all of the following:
(a) a certificate from Seller in a form reasonably satisfactory to
Purchaser, dated the Closing Date, stating that the preconditions specified in
Sections 7.1, 7.2 and 7.3 have been satisfied;
(b) copies of resolutions, certified by the Secretary of Seller,
of Seller's board of directors approving this Agreement and the transactions
contemplated by this Agreement;
(c) certificates of the Secretary of State of the State of
Delaware and all other states where any of the Acquired Companies are qualified
to do business providing that each such Acquired Company is in good standing;
(d) a copy of the certificate of incorporation or equivalent
governing document for each Acquired Company, certified by the appropriate
authority in the jurisdiction in which such entity was incorporated or
organized;
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(e) a copy of the bylaws or equivalent governing document for
each Acquired Company, certified by an officer of such Acquired Company;
(f) all stock certificates and other instruments evidencing
ownership of each of the Acquired Companies;
(g) all minutes books, stock books, ledgers and registers,
corporate seals and other corporate records relating to the organization,
ownership and maintenance of each Acquired Company;
(h) a counterpart executed copy of an assignment agreement in
substantially the form attached hereto as EXHIBIT B of Seller's or the Acquired
Companies' indemnification rights related to the Acquired Companies under the
Agreements listed in Exhibit B;
(i) resignation letters delivered by members of the Board of
Directors and officers of each Acquired Company, effective as of the Closing;
(j) a legal opinion (subject to certain qualifications and
assumptions) of counsel to Seller in the form attached as Exhibit C;
(k) audited financial statements for each of the Acquired
Companies for 1999, 2000 and 2001 together with the period commencing January 1,
2002 through the most recent quarter ending prior to the Closing Date;
(l) Amendments to the existing employment agreements between
Patient Care, Inc. and Elaine Boardman and Louis Tamburro, respectively,
providing for their continued employment after the Closing Date and containing
such provisions as Purchaser and the above employees shall mutually agree upon,
including, but not limited to, extension of the term thereof; and
(m) such other documents or instruments as Purchaser may
reasonably request to effect the transactions contemplated hereby.
7.7 FINANCING. Purchaser shall have received debt and/or equity
commitments sufficient to fund the Purchase Price and consummate the
transactions contemplated hereby on or prior to June 30, 2002.
7.8 NEW JERSEY PROPERTIES. For each property owned, leased or
operated by any of the Acquired Companies in New Jersey, Seller shall have
secured from the New Jersey Department of Environmental Protection ("NJDEP") and
provided to Purchaser either (i) a Letter of Non-Applicability under New
Jersey's Industrial Site Recovery Act, N.J.S.A. 12:K-6 et seq. ("ISRA"), or (ii)
if it is determined that the transactions contemplated at Closing do trigger
ISRA, for each of those properties for which ISRA is triggered, a written
approval by the NJDEP of a negative declaration affidavit, which affidavit had
been submitted by Seller to the NJDEP. Seller shall provide Purchaser with
copies of all submissions to, and any correspondence received from, NJDEP
regarding ISRA.
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7.9 DUE DILIGENCE. Purchaser shall have performed a comprehensive
business, legal (including fraud and abuse and Stark) and financial due
diligence review of the Acquired Companies, and shall not, on or prior to June
1, 2002, have given written notice to Seller that it has determined, in its sole
discretion, that the Acquired Companies are not acceptable to Purchaser.
7.10 PRIORITY CARE SETTLEMENT. Seller shall have settled to Purchaser's
satisfaction any pending claims against the Acquired Companies referenced in the
"Priority Care Schedule" attached hereto.
7.11 BENEFIT PLAN. To the extent directed by Purchaser prior to the
Closing Date, Seller shall have terminated, modified, or otherwise amended the
Benefit Plans in such manner as Purchaser shall have directed in writing thirty
(30) days prior to the Closing Date. Any costs or expenses associated with such
actions shall be borne by Seller.
Any condition specified in this Section 7 may be waived by
Purchaser in its sole discretion; PROVIDED that no such waiver shall be
effective against Purchaser unless it is set forth in a writing executed by
Purchaser.
SECTION 8. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE
The obligation of Seller to sell the Acquired Stock to Purchaser
and otherwise consummate the transactions that are to be consummated at the
Closing is subject to the satisfaction, as of the Closing Date, of the following
conditions (any of which may be waived by Seller in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Purchaser set forth in Section 4 shall be accurate in all
material respects as of the Closing Date, as though made on and as of the
Closing Date.
8.2 PERFORMANCE. Purchaser shall have performed and complied with, in
all material respects, all obligations, covenants and agreements required by
this Agreement to be performed by Purchaser on or before the Closing Date.
8.3 REQUIRED APPROVALS. The Required Approvals shall have been
obtained.
8.4 NO INJUNCTION. There shall not be in effect, at the Closing Date,
any (i) injunction or binding order of any court or other tribunal having
jurisdiction over Seller or Purchaser that prohibits or makes illegal the sale
of the Acquired Stock by Seller and there shall not be pending or threatened on
the Closing Date any action, suit or proceeding by any governmental or
regulatory authority which could reasonably be expected to result in the
issuance of any such order, or (ii) or law or regulation that is enacted or
adopted in final form, that prohibits or makes illegal the sale of the Acquired
Stock by Seller.
8.5 CLOSING DELIVERABLES. On or prior to the Closing Date, Purchaser
shall have delivered to Seller all of the following:
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(a) a certificate from Purchaser in a form reasonably
satisfactory to Seller, dated the Closing Date, stating that the preconditions
specified in Sections 8.1 and 8.2 have been satisfied;
(b) copies of resolutions, certified by the Secretary of
Purchaser, of Purchaser's board of directors approving this Agreement and the
transactions contemplated by this Agreement;
(c) a legal opinion (subject to certain qualifications and
assumptions) of counsel to Purchaser that such counsel is of the opinion that
the Transaction Documents have been duly authorized by Purchaser and are
enforceable against Purchaser in accordance with applicable law;
(d) such other documents or instruments as Seller may reasonably
request to effect the transactions contemplated hereby.
Any condition specified in this Section 8 may be waived by Seller
in its sole discretion; PROVIDED that no such waiver shall be effective unless
it is set forth in a writing executed by Seller.
8.6 NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of the Audited Statements with respect to the Acquired
Companies (taken as a whole), their properties, financial conditions or
prospects.
SECTION 9. TERMINATION OF AGREEMENT
9.1 RIGHT TO TERMINATE AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written agreement of Seller and Purchaser;
(b) by Seller or Purchaser, if the Closing has not occurred on or
prior to eighteen (18) months from the date of this Agreement; PROVIDED,
HOWEVER, that neither Purchaser nor Seller shall be entitled to terminate this
Agreement pursuant to this Section 9.1(b) if such party's failure to fulfill any
of its obligations in any material respect under this Agreement has prevented
the consummation of the transactions contemplated hereby at or prior to such
time;
(c) by Seller or Purchaser, if there shall be in effect any (i)
final, non-appealable injunction or binding order of any court or other tribunal
having jurisdiction over Seller or Purchaser that prohibits or makes illegal the
purchase of the Acquired Stock by Purchaser or (ii) law or regulation that is
enacted or adopted in final form, that prohibits or makes illegal the purchase
of the Acquired Stock by Purchaser;
(d) by Purchaser, upon breach of any material representation,
warranty or covenant on the part of Seller set forth in this Agreement, or if
any material representation or warranty of Seller shall have become untrue
excluding changes in the Business of the Acquired Companies occurring in the
Ordinary Course of Business
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provided such changes are not adverse to the Business or the Purchaser,
in either case such that the conditions set forth in Section 7.1 or 7.2 would
not be satisfied (a "TERMINATING SELLER BREACH"); PROVIDED, HOWEVER, that, if
such Terminating Seller Breach is curable by Seller through exercise of all
reasonable efforts and for so long as Seller continues to exercise such
reasonable efforts, Purchaser may not terminate this Agreement under this
Section 9.1(d) for a period of thirty (30) days after written notice; provided
Purchaser may terminate before the expiry of such thirty (30) days if during the
pendency thereof Purchaser's financing is terminated or an uncurable Material
Adverse Change occurs; or
(e) by Seller, upon breach of any material representation, warranty
or covenant on the part of Purchaser set forth in this Agreement, or if any
representation or warranty of Purchaser shall have become untrue, in either case
such that the conditions set forth in Section 8.1 or 8.2 would not be satisfied
(a "TERMINATING PURCHASER BREACH"); PROVIDED, HOWEVER, that, if such Terminating
Purchaser Breach is curable by Purchaser through exercise of all reasonable
efforts and for so long as Purchaser continues to exercise such reasonable
efforts, Seller may not terminate this Agreement under this Section 9.1(e) for a
period of thirty (30) days after written notice; and PROVIDED FURTHER that the
preceding proviso shall not in any event be deemed to extend any date set forth
in clause (b) of this Section 9.1.
Such right of termination shall be exercised by written notice of
termination given by the terminating party to the other party hereto in the
manner hereinafter provided.
9.2 EFFECT OF TERMINATION. (a) Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an
exclusive election of remedies. If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Sections 12.5 and the CONFIDENTIALITY
AGREEMENT will survive.
(b) Not in limitation of the foregoing, in the event of a termination
of this Agreement (a) by Purchaser, pursuant to the provisions of Section 9.1(d)
due to a material breach by Seller or the Acquired Companies (by action or
omission) of any provision of Sections 5.1 or 5.2 (other than Sections 5.1(j) or
5.2(h), or due to an intentional or grossly negligent breach by Seller or any
Acquired Company of Sections 5.1(j) or 5.2(h), which occurs since the date of
execution of this Agreement or (b) by Seller, other than pursuant to the
provisions of Sections 9.1(a), (b), (c) or (e), Purchaser shall be entitled (i)
to payment from Seller of an amount equal to the sum of (A) all out-of-pocket
fees, costs and expenses incurred by Purchaser in connection with this
Agreement, the negotiation or performance hereof, or any effort to consummate
any of the transactions contemplated hereby, plus (B) reasonable fees and
disbursements of counsel and court costs incurred by Purchaser in connection
with obtaining such payment, and (ii) in the event that on or prior to the date
which is one year from the date of termination of this Agreement there shall
occur any Change of Control Transaction (defined below), to payment from Seller
of an amount equal to the sum of (C) the positive difference, if any, between
$1,400,000 and the amount paid or payable by Seller pursuant to item (i) hereof,
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plus (D) reasonable fees and disbursements of counsel and court costs incurred
in connection with obtaining such payment. Purchaser shall not be entitled to
any of the above payments in the event of a termination of this Agreement on any
other grounds.
SECTION 10. INDEMNIFICATION RELATED MATTERS; TAXES
10.1 EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
representations and warranties set forth in this Agreement shall survive the
Closing and shall expire on the twenty-four month anniversary of the Closing
Date, provided, that the representations and warranties in Sections 3.7, 3.17,
3.23, and 3.24 on Taxes, Environmental Matters, Medicare and Medicaid and
Compliance With Healthcare Laws matters shall survive for the applicable statute
of limitations. All of the covenants set forth in this Agreement shall survive
the Closing in accordance with their respective terms.
10.2 INDEMNIFICATION BY SELLER.
(a) Except for (i) any claims for Damages under this Section 10.2
that properly constitute claims for Taxes under Section 10.3 (which claims shall
be governed exclusively by Section 10.3 hereof and not by this Section 10.2) and
(ii) any claims for Damages under this Section 10.2 that properly constitute
claims related to Third Party Reimbursement under Section 10.4 (which claims
shall be governed exclusively by Section 10.4 hereof and not by this Section
10.2), and (iii) any claims for Damages under this Section 10.2 that properly
constitute claims related to the Litigation Accrual under Section 3.27 (which
claims shall be exclusively governed by Section 3.27 and not this Section 10.2;
provided that (i) the Board of Mediators procedure set forth in Section
10.2(d)(iii) shall govern any dispute between Seller and Purchaser under Section
3.27 and (ii) Section 10.2(b) shall apply to the Litigation Accrual) and subject
to the provisions and limitations set forth in this Section 10.2, Seller shall
indemnify Purchaser and the Acquired Companies and their respective directors
and officers (each, an "INDEMNIFIED PARTY") against any Damages that an
Indemnified Party incurs as a result of any misrepresentation or breach of any
representation, warranty or covenant of Seller set forth in this Agreement.
(b) Without limiting the effect of any of the other limitations
set forth herein, Seller shall not be required to make any indemnification
payment under Section 10.2 hereof with respect to any breach of any of such
representations and warranties referenced in this Section 10.2, until the
cumulative amount of the Damages incurred by the Indemnified Parties as a result
of all such breaches of such representations and warranties exceeds the
THRESHOLD AMOUNT (defined below); at which point Seller shall be required to pay
the Damages incurred by the Indemnified Parties above the THRESHOLD AMOUNT. The
"THRESHOLD AMOUNT" shall be $100,000 and there shall be excluded from the
THRESHOLD AMOUNT (i) any and all Damages with respect to Taxes and Third Party
Reimbursement which shall be governed exclusively by Section 10.3 and Section
10.4, respectively. The parties agree that as to claims which are the subject of
Section 3.27, the Litigation Accrual shall have been exhausted prior to
utilization of the Threshold Amount as to such claims.
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(c) The total amount of the payments that Seller shall be required to
make under or in connection with Section 10.2 of this Agreement (including all
indemnification payments required to be made to the Indemnified Parties) shall
be limited in the aggregate to Thirty-Five Million Dollars ($35,000,000.00)
(d) All claims for indemnification by any Indemnified Party under
Section 10.2 will be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 10.2(a) is asserted against
or sought to be collected from such Indemnified Party by a Person other than
Seller (a "THIRD PARTY CLAIM"), the Indemnified Party shall deliver a Claim
Notice within sixty days to Seller. Seller will notify the Indemnified Party as
soon as practicable but in not more than twenty (20) days within the Dispute
Period whether Seller disputes its liability to the Indemnified Party under
Section 10.2, and whether Seller desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.
(A) If Seller notifies the Indemnified Party within the
Dispute Period that Seller desires to defend the Indemnified Party with respect
to the Third Party Claim pursuant to this Section 10.2(d), then Seller will have
the right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of Seller, such Third Party Claim by all
appropriate proceedings, which proceedings will be prosecuted by Seller to a
final conclusion or will be settled at the discretion of Seller (but only with
the consent of the Indemnified Party in the case of any settlement that provides
for any relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party will not be
indemnified in full pursuant to Section 10.2); PROVIDED, HOWEVER, that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to Seller's delivery of the notice referred to in the first
sentence of this clause (A), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be necessary
or appropriate to protect its interests; and PROVIDED FURTHER, that if requested
by Seller, the Indemnified Party will, at the sole cost and expense of Seller,
provide reasonable cooperation to Seller in contesting any Third Party Claim
that Seller elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by Seller
pursuant to this clause (A), and except as provided in the preceding sentence,
the Indemnified Party will bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party Claim at any time
if it irrevocably waives its right to indemnity under Section 10.2, with respect
to such Third Party Claim.
(B) If Seller fails to notify the Indemnified Party within the
Dispute Period that Seller desires to defend the Third Party Claim pursuant to
Section 10.2 or if Seller gives such notice but fails to prosecute or settle the
Third Party Claim, or if Seller fails to give any notice whatsoever within the
Dispute Period in respect of the foregoing, then the Indemnified Party will have
the right to defend, at the sole cost and expense of Seller, the Third Party
Claim by all commercially reasonable proceedings,
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which proceedings will be prosecuted by the Indemnified Party in a reasonable
manner and in good faith or will be settled at the discretion of the Indemnified
Party. The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; PROVIDED, HOWEVER,
that if requested by the Indemnified Party, Seller will, at its sole cost and
expense, provide reasonable cooperation to the Indemnified Party and its counsel
in contesting any Third Party Claim which the Indemnified Party is contesting.
Seller may participate in, but not control, any defense or settlement controlled
by the Indemnified Party pursuant to this clause (B), and Seller will bear its
own costs and expenses with respect to such participation.
(C) If Seller notifies the Indemnified Party that it does not
dispute its liability to the Indemnified Party with respect to the Third Party
Claim under Section 10.2, or fails to notify the Indemnified Party within the
Dispute Period that it disputes its liability to the Indemnified Party with
respect to such Third Party Claim, the Damages in the amount specified in the
Claim Notice will be conclusively deemed a liability of Seller under Section
10.2, and Seller shall pay the amount of such Damages to the Indemnified Party
on demand. If Seller has timely disputed its liability with respect to such
claim, Seller and the Indemnified Party will proceed in good faith to negotiate
a resolution of such dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved in accordance with
paragraph (iii) of this Section 10.2(d).
(ii) In the event any Indemnified Party should have a claim under Section
10.2 against Seller that does not involve a Third Party Claim, the Indemnified
Party shall deliver an Indemnity Notice within sixty (60) days to Seller. If
Seller notifies the Indemnified Party that it does not dispute the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period that Seller disputes the claim described in such
Indemnity Notice, the Damages in the amount specified in the Indemnity Notice
will be conclusively deemed a liability of Seller under Section 10.2, and Seller
shall pay the amount of such Damages to the Indemnified Party on demand. If
Seller has timely disputed its liability with respect to such claim, Seller and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved in accordance with paragraph (iii) of
this Section 10.2.
(iii) Any dispute arising under this Section 10.2 between the parties
hereto or between a party hereto and any Indemnified Party that is not a party
hereto which is not resolved by mutual agreement prior to the expiration of the
applicable Resolution Period, shall, upon the written request of one or more
parties to such dispute, be finally and conclusively determined by the decision
of a board of mediators consisting of three (3) members (hereinafter sometimes
called the "BOARD OF MEDIATORS") selected as hereinafter provided. Each of the
Indemnified Party and Seller shall, within ten (10) working days of receipt of
written request from the aforementioned, select one (1) member and the third
member shall be selected by mutual agreement of the other members, or if the
other members fail to reach agreement on a third member within ten (10) days
after their selection, such third member shall thereafter be selected by the
American Arbitration Association upon application made to it for such purpose by
the
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Indemnified Party. Each of the Indemnified Party and Seller shall submit to
the Board of Mediators the amount, if any, such party reasonably believes Seller
is required to pay the Indemnified Party in respect of a claim filed by the
Indemnified Party together with any supporting documentation necessary or
appropriate to calculate such amount. The Board of Mediators shall meet in
Boston, Massachusetts or such other place as a majority of the members of the
Board of Mediators determines more appropriate, and shall reach and render a
decision in writing (concurred in by a majority of the members of the Board of
Mediators) stating solely whether they agree with the amount submitted by Seller
or the amount submitted by the Indemnified Party. The Board of Mediators'
decision shall be limited to choosing between the two amounts presented and they
shall not be permitted to disagree with both amounts submitted nor shall they be
permitted to deviate from such amounts or propose an alternative resolution to
the dispute. In connection with rendering its decisions, the Board of Mediators
shall adopt and follow such rules and procedures as a majority of the members of
the Board of Mediators deems necessary or appropriate. In the event that one of
the parties to the dispute fails to appoint its member to the Board of Mediators
within such ten (10) working day period, then the sole member appointed by the
other party shall constitute the Board of Mediators for purposes of resolving
such dispute. The decision of the Board of Mediators shall be rendered no more
than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Mediators shall cause its written decision to be
delivered to the Indemnified Party and Seller. The decision of the Board of
Mediators shall be final, binding and conclusive on the Indemnified Party and
Seller and entitled to be enforced to the fullest extent permitted by law and
judgment on the award may be entered in any court of competent jurisdiction.
Except as may otherwise be agreed to in each instance by the parties, the
prevailing party in any dispute resolved under this Section 10.2(d) shall be
entitled to reimbursement from the losing party of reasonable fees and
disbursements of counsel, together with the fees and expenses of the Board of
Mediators.
10.3 TAX MATTERS
(a) From and after the Closing Date until 90 days after the
expiration date of the applicable statute of limitations, Seller agrees to
indemnify Purchaser and each Acquired Company against all Taxes: (i) relating to
any Acquired Company (including Taxes arising out of the matters described in
the LITIGATION SCHEDULE) for (A) any taxable period that ends on or before the
Closing Date or (B) the portion ending on the Closing Date of any taxable period
ending after the Closing Date; (ii) imposed on any Acquired Company under
Treasury Regulations section 1.1502-6 or any similar state, local or foreign
provision; PROVIDED, HOWEVER, that no indemnity shall be provided under this
Agreement for any Taxes resulting from any transaction of any Acquired Company
occurring after the Closing; or (iii) relating to the failure of Seller to be
the common parent of an affiliated group (as defined in Code section 338(h)(5))
of which the Acquired Companies, on and before the Closing Date, are members or
the failure of such affiliated group to file consolidated federal income tax
returns for all periods of the Acquired Companies ending on or before the
Closing Date. Any indemnity payment made hereunder by Seller to Purchaser shall,
in accordance with Section 10.3(k)(i), be treated as an adjustment to the
Purchase Price for Tax purposes; PROVIDED, HOWEVER, that to the extent all or
any portion of any indemnification payment made pursuant to this Section
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10.3 is finally determined by an applicable Tax authority to be treated other
than as an adjustment to the Purchase Price and the payment of such claim is
considered taxable income to Purchaser, then Seller shall also indemnify
Purchaser for the amount of Taxes to be paid on such claim.
(b) From and after the Closing Date until the expiration date of the
applicable statute of limitations, Purchaser and the Acquired Companies shall
indemnify Seller and its Affiliates against all Taxes resulting from any
transaction of any such Acquired Company occurring after the Closing. Any
indemnity payment made hereunder by Purchaser to Seller shall, in accordance
with Section 10.3(k)(i), be treated as an adjustment to the Purchase Price for
Tax purposes; PROVIDED, HOWEVER, that to the extent all or any portion of any
indemnification payment made pursuant to this Section 10.3 is finally determined
by an applicable Tax authority to be treated other than as an adjustment to the
Purchase Price and the payment of such claim is considered taxable income to
Seller, then Purchaser shall also indemnify Seller for the amount of Taxes to be
paid on such claim.
(c) Payment by the Tax indemnitor of any amount due under this Section
10.3 shall be made within ten days following written notice by the Tax
indemnitee that payment of such amounts to the appropriate Tax authority is due;
PROVIDED, that, the Tax indemnitor shall not be required to make any payment
earlier than five days before it is due to the appropriate Tax authority. The
provisions of the immediately preceding sentence shall apply with respect to a
payment of Tax that is due despite the fact that the Tax is being contested;
PROVIDED, HOWEVER, that the Tax indemnitor may post a bond or take any other
action (that does not have any cost to, or adverse effect on, the Tax
indemnitee) that prevents the payment of the Tax from becoming due.
(d) For purposes of this Agreement, in the case of any Tax that is
imposed on a periodic basis and is payable for a period that begins before the
Closing Date and ends after the Closing Date, the portion of such Taxes payable
for the portion of the period ending on the Closing Date shall be (i) in the
case of any Tax other than a Tax based upon or measured by income, the amount of
such Tax for the entire period multiplied by a fraction, the numerator of which
is the number of days in the period ending on the Closing Date and the
denominator of which is the number of days in the entire period and (ii) in the
case of any Tax based upon or measured by income, the amount which would be
payable if the taxable year ended on the Closing Date. Any credit that cannot be
prorated pursuant to clause (ii) of the immediately preceding sentence shall be
prorated based upon the fraction employed in clause (i) thereof.
(e) Seller may elect to direct, through Tax counsel of its own
choosing (subject to Purchaser's approval, which shall not be unreasonably
withheld) and at its own expense, the portion of any audit, claim for refund and
administrative or judicial proceeding involving any asserted liability with
respect to which indemnity may be sought under Section 10.3(a) (that portion of
any such audit, claim for refund or proceeding relating to an asserted Tax
liability is referred to herein as a "CONTEST" provided that Purchaser may
participate, at Purchaser's expense, in the Contest, and provided further that
Seller may not settle any such Contest without Purchaser's approval if the
effect of such
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settlement would be to increase Purchaser's Tax liability following the
Closing). If Seller elects to direct a Contest, it shall within 30 calendar days
of receipt of the notice of asserted Tax liability, notify Purchaser in writing
of its intent to do so and may not thereafter contest its obligation to
indemnify Purchaser with respect to the subject matter of such Contest (but only
with respect to such Taxes that are determined by the applicable Tax authority
in such Contest to be Taxes that relate to any date, period, or portion of a
period ending before the Closing Date), and Purchaser shall (i) cooperate and
shall cause each Acquired Company or its respective successor or successors to
cooperate, at Seller's expense, in each phase of such Contest and (ii) promptly
empower and shall cause the Acquired Companies or their respective successors
promptly to empower (by power of attorney and such other documentation as may be
reasonably necessary and appropriate) such representatives of Seller as it may
designate (subject to Purchaser's approval, which shall not be unreasonably
withheld) to represent Purchaser or the Acquired Companies or their respective
successors in the Contest insofar as the Contest involves an asserted Tax
liability for which Seller would be liable under Section 10.3(a). If Seller
elects not to direct the Contest, fails to notify Purchaser of its election as
herein provided or contests its obligation to indemnify under Section 10.3(a),
Purchaser or any Acquired Company may pay, compromise or contest such asserted
Tax liability; provided, however, that such payment, compromise or contest shall
in no event minimize or waive Seller's liability to Purchaser. In any event,
Seller may participate, at Seller's expense, in the Contest.
(f) Seller shall prepare and file in a timely fashion any Tax Returns
and schedules relating to the Acquired Companies for the period ending on or
before the Closing Date and shall pay or discharge any and all Taxes received on
such Tax Returns. Such Tax Returns and schedules shall be prepared on a basis
consistent with those prepared for prior Tax years unless a different treatment
of any item is required by an intervening change in law. Seller shall provide
Purchaser with a copy of such Tax Returns, and the documentation related
thereto, prior to their filing. Purchaser shall prepare or cause each Acquired
Company to prepare any Tax Return relating to such Acquired Company for any
period ending after the Closing Date.
(g) The parties agree to an allocation of the Purchase Price
attributable to Section 11.1 of Five Million Dollars ($5,000,000) for the
purposes of IRS reporting.
(h) All tax sharing agreements or similar agreements with respect to
or involving the Acquired Companies shall be terminated as of the Closing Date
and, after the Closing Date, the Acquired Companies shall not be bound thereby
or have any liability thereunder.
(i) Subject to the agreements in the other subsections of this Section
10.3, Seller and Purchaser will provide each other with such cooperation and
information as either of them reasonably may request of the other in filing any
Tax Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting any
audit or other proceeding in respect of Taxes. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules and related work papers and documents
relating to rulings or other determinations by taxing authorities. Each party
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shall make its employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. Each party will
retain all Tax Returns, schedules and work papers and all material records or
other documents relating to Tax matters of the Acquired Companies for the
taxable period first ending after the Closing Date and for all prior taxable
periods until the later of: (i) 90 days after the expiration of the statute of
limitations of the taxable periods to which such Tax Returns and other documents
relate, without regard to extensions except to the extent notified by the other
party in writing of such extensions for the respective Tax periods; or (ii)
eight years following the due date (without extension) for such Tax Returns. Any
information obtained under this Section 10.3(i) shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax
Returns or claims for refund or in conducting an audit or other proceeding.
(j) Purchaser agrees to assume liability for and to pay all sales,
use, transfer, stamp, stock transfer, real property transfer and similar Taxes
incurred as a result of the Closing Transactions contemplated hereby.
(k) The Parties agree as follows with respect to the following
miscellaneous Tax matters:
(i) The parties agree to treat all indemnification
payments made under this Agreement as adjustments to the Purchase Price for Tax
purposes;
(ii) Section 10.3 shall be the sole provision governing Tax
matters and indemnities therefor under this Agreement;
(iii) For purposes of this Section 10.3 all references to
Purchaser, Seller, and the Acquired Companies include successors; and
(iv) The covenants and agreements of the parties hereto
contained in this Section 10.3 shall survive the Closing and shall remain in
full force and effect until 90 days after the expiration of all statutes of
limitations with respect to any Taxes that would be indemnifiable by Seller
under Section 10.3(a) of this Agreement or by Purchaser under Section 10.3(b) of
this Agreement.
10.4 THIRD PARTY REIMBURSEMENT. Seller shall be responsible for every
liability of every kind or nature, known or unknown, to Medicare, Medicaid or
CHAMPUS resulting, arising from or relating to services rendered by the Acquired
Companies prior to the Closing Date, regardless of when any such claim is made,
including, without limitation, any amounts for any claims for reimbursement to
the Acquired Companies under Medicare, Medicaid or CHAMPUS for which it is
determined that Seller is not entitled, and for which Purchaser incurs liability
or expense. Seller shall pay the full amount owed to Purchaser pursuant to this
Section 10.4 within ten (10) days of receipt from Purchaser of evidence of such
liabilities. Seller shall retain the obligation to indemnify Purchaser for any
losses arising out of any such claim including any losses resulting from a good
faith settlement or compromise of any such claim by Seller. If it shall later be
determined that Seller has reimbursed Purchaser for liabilities pursuant to this
Section 10.4 that are
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subsequently credited or refunded to Purchaser by Medicare, Medicaid or CHAMPUS,
Purchaser shall pay to Seller such excess amounts within ten (10) days of
Purchaser's receipt of such credits or refunds. Seller and the Acquired
Companies shall promptly pay over to Purchaser all revenues, if any, received by
Seller from Medicare, Medicaid and CHAMPUS with respect to services performed by
Purchaser.
SECTION 11. SECTION 11. ADDITIONAL COVENANTS
11.1 COVENANT OF SELLER NOT TO COMPETE: NONSOLICITATION. In
consideration of the Purchase Price to be received under this Agreement and the
other obligations of Purchaser hereunder, Seller, for itself and its
subsidiaries, agrees that, for a period of three (3) years after the Closing
Date, it shall not directly or indirectly, do any of the following:
(a) own, manage, operate, control, act as consultant or advisor
to, render any services for, have any financial interest in, or otherwise be
connected in any manner with the ownership, management, operation or control of
any person, firm, partnership, corporation, or other entity that is engaged in
the home health industry (the "BUSINESS") anywhere within North America;
PROVIDED, HOWEVER, that the following items shall in no way breach, violate, or
otherwise in any manner conflict with the noncompetition covenant in the
preceding clause: (i) the ownership of not more than five percent (5%) of any
class of securities of any Person that engages in the Business and has a class
of securities registered pursuant to Section 12 of the Exchange Act and (ii)
Seller's current or future increased ownership interests in or management
positions held by Seller's employees in Vitas; provided; however, from and after
such time as Seller has the ability to elect through voting securities or
otherwise a majority of the Board of Directors of Vitas, Seller agrees that the
provision set forth in (ii) above shall be limited to its ownership interest and
management positions in Vitas as then operated; or
(b) solicit (i) the Business of any Person who to Seller's
Knowledge is a customer of the Acquired Companies or any Business from any
Person who was a customer or account of any of the Acquired Companies or (ii)
solicit either for employment or retention as consultant or contractor any
Person who was an employee, consultant or contractor of any of the Acquired
Companies at the time of the Closing or within the preceding one year period.
11.2 CONFIDENTIALITY. Seller shall (a) treat and hold as confidential
for a period of three (3) years following the Closing Date any information
concerning the business and affairs of the Acquired Companies that is not
available to the public as of the date of this Agreement, unless such
information becomes publicly available during such three-year period through no
breach of this covenant by Seller (the "CONFIDENTIAL INFORMATION"), (b) refrain
from using any of the CONFIDENTIAL INFORMATION, except in connection with this
Agreement, and (c) deliver promptly to Purchaser or destroy, at the request and
option of Purchaser, all tangible embodiments (and all copies) of the
CONFIDENTIAL INFORMATION which are in Seller's possession or under Seller's
control. In the event that Seller is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena,
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civil investigative demand or similar process) to disclose any CONFIDENTIAL
INFORMATION, Seller shall notify Purchaser promptly of the request or
requirement so that Purchaser may seek an appropriate protective order at
Purchaser's expense or waive compliance with the provisions of this Section
11.2. If, in the absence of a protective order or the receipt of a waiver
hereunder, Seller on the advice of counsel, is compelled to disclose any
CONFIDENTIAL INFORMATION to any tribunal or else stand liable for contempt,
Seller may disclose the CONFIDENTIAL INFORMATION to the tribunal; PROVIDED,
HOWEVER, that such disclosing Person shall use his or its reasonable best
efforts to obtain, at the expense and request of Purchaser, an order or other
assurance that confidential treatment shall be accorded to such expense and
portion of the CONFIDENTIAL INFORMATION required to be disclosed as Purchaser
shall designate.
11.3 INSURANCE. Seller shall ensure that any person who immediately,
prior to the Closing Date, served as a director or officer of Seller and who,
upon the Closing becomes an employee, officer or director of Purchaser or an
Acquired Company, continues to be covered by Seller's Directors and Officers
liability insurance policy with respect to actions or omissions arising through
the Closing Date and until the expiration of any applicable statute of
limitations.
11.4 RESERVED.
11.5 BONUSES. Purchaser acknowledges that the Closing Date Balance
Sheet will include an accrual of 2002 bonuses for employees of the Acquired
Companies for bonus compensation earned but not paid as of the Closing Date
which Purchaser agrees to fund consistent with past practices pursuant to a
schedule provided by Seller to Purchaser at the Closing which schedule shall, as
to each employee, be consistent with past practices as to amount and allocation.
Notwithstanding the above, nothing in this Section 11.5 is intended to alter or
amend the parties obligations under Section 1.4 hereof.
11.6 CAFETERIA PLAN. After the Closing, the Acquired Companies shall
each remain a participating employer under the Chemed Corporation Flexible
Benefits Plan (the "Cafeteria Plan") until December 31, 2002. The provisions of
the Cafeteria Plan shall apply to employees of the Acquired Companies during the
period from the Closing Date until December 31, 2002 in the same manner as
provided to all other participants. The Purchaser and the Acquired Companies
shall have no obligations with respect to the Cafeteria Plan at any time other
than to remit payments as reimbursement for benefits under flexible spending
accounts. The Acquired Companies shall be entitled to retain any contributions
made by participants employed by the Acquired Companies that are not used for
benefits and thereafter forfeited on March 31, 2003.
11.7 DIVISIBILITY. Seller acknowledges that all of the foregoing
provisions of Section 11 are reasonable and are necessary to protect and
preserve the value of the Acquired Companies and to prevent any unfair advantage
being conferred on Seller. If any of the covenants set forth in this Section are
held to be unreasonable, arbitrary, or against public policy, the restrictive
time period herein shall be deemed to be the longest period permissible by law
under the circumstances and the restrictive geographical area herein
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shall be deemed to comprise the larger territory permissible by law under the
circumstances.
SECTION 12. SECTION 12. MISCELLANEOUS PROVISIONS
12.1 TIME OF ESSENCE. Time is of the essence of this Agreement.
12.2 COMPLIANCE WITH LAWS. Purchaser and Seller shall execute such
agreements and other documents, and shall take such other actions, as Seller and
Purchaser, as the case may be, may reasonably request (prior to, at or after the
Closing) for the purpose of ensuring that the transactions contemplated by this
Agreement are carried out in full compliance with the provisions of all
applicable laws and regulations.
12.3 PUBLICITY. No press release, publicity, disclosure or notice to any
Person concerning any of the transactions contemplated by this Agreement shall
be issued, given, made or otherwise disseminated by Purchaser or Seller or any
of their respective Affiliates or Associates at any time (whether prior to, at
or after the Closing) without the prior consent of Seller and Purchaser, which
consent shall not be unreasonably withheld.
12.4 ACCESS OF SELLER TO BOOKS AND RECORDS. At all times after the
Closing Date, Purchaser shall give Seller and Seller's agents reasonable access
to the books and records of the Acquired Companies (to the extent such books and
records relate to the period prior to the Closing Date).
12.5 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated thereby; PROVIDED, HOWEVER, that Purchaser shall
deliver to Seller at Closing [$22,500] in respect of HSR Act filing fees
previously paid by Seller in connection with the transactions contemplated by
this Agreement.
12.6 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the laws of the State of Delaware (without
giving effect to principles of conflicts of law).
12.7 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given and duly
delivered when received personally, by fax, mail or overnight delivery service
by the intended recipient at the following address or fax number (or at such
other address or fax number as the intended recipient shall have specified in a
written notice given to the other party hereto):
if to Purchaser:
PCI Holding Corp.
c/o Schroder Ventures Life Sciences Advisers, Inc.
60 State Street
Boston, MA 02109
Attention: Arthur W. Stratton, Jr. M.D.
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with a copy to:
McDermott, Will & Emery
28 State Street
Boston, MA 02109
Attn: Christopher J. Donovan, Esq.
Fax: (617) 535-3800
if to Seller:
Chemed Corporation
2600 Chemed Center
255 East 5th Street
Cincinnati, OH 45202-4726
Attn: Kevin J. McNamara, President and Chief Executive Officer
Fax: (513) 762-6919
with a copy to:
Dinsmore & Shohl, LLP
1900 Chemed Center
255 East 5th Street
Cincinnati, OH 45202
Attention: Clifford A. Roe, Jr., Esq.
12.8 TABLE OF CONTENTS AND HEADINGS. The table of contents of this
Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
12.9 ASSIGNMENT. Neither party hereto may assign any of its rights or
delegate any of its obligations under this Agreement to any other Person without
the prior written consent of the other party hereto, which shall not be
unreasonably withheld.
12.10 PARTIES IN INTEREST. Nothing in this Agreement is intended to
provide any rights or remedies to any Person (including any employee or creditor
of the Company) other than the parties hereto and the Persons (in addition to
the parties hereto) that may be entitled to indemnification pursuant to Section
10 of this Agreement.
12.11 SEVERABILITY. In the event that any provision of this Agreement, or
the application of such provision to any Person or set of circumstances, shall
be determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be affected and shall continue to be
valid and enforceable to the fullest extent permitted by law.
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12.12 ENTIRE AGREEMENT. This Agreement, and the Confidentiality
Agreement set forth the entire understanding of Purchaser and Seller and
supersede all other agreements and understandings between Purchaser and Seller
relating to the subject matter hereof and thereof. Regardless of any termination
of this Agreement or any closing of the transactions contemplated by this
Agreement, the Confidentiality Agreement shall remain in full force and effect
in accordance with the terms thereof.
12.13 WAIVER. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
12.14 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented except by means of a written instrument executed on behalf of
both Purchaser and Seller.
12.15 INTERPRETATION OF AGREEMENT.
(a) Each party hereto acknowledges that it has participated in
the drafting of this Agreement, and any applicable rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in connection with the construction or interpretation of this
Agreement.
(b) Whenever required by the context hereof, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(c) As used in this Agreement, the words "INCLUDE" and
"INCLUDING," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "WITHOUT
LIMITATION."
(d) References herein to "SECTIONS," "EXHIBITS," and "SCHEDULES"
are intended to refer to Sections of and Exhibits and Schedules to this
Agreement.
12.16 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties hereto on separate counterparts each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[Signature Pages to Follow]
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IN WITNESS WHEREOF, Purchaser and Seller have caused this Stock
Purchase Agreement to be executed as of the date first written above.
PCI HOLDING CORP.
By: /s/ Arthur W. Stratton, M.D.
---------------------------
Name: Arthur W. Stratton, M.D.
------------------------
Title: President
------------------------
CHEMED CORPORATION
By: /s/ Kevin J. McNamara
--------------------------
Name: Kevin J. McNamara
------------------------
Title: President and CEO
------------------------
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EXHIBIT A TO
STOCK PURCHASE AGREEMENT
DEFINED TERMS
For purposes of this Agreement (including the Schedules thereto):
"ACQUIRED COMPANIES" shall have the meaning specified in the recitals to this
Agreement.
"ACQUIRED STOCK" shall have the meaning specified in the recitals to this
Agreement.
"ADJUSTED NET WORKING CAPITAL" means the Initial Working Capital MINUS any
amount of the account receivable total line item on the Closing Date Balance
Sheet that remains unpaid on the Realization Date net of reserves.
"AFFILIATE" of any Person means any other Person controlling, controlled by or
under common control with such first Person, where "CONTROL" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person whether through the ownership of voting securities or
otherwise.
"AGREEMENT" means this Stock Purchase Agreement, including all Exhibits and
Schedules hereto, as it may be amended from time to time in accordance with its
terms.
"ASSOCIATES" of a Person shall include:
(a) such Person's Affiliates, directors, officers, employees, agents,
attorneys, accountants and representatives; and
(b) all directors, officers, employees, agents, attorneys, accountants
and representatives of each of such Person's Affiliates.
"UNAUDITED STATEMENTS" shall have the meaning set forth in Section 3.5(a).
"BENEFIT ARRANGEMENT" means any employment, severance or similar contract or
arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option, or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, sick time,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that: (i) is not an Employee Plan; (ii) is entered into, maintained,
administered or contributed to, as the case may be, by Seller, the Acquired
Companies and/or any of its ERISA Affiliates; and (iii) covers any employee or
independent contractor, whether or not currently providing services to Seller,
the Acquired Companies, or any ERISA Affiliate.
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"BENEFIT PLANS" shall have the meaning set forth in Section 3.13(a).
"BOARD OF MEDIATORS" shall have the meaning set forth in Section 10.2(d)(iii).
"BUSINESS" shall have the meaning set forth in Section 11.1(a).
"CAPITAL STOCK" means (i) in the case of a corporation, any and all shares of
capital stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership or limited
liability company, any and all partnership or membership interests (whether
general or limited), (iv) in any case, any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person, and (v) in any case, any
right to acquire any of the foregoing.
"CHANGE OF CONTROL" shall mean with respect to Seller or any Acquired Company
the occurrence of any of the following events: (a) there shall be consummated
any consolidation, merger or share exchange (i) in which Seller or any Acquired
Company is not the continuing or surviving entity or (ii) pursuant to which the
stock of Seller or any Acquired Company is converted into cash, securities or
other property; (b) all or substantially all of Seller's or any Acquired
Company's properties and assets on a consolidated basis are sold or otherwise
disposed of to any party or parties in any one transaction or series of
transactions; or (c) any party or parties acting together with any affiliates
thereof, shall acquire beneficial ownership (as defined in Rule 13d-3 of the
Exchange Act) of 50% or more of the voting stock of Seller or any Acquired
Company.
"CLAIM NOTICE" means written notification pursuant to Section 10.2(d) of a Third
Party Claim as to which indemnity under Section 10.2 is sought by an Indemnified
Party, enclosing a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified Party's claim
against Seller under Section 10.2, together with the amount or, if not then
reasonably ascertainable, the estimated amount determined in good faith, of such
Third Party Claim.
"CLOSING" shall have the meaning set forth in Section 2.1.
"CLOSING DATE" shall mean the time and date as of which the Closing actually
takes place.
"CLOSING DATE BALANCE SHEET" means an unaudited combined balance sheet for the
Acquired Companies as of the close of business on the Closing Date (determined
on a pro forma basis as though the parties had not consummated the transactions
contemplated by this Agreement) prepared in accordance with and applied on a
basis consistent with the Latest Balance Sheet (subject to the same types of
adjustments, including cutoff adjustments, as reflected in the Latest Balance
Sheet, as well as being subject to the same inclusions, exclusions and
exceptions set forth on the FINANCIAL STATEMENTS
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SCHEDULE); PROVIDED, HOWEVER, that the allowance for doubtful accounts amount in
the Closing Date Balance Sheet shall be the same amount as that set forth in the
Latest Balance Sheet.
"CLOSING TRANSACTIONS" shall have the meaning set forth in Section 2.2.
"COBRA" shall have the meaning set forth in Section 3.13(a).
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section 11.2.
"CONFIDENTIALITY AGREEMENT" shall mean the letter agreement, dated as of
February 14, 2002, between Chemed Corporation and Schroder Ventures Life Science
Advisers, Inc.
"CONTEST" shall have the meaning specified in Section 10.3(e).
"DAMAGES" shall mean losses, costs, including reasonable attorney fees for which
an Indemnified Party shall have the right to receive reimbursement pursuant to
Section 10 hereof, including, but not limited to, direct, indirect,
consequential and actual losses.
"DETERMINATION DATE" has the meaning set forth in Section 1.4(b).
"DISCLOSURE SCHEDULE" shall have the meaning set forth in Section 3.
"DISPUTE NOTICE" means written notification during the Dispute Period to an
Indemnified Party stating that Seller disputes its liability under Section 10.2
to such Indemnified Party with respect to the Indemnified Party's Claim Notice
or Indemnity Notice.
"DISPUTE PERIOD" means the period ending 30 calendar days following receipt by
Seller of either a Claim Notice or an Indemnity Notice.
"EMPLOYEE PLAN" means any "employee benefit plan", as defined in Section 3(3) of
ERISA, that: (i) is subject to any provision of ERISA; (ii) is maintained,
administered or contributed to by Seller, any Acquired Company or any of its
ERISA Affiliates; and (iii) covers any employee or independent contractor,
whether or not currently providing services to Seller, any Acquired Company or
any ERISA Affiliate.
"ENCUMBRANCE" shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, equity, trust, equitable interest, claim, preference, right
of possession, lease, tenancy, license, encroachment, covenant, interference,
proxy, option, right of first refusal, preemptive right, community property
interest, impediment, limitation, imperfection of title, condition or
restriction of any nature (including any restriction on the transfer of any
security or other asset, any restriction on the receipt of any income derived
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from any asset, any restriction on the use of any asset and any restriction on
the possession, exercise or transfer of any other attribute of ownership of any
asset).
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal, state, local and
foreign statutes, regulations, rules, codes, judgments, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety and pollution or
protection of the environment, including all such standards of conduct and bases
of obligations relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"ERISA" shall have the meaning set forth in Section 3.13(a).
"ERISA AFFILIATE" means the Acquired Companies or any entity that would be
deemed a "single employer" with Seller or any Acquired Company under Section
414(b)(c), (m) or (o) of the Code or Section 4001 of the Employee Retirement
Income Security Act of 1974 ("ERISA").
"ESCROW AGENT" shall mean an institutional lender mutually agreeable to the
parties.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.5. "GAAP"
means, at any given time, generally accepted accounting principles of the United
States, consistently applied.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules promulgated thereunder.
"INDEMNITY ESCROW AMOUNT" shall have the meaning set forth in Section 1.3.
"INDEMNITY ESCROW AGREEMENT" shall mean the escrow agreement between Seller,
Purchaser and Escrow Agent substantially in the form required by Escrow Agent.
"INDEMNITY NOTICE" means written notification pursuant to Section 10.2 of a
claim for indemnity under Section 10.2 by an Indemnified Party, specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"INDEPENDENT ACCOUNTING FIRM" has the meaning set forth in Section 1.4(b).
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"INITIAL NET WORKING CAPITAL" means the Net Working Capital of the Acquired
Companies on the Closing Date Balance Sheet which shall in no event be less than
$26,922,306.
"INSIDER" means, (i) any executive officer or director of Seller, any of the
Acquired Companies, or any Affiliate of Seller (ii) any stockholder owning
beneficially 5% or more of the Capital Stock of Seller (excluding any Person not
otherwise referenced in clauses (i), (iii) or (iv) hereof that has filed, with
respect to Seller, a beneficial ownership report on Schedule 13G under the
Exchange Act), (iii) any partner of Seller or any of the Acquired Companies, or
(iv) any Affiliate of Seller or any of the Acquired Companies, or any entity in
which any such Person owns a controlling interest.
"ISRA" shall have the meaning set forth in Section 7.7.
"KNOWLEDGE" means, with respect to a Person, the actual knowledge (after
reasonable investigation and inquiry) of such individual, or if the Person is a
corporation, the actual knowledge (after reasonable investigation and inquiry)
of the officers, directors, branch managers, and any employees or contractors of
such Person who have financial oversight responsibilities of such Person with
respect to the particular matter in question.
"LATEST BALANCE SHEET" shall have the meaning set forth in Section 3.5.
"LEASES" has the meaning set forth in Section 3.20.
"LICENSES" means all permits, licenses, franchises, certificates, approvals and
other authorizations of third parties or foreign, federal, state or local
governments or other similar rights including, but not limited to, applicable
state healthcare licenses, Medicare and Medicaid provider agreements and
certifications.
"LIENS" means, except with respect to any and all Permitted Encumbrances, any
mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including, without limitation, any conditional sale or other title retention
agreement or lease in the nature thereof), any sale of receivables with recourse
against Seller or any Affiliate, any filing or agreement to file a financing
statement as debtor under the UCC or any similar statute other than to reflect
ownership by a third party of property leased to any of the Acquired Companies
under a lease which is not in the nature of a conditional sale or title
retention agreement.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any material
adverse effect on, or change in, the Business, financial condition, results of
operations, prospects or properties of the Acquired Companies, taken as a whole.
"MATTER" shall mean any claim, demand, dispute, action, suit, examination,
audit, proceeding, investigation, inquiry or other similar matter.
"NEGOTIATION PERIOD" shall have the meaning set forth in Section 1.4(b).
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"NET WORKING CAPITAL" means, as of any date, the amount set forth on the balance
sheet of the Acquired Companies, on a consolidated basis, as of such date, equal
to the difference of (x) the sum of the amounts from such balance sheet of the
following current asset accounts of the Acquired Companies: (A) cash and cash
equivalents, (B) cash clearing (which includes only payments against accounts
receivable), (C) restricted cash, (D) accounts receivable, (E) prepaid expenses,
(F) deferred taxes - current, and (G) other current assets, MINUS (y) the sum of
the amounts from such balance sheet of the following current liability accounts
of the Acquired Companies: (A) payroll and related liabilities, (B) accounts
payable, (C) Federal and State Income Taxes - payable, and (D) other accrued
liabilities.
"NET WORKING CAPITAL ADJUSTMENT" means the positive or negative difference of:
(x) the Initial Net Working Capital MINUS (y) the Adjusted Net Working Capital.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of any of the Acquired
Companies' businesses, in each case consistent with past practice.
"PARTICIPANT" shall have the meaning set forth in Section 11.4.
"PARTICIPATING COMPANIES" shall have the meaning set forth in Section 3.23.
"PERMITTED ENCUMBRANCES" shall mean: (A) statutory liens for current taxes or
other governmental charges with respect to such property not yet due and payable
or the amount or validity of which is being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, which reserves are included in the Financial Statements;
(B) mechanics, carriers, workers, repairers and similar statutory liens arising
or incurred in the Ordinary Course of Business for amounts which are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect; (C) zoning, entitlement, building and other land use regulations imposed
by governmental agencies having jurisdiction over such property which are not
violated by the current use and operation of such property; and (D) covenants,
conditions, restrictions, easements and other matters of record affecting title
to such property which do not unreasonably interfere with the current use,
occupancy, or value, or the marketability of title, of such property; (E) other
Liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money; (F) pledges or deposits in connection with or to
secure workmen's compensation, unemployment insurance pension or other employee
benefits; (G) any Lien renewing, extending or refunding any Lien permitted
hereunder; and (H) Liens and imperfections of title the existence of which would
not materially affect the use of the property subject thereto, consistent with
past practice.
"PERSON" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality including, but not limited to, employees and customers of any
party.
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"PROPOSAL" shall have the meaning set forth in Section 5.7(b).
"PROPOSAL INTEREST" shall have the meaning set forth in Section 5.7(a).
"PROPRIETARY RIGHTS" means the following matters solely related to the business
of the Acquired Companies only: (i) patents, patent applications, patent
disclosures, as well as any reissues, continuations, continuations-in-part,
divisions, extensions and reexaminations thereof, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names, and registrations
and applications for registration thereof, together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) Internet domain names and web sites, (v) computer software, data, data
bases and documentation thereof, (vi) trade secrets and other confidential
information (including, without limitation, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans, and
customer and supplier lists and information), and (vii) license agreements
related thereto.
"PURCHASE PRICE" shall have the meaning specified in Section 1.2.
"PURCHASER" shall mean [Purchaser NEWCO], a Delaware Corporation.
"PURCHASER 401(k) PLAN" shall have the meaning specified in Section 11.4.
"REALIZATION DATE" shall have the meaning set forth in Section 1.4(a).
"REQUIRED APPROVALS" shall have the meaning specified in Section 7.4.
"RESOLUTION PERIOD" means the period ending thirty (30) calendar days following
receipt by an Indemnified Party of a Dispute Notice.
"SELLER" shall mean Chemed Corporation, a Delaware corporation.
"SEC" means the Securities and Exchange Commission of the United States.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"SUBSIDIARY" means, with respect to any Person, any corporation a majority of
the total voting power of shares of stock of which is entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or any partnership, limited liability company,
association or other business entity a majority of the partnership or other
similar ownership interest of which is at the time owned or controlled, directly
or indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. For
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purposes of this definition, a Person is deemed to have a majority ownership
interest in a partnership, limited liability company, association or other
business entity if such Person is allocated a majority of the gains or losses of
such partnership, limited liability company, association or other business
entity or is or controls the managing director or general partner of such
partnership, limited liability company, association or other business entity.
"TAX RETURNS" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"TAXES" means any federal, state, local, or foreign income, gross receipts,
sales, use, employment, unemployment, franchise, profits, property or other
taxes, stamp taxes and duties, assessments or charges of any kind whatsoever
(whether direct or withholding taxes), together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto, and together with out-of-pocket expenses
associated with the reasonable attorney fees for which Purchaser or the Acquired
Companies shall have the right to receive reimbursement pursuant to Section 10
hereof.
"TERMINATING PURCHASER BREACH" shall have the meaning set forth in Section
9.1(e).
"TERMINATING SELLER BREACH" shall have the meaning set forth in Section 9.1(d).
"THIRD PARTY CLAIM" shall have the meaning set forth in Section 10.2(d)(i).
"THRESHOLD AMOUNT" shall have the meaning specified in Section 10.2(b).
"TRANSACTION DOCUMENTS" means this Agreement, and all other agreements,
instruments, certificates and other documents to be entered into or delivered by
any party in connection with the transactions contemplated to be consummated
pursuant to this Agreement.
"TREASURY REGULATIONS" means the United States Treasury Regulations promulgated
pursuant to the Code.
"UCC" means the Uniform Commercial Code.
"WARN" shall have the meaning set forth in Section 3.12.
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INDEX OF SCHEDULES
EXHIBITS
Exhibit A - List of Defined Terms
Exhibit B - Form of Assignment Agreement
Exhibit C - Form of Opinion of Seller's Counsel
SCHEDULES
Acquired Companies Schedule
Medicare and Medicaid Cost Report Schedule (includes breakdown of Section 1.4(d)
amounts to be remitted to Seller and open cost reports)
Organization Schedule
Conflicts Schedule
Financial Statements Schedule
Developments Schedule
Taxes Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Benefit Plans Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Compliance Schedule
Environmental Schedule
Contracts Schedule
Real Estate Schedule
Undisclosed Liabilities Schedule
Affiliated Transactions Schedule
HIPAA Schedule
Priority Care Schedule
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Exhibit B
Form of Assignment Agreement
to be issued pursuant to Section 7.6(h) of that
certain Stock Purchase Agreement by and between
PCI Holding Corp. and Chemed Corporation
(the "Agreement")
This Assignment Agreement (the "Agreement") entered into as of
October 11, 2002 by and among (i) PCI Holding Corp., PCI-A Holding Corp., each
Delaware corporations (collectively, "Purchaser"), (ii) Chemed Corporation, a
Delaware corporation ("Seller"), and (iii) the Acquired Companies (as defined in
the Agreement). Capitalized terms used in this Agreement have the same meaning
set forth in the Agreement.
R E C I T A L S
A. Seller, through the Acquired Companies, is engaged in the business of
permanent placement and temporary staffing of nursing personnel and the direct
delivery of home health services.
B. Seller is selling and Purchaser is purchasing all of the Capital Stock
of the Acquired Companies of Seller pursuant to the terms of the Agreement.
C. Pursuant to Section 7.6(h) thereof, the Seller is required to deliver
to Purchaser an assignment of Seller's and the Acquired Companies
indemnification rights under the Asset Purchase Agreements and Stock Purchase
Agreements listed in Exhibit A hereto (the "Prior Agreements").
NOW, THEREFORE, for consideration, the receipt and sufficiency of which
is hereby acknowledged the parties hereby agree as follows:
1. Seller and the Acquired Companies hereby assign to Purchaser all
rights to indemnification, reimbursement and recourse against the counterparties
to any of the Prior Agreements or any agreement executed in connection with or
pursuant thereto. Seller and the Acquired Companies represent and warrant that
no notice, consent, or other action is required by any other party to deliver
this Assignment and that same does not conflict with the Prior Agreements.
2. Nothing in this Assignment is intended to transfer to Purchaser
any liabilities under the Prior Agreements, except to the extent set forth in
the Stock Purchase Agreement.
3. Seller and the Acquired Companies agree to promptly provide copies
of any notices received by the Seller or Acquired Companies in connection with
any of the Prior Agreements promptly but, in any event, within five (5) business
days of the receipt thereof.
4. Nothing in this Agreement is intended to conflict with, alter, or
amend the terms of the Agreement which, in the event of a conflict between the
terms hereof and such Agreement, the Agreement shall control the agreement of
the parties.
IN WITNESS WHEREOF, the parties have executed this document this 11 day of
October, 2002.
PCI HOLDING CORP.
By: /s/ Alison K. Gilligan
------------------------------
Its: EVP-Secretary
PCI-A HOLDING CORP.
By: Alison K. Gilligan
------------------------------
Its: EVP-Secretary
CHEMED CORPORATION
By: /s/ Timothy O'Toole
------------------------------
Its: Executive Vice President
& Treasurer
CARING COMPANIONS, INC.
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
ELDER CARE SOLUTIONS, INC.
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
GEORGIA NURSING SERVICES, INC.
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
MEDICAL PERSONNEL
SERVICES, INC.
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
NATIONAL HOME CARE, INC.
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
PATIENT CARE, INC. - ILLINOIS
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
PATIENT CARE MEDICAL
SERVICES, INC. (NEW JERSEY)
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
PATIENT CARE MEDICAL
SERVICES, INC. (OHIO)
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
PRIORITY CARE, INC.
By: /s/ N C Dallob
------------------------------
Its: Assistant Secretary
PATIENT CARE, INC.
By: /s/ Timothy O'Toole
------------------------------
Its: CEO
Exhibit C
FORM OF LEGAL OPINION
to be issued pursuant to Section 7.6(j) of
that certain Stock Purchase Agreement
by and between
PCI Holding Corp. and Chemed Corporation (the "Agreement")
Capitalized terms used herein but not otherwise defined shall have the
meanings attributed to such terms in the Agreement.
A. To be given by Dinsmore & Shohl:
1. Seller and each Acquired Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to conduct its business as now being conducted.
Seller and each Acquired Company is duly qualified to transact business and is
in good standing as a foreign corporation in each jurisdiction where the nature
of its business makes such qualification necessary.
2. Seller has the authority to own, operate and sell the Acquired
Companies. Seller and each Acquired Company has all requisite corporate power
and authority to execute and deliver the Transaction Documents to which it is a
party and to consummate the transactions contemplated thereby and to carry out
its respective obligations thereunder. Seller and each Acquired Company has
taken all necessary corporate action to authorize the execution and delivery by
it of each such Transaction Document to which it is a party, and the performance
of its respective obligations thereunder or the consummation of the transactions
contemplated thereby.
3. Each officer who has executed the Transaction Documents on behalf
of Seller and each Acquired Company has the authority to bind such party to the
terms and conditions of the Transaction Documents.
4. Seller and each Acquired Company has duly executed and delivered
each of the Transaction Documents to which it is party, and each such
Transaction Document constitutes the legal, valid and binding obligation of
Seller and each such Acquired Company, as the case may be, enforceable in
accordance with its terms.
5. The execution, delivery and performance by Seller and each
Acquired Company of the Transaction Documents to which it is a party, and
compliance by Seller or any such Acquired Company with the terms and provisions
thereof, will not contravene or conflict with the articles of incorporation or
bylaws of Seller or such Acquired Company.
6. The shares of capital stock listed on the Organization Schedule to
the Agreement constitute all the issued and outstanding shares of all classes of
Capital Stock issued by each Acquired Company as of the Closing Date. There are
no outstanding or
authorized subscriptions, options, warrants, calls, rights (including preemptive
rights) or any other agreements or commitments of any nature with respect to
such Capital Stock (other than the Agreement). All of the issued and outstanding
shares of Capital Stock of the Acquired Companies have been duly authorized, are
validly issued, and are fully paid and nonassessable. The delivery of
certificates at the Closing representing the Acquired Stock in the manner
provided in the Agreement will transfer to Purchaser or its designees, directly
or indirectly, good and valid title to the Acquired Stock, which constitutes all
of the outstanding capital stock of or other ownership interests in each
Acquired Company, in each case, free and clear of all Liens and Encumbrances.
7. As to various questions of fact material to the opinions we shall
rely upon accuracy of representations made in the Stock Purchase Agreement (the
"Agreement") and upon certificates of the Seller and Acquired Companies as to
factual matters not within our express knowledge.
8. We shall assume the due execution, delivery and the authenticity
and the genuineness of the signatures on all documents submitted to us as
originals; the legal capacity of all signing parties to such documents; the
conformity to original documents of all photostatic copies of such document
submitted to us; that the Agreement constitutes the valid and binding obligation
of Purchaser under applicable law; and that the Agreement is delivered for
adequate consideration.
9. We shall assume that the records of the proceedings of the
stockholders and directors of the Seller and Acquired Companies furnished to us
are complete and include all such records and reflect the actions actually taken
by the stockholders and directors of such companies.
10. We shall express no opinion as to the laws of any state or
jurisdiction other than Delaware to the extent relevant to matters of corporate
law and applicable federal law, provided that to the extent we express an
opinion with respect to the existence and qualifications of Seller and the
Acquired Companies in other jurisdictions such opinions shall be based solely on
certificates issued by the Secretary of State for such jurisdictions.
11. Such further qualifications as are normally included in opinions
for corporate transactions of this size, scope and materiality including
appropriate general qualifications contained in the American Bar Association
Accord.
B. To be given by Seller's General Counsel:
1. No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with (other than the filing of the
UCC-3 termination statements with the applicable filing office), or exemption
by, any governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, the execution and
delivery of any Transaction Document by Seller and each Acquired Company which
is a party thereto, and the performance by Seller and each such Acquired Company
of their obligations thereunder.
2. The execution, delivery and performance by Seller and each
Acquired Company of the Transaction Documents to which it is a party, and
compliance by Seller or any such Acquired Company with the terms and provisions
thereof, will not (i) violate any provision of any existing law, statute, rule
or regulation applicable to Seller or such Acquired Company, including, without
limitation, any federal or state rule or regulation relating to Medicare
certification or Medicaid certification of the Seller's or such Acquired
Company's Business, or relating to any other healthcare regulatory matter, (ii)
except for notices required under any provider agreements to effectively assign
and transfer to Purchaser rights thereunder which will not be procured until
after the Closing, result in any breach of, or constitute a default under, any
instrument, document, or agreement by which Seller or such Acquired Company is
bound, or under any law, ordinance, order, rule, regulation or other legal
requirement or writ, injunction, order or decree applicable to Seller or such
Acquired Company of any court or any governmental instrumentality or agency
having jurisdiction over Seller or such Acquired Company, (iii) result in the
creation or imposition of (or the obligation to create or impose) any lien upon
any of the property or assets of Seller or such Acquired Company.
3. Except as set forth on the Litigation Schedule to the Agreement,
there is no litigation or other claim pending before any court or administrative
or other governmental body, or overtly threatened, against Seller, any Acquired
Company, the Business of Seller or any such Acquired Company, or any other
properties of Seller. Neither Seller nor any Acquired Company is in violation
with respect to any judgment, order, writ, injunction or decree, nor in
violation of any law, rule or regulation of any court or federal, state
municipal or other governmental entity or department.
4. All necessary federal, state and local certificates, permits,
licenses, consents and approvals, registrations and authorizations required by
Seller or any Acquired Company to permit any such Acquired Company to conduct
operations of the Business in all material respects have been obtained and are
current and in full force and effect, including, without limitation, any
certificates, permits, licenses, consents and approvals, registrations,
authorizations, provider agreements and authorizations required to obtain
reimbursement as a provider of services under Title XVIII and/or Title XIX of
the Social Security Act, as applicable, and any other applicable Governmental
Program under which any such Acquired Company participates as a provider, and
any such Acquired Company operates its respective Business in compliance with
all of such certificates, permits, licenses, consents, approvals, registrations,
authorizations and agreements in all material respects. All notices, if any,
required to be given by Seller or each such Acquired Company to any federal or
state agency to notify such agency of the transactions contemplated by the
Transaction Documents have been given in a timely manner. No certificate or
determination of need, determination of non-reviewability or similar
governmental approval or determination is necessary to operate the Business
irrespective of whether the Business is owned by Seller or any such Acquired
Company, Purchaser or any third party. No such certificate, permit, license,
consent or approval, registration or authorization being assigned or transferred
by Seller to Purchaser shall be suspended, expire or otherwise affect any of the
Purchaser's rights thereunder as a result of such transfer or assignment to
Purchaser.
5. The Participating Companies are the only Acquired Companies
eligible to receive payment under Medicare and Medicaid; (ii) each of the
Participating Companies is a "provider" with valid and current provider
agreements and provider numbers with each Government Program in which it
participates; (ii) each of the Participating Companies is currently certified to
participate in the Medicare program and the Medicaid program in each state in
which its Business is currently being conducted; and (iii) each of Seller and
the Acquired Companies, as applicable, has taken all actions required to be
taken by it in connection with the consummation of the Transaction Documents to
maintain such Medicare and Medicaid program certification. There are no claims,
actions, investigations, payment reviews, or appeals pending or threatened
against Seller or any Acquired Company by or before any governmental department,
commission, board, bureau, agency or instrumentality, including, without
limitation, the Centers for Medicare and Medicaid ("CMS"), or any intermediary
or carrier, with respect to any Medicare or Medicaid claim or under any Fraud
and Abuse Laws, including, but not limited to, decertification proceedings.
6. There is neither (i) any claim, requirement, notice or demand of
any licensing or certifying agency or accreditation body supervising or having
authority over any of the Acquired Companies to remodel, rework or redesign any
such Acquired Company, its professional staff or its professional services,
procedures or practices in any material respect or to provide additional
equipment or inventory or to otherwise take any action, including, without
limitation, any action relating to compliance with any applicable life safety
codes, so as to conform or to comply with any existing statute, ordinance, code,
rule, regulation or standard, nor (ii) any violation or claim of any violation
of any applicable federal, state or local statute, ordinance, code, rule or
regulation or any requirement of any certifying agency or accreditation body.
7. In reliance upon the representations and warranties of the
Purchaser in the Transaction Documents, and solely as it relates to the sale of
the Business to Purchaser, the execution and delivery of the Transaction
Documents, and the performance by each of Seller and the Acquired Companies of
the obligations thereunder, do not violate any Fraud and Abuse Laws, ordinances
or orders of any court or federal, state, county, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, environmental protection laws and regulations,
civil rights laws, fire codes, confidentiality laws, record and document
maintenance laws, zoning ordinances, building, occupancy and use restrictions,
and public and occupational health and safety codes).