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EXHIBIT 2
ASSET PURCHASE AGREEMENT
among
I.M.D. CORPORATION
the Seller
XXXXXX XXXXX
the Shareholder
THE TRUST
(as defined herein)
and
ILLINOIS PHARMACY ACQUISITION CO.
and
CAPSTONE PHARMACY SERVICES, INC.
collectively, the Buyer
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TABLE OF CONTENTS
PAGE
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ARTICLE I. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Assumed Contracts, Leases and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II. RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Collection of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Additional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Purchase Price Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 [HAS NO TITLE] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Organization, Qualification and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Operations Since December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Absence of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Employment Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.7 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.8 Medicare, Medicaid and Other Third-Party Payors . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9 Compliance with Zoning, Land Use and Other Laws; Easements . . . . . . . . . . . . . . . . . . . . . 11
4.10 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.11 Leases and Contracts; Payables and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.13 Miscellaneous Representations Relating to Real Estate . . . . . . . . . . . . . . . . . . . . . . . 16
4.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.15 Seller's Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.16 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.18 Broker's or Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.19 Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.20 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.21 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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4.22 Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.23 Employee Benefit Plans 19
4.24 Compliance with Healthcare Laws and Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.25 Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.26 Tax Returns; Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.27 No Omissions or Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Organization, Qualification and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Broker's or Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Buyer Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI. COVENANTS OF PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Ownership of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Maintain Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Current Return Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII. SELLER'S AND SHAREHOLDER'S CONDITIONS TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 Representations and Warranties True at Closing; Compliance with Agreement . . . . . . . . . . . . . 24
8.2 No Action/Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 Order Prohibiting Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.4 Approval of Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.6 Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.7 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX. BUYER'S CONDITIONS TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 Representations and Warranties True at Closing; Compliance
with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 No Action/Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.4 Inspection of Assets; UCC Searches, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.5 Order Prohibiting Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.6 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.7 Lease Agreement and Landlord Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.8 Third Party Consents and Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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9.9 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.10 Foxmeyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE X. OBLIGATIONS OF SELLER AND SHAREHOLDER AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Documents Relating to Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.4 Corporate Good Standing and Corporate Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.5 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.6 Third Party Consents, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.7 Taxes and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.9 Employment and Lease Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.10 Subordination, Nondisturbance and Attornment Agreement . . . . . . . . . . . . . . . . . . . . . . . 28
10.11 Additionally Requested Documents; Post Closing Assistance . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.2 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 Corporate Good Standing and Board Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.5 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 Additional Requested Documents; Post Closing Assistance . . . . . . . . . . . . . . . . . . . . . . 29
11.7 Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.8 Employment and Lease Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
11.9 Illinois Resale Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XII. [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.2 Indemnification by Seller Shareholder and Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.4 Rules Regarding Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV. PRESERVATION OF BUSINESS AND NONCOMPETE
RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.1 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.2 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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15.2 Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.4 Confidentiality; Prohibition on Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.5 Controlling Law 34
15.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.7 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.8 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.11 Interpretation; Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.13 Legal Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is made on
February 29, 1996, by and among I.M.D. CORPORATION, an Illinois corporation
(the "Seller"), XXXXXX XXXXX, a resident of the State of Illinois (the
"Shareholder"), the Trust (as defined herein), and ILLINOIS PHARMACY
ACQUISITION CO. ("IPA"), an Illinois corporation and a wholly-owned subsidiary
of CAPSTONE PHARMACY SERVICES, INC., a Delaware corporation ("Capstone") and
Capstone (together with IPS, the "Buyer").
R E C I T A L S:
WHEREAS, Seller owns and operates an institutional pharmacy business
in the State of Illinois, all as more particularly described on Exhibit A
hereto, which Exhibit sets forth the type of services and products provided by
Seller at each of its locations (the "Business"); and
WHEREAS, Shareholder is trustee under Trust Instrument dated December
7, 1987 (the "Trust") and Trust owns all of the issued and outstanding
securities of Seller; and
WHEREAS, except for the Excluded Assets (as such term is defined
herein), Seller and Shareholder desire to sell and transfer the Assets (as such
term is defined herein) of the Business to Buyer, and Buyer desires to purchase
the same from Seller, subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained in this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale. Seller agrees to sell, transfer, assign,
convey and deliver to Buyer, and Buyer agrees to purchase from Seller, all
right, title and interest in all assets (except the Excluded Assets) of Seller
of every kind and type, tangible or intangible, real and personal, that are
necessary or reasonably desirable to operate the Business (collectively, the
"Assets"), free and clear of all obligations and liabilities other than the
Assumed Liabilities (as defined in Section 1.3), which Assets include, without
limitation, the following:
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(1) All tangible personal property, medical and other
equipment, machinery, data processing hardware and software, furniture,
furnishings, appliances, vehicles and other tangible personal property of every
description and kind and all replacement parts therefor used in connection with
the Business including, without limitation, the items listed on Exhibit 1.1(2)
attached hereto (collectively, the "Equipment and Furnishings");
(2) All inventory of goods and supplies used or
maintained in connection with the Business (collectively, the "Inventory");
(3) All accounts and notes receivables (the"Receivables")
and the proceeds thereof;
(4) All patient, medical, personnel and other records
related to the Business (including both hard and microfiche copies), and all
manuals, books and records used in operating the Business, including, without
limitation, personnel policies and files and manuals, accounting records, and
computer software;
(5) To the full extent transferable, all licenses,
permits, registrations, certificates, consents, accreditations, approvals and
franchises necessary to operate and conduct the Business, together with
assignments thereof, if required, and all waivers which Seller currently has,
if any, of any requirements pertaining to such licenses, permits,
registrations, certificates, consents, accreditations, approvals and
franchises;
(6) All goodwill, and, to the extent assignable by
Seller, all warranties (express or implied) and rights and claims related to
the Assets or the operation of the Business;
(7) All prepaid expenses;
(8) Contract and leasehold rights and interests pursuant
to contracts for purchase or lease of personal property, contracts for
purchase, sale or lease of pharmaceuticals, supplies, equipment, goods or
services currently furnished or to be furnished in connection with the Business
and that are Assumed Liabilities (as such term is defined in paragraph 1.3(1));
(9) All intangible or intellectual property owned,
leased, licensed or possessed by either Seller or Shareholder and utilized in
connection with the Business, including without limitation, software programs
and the names "I.M.D. Corporation", "Healthcare Pharmacy-Chicago" and
derivatives thereof; and
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(10) All cash and cash equivalents of the business on the
books of Seller on February 29, 1996 after giving effect to Section 1.2(2) and
the payment of salary to Shareholder in the amount of $50,000 for the period
covering January 1, 1996 through February 29, 1996.
1.2 Excluded Assets. Seller is not selling and Buyer is not
purchasing or assuming obligations with respect to the following (collectively,
the "Excluded Assets"):
(1) Seller's corporate and fiscal records that Seller is
required by law to retain in its possession;
(2) Cash and any cash equivalents on hand, on deposit
with and in transit to financial institutions as of December 31, 1995, as
reflected on the Post Closing Financial Statements (as defined herein); and
(3) The Excluded Assets set forth on Exhibit 1.2 hereto.
The parties acknowledge and agree that Seller is not conveying to Buyer any of
the Excluded Assets and that, following Closing, Buyer will not have any right,
title, interest or obligation with respect to the Excluded Assets.
1.3 Assumed Contracts, Leases and Liabilities.
(1) At Closing, Buyer will assume and hereby does assume
as of the Closing and agree to pay or perform, as the case may be, only (a)
those obligations consisting of current trade accounts payable and accrued
expenses of Seller (the "Payables and Expenses") reflected on the Post Closing
Financial Statements (as defined), and (b) those obligations arising after the
effective date of the Closing under those Leases and Contracts (as such term is
defined in paragraph 4.11) which Buyer expressly elects to assume as set forth
on Exhibit 1.3 (collectively, the "Assumed Liabilities").
(2) Except for the Assumed Liabilities and as provided by
Article XIII, it is expressly agreed and understood by each of the parties to
this Agreement that Buyer does not assume, and shall not be liable for, any
debt, liability contract, lease, note payable, account payable, commitment,
agreement, suit, indemnity, claim, mortgage, tax or other obligation of Seller
or Shareholder, of any type or description whatsoever, whether related or
unrelated to the Assets or the Business.
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ARTICLE II. RECEIVABLES
2.1 Collection of Receivables. At Closing, Seller and Shareholder
will use good faith efforts to vest in Buyer all right, title and interest in
the Receivables, and Buyer will proceed to collect the Receivables following
Closing. In the event that any Receivable cannot be transferred to Buyer, then
Seller and Shareholder shall use good faith efforts to collect the Receivable
in compliance with all applicable laws, as Buyer's agents for the limited
purpose of such collection, and shall immediately deliver to Buyer the gross
proceeds of such collection. Seller and Shareholder shall each also provide
such additional assistance in the collection process as Buyer may reasonably
request; provided, however, in no event shall Seller be liable for any
Receivable not collected after Seller has complied with the preceding
provisions of this Section 2.1.
ARTICLE III. PURCHASE PRICE
3.1 Purchase Price. The purchase price payable by Buyer to Seller
for the Assets and in consideration for the agreements contained herein,
including the agreements contained in Article XIV hereof, shall be Fifteen
Million Four Hundred Eighty-Three Thousand Dollars ($15,483,000.00), payable in
cash at Closing subject to the adjustments set forth in this Article III, plus
a warrant delivered at Closing (the "Warrant") to acquire 75,000 shares of
Buyer's common stock the form of which is attached hereto as Exhibit 3.1 (the
"Purchase Price").
3.2 Additional Consideration. In addition to the Purchase Price
set forth in Paragraph 3.1 above, Buyer shall pay to Seller additional Purchase
Price with respect to any new facility not a customer of the Business as of
Closing which becomes a customer within ninety (90) days following Closing and
remains as such for a period of one year. Such additional consideration shall
equal the sum of Three Hundred Sixty and No/100 Dollars ($360.00) per bed based
upon the licensed maximum capacity of each such new facility customer. Buyer
shall pay Seller such cash consideration with respect to each new facility
customer within thirty (30) days following the first anniversary of such
customer's service commencement date with the Business.
3.3 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner set forth in Exhibit 3.3 attached
hereto (the "Allocation"). The parties to this Agreement expressly agree that
the Allocation shall be used by them for all purposes including tax purposes.
Each party to this Agreement agrees that it will report the transaction
completed pursuant to this Agreement in accordance with the Allocation,
including any report made under Section 1060 of the Internal Revenue Code of
1986, as amended (the "Code"), and that no such party will take a position
inconsistent with the Allocation except with the prior written consent of the
other parties hereto or as may be required by law.
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3.4 Purchase Price Adjustments.
(a) On or before April 15, 1996, Seller and Shareholder
will cause an audit of Seller to be made as of December 31, 1995 and shall
prepare and deliver to Buyer an unqualified, audited balance sheet, income
statement, statement of stockholder's equity and cash flow statement
accordingly (the "Post Closing Financial Statements"). The Buyer shall allow
Seller, Shareholder and their accountants access at all reasonable times after
the date hereof to the books, records, accounts and physical facilities of the
Business to allow Seller and Shareholder to prepare the Post Closing Financial
Statements, and the Buyer agrees to cooperate with the Seller and Shareholder
in the preparation thereof. The Post Closing Financial Statements shall be
based on the books and records of the Seller and shall present fairly in
compliance with generally accepted accounting principles applied consistently
throughout the periods, the financial position of Seller as of, and the results
of its operations for, the periods specified.
(b) Within forty-five (45) days after the Post Closing
Financial Statements are delivered to Buyer pursuant to Section 3.4(a), Buyer
shall complete its examination thereof and shall deliver to Seller either (i) a
written acknowledgment accepting the Post Closing Financial Statements; or (ii)
a written report setting forth in reasonable detail any proposed adjustments to
the Post Closing Financial Statements (the "Adjustment Report"). A failure by
the Buyer to deliver the Adjustment Report within the required forty-five (45)
day period shall constitute Buyer's acceptance of the Post Closing Financial
Statements.
(c) During a period of thirty (30) days following the
receipt by the Seller of the Adjustment Report, the Buyer and Seller shall
attempt to resolve any differences they may have with respect to the matters
raised in the Adjustment Report. In the event Seller and the Buyer fail to
agree on any of Buyer's proposed adjustments contained in the Adjustment Report
within such thirty (30) day period, then Seller and Buyer mutually agree that
the accountant of each shall jointly choose the Chicago, Illinois office of a
nationally recognized firm of certified public accountants ("Independent
Auditors"), and the Independent Auditors shall make the final determination
with respect to the correctness of the proposed adjustments in the Adjustment
Report in light of the terms and provisions of this Agreement. The decision of
the Independent Auditors shall be final and binding on Seller, Shareholder and
Buyer. The costs and expenses of the Independent Auditors and their services
rendered pursuant to this Section 3.4(c) shall be born equally by Seller and
the Buyer.
(d) The term "Post Closing Financial Statements," as that
term has hereinbefore and will be hereinafter used, shall mean the Post Closing
Financial Statements delivered pursuant to Section 3.4(a), as adjusted, if at
all, pursuant to this
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Section 3.4. The date on which the Post Closing Financial Statements are
finally determined pursuant to this Section 3.4 shall hereinafter be referred
to as the "Settlement Date."
(e) On the Settlement Date, the following adjustments to
the Purchase Price shall be made:
(i) the Purchase Price shall be reduced by the
Payables and Expenses Adjustment (as defined
in Section 3.4(h)), if any; and
(ii) the Purchase Price shall be reduced by the
Non-Cash Asset Deficit (as defined in Section
3.4(h)), if any.
(f) The adjustments set forth in Section 3.4(e) shall be
aggregated to arrive at a net Purchase Price adjustment. Such Purchase Price
adjustment shall be immediately payable in cash by Seller.
(g) [Reserved]
(h) As used in this Section 3.4, the following terms
shall have the following meanings:
"Excess Non-Cash Assets" means (x) the aggregate book
value of the Assets (other than cash and cash equivalents for the purposes of
this definition) set forth in the Post Closing Financial Statements, less (y)
$5,685,000; provided that if (x) less (y) is less than zero (0), the Excess
Non-Cash Assets shall equal zero (0).
"Excess Payables and Expenses" means (x) the amount
of the Payables and Expenses set forth in the Post Closing Financial
Statements, less (y) thirty percent (30%) of the aggregate book value of the
Assets (other than cash and cash equivalents, for the purposes of this
definition) set forth in the Post Closing Financial Statements; provided that
if (x) less (y) is less than zero (0), the Excess Payables and Expenses shall
equal zero (0).
"Non-Cash Asset Deficit" means (x) $5,685,000, less
(y) the aggregate book value of the Assets (other than cash and cash
equivalents for the purposes of this definition) set forth in the Post Closing
Financial Statements; provided that if (x) less (y) is less than zero (0), the
Non-Cash Asset Deficit shall equal zero (0).
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"Payables and Expenses Adjustment" means (x) Excess
Payables and Expenses, less (y) Excess Non-Cash Assets; provided that if (x)
less (y) is less than zero (0), the Payables and Expenses Adjustment shall
equal zero (0).
3.5 In the event that, following Closing, Buyer suffers any
recoupments in the form of an offset against any reimbursement under any
third-party payor or government reimbursement programs due to Buyer relating to
payments made to Seller for the periods on or prior to the Closing, then Seller
and/or Shareholder shall either contest such offsets or pay to Buyer the
amounts so offset, with interest at a rate equal to eight percent (8%) per
annum (an "Offset Payment"). In the event that any such offset is contested by
Seller and/or Shareholder and is not repaid upon the conclusion of the inquiry,
Seller and/or Shareholder shall immediately pay in full the related Offset
Payment to Buyer with interest at a rate equal to 8% per annum from the date of
the offset.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER
AND SHAREHOLDER
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereunder, Seller and Shareholder
hereby jointly and severally represent and warrant to Buyer, which
representations and warranties shall be true and correct on the date hereof and
as of the date of Closing, as follows:
4.1 Organization, Qualification and Authority. Seller is a
corporation duly organized and validly existing and in good standing in the
State of Illinois and is not qualified to do business as a foreign corporation
in any state. Seller has full power and authority to own, lease and operate
its facilities and assets as presently owned, leased and operated; and to carry
on its business as it is now being conducted. Except for Trust, no other
person or entity owns or holds, has any interest in, whether legal, equitable
or beneficial, or has the right to purchase, any capital stock or other
security of Seller. Seller owns no capital stock, security, interest or other
right, or any option or warrant convertible into the same, of any corporation,
partnership, joint venture or other business enterprise. Seller has the right,
power and authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements necessary to give effect to the
provisions of this Agreement and to consummate the transactions contemplated on
the part of Seller hereby. Shareholder has the right, power and authority to
execute, deliver and carry out the terms of this Agreement and all documents
and agreements necessary to give effect to the provisions of this Agreement, to
consummate the transactions contemplated on the part of Shareholder hereby, and
to take all actions necessary, in his capacity as the sole stockholder of
Seller, to permit or approve the actions of Seller taken in connection with
this Agreement. The execution,
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delivery and consummation of this Agreement, and all other agreements and
documents executed in connection herewith by Seller, have been duly authorized
by all necessary action on the part of Seller. No other action, consent or
approval on the part of Seller, Shareholder or any other person or entity, is
necessary to authorize Seller's due and valid execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection hereto. This Agreement and all other agreements and documents
executed in connection herewith by Seller and/or Shareholder, upon due
execution and delivery thereof, shall constitute the valid and binding
obligations of each of Seller and Shareholder, enforceable in accordance with
their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by general principles of equity.
4.2 Absence of Default. The execution, delivery and consummation
of this Agreement, and all other agreements and documents executed in
connection herewith by Seller and/or Shareholder will not constitute a
violation of, or be in conflict with, will not, with or without the giving of
notice or the passage of time, or both, result in a breach of, constitute a
default under, create other than with respect to Buyer's obligations for
Assumed Liabilities (or cause the acceleration of the maturity of) any debt,
indenture, obligation or liability under, result in the creation or imposition
of any security interest, lien, charge or other encumbrance upon any of the
Assets, or otherwise adversely affect Buyer, Seller or Business under: (a) any
term or provision of the Charter or Bylaws of Seller; (b) any contract, lease,
purchase order, agreement, document, instrument, indenture, mortgage, pledge,
assignment, permit, license, approval or other commitment to which Seller
and/or Shareholder is a party or by which Seller and/or Shareholder or the
Assets are bound; (c) any judgment, decree, order, regulation or rule of any
court or regulatory authority applicable to Seller or the Business; or (d) any
law, statute, rule, regulation, order, writ, injunction, judgment or decree of
any court or governmental authority or arbitration tribunal to which Seller
and/or Shareholder and/or the Assets are subject.
4.3 Financial Statements.
(a) Attached hereto as Exhibit 4.3 are true and correct
copies of Seller's unaudited balance sheets as of December 31, 1995, December
31, 1994 and December 31, 1993 and its unaudited income statements, statement
of stockholder's equity and cash flow statements for the years then ended (the
"Financial Statements"). The Financial Statements are based on the books and
records of Seller (which have been maintained in reasonable detail) and
present fairly, in compliance with generally accepted accounting principles
applied consistently throughout the periods, the financial position of Seller
as of, and the results of its operations for, the dates and periods specified.
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(b) Seller and Shareholder shall cause to be delivered to
Buyer an unqualified audit of the Seller for the fiscal periods ending December
31, 1993 and 1994 by March 31, 1996, satisfying the requirements set forth in
Section 3.4(a) above. Seller and Shareholder shall fully and readily cooperate
with Buyer in Buyer's attempt to perform an audit of Seller for any other
period prior to January 1, 1996 not already audited.
4.4 Operations Since December 31, 1995. Except as set forth in
Exhibit 4.4, since December 31, 1995, there has been no:
(a) change in the condition, financial or otherwise,
which in the aggregate has, or could reasonably be unexpected to have, a
material adverse effect on any of the Assets, the Business or future prospects
of the Business, or in the results of the operations of Seller;
(b) loss, damage or destruction of or to any of the
Assets, whether or not covered by insurance normal wear and tear excepted;
(c) sale, lease, transfer or other disposition by Seller
of, or mortgages or pledges of or the imposition of any lien, charge or
encumbrance on, any portion of the Assets, other than those made in the
ordinary course of business;
(d) material increase in the compensation payable by
Seller to Shareholder, any of Seller's employees, directors, independent
contractors or agents, or any increase in, or institution of, any bonus,
insurance, pension, profit-sharing or other employee benefit plan or
arrangements made to, for or with the employees, directors, Shareholder,
independent contractors or agents of Seller;
(e) cumulative net operating loss incurred in the
operation of the Business;
(f) adjustment or write-off of Receivables or reduction in
reserves for Receivables outside of the ordinary course of business;
(g) change in the accounting methods or practices
employed by Seller or change in depreciation or amortization policies;
(h) issuance or sale by Seller or Shareholder, or
contract or other commitment entered into by Seller or Shareholder, for the
issuance or sale of any shares of capital stock or securities convertible into
or exchangeable for capital stock of Seller;
(i) payment by Seller of any dividend, distribution or
extraordinary disbursement or expenditure or intercompany payable;
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(j) sale, transfer, pledge, mortgage or other disposition
of any of the Assets (except in the ordinary course of business);
(k) merger, consolidation or similar transaction; or
solicitations therefor involving the Seller;
(l) federal, state or local statutes, rule, regulation,
order or case adopted, promulgated or decided which, to the knowledge of Seller
and Shareholder, adversely affects the Business or Assets;
(m) strike, work stoppage or similar other labor dispute,
except as set forth on Exhibit 4.6, adversely affecting the Business;
(n) termination, waiver or cancellation of any rights or
claims of Seller, under contract or otherwise outside of the ordinary course of
business which in the aggregate have had a material adverse affect on the
Business; or
(o) made any payment under the Partner's Program
described in the Exhibits hereto.
4.5 Absence of Certain Liabilities. Except as set forth in the
December 31, 1995 Financial Statements, Seller has, and as of the Closing will
have, no contingent liabilities or contingent obligations.
4.6 Employment Discrimination. Except as disclosed in Exhibit 4.6
attached hereto, no person or party (including, without limitation, any
governmental agency) has asserted, or to the knowledge of Seller or
Shareholder, has threatened to assert, any claim for any action or proceeding,
against Seller (or any officer, director, employee, agent or Shareholder of
Seller) arising out of any statute, ordinance or regulation relating to wages,
collective bargaining, discrimination in employment or employment practices or
occupational safety and health standards (including, without limitation, the
Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, as
amended, the Occupational Safety and Health Act, the Age Discrimination in
Employment Act of 1967, the Americans With Disabilities Act or the Family and
Medical Leave Act).
4.7 Licenses and Permits.
(1) To Seller's knowledge, Seller has all local, state
and federal licenses, permits, registrations, certificates, contracts,
consents, accreditations and approvals (collectively, the "Licenses and
Permits") necessary for Seller to occupy, operate and conduct the Business, and
there do not exist any waivers or exemptions relating thereto. There is no
default on the part of Seller or, to Seller's knowledge, any other party under
any of the Licenses and Permits. To Seller's knowledge, there exist no grounds
for revocation,
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suspension or limitation of any of the Licenses or Permits. Copies of each of
the Licenses and Permits are attached to and listed on Exhibit 4.7(1) attached
hereto. Where available after reasonable inquiry, the most recent licensure
surveys and deficiency reports related to each of these items has also been
included in Exhibit 4.7(1). Seller is, and at the time of Closing will be,
licensed by the regulatory bodies listed on Exhibit 4.7(1). No notices have
been received by Seller or Shareholder with respect to any threatened, pending,
or possible revocation, termination, suspension or limitation of the Licenses
and Permits.
(2) Each employee of Seller has all Licenses and Permits
required for each such employee to perform such employees' designated functions
and duties for Seller in connection with conducting the Business, and there
exists no waivers or exemptions relating thereto. There is no default under,
nor does there exist any grounds for revocation, suspension or limitation of,
any such Licenses and Permits.
4.8 Medicare, Medicaid and Other Third-Party Payors.
(1) Seller does not and has never participated in the
Medicare Program. Seller participates in the Medicaid Program (the "Program").
A list of and copies of its existing Medicaid contracts or, if such contracts
do not exist, other documentation evidencing such participation (collectively,
the "Program Agreements") are included in Exhibit 4.11 attached hereto. Seller
is, and will be at the time of Closing, in full compliance with all of the
terms, conditions and provisions of the Program Agreements.
(2) No notice of any violation of any law or regulation
or offsets against future reimbursements under or pursuant to the Program has
been received by either Seller or Shareholder, nor is there any basis therefor.
There are no pending appeals, adjustments, challenges, audits, litigation, or
notices of intent received by Seller to recoup past or present reimbursements
with respect to the Program. Seller has not been subject to or, to its
knowledge, threatened with loss of waiver of liability for utilization review
denials with respect to the Program during the past twelve (12) months, nor
have either Seller or Shareholder received notice of any pending, threatened or
possible decertification or other loss of participation in, the Program.
(3) Seller currently has contractual arrangements with
certain third party payors. A list of and copies of its existing Blue Cross
contracts and other third party payor contract(s) are included in Exhibit 4.11
attached hereto. Seller is, and will be at the time of Closing, in full
compliance with all of the material terms, conditions and provisions of such
contracts.
(4) All liabilities and contractual adjustments of Seller
under any third party payor or reimbursement programs have been properly
reflected and adequately reserved for in the Financial Statements in accordance
with and as required by GAAP.
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(5) Seller has timely filed or caused to be filed all
reports and claims of every kind, nature or description, required by law or by
written or oral contract to be filed with respect to the purchase of services
by third party payors, including, but not limited to, Medicaid and Blue Cross.
Seller has paid all liabilities for contractual adjustments, discounts, refunds
and other offsets in connection with the filing of such reports and claims.
4.9 Compliance with Zoning, Land Use and Other Laws; Easements.
To Seller's knowledge, none of the real estate to be leased from the Land Trust
(as defined herein) to Buyer as set forth in Exhibit 4.9 (the "Real Estate") is
in violation of any zoning, public health, building code or other similar laws
applicable thereto or to the ownership, occupancy and/or operation thereof, nor
does there exist any waivers or exemptions relating to the Real Estate with
respect to any non-conforming use or other zoning or building codes matters.
Seller has all material easements and material rights necessary to continue
operation of the Business, copies of which are set forth in Exhibit 4.9
attached hereto.
4.10 Title to Assets.
(1) Seller has and is conveying to Buyer good and
merchantable title in the Assets, free and clear of all mortgages, pledges,
security interests, liens, leases, covenants, assessments, easements, options,
rights of refusal, restrictions, and other encumbrances, except:
(i) as set forth in the Leases and Contracts
attached hereto;
(ii) liens created by statute securing the claims
of materialmen, landlords and like persons;
(iii) easements, covenants, conditions,
restrictions or other encumbrances or imperfections which do not materially
detract from, or materially interfere with the present use of the properties or
assets subject thereto or affected thereby, business or financial condition of
the Seller or affect the marketability of the properties subject thereto in any
material respect;
(iv) security interests, mortgages, liens and
encumbrances described in the Notes to the Financial Statements;
(v) liens of current state and local property
taxes which are not delinquent or subject to penalty ((i) through (v),
collectively the "Permitted Liens").
The Assets are all the assets set forth on the Interim Financial Statements or
used in the operation of the Business.
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(2) The Real Estate is held by Marquette National Bank,
solely as trustee under Trust Number 13089, the beneficiary of which is
Shareholder (the "Land Trust"). The descriptions of the Real Estate contained
in Exhibit 4.9 hereto are accurate and sufficient for their intended purposes,
and such descriptions include all real property leased or owned by Seller and
used in connection with the Business or set forth on the Interim Financial
Statements. Seller owns no real estate. Seller is in lawful possession of all
of the Real Estate, including, without limitation, the buildings, structures
and improvements situated thereon and appurtenances thereto, in each case,
except as set forth on Exhibit 4.9, free and clear of all mortgages, liens and
other encumbrances or restrictions that are related to or impair the Assets or
the Business. Additionally, Land Trust has the right and authority to lease
the Real Estate to Buyer as contemplated by the terms of this Agreement, and
such lease, once effected as contemplated hereunder, will vest in Buyer the
lawful right to possess and use the leased Real Estate, superior in right to
all others except as set forth on Exhibit 4.9.
4.11 Leases and Contracts; Payables and Expenses.
(1) Exhibit 4.11 attached hereto sets forth a complete
and accurate list of all contracts, including the Program Agreements,
agreements, purchase orders, leases, subleases, options and commitments, oral
or written, and all assignments, amendments, schedules, exhibits and appendices
thereof, affecting or relating to the Business or any Asset or any interest
therein, to which either Seller and/or Shareholder is a party or by which
Seller, the Assets or the Business is bound or affected, including, without
limitation, service, contracts, management agreements, equipment leases and
building leases pertaining to any part of the Real Estate (collectively, the
"Leases and Contracts"). Attached to Exhibit 4.11 are accurate and complete
copies of all written Leases and Contracts and written summaries of key terms
of all oral Leases and Contracts. Except for the Assumed Liabilities, all
Leases and Contracts and all other obligations and liabilities relating to the
Assets and the Business shall be retained by Seller.
(2) None of the Leases and Contracts have been modified
or amended from the form thereof attached hereto as Exhibit 4.11 or terminated,
assigned or transferred by Seller, and none, to the knowledge of Seller and
Shareholder, may be subject to any such action. To Seller's knowledge, each
Lease and Contract is in full force and effect and is valid, binding and
enforceable in accordance with its respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity.
(3) No event or condition has happened or presently
exists which constitutes a default or breach or, after notice or lapse of time
or both, could constitute a default or breach by Seller nor to Seller's
knowledge, any other party under any of the Leases and Contracts. To Seller's
knowledge, there are no counterclaims or offsets under any of the Leases and
Contracts.
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(4) Except for Permitted Liens, there does not exist any
security interest, lien, encumbrance or claim of others created or suffered to
exist on any interest created under any of the Leases and Contracts (except for
those that result from or relate to leased Assets).
(5) No purchase commitment by Seller is in excess of
Seller's ordinary business requirements.
(6) Seller shall obtain the consent of RESTAT, a division
of The X. Xxxxxx Co., to the assignment of the contract set forth as item 8 on
Exhibit 4.11 and shall use its good faith efforts to obtain such other consents
to assignment as are reasonably requested by Buyer.
(7) The Payables and Expenses are constituted solely of
current working capital liabilities incurred in the ordinary course of
business, exclusive of long-term and interest bearing debt.
4.12 Environmental Matters.
(1) Hazardous Substances. As used in this Section, the
term "Hazardous Substances" means any hazardous or toxic substances, materials
or wastes, including but not limited to those substances, materials, and wastes
defined in Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or which are
regulated under any Environmental Law (as such term is defined below), or any
of the following: hydrocarbons, petroleum and petroleum products, asbestos,
polychlorinated biphenyls, formaldehyde, radioactive substances (other than
naturally occurring materials in place).
(2) Compliance with Environmental Laws. Except as set
forth in the Phase I Environmental Real Estate Assessment, 000 Xxxxxxxxxx Xxxxx
Building, prepared by AIG Consultants, Inc., February 1, 1994, ("Phase I
Report") all operations or activities upon, or any use of occupancy of the Real
Estate, or any portion thereof, by Seller, any Affiliates of Seller (wherein
the term "Affiliates" shall mean any person or entity controlling, controlled
by or under common control at any time with Seller, and the term "control"
shall mean the power, directly or indirectly to direct the management or
policies of such person or entity), and any agent, contractor or employee of
any agent or contractor of Seller or its Affiliates ("Agents"), or any tenant
or subtenant of Seller of any part of the Real Estate are and have been in
compliance with any and all applicable, federal, state and local environmental,
health and safety laws, regulations, orders, codes, judicial decisions,
decrees, licenses, and permits (collectively, "Environmental Law"), including
but not limited to the release, emission, discharge, storage and removal of
Hazardous Substances. Seller, Affiliates and Agents have kept the Real Estate
free of any lien imposed pursuant to Environmental Law. To the knowledge of
Seller and Shareholder, all prior owners,
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operators and occupants of the Real Estate complied with Environmental Law.
Except for uses, storage or presence of Hazardous Substances reasonably
necessary or incidental to the customary operation of a business similar to the
Business provided such use, storage or presence was duly licensed, authorized,
permitted or otherwise in material compliance with Environmental Law:
(a) Neither Seller nor Affiliates or, to the
knowledge of Seller, the Agents have allowed the use, generation, treatment,
handling, manufacture, voluntary transmission or storage of any Hazardous
Substances over, in or upon the Real Estate, nor, to the knowledge of Seller
and Shareholder, has the Real Estate ever been used for any of the foregoing.
(b) Neither Seller, Affiliates nor, to the
knowledge of Seller, the Agents have installed or permitted to be installed, in
or on the Real Estate friable asbestos or any substance containing asbestos in
condition deemed hazardous by Environmental Law respecting such material.
(c) Seller has not at any time engaged in or
permitted, nor to the knowledge of Seller, has any tenant of Seller, Agent,
Affiliate or any other occupant of the Real Estate, or any portion thereof,
engaged in or permitted any dumping, discharge, disposal, spillage, or leakage
(whether legal or illegal, accidental or intentional) of such Hazardous
Substances, at, on, in or about the Real Estate, or any portion thereof that
would subject the Real Estate or Buyer to clean-up obligations imposed by
governmental authorities under Environmental Law.
(d) Neither Seller nor any present owner or
operator of the Real Estate (i) has either received or been issued a notice,
demand, request for information, citation, summons or complaint regarding an
alleged failure to comply with Environmental Law at the Real Estate, or (ii) is
subject to any existing, pending, or threatened investigation or inquiry by any
governmental authority for failure to comply with or regarding any remedial
obligations under Environmental Law at the Real Estate, and there are no
circumstances known to Seller or Shareholder which could serve as a basis
therefor. Seller has not assumed any liability of a third party for clean up
under, or noncompliance with, Environmental Law.
(e) Neither Seller, its Affiliates nor, to the
knowledge of Seller and Shareholder, its Agents have transported or arranged
for the transportation of any Hazardous Substances to any location which is
listed or proposed for listing on the National Priorities list, or is the
subject of any enforcement action, investigation or other inquiry under
Environmental Law.
Seller shall notify Buyer in writing promptly, after receiving or
being made aware, of any order under or notice of violation or noncompliance
with any Environmental Law,
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any threatened or pending action of which either is aware by any regulatory
agency or governmental authority under Environmental Law, or any claims made by
any third party of which it is aware relating to Hazardous Substances on,
emanations on or from, releases on or from, any of the Real Estate relating to
the period prior to Closing; and shall promptly furnish Buyer with copies of
any written correspondence, notices or legal pleadings and written summaries of
any oral communications or notices in connection therewith.
(3) Other Environmental Matters. Except as set forth in
the Phase I Report, There are no underground storage tanks on any portion of
the Real Estate, and the Real Estate is free of dangerous levels of
naturally-emitted radon. To the knowledge of Seller, no portion of the Real
Estate has ever been used as a landfill. Seller has furnished to Buyer a copy
of the Phase I Report on the Real Estate, which Seller or its Affiliates
obtained or was furnished.
4.13 Miscellaneous Representations Relating to Real Estate.
(1) No part of the Real Estate is currently subject to
condemnation proceedings, and, to the knowledge of Seller and Shareholder, no
condemnation or taking is threatened or contemplated. To Seller's knowledge,
there are no public improvements which may result in special assessments
against or otherwise affect the Real Estate. There are no facts known to
either Seller or Shareholder that would adversely affect the possession, use or
occupancy of the Real Estate.
(2) Attached as Exhibit 4.13 are complete copies of all
appraisals, mechanical and structural studies or reports or assessments,
engineering plans, architectural drawings, soil studies, surveys and other
documents which have been prepared by or at the direction of Seller or
Shareholder within the last five years relating to any of the Assets.
(3) To Seller's knowledge and (with respect to items for
which Seller had no knowledge) except as set forth on the survey attached as
part of Exhibit 4.13 hereto, all utilities serving the Real Estate are adequate
to operate the Real Estate in the manner it is currently operated and all
utility lines, pipes, hook-ups and wires serving the Real Estate are located
within recorded easements for the benefit of the Real Estate. There are no
encroachments upon the Real Estate and no encroachment of any improvements to
the Real Estate onto adjacent property. None of the improvements to the Real
Estate violate set-back, building or side lines, nor do they encroach on any
easements located on the Real Estate.
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(4) All potable and industrial water and all gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving the Real Estate and the
facilities of the Business are installed and operating and are sufficient to
enable the Real Estate and the facilities of the Business to continue to be
used and operated in the manner currently being used and operated, and any
so-called hook-up fees or other associated charges accrued to date have been
fully paid. Seller has received no written recommendation from any insurer to
repair or replace any of the Assets with which Seller has not complied.
4.14 Litigation. Neither Seller nor Shareholder has received
notice of any violation of any law, rule, regulation, ordinance or order of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality (including, but not
limited to, Food and Drug Administration, Drug Enforcement Administration,
state controlled substance agencies and boards of pharmacy, civil rights
agencies, public health and safety and occupational health agencies). Except as
set forth in Exhibit 4.14 attached hereto (for which Buyer assumes no
liability), there are no lawsuits, proceedings, actions, arbitrations, audits,
governmental investigations, claims, inquiries or proceedings pending or, to
the knowledge of Seller and Shareholder, threatened involving Seller which
relate to the Business, Shareholder, any of the Assets or the Business.
4.15 Seller's Employees. Exhibit 4.15 attached hereto sets forth:
(a) a complete list of all of Seller's employees, and rates of pay, (b) true
and correct copies of any and all fringe benefits and personnel policies, (c)
the employment dates and job titles of each such person, and (d) categorization
of each such person as a full-time or part-time employee of Seller. For
purposes of this paragraph, "part-time employee" means an employee who is
employed for an average of fewer than twenty hours (20) per week or who has
been employed for fewer than six of the twelve (12) months preceding the date
on which notice is required pursuant to the "Worker Adjustment and Retraining
Notification Act" ("WARN"), 29 U.S.C. Section 2102 et seq. Except as provided
in Exhibit 4.11, Seller has no employment agreements with its employees and all
such employees are employed on an at "at will" basis. Exhibit 4.15 lists all
ex-employees of Seller utilizing or eligible to utilize COBRA (health
insurance). Seller will terminate all of its employees at Closing, and each of
Seller and Shareholder agree, jointly and severally, to indemnify and hold
Buyer harmless, from and against any and all claims of Seller's employees
relating to their employment by Seller through Closing and such termination,
whenever made. Other than Assumed Liabilities, the parties expressly agree
that Seller shall retain responsibility for and fully and timely pay all
salaries and wages, related payroll taxes and all sick leave, holiday, vacation
benefits, retirement and other fringe benefits that have accrued to its
employees through the date of Closing, including related payroll taxes. Within
the period ninety (90) days prior to Closing, Seller did not temporarily or
permanently close or shut down any "single site of employment" or any
"facility" or any
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"operating unit," department or service within a single site of employment, as
such terms are used in WARN.
4.16 Labor Relations. Seller is not a party to any labor contract,
collective bargaining agreement, contract, Letter of Understanding, or any
other arrangement, formal or informal, with any labor union or organization
which obligates Seller to compensate Seller's employees at prevailing rates or
union scale, nor are any of its employees represented by any labor union or
organization. There is no pending or, to the knowledge of Seller and
Shareholder, threatened labor dispute, work stoppage, unfair labor practice
complaint, strike, administrative or court proceeding or order between Seller
and any present or former employee(s) of Seller. There is no pending or, to
the knowledge of Seller and Shareholder, threatened suit, action, investigation
or claim between Seller and any present or former employee(s) of Seller. There
has not been any labor union organizing activity at any location of Seller, or
elsewhere, with respect to Seller's employees within the last three years.
4.17 Insurance. Seller has in effect and has continuously
maintained insurance coverage including "per occurrence" insurance paid in full
through Closing for all of its operations, personnel and assets, and for the
Assets and the Business customary for a business similar to the Business. A
complete and accurate list of all Seller's insurance policies is set forth in
Exhibit 4.17 attached hereto, which policies have previously been provided to
Buyer. Exhibit 4.17 also sets forth a summary of Seller's current insurance
coverage (listing type, carrier and limits), and includes a list of any pending
insurance claims relating to Seller. Seller and Shareholder agree, jointly and
severally, to indemnify and hold harmless Buyer from and against such pending
insurance claims. Seller is not in default or breach with respect to any
provision contained in any such insurance policies, nor has Seller failed to
give any notice or to present any claim thereunder in due and timely fashion.
4.18 Broker's or Finder's Fee. Neither Seller nor Shareholder has
employed, or is liable for the payment of any fee to, any finder, broker, or
similar person in connection with the transactions contemplated by this
Agreement.
4.19 Conflicts of Interest. Except for the lease of the Real
Estate to Seller by Land Trust, none of the following is either a supplier of
goods or services to Seller, or directly or indirectly controls or is a
director, officer, employee or agent of any corporation, firm, association,
partnership or other business entity that is a supplier of goods or services to
Seller: (a) Shareholder, (b) any director or officer of Seller, or (c) any
entity under common control with Seller or controlled by or related to
Shareholder.
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4.20 Intellectual Property. All trademarks, service marks, trade
names, patents, inventions, processes, copyrights and applications therefor,
whether registered or at common law (collectively, the "Intellectual
Property"), owned by Seller are listed and described in Exhibit 4.20 attached
hereto. No proceedings have been instituted or are pending or, to the
knowledge of Seller and Shareholder, threatened which challenge the validity of
the ownership by Seller of any such Intellectual Property. Seller has not
licensed anyone to use any such Intellectual Property, and neither Seller nor
Shareholder has any knowledge of the use or the infringement of any of such
Intellectual Property by any other person. Seller owns or possesses adequate
and enforceable licenses or other rights to use all Intellectual Property now
used in the conduct of its Business.
4.21 Inventories. The Inventory is, and on Closing will be, of a
quality and quantity presently used by Seller in the ordinary course of
business determined and valued consistent with Seller's past practice. The
Inventory is, and at December 31, 1995, will be, properly valued at the lower
of cost or market value on a first-in/first-out basis in accordance with
generally accepted accounting principles consistently applied. Since December
31, 1995, Seller has not decreased or substituted its items of Inventory other
than in the ordinary course of business. Seller has fairly represented the
nature and extent of the Inventory to its outside auditors and accountants on a
consistent basis and in the exercise of good faith.
4.22 Motor Vehicles. All motor vehicles used in the Business,
whether owned or leased, are listed in Exhibit 1.1(2) attached hereto. All
such vehicles are properly licensed and registered in accordance with
applicable law.
4.23 Employee Benefit Plans.
(1) Welfare Benefit Plans. Exhibit 4.23(1) attached
hereto contains a true, accurate and complete list of each "employee welfare
benefit plan" (as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974 as amended ("ERISA")) maintained by Seller or to which
Seller contributes or is required to contribute (such employee welfare benefit
plans being hereinafter collectively referred to as the "Welfare Benefit
Plans"). Copies to all Welfare Benefit Plans have previously been provided to
Buyer.
(2) Pension Benefit Plans. Exhibit 4.23(2) attached
hereto contains a true and complete list of each "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) maintained by Seller, to which
Seller contributes or is required to contribute, or which covered employee of
Seller during the period of their employment with any predecessor of Seller,
(such employee pension benefit plans being hereinafter collectively referred to
as the "Pension Benefit Plans"). Copies of all Pension Benefit
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Plans, if any, have previously been provided to Buyer. Seller does not
constitute and is not required to contribute to any multi-employer plan (as
defined in Sections 3 (37) and 4001 (4)(3) of ERISA).
(3) Liabilities. Buyer shall not assume or be
responsible for any Welfare Benefit Plan or Pension Benefit Plan or any
liability thereunder.
(4) Termination of Participation. Upon Closing, Seller
shall cease to be a participating employer under all Pension Benefit Plans and
Welfare Benefit Plans maintained by Seller, and any such action by Seller shall
in no way diminish its obligations to Buyer.
4.24 Compliance with Healthcare Laws and Other Laws. Seller has
not made any kickback, bribe or payment to any person or entity, directly or
indirectly, for referring, recommending or arranging business or patients with,
to or for Seller which action could have a material adverse effect on the
Business. The transactions contemplated under this Agreement comply with any
applicable state antitrust and similar laws. None of the Leases and Contracts
and no activity of Seller violates Section 1877 of the Social Security Act or
any similar provision of applicable state law in any material respect. None of
the Leases and Contracts and no activity of Seller violates provisions of
applicable state law relating to the corporate practice of medicine in any
material respect. The Seller is in compliance (without obtaining waivers,
variances or extensions) with, all federal, state and local laws, rules and
regulations which relate to the operations of the Business, except where the
failure to be in compliance could not have a material adverse effect on the
Business. All healthcare, tax and other returns, reports, plans and filings of
any nature required to be filed by Seller with any federal, state or local
governmental authorities and any third party payors have been properly
completed, except where the failure to be so completed or filed could not have
a material adverse effect on the Business, and timely filed in compliance with
all applicable requirements. Each return, report, plan and filling contains no
materially untrue or misleading statements and does not omit anything which
would cause it to be misleading or inaccurate in any material respect. Seller
shall retain and be responsible, for any liability incurred, and Seller shall
be entitled to receive any refund or other benefit which may result from the
same in connection with any such return, report, plan and filing.
4.25 Condition of Assets. The Equipment and Furnishings are all of
the "Equipment" reflected on the Financial Statements, other than those items
sold and replaced in the ordinary course of business. The Assets together with
the Excluded Assets comprise all of the following: all assets owned by Seller
and all assets used in connection with the Business and any related businesses.
Except as set forth on Exhibit 4.25, all components of all of the Equipment and
Furnishings are in good working order. Seller has received no written
recommendation from any insurer to repair or replace any
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of the Assets with which Seller has not complied. Since December 31, 1995 and
except as required in the ordinary and usual course of the Business, no assets
have been removed, distributed, assigned or paid by or from Seller.
4.26 Tax Returns; Taxes. Seller has filed all federal, state and
local tax returns and tax reports required by such authorities to be filed and
has paid or made arrangements for all taxes for all periods, through December
31, 1995, except where the failure to do so would not adversely effect the
Business or Assets.
4.27 No Omissions or Misstatements. None of the representations,
warranties, covenants or other information in this Agreement and Exhibits
hereto, contains any untrue statement of a material fact or is misleading in
any material respect or omits to state any material fact necessary in order to
make any of the statements herein or therein not misleading in light of the
circumstances in which they were made.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and Shareholder to enter into this
Agreement and to consummate the transactions contemplated herein, Buyer hereby
represents and warrants to Seller and Shareholder, which representations and
warranties shall be true and correct on the date hereof and on the date of
Closing, as follows:
5.1 Organization, Qualification and Authority. IPA and Capstone
are each corporations duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer has the full corporate power
and corporate authority to own, lease and operate its properties and assets as
presently owned, leased and operated and to carry on its business as it is now
being conducted. Buyer has the full right, power and authority to execute,
deliver and carry out the terms of this Agreement and all documents and
agreements necessary to give effect to the provisions of this Agreement and to
consummate the transactions contemplated on the part of Buyer hereby. The
execution, delivery and consummation of this Agreement and all other agreements
and documents executed in connection herewith by Buyer has been duly authorized
by all necessary corporate action on the part of Buyer. No other action on the
part of Buyer or any other person or entity is necessary to authorize the
execution, delivery and consummation of this Agreement and all other agreements
and documents executed in connection herewith. This Agreement, and all other
agreements and documents executed in connection herewith by Buyer, upon due
execution and delivery thereof, shall constitute the valid binding obligations
of Buyer, enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
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5.2 Absence of Default. The execution, delivery and consummation
of this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
with or without the giving of notice or the passage of time, or both, result in
a breach of, constitute a default under, or create (or cause the acceleration
of the maturity of) any debt, indenture, obligation or liability or result in
the creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets (except in the ordinary course pursuant to
Buyer's existing credit agreement) under: (a) any term or provision of the
Certificate of Incorporation or Bylaws of Buyer; (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Buyer is a party or by which Buyer is bound; (c)
any judgment, decree, order, regulation or rule of any court or regulatory
authority, or (d) any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Buyer is subject.
5.3 Broker's or Finder's Fee. Buyer shall be responsible for the
payment of any fee to any finder, broker, government official, consultant or
similar person retained by Buyer in connection with the transactions
contemplated by this Agreement.
5.4 Buyer Reports. Capstone has delivered to the Shareholder
those filings with the Securities and Exchange Commission (collectively, the
"Buyer Reports") listed on Exhibit 5.4 hereto. The Buyer Reports were complete,
accurate and correct, in all material respects, when filed. The Buyer Reports
are or amend and restate, all of the periodic reports filed with the SEC by
Capstone since January 1, 1995. The Buyer Reports, when filed, did not contain
any untrue statement of material fact or omit to state any material fact
necessary in order to make any of the statements therein not misleading in
light of the circumstances in which they were made.
ARTICLE VI. COVENANTS OF PARTIES
6.1 Ownership of Intellectual Property. Seller will reasonably
assist Buyer (including, but not limited to the execution of all necessary
documents and agreements) in order for Buyer to create, perfect or renew rights
in any Intellectual Property (including but not limited to rights which are
created, perfected or renewed subsequent to the Closing).
6.2 Access to Books and Records.
(a) Following the Closing, Buyer shall permit Seller's
representatives and employees (including, without limitation, their counsel
consultants and auditors), during normal business hours, to have reasonable
access to at all reasonable times, and
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examine and make copies of, all books and records of the Business which relate
to transactions or events occurring prior to the Closing and have reasonable
access to the employees of the Business. For a period of five years after the
Closing, Buyer agrees that, prior to the destruction or disposition of any such
books or records, Buyer shall provide not less than forty-five (45) days', nor
more than ninety (90) days', prior written notice to Seller of such proposed
destruction or disposal. If Seller desires to obtain any such documents or
records, it may do so by notifying Buyer in writing at any time prior to the
date scheduled for such destruction or disposal. In such event, Buyer shall
not destroy such documents or records and the parties shall then promptly
arrange for the delivery of such documents or records to Seller, its successors
or assigns. All out-of-pocket costs associated with the delivery of the
requested documents shall be paid by Seller.
(b) Following the Closing, Seller shall permit Buyer and
its representatives (including, without limitation, their counsel and
auditors), to have access at all reasonable times to, and examine and make
copies of, all books and records of Seller and its affiliates relating to the
Business or Assets, which books and records are retained by Seller and which
relate to transactions or events occurring prior to the Closing. For a period
of five years after the Closing, Seller agrees that, prior to the destruction
or disposition of any such books or records, Seller shall provide not less than
forty-five (45) days', nor more than ninety (90) days', prior written notice to
Buyer of such proposed destruction or disposal. If Buyer desires to obtain any
such documents or records, it may do so by notifying Seller in writing at any
time prior to the date scheduled for such destruction or disposal. In such
event, Seller shall not destroy such documents or records and the parties shall
then promptly arrange for the delivery of such documents or records to Buyer,
its successors or assigns. All out-of-pocket costs associated with the
delivery of the requested documents or records shall be paid by Buyer.
(c) Seller shall cause its accounting firm to consent to,
and provide the necessary written consents for, the inclusion of the Financial
Statements and Post Closing Financial Statements in any registration
statements, private placement memoranda, and periodic reports, if any,
necessary or appropriate in order to enable Buyer or its affiliates to comply
with any applicable registration or reporting requirements of federal or state
securities laws.
6.3 Maintain Insurance Coverage. Seller shall provide at Closing
evidence satisfactory to Buyer that the insurance described in Section 4.17
continues to be in effect through the date of Closing and that all premiums due
have been paid.
6.4 Current Return Filing. Seller shall be responsible for (a)
the preparation and filing of the federal, state and local income tax and gross
receipts and use tax
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returns for all the tax periods of Seller ending on or before the Closing; and
(b) the payment of all such taxes when due.
ARTICLE VII. CLOSING
7.1 Closing. If all of the conditions to Closing set forth in
Articles VIII and IX hereof are satisfied, then the Closing shall occur on
March 1, 1996, at the offices of Seller's counsel in Chicago, Illinois (the
"Closing"). The Closing shall be effective January 1, 1996. In the event that
Closing has not occurred by March 31, 1996, then any party not in default
hereunder may terminate this Agreement without further obligation.
ARTICLE VIII. SELLER'S AND SHAREHOLDER'S CONDITIONS TO CLOSE
The obligations of Seller and Shareholder under this Agreement are
subject to the satisfaction on or prior to Closing, of the following conditions
(which may be waived in writing by Seller or Shareholder in whole or in part):
8.1 Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits and attachments hereto) or in any certificate
or document delivered to Seller pursuant hereto, shall be deemed to have been
made again at the Closing and shall then be true in all respects; and Buyer
shall have performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or
at Closing.
8.2 No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transactions hereunder contemplated, and
no governmental agency or body or other entity shall have taken any other
action or made any request of Seller or Buyer as a result of which Seller
reasonably and in good xxxxx xxxxx that to proceed with the transactions
hereunder may constitute a violation of law.
8.3 Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued
which would have the effect of (a) making the transactions contemplated under
this Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There shall have been no United States federal or state statute,
rule or regulations enacted or promulgated after
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the date of this Agreement that would reasonably, directly or indirectly,
result in any of the consequences referred to in this paragraph.
8.4 Approval of Board of Directors. This Agreement and
consummation of the transactions contemplated hereunder shall have been
approved by the Board of Directors of Seller.
8.5 Employment Agreement. Buyer and Shareholder shall have
entered into an employment agreement in the form attached hereto as Exhibit
9.6.
8.6 Lease Agreement. Buyer and Land Trust shall have entered into
a lease agreement in the form attached hereto as Exhibit 9.7 and Buyer shall
have delivered evidence of the insurance required thereunder.
8.7 Deliveries. Buyer shall have complied with its obligations
under Article XI hereunder.
ARTICLE IX. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to
the satisfaction, on or prior to Closing, of the following conditions
(which may be waived in writing by Buyer in whole or in part):
9.1 Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Seller and Shareholder
contained in this Agreement (including the Exhibits and attachments hereto) or
in any certificate or document delivered to Buyer in connection herewith, shall
be deemed to have been made again at the Closing and shall then be true in all
respects; and Seller and Shareholder shall have performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by them prior to or at Closing.
9.2 Regulatory Approvals. Buyer shall have obtained (a)
certification for participation in the Medicaid Programs of the states where
the Business is conducted, (b) certification from the appropriate agency of the
federal government for participation in the federal Medicare Program, and (c)
all other consents, licenses, registrations, permits, approvals, provider
contracts, necessary in the judgment of Buyer to acquire and operate the Assets
and Business as contemplated hereunder.
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9.3 No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction hereunder contemplated, and
no governmental agency or body or other entity shall have taken any other
action or made any request of Seller or Buyer as a result of which Buyer
reasonably and in good xxxxx xxxxx that to proceed with the transactions
hereunder may constitute a violation of law.
9.4 Inspection of Assets; UCC Searches, etc. Buyer and its
representatives shall have had and continue to have reasonable rights of
inspection of the Assets in connection with Buyer's due diligence review, and
the results of Buyer's inspection and due diligence review shall be acceptable
to it. Seller shall have delivered to Buyer, at Seller's expense, all UCC
financing statements and title searches, local and central, including fixtures,
and federal and state pending litigation, tax lien and judgment searches, with
respect to Seller, the Assets and the Business, including all "DBA's,"trade
names and fictitious names of Seller, dated no more than ten (10) days prior to
Closing, with results satisfactory to Buyer.
9.5 Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued
which would have the effect of (a) making the transactions contemplated under
this Agreement illegal, (b) otherwise preventing consummation of such
transactions, or (c) imposing material limitations on the ability of Buyer
effectively to acquire and hold Assets, to operate the Business, or, in any
case, to exercise rights of ownership pursuant thereto. There shall have been
no federal or state statute, rule or regulations enacted or promulgated after
the date of this Agreement that would reasonably result, directly or
indirectly, in any of the consequences referred to in this paragraph.
9.6 Employment Agreement. Buyer and Shareholder shall have
entered into an employment agreement in the form attached hereto as Exhibit
9.6.
9.7 Lease Agreement and Landlord Waiver. Buyer and Land Trust
shall have entered into a lease agreement in the form attached hereto as
Exhibit 9.7 and the related Landlord Waiver and Consent.
9.8 Third Party Consents and Releases. Seller shall provide to
Buyer the consents described in Section 4.11(6).
9.9 Deliveries. Seller shall have complied with its obligations
under Article X hereunder.
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9.10 Foxmeyer. The Financial Statements shall reflect the amount
of liability to Foxmeyer as $1,855,455.86.
ARTICLE X. OBLIGATIONS OF SELLER AND SHAREHOLDER AT CLOSING
At Closing, Seller and Shareholder shall deliver or cause to be
delivered to Buyer the following in form and substance reasonably satisfactory
to Buyer:
10.1 Documents Relating to Title. Seller shall execute,
acknowledge, deliver and cause to be executed, acknowledged and delivered to
Buyer:
(a) A Xxxx of Sale, in form and substance satisfactory to
Buyer, warranting and conveying to Buyer good, valid and marketable title to
all Assets, free and clear (except for Permitted Liens) of all liens,
mortgages, pledges, encumbrances, security interests, covenants, easements,
rights of way, equities, options, rights of first refusal restrictions, special
tax or governmental assessments, defects in title, encroachments and other
burdens, except for the Assumed Liabilities.
(b) Certificates of title to all vehicles that constitute
Assets endorsed by Seller together with completed originals of any forms
required by all applicable states to transfer the same, free and clear of all
liens, except for the Assumed Liabilities.
(c) An executed assignment to Buyer of each Lease and
Contract which Buyer has agreed to assume in form and substance reasonably
satisfactory to Buyer.
10.2 Possession. Seller shall deliver to Buyer full possession and
control of the Business and Assets at the Seller's premises (except for Assets
located at the premises of the Business' customers).
10.3 Opinion of Counsel. Seller and Shareholder shall deliver to
Buyer the favorable opinion of counsel for Seller and Shareholder, dated as of
Closing, in the form attached hereto as Exhibit 10.3.
10.4 Corporate Good Standing and Corporate Resolutions. Seller
deliver to Buyer a certificate of good standing from the Secretary of State of
its state of organization, certified copies of the Bylaws and Charter of Seller
(all dated the most recent practical date prior to Closing), certified copies
of the resolutions of the Board of Directors and Shareholder authorizing the
execution, delivery and consummation of this Agreement and the execution,
delivery and consummation of all other agreements and documents executed in
connection herewith by them, including all deeds, bills of sale and other
instruments required hereunder, sufficient in form and content to meet the
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requirements of the law of the state of Seller's incorporation relevant to such
transactions and certified by officers of Seller to be validly adopted and in
full force and effect and unamended as of Closing.
10.5 Closing Certificate. Seller and Shareholder shall deliver to
Buyer a certificate of an officer of Seller and of Shareholder, dated as of
Closing, certifying that (a) each covenant and obligation of Seller and
Shareholder has been complied with by such parties, and (b) each representation
and warranty of Seller and Shareholder is true and correct at the Closing as
if made on and as of the Closing.
10.6 Third Party Consents, Etc. Seller shall deliver to Buyer, all
consents, estoppels, approvals, releases and authorizations of governmental
agencies and other third parties that Buyer believes are necessary or advisable
for the legal and proper execution, delivery and consummation of this
Agreement, and the transactions contemplated hereby, including, but not limited
to, those consents necessary for the assignment of Leases and Contracts
pursuant to paragraph 10.1(c) and those releases needed to convey the Assets as
contemplated hereunder.
10.7 Taxes and Other Payments. Seller shall deliver to Buyer:
(a) A certificate of non-foreign status signed by the
appropriate party and sufficient in form and substance to relieve Buyer of all
withholding obligations under Section 1445 of the Code.
(b) Executed releases of all mortgages, security
interests, liens, pledges, restrictions or other encumbrances on or applicable
to the Assets, except those encumbrances permitted under paragraph 9.10.
10.8 Insurance. Seller shall deliver evidence of its insurance
coverage required by paragraph 6.9.
10.9 Employment and Lease Agreements. Seller and Shareholder shall
deliver to Buyer each of the agreements described in paragraphs 9.6 and 9.7.
10.10 Subordination, Nondisturbance and Attornment Agreement.
Seller shall deliver to Buyer a Subordination, Nondisturbance and Attornment
Agreement executed by Marquette National Bank in the form attached hereto as
Exhibit 10.10.
10.11 Additionally Requested Documents; Post Closing Assistance. At
the reasonable request of Buyer at Closing and at any time or from time to time
thereafter, Seller and Shareholder shall cooperate with Buyer to put Buyer in
actual possession and operating control of the Assets and Business, execute and
deliver such further
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instruments of sale, conveyance, transfer and assignment, as Buyer may
reasonably request in order to effectively sell, convey, transfer and assign
the Assets and Business to Buyer, to execute and deliver such further
instruments and to take such other actions as Buyer may reasonably request to
release Buyer from all obligation and liability with regard to any obligation
or liability retained by Seller and/or Shareholder and to execute and deliver
such further instruments and to cooperate with Buyer as Buyer may reasonably
request or to enable Buyer to obtain all necessary health care or regulatory
certifications, approvals, registrations, consents and licenses, accreditations
or permits.
ARTICLE XI. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the
following in a form and substance reasonably satisfactory to Seller:
11.1 Purchase Price. Buyer shall make available to Seller the
Purchase Price upon the terms specified in paragraph 3.1.
11.2 Assumption of Liabilities. Buyer shall covenant to fully
perform and comply with all of the Assumed Liabilities, subject to the
provisions of this Agreement, from and after Closing.
11.3 Opinion of Counsel. Buyer shall deliver to Seller and
Shareholder the favorable opinion of counsel for Buyer, dated as of Closing, in
the form attached hereto as Exhibit 11.3.
11.4 Corporate Good Standing and Board Resolutions. Buyer shall
deliver to Seller a certificate of good standing from the Secretary of State of
Delaware, dated the most recent practical date prior to Closing, together with
a certified copy of the resolutions of the Board of Directors of Buyer
approving this Agreement and the consummation of the transactions hereunder
contemplated.
11.5 Closing Certificate. Buyer shall deliver to Seller a
certificate of an officer of Buyer, dated as of Closing, certifying that (a)
each covenant and obligation of Buyer has been complied with by Buyer, and (b)
each representation and warranty of Buyer is true and correct on the Closing as
if made on and as of the Closing.
11.6 Additional Requested Documents; Post Closing Assistance. At
the reasonable request of Seller at Closing and at any time or from time to
time thereafter, Buyer shall execute and deliver such further instruments and
take such other action as Seller may reasonably request, and otherwise
cooperate with Seller as Seller may reasonably request, to effectuate the
transactions contemplated hereunder.
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11.7 Warrant. Buyer shall deliver to Seller and Shareholder an
executed Warrant.
11.8 Employment and Lease Agreements. Buyer shall deliver to
Seller and Shareholder each of the agreements described in paragraphs 9.6 and
9.7.
11.9 Illinois Resale Certificate. Buyer shall deliver to Seller
and Shareholder an End Use Certificate in the form attached as Exhibit 11.9.
ARTICLE XII. [RESERVED]
ARTICLE XIII. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
13.1 Survival. The covenants, obligations, representations and
warranties of Buyer, Seller and Shareholder contained in this Agreement, or in
any certificate or document delivered pursuant to this Agreement, shall be
deemed to be material and to have been relied upon by the parties hereto and
shall survive the date of Closing, and shall not be merged into any documents
delivered in connection with the Closing, for a period of three (3) years.
Notwithstanding the three (3) year limitation set forth above, those
representations, warranties, covenants and obligations set forth in paragraphs
4.8, 4.24 (as such paragraph pertains to health care matters), 4.26 and 6.4
shall each survive for a period equal to the applicable statute of limitations.
13.2 Indemnification by Seller, Shareholder and Trust. Subject to
provisions of paragraph 13.4, Seller, Shareholder and Trust, jointly and
severally, shall promptly indemnify, defend, and hold harmless Buyer, the
directors, officers, shareholders, employees and agents of Buyer, and the
Assets against any and all losses, costs, expenses (including reasonable cost
of investigation, court costs and legal fees actually incurred) and damages
suffered by Buyer resulting from (i) any breach by either Seller or Shareholder
of any of the covenants, obligations, representations or warranties contained
in this Agreement or any certificate or affidavit of Seller and/or Shareholder
delivered pursuant to this Agreement, (ii) any liability of Seller not
expressly assumed by Buyer pursuant to paragraph 1.3, and (iii) any claim
(whether or not disclosed herein) that is brought or asserted by any third
party(ies) against Buyer arising out of the ownership, licensing, operation or
conduct of the Business or Assets or the conduct of any of Seller's employees,
agents or independent contractors, relating to all periods of time through the
date of Closing. Any indemnification payment made pursuant to this Article
shall include interest at eight percent (8%) per annum (the "Rate"), payable
for the period measured from the date that the loss, cost, expense or damage
was incurred until the date of payment. The liability created under this
paragraph shall be joint and several between Seller and Shareholder.
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13.3 Indemnification by Buyer. Subject to the provisions of
paragraph 13.4, Buyer shall promptly indemnify, defend, and hold Seller
harmless against any and all losses, costs, and expenses (including reasonable
cost of investigation, court costs and legal fees actually incurred) and other
damages resulting from (i) any breach by Buyer of any of its covenants,
obligations, representations or warranties or breach or untruth of any
representation, warranty, fact or conclusion contained in this Agreement or any
certificate or document of Buyer delivered pursuant to this Agreement,(ii) any
claim which is brought or asserted by any third party(ies) against Seller for
failure to pay or perform any of the Assumed Liabilities, and (iii) any claim
that is brought or asserted by any third party(s) against Seller arising out of
the ownership, licensing, operation or conduct of the Business or Assets or the
conduct of any of Buyer's employees, agents or independent contractors,
relating to all periods of time subsequent to the date of Closing. Any
indemnification payment pursuant to the foregoing shall include interest at the
Rate from the date that the loss, cost, expense or damage was incurred until
the date of payment. The liability created under this paragraph shall be joint
and several between IPA and Capstone.
13.4 Rules Regarding Indemnification. The obligations and
liabilities of each party which may be subject to indemnification liability
hereunder (the "indemnifying party") to the other party (the "indemnified
party") shall be subject to the following terms and conditions:
(1) Claims by Non-parties. Prior to seeking
indemnification hereunder, the indemnified party shall deliver appropriate
claims to any relevant insurer or third party obligated to indemnify the
indemnified party with respect to the loss giving rise to such claim so long as
such action would not violate the provisions of any agreement binding upon the
indemnified party and would not otherwise have a detrimental effect on the
indemnified party. The indemnified party shall give written notice within a
reasonably prompt period of time to the indemnifying party of any written claim
by a third party which is likely to give rise to a claim by the indemnified
party against the indemnifying party based on the indemnity agreements
contained in this Article, stating the nature of said claim and the amount
thereof, to the extent known. The indemnified party shall give notice to the
indemnifying party that pursuant to the indemnity, the indemnified party is
asserting against the indemnifying party a claim with respect to a potential
loss from the third party claim, and such notice shall constitute the assertion
of a claim for indemnity by the indemnified party. If, within thirty (30) days
after receiving such notice, the indemnifying party advises the indemnified
party that it will provide indemnification and assume the defense at its
expense, then so long as such defense is being conducted, the indemnified party
shall not settle or admit liability with respect to the claim and shall afford
to the indemnifying party and defending counsel reasonable assistance in
defending against the claim. If the indemnifying party assumes the defense,
counsel shall be selected by such party and if the indemnified party then
retains its own counsel,
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it shall do so at its own expense. If the indemnified party does not receive a
written objection to the notice from the indemnifying party within thirty (30)
days after the indemnifying party's receipt of such notice, the claim for
indemnity shall be conclusively presumed to have been assented to and approved,
and in such case the indemnified party may control the defense of the matter or
case and, at its sole discretion, settle or admit liability. If within the
aforesaid thirty (30) day period the indemnified party shall have received
written objection to a claim (which written objection shall briefly describe
the basis of the objection to the claim or the amount thereof, all in good
faith), then for a period of ten (10) days after receipt of such objection the
parties shall attempt to settle the dispute as between the indemnified and
indemnifying parties. If they are unable to settle the dispute, the unresolved
issue or issues shall be settled by arbitration in Chicago, Illinois in
accordance with the rules and procedures of the American Arbitration
Association.
(2) Claims by a Party. The determination of a claim
asserted by a party hereunder (other than as set forth in subparagraph (1)
above) pursuant to this Article shall be made as follows: The indemnified party
shall give written notice within a reasonably prompt period of time to the
indemnifying party of any claim by the indemnified party which has not been
made pursuant to subparagraph (1) above, stating the nature of such claim and
the amount thereof, to the extent known. The claim shall be deemed to have
resulted in a determination in favor of the indemnified party and to have
resulted in a liability of the indemnifying party in an amount equal to the
amount of such claim estimated pursuant to this paragraph if within forty-five
(45) days after the indemnifying party's receipt of the claim the indemnified
party shall not have received written objection to the claim. In such event,
the claim shall be conclusively presumed to have been assented to and approved.
If within the aforesaid forty-five (45) day period the indemnified party shall
have received written objection to a claim (which written objection shall
briefly describe the basis of the objection to the claim or the amount thereof,
all in good faith), then for a period of sixty (60) days after receipt of such
objection the parties shall attempt to settle the disputed claim as between the
indemnified and indemnifying parties. If they are unable to settle the
disputed claim, the unresolved issue or issues shall be settled by arbitration
in Chicago, Illinois in accordance with the rules and procedures of the
American Arbitration Association.
(3) Claims by a Straddle Customer or Patient. Any claim
by a customer or patient relating to professional negligence or similar matters
involving a customer or patient served both prior to and subsequent to Closing
will be the responsibility of either Seller and Shareholder, jointly and
severally on the one hand, or Buyer, on the other hand, in accordance with the
following guidelines: (i) if it is a claim in which the incident giving rise to
liability clearly arose on or before the date of Closing, Seller and
Shareholder shall respond to the loss and defense expenses and indemnify Buyer;
(ii) if it is a claim in which the incident giving rise to liability clearly
arose subsequent to the
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date of Closing, Buyer shall respond to the loss and defense expenses and
indemnify Seller; and (iii) in the event that the incident giving rise to
liability as to time is not clear, Seller, Shareholder and Buyer will jointly
defend the case and each will fully cooperate with the others in such defense.
Once the case is closed, if Buyer and Seller and Shareholder cannot agree to
the allocation of both indemnity and expenses, then the matter shall be
submitted to binding arbitration in Nashville, Tennessee in accordance with the
rules and procedures of the American Arbitration Association.
(4) Limitation on Claims. The obligations of an
indemnifying party under this Agreement shall not begin until the indemnified
party incurs one or more claims which equal One Hundred Thousand and No/100
Dollars ($100,000.00) (the "Basket"). Once the Basket is reached, the
obligations of an indemnifying party under this Agreement shall apply to all
claims of the indemnified party, whether such claims are part of the Basket or
in excess thereof. In no event shall the obligations of an indemnifying party
and its affiliates under this Agreement exceed the cash portion of the Purchase
Price.
ARTICLE XIV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
14.1 Covenant Not to Compete. Seller and Shareholder hereby,
jointly and severally, covenant and agree with Buyer that, during the
"NONCOMPETE PERIOD" (as such term is defined herein) neither Seller nor
Shareholder shall directly or indirectly, (a) within the "NONCOMPETE AREA" (as
such term if defined herein), acquire, lease, manage, consult for, serve as
agent or subcontractor for, finance, invest in, own any part of or exercise
management control over any pharmaceutical operation or business which provides
any goods or services competitive with the goods and services provided by the
Business as of the Closing; (b) solicit for employment or employ any person who
at Closing or thereafter became an employee of Buyer or an Affiliate unless
such person is not so employed for at least six (6) months; or (c) with respect
to any customer, patient, physician, physician group, or health care provider
with whom Buyer or an Affiliate contracts with or serves in connection with the
Business subsequent to Closing, or any potential customer with whom Buyer or
Affiliate may reasonably be expected to contract with or service in connection
with the Business within six (6) months of the Closing, either solicit the same
in a manner which could adversely affect Buyer or an Affiliate or make
statements to the same which disparage Buyer, an Affiliate, the Business or
their respective operations in anyway. The "NONCOMPETE PERIOD" shall commence
at the Closing and terminate on the third anniversary thereof. The "NONCOMPETE
AREA" shall mean the area within a fifty (50) mile radius of (a) each location
from which the Business is operated or conducted as of the Closing, and (b)
each location at which Seller delivers pharmaceuticals as of the Closing.
Ownership of
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less than five percent (5%) of the stock of a publicly held company shall not
be deemed a breach of this covenant.
14.2 Enforceability. In the event of a breach of paragraph 14.1,
Seller and Shareholder recognize that monetary damages shall be inadequate to
compensate Buyer and Buyer shall be entitled, without the posting of a bond or
similar security, to an injunction restraining such breach, with the costs
(including attorneys fees) of securing such injunction to be jointly and
severally borne by Seller and Shareholder. Nothing contained herein shall be
construed as prohibiting Buyer from pursuing any other remedy available to it
for such breach or threatened breach.
All parties hereby acknowledge the necessity of protection against the
competition of Seller and Shareholder and that the nature and scope of such
protection has been carefully considered by the parties. The period provided
and the area covered are expressly represented and agreed to be fair,
reasonable and necessary. The consideration provided for herein is deemed to
be sufficient and adequate to compensate Seller and Shareholder for agreeing to
the restrictions contained in paragraph 14.1. If, however, any court
determines that the forgoing restrictions are not reasonable, such restrictions
shall be modified, rewritten or interpreted to include as much of their nature
and scope as will render them enforceable.
ARTICLE XV. MISCELLANEOUS
15.1 Assignment. Following Closing, Buyer may freely assign any or
all of its rights or delegate any or all of its obligations under this
Agreement without the express written consent of Seller or Shareholder.
Neither Seller nor Shareholder may assign any rights or delegate any
obligations under this Agreement without the prior written consent of Buyer,
and any prohibited assignment or delegation will be null and void.
15.2 Other Expenses. Except as otherwise provided in this
Agreement, Seller and Shareholder shall pay all of their expenses in connection
with the negotiation, execution, and implementation of the transactions
contemplated by this Agreement and Buyer shall pay all of its expenses in
connection with the negotiation, execution, and implementation of the
transactions contemplated by this Agreement. All state and local sales and use
taxes, recording fees and transfer taxes incurred in connection with the
transactions contemplated within this Agreement shall be borne and timely paid
by Seller. All ad valorem taxes incurred in connection with the transactions
contemplated within this Agreement shall be prorated as of Closing.
15.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in
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writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received, (b) if delivered by
overnight courier, on the day after mailing, and (c) if mailed, five days
after mailing with postage prepaid. Any such notice shall be sent as follows:
To Seller or Shareholder:
------------------------
Xxxxxx Xxxxx
0000 Xxxxx Xxxxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxxxxx
Winston & Xxxxxx
00 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
To Buyer:
--------
Capstone Pharmacy Services, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attn: R. Xxxx Xxxxxxx, President
with a copy to:
Xxxx Manner
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
15.4 Confidentiality; Prohibition on Trading. All parties agree to
maintain the confidentiality of the existence of this Agreement and the
transactions contemplated hereunder, unless disclosure is required by law.
Seller, Shareholder and their Affiliates agree not to trade in the securities
of Buyer or its Affiliates based upon any non-public information.
15.5 Controlling Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of Delaware.
15.6 Headings. Any table of contents and paragraph headings in
this Agreement are for convenience of reference only and shall not be
considered or referred to in resolving questions of interpretation.
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15.7 Benefit. Subject to paragraph 15.1, this Agreement shall be
binding upon and shall inure to the exclusive benefit of the parties hereto and
their respective heirs, legal representatives, successors and assigns. This
Agreement is not intended to, nor shall it, create any rights in any other
party.
15.8 Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted. Further, there shall be
automatically substituted for such invalid or unenforceable provision a
provision as similar as possible which is valid and enforceable.
15.9 Waiver. Neither the failure nor any delay on the part of any
party hereto in exercising any rights, power or remedy hereunder shall operate
as a waiver thereof, or of any other right, power or remedy; nor shall any
single or partial exercise of any right, power or remedy preclude any further
or other exercise thereof, or the exercise of any other right, power or remedy.
No waiver of any of the provisions of this Agreement shall be valid unless it
is in writing and signed by the party against which it is sought to be
enforced.
15.10 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
15.11 Interpretation; Knowledge. All pronouns and any variation
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or entity, or the context, may require.
Further, it is acknowledged by the parties that this Agreement has undergone
several drafts with the negotiated suggestions of both; and, therefore, no
presumptions shall arise favoring either party by virtue of the authorship of
any of its provisions or the changes made through revisions. Whenever in this
Agreement the term "to the knowledge of Seller or Shareholder" or the like is
used, Seller and Shareholder shall each be deemed to have the knowledge of
Seller's Shareholder, officers, directors, Director of Pharmacy and Assistant
Director of Pharmacy, and of its Affiliates; and Seller and Shareholder shall
each be under a duty of due inquiry.
15.12 Entire Agreement. This Agreement, including the Exhibits and
attachments hereto, which are incorporated herein by reference, constitutes the
entire agreement between the parties hereto with regard to the matters
contained herein and it is understood and agreed that all previous
undertakings, negotiations, letters of intent and agreements between the
parties are merged herein. This Agreement may not be modified orally, but only
by an agreement in writing signed by Buyer, Seller and Shareholder.
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15.13 Legal Fees and Costs. Subject to Section 13.4(2), in the
event any party incurs legal expenses to enforce or interpret any provision of
this Agreement, the prevailing party will be entitled to recover such legal
expenses, including, without limitation, attorney's fees, costs and
disbursements, in addition to any other relief to which such party shall be
entitled.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SELLER": "BUYER"
I.M.D. CORPORATION ILLINOIS PHARMACY ACQUISITION CO.
By: By:
------------------------ -----------------------------------
Xxxxxx Xxxxx, President
Title:
--------------------------------
"SHAREHOLDER": CAPSTONE PHARMACY SERVICES, INC.
--------------------------- By:
XXXXXX XXXXX -----------------------------------
Title:
--------------------------------
XXXXXX XXXXX, AS TRUSTEE
UNDER TRUST INSTRUMENT
DATED DECEMBER 7, 1987
By:
--------------------------- -----------------------------------
Title:
--------------------------------
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I.M.D.
Exhibit List
Exhibit A Description of Business
Exhibit 1.1(2) Equipment and Furnishings
Exhibit 1.2 Excluded Assets
Exhibit 1.3 Assumed Liabilities
Exhibit 3.1 Form of Warrant
Exhibit 3.3 Allocation of Purchase Price
Exhibit 4.3 Financial Statements
Exhibit 4.4 Operations Since December 31, 1995
Exhibit 4.6 Employment Discrimination
Exhibit 4.7(1) Licenses and Permits
Exhibit 4.9 Real Estate
Exhibit 4.11 List and Copies/Summaries of Leases and
Contracts
Exhibit 4.13 Copies of Appraisals, Mechanical and Structural
Studies, Engineering Plans, Architectural
Drawings and Soil Studies
Exhibit 4.14 Litigation
Exhibit 4.15 Employee Information
Exhibit 4.17 Insurance; Summary of Coverage; Pending
Claims
Exhibit 4.20 Intellectual Property
Exhibit 4.23(1) Welfare Benefit Plans
Exhibit 4.23(2) Pension Benefit Plans
Exhibit 4.25 Condition of Assets
Exhibit 5.4 Buyer Reports
Exhibit 9.6 Form of Employment Agreement
Exhibit 9.7 Form of Lease Agreement
Exhibit 10.3 Form of Opinion of Counsel for the Seller and
Shareholder
Exhibit 10.10 Form of Subordination, Nondisturbance and
Attornment Agreement
Exhibit 11.3 Form of H3GM Opinion
Exhibit 11.9 Illinois Resale Certificate
