EXHIBIT 2.3
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
AND RESTRICTIVE COVENANTS
THIS AGREEMENT is made as of March 20, 1998, by and among REGIONAL
MEDICAL SUPPLY, INC., a New Mexico corporation, having its principal place of
business at 0000 Xxxxxx Xxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxx (the "SELLER" or the
"CORPORATION"), XXXXX XXXXXX AND XXXXXX XXXXXXX, the shareholders of Seller (the
"SHAREHOLDERS"), INTEGRATED HEALTH SERVICES AT JEFFERSON HOSPITAL, INC., a
Delaware corporation (the "BUYER") and INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation ("IHS").
W I T N E S S E T H :
WHEREAS, Seller operates a home respiratory care and durable medical
equipment business in the State of New Mexico (the "BUSINESS"); and
WHEREAS, Shareholders are the sole shareholders of the Seller; and
WHEREAS, Buyer is a wholly owned subsidiary of IHS;
WHEREAS, the Seller wishes to transfer its business and substantially
all of its assets to the Buyer solely in exchange for voting shares of IHS in a
transaction intended to qualify as a "reorganization" within the meaning of
ss.368(a)(1)(c) of the Internal Revenue Code of 1986, as amended (the "CODE"),
it being contemplated by the Seller and Buyer that the Seller will thereafter,
as an integral part of the transaction, distribute the IHS Shares to the
Shareholders in complete liquidation of the Seller and dissolve; and Buyer also
desires to acquire from Seller and each Shareholder, and Seller and each
Shareholder desire to grant to Buyer, covenants not to compete and other
restrictive covenants as described in paragraph 16 hereof (the "RESTRICTIVE
COVENANTS"); and
WHEREAS, the consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby has been obtained,
including without limitation, all approvals of governmental authorities and
parties to any contracts to be assigned to Buyer in connection herewith.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Sale of Assets, Restrictive Covenants and Other Obligations.
(a) The Assets. As of the Effective Date referred to below in
paragraph 8, Seller shall be deemed to have sold, transferred, conveyed and
assigned, free and clear of all liens, claims, security interests, pledges,
restrictions on transfer or use and other encumbrances of any kind or nature
whatsoever ("LIENS"), all of Seller' rights, title and interest in, to or under:
(i) Accounts Receivable. All of the accounts receivable of
the Business including, without limitation, all accounts receivable set
forth on the Schedule of Accounts Receivable Data attached hereto as
Schedule 1(a)(i); and
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(ii) Inventory; Fixed Assets. All inventory and fixed
assets of the Business, including, without limitation, all of the same
set forth on the Schedule of Inventory and Fixed Assets attached hereto
as Schedule 1(a)(ii); and
(iii) Motor Vehicles. All motor vehicles of the Business,
including without limitation, all of the same set forth on the Schedule
of Motor Vehicles attached hereto as Schedule 1(a)(iii); and
(iv) Property Rights. All real property, easements and
rights of way permitting access to the Business; and
(v) Other Assets. All other assets of any kind, tangible
or intangible, real, personal or mixed, owned and used or held for use
by Seller in connection with the Business, including, without
limitation, all of the following: (A) all corporate compliance
materials; (B) the Patients' List of the Business, as described in
Schedule 1(a)(v)(B); (C) the telephone numbers listed on the Schedule
of Telephone Numbers and Licenses attached hereto as Schedule
1(a)(v)(C); (D) all personal property, machinery and equipment; (E) all
of Seller's prepaid assets; (F) rights under contracts, agreements, and
instruments; (G) any Assets used in the operation of the Business, but
not owned by the Seller; and (H) all intangible rights of Seller of
every kind and description used in, or held for use in connection with,
the operation of the Business, including, without limitation, all
intangible assets, and to the extent permitted by applicable law, all
licenses, permits and authorizations.
(b) Additional Assets. The Seller agrees and acknowledges that
the Assets also shall include all of the assets arising out of the operation of
the Business during the period commencing on the Effective Date and terminating
on the Closing Date (the "INTERIM PERIOD"), including without limitation, any
accounts receivable generated (whether or not billed) during the Interim Period
(the "INTERIM PERIOD RECEIVABLES"), any cash collected in respect of any
accounts receivable, and any inventory or equipment acquired by Seller during
such Interim Period in connection with the operation of the Business.
(c) Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and Seller shall not be deemed to have sold, transferred,
conveyed or assigned the following assets to Buyer: Seller's Certificate of
Incorporation, qualification to do business in any jurisdiction, taxpayer
identification number, minute books, stock transfer records and other documents
related specifically to Seller's corporate organization and maintenance, any
non-material tangible assets (such as inventory or supplies) used or disposed of
in the ordinary course of business consistent with past practice, and those
assets listed on Schedule 1(c) attached hereto (collectively, "EXCLUDED
ASSETS").
(d) Restrictive Covenants. Pursuant to paragraph 16 hereof,
each of Seller and Shareholder is granting to Buyer the Restrictive Covenants.
(e) Other Obligations. From and after the Closing Date, the
Seller will not engage in any business, will promptly liquidate and dissolve as
a corporation, and will distribute the IHS Shares received pursuant to paragraph
2 below to the Shareholders in complete cancellation and redemption of their
shares of the Seller's capital stock.
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2. Purchase Price; Method of Payment.
(a) Purchase Price. The aggregate "PURCHASE PRICE" for the
Assets and the Restrictive Covenants shall be Six Hundred Seventy Five Thousand
Dollars ($675,000), Five Hundred Forty Five Thousand Dollars ($545,000) of which
shall be payable in newly issued shares of voting common stock of IHS (the "IHS
SHARES") valued as set forth in paragraph 7(a) below. The Purchase Price shall
be allocated among the Assets and the Restrictive Covenants in the manner set
forth on the Allocation Schedule attached hereto as Schedule 2(a), and the
parties hereto expressly consent to the allocation stated therein.
(b) Method of Payment. At the Closing (as defined in paragraph
8), Buyer shall pay, disburse, and deliver the Purchase Price as follows:
(i) IHS Shares equal to Seventy Thousand Dollars
($70,000) thereof (having a value determined as of the date hereof in
accordance with Section 7(a) below) (the "ESCROWED SHARES" or "ESCROW
FUND"), together with a copy of a fully executed stock pledge agreement
in the form of Exhibit 2(b)(i)-A hereto (the "STOCK PLEDGE AGREEMENT"),
shall be delivered to Crestar Bank, as escrow agent ("ESCROW AGENT"),
to be held by Escrow Agent during the Escrow Period (as defined in
paragraph 5(d), below), pursuant to the terms of an Escrow Agreement,
in the form attached hereto as Exhibit 2(b)(i)-B (the "ESCROW
AGREEMENT"), pursuant to which, among other things, the Escrow Agent
shall acknowledge that it is holding the Escrowed Shares as the Agent
of Buyer pursuant to the Stock Pledge Agreement. The entire Escrow Fund
shall be subject to the provisions of paragraphs 5 and 17 hereof.
(ii) One Hundred Thousand Dollars ($100,000) thereof,
in cash, shall be paid and delivered to the "PAYING AGENT" designated
by Seller (and reasonably satisfactory to Buyer), to be held and
administered pursuant to the "PAYMENT ESCROW AGREEMENT" attached hereto
as Exhibit 2(b)(ii); and
(iii) Thirty Thousand Dollars ($30,000) in cash shall
be paid to Seller by wired funds to Seller's account numbers as set
forth on the Schedule of Wire Instructions attached hereto as Schedule
2(b)(iii);
(iv) IHS Shares equal to Four Hundred Seventy-Five
Thousand Dollars ($475,000) (having a value determined as of the date
hereof in accordance with Section 7(a) below) (the balance of the
Purchase Price) shall be delivered to the Shareholders. The parties
agree that the Buyer shall deliver the IHS Stock pursuant to this
Section 2(b)(v) within a reasonable period of time following the
Closing, and that IHS will certify to each Shareholder that such
Shareholder is a shareholder of IHS upon Closing.
3. Indemnity Against Creditors Claims; No Assumption of
Liabilities. Seller has requested that Buyer waive the requirements of the bulk
sales and transfer laws of the State of New Mexico. Seller and Shareholder agree
to indemnify Buyer and save and hold Buyer harmless against all Damages (as
defined in paragraph 17(c)) arising out of any claims made by creditors
(including, without limitation, any Federal, state or local taxing authority) of
Seller that relate to the Business, or that arise out of the failure to comply
with any of such laws.
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4. Closing Date Liabilities.
(a) Seller and the Shareholders represent and warrant that, to
the best of Seller's and Shareholders' knowledge and belief after diligent
inquiry, all of Seller's liabilities, as of the Closing Date are listed on the
Schedule of Liabilities attached hereto as Schedule 4(a). For purposes of this
Agreement "LIABILITIES" shall mean and include all claims, lawsuits,
liabilities, obligations or debts of any kind or nature whatsoever, whether
absolute, accrued, due, direct or indirect, contingent or liquidated, matured or
unmatured, joint or several, whether or not for a sum certain, whether for the
payment of money or for the performance or observance of any obligation or
condition, and whether or not of a type which would be reflected as a liability
on a balance sheet (including, without limitation, federal, state and local
taxes of any nature) in accordance with generally accepted accounting
principles, consistently applied ("GAAP"), including without limitation,
malpractice or other tort claims, claims for breach of contract, any claims of
any kind asserted by patients, former patients, employees and former employees
of Seller or any other party that are based on acts or omissions by Seller
occurring on or before the Closing Date, amounts due or that may become due in
connection with the participation of Seller in the Medicare or Medicaid programs
or due to any other health care reimbursement or payment intermediary, or that
may be due by Seller to any other third party payor, accounts payable, notes
payable, trade payables, lease obligations, indebtedness for borrowed money,
accrued interest, and contractual obligations. Seller and each Shareholder
acknowledges that the Purchase Price for the Assets is based on the accuracy of
Seller's and Shareholders' representations and warranties contained in this
Agreement, including, but not limited to, Seller's and Shareholders'
representations and warranties contained in this paragraph 4(a). Without
limiting the generality of the foregoing, Buyer will not assume any, and Seller
shall remain liable for each, liability of Seller arising out of any facts,
circumstances, matter or occurrences existing on or prior to the Closing Date
(whether or not known or disclosed) ("CLOSING DATE LIABILITIES").
(b) Without limiting the generality of the provisions of
subparagraph (a) above, Buyer shall not assume the Contracts (as hereinafter
defined in paragraph 13(g)), if any, set forth on Schedule 4(b), or any
liabilities with respect thereto, and shall not, in any case, assume any
liabilities under any Contracts (whether or not such Contracts are assumed by
Buyer) to the extent such liabilities arise out of facts or circumstances in
existence, or obligations to be satisfied, on or prior to the Closing Date.
5. Right of Offset Against the Escrow Fund.
(a) Event of Deficiency. If:
(i) Buyer pays for any debts or liabilities of Seller
then Seller shall reimburse Buyer for such payment (a "LIABILITIES
DEFICIENCY"); or
(ii) the aggregate value of the Corporation's
collectible accounts receivable as of the Effective Date and determined
to be less than $30,000, as determined by actual net cash collections
of such receivables during the twelve (12) month period immediately
following the Effective Date, then Seller shall pay to Buyer the amount
of such deficiency (an "ASSET VALUE DEFICIENCY"); or
(iii) Buyer shall be entitled to be indemnified for
any Damages pursuant to this Agreement ("INDEMNIFICATION CLAIMS", and
together with any Liabilities Deficiencies and Asset Value
Deficiencies, collectively "CLAIMS" and each, a "CLAIM");
then, and in any of such events, Buyer may provide written notice to Seller of
the Claim, in which case Buyer shall be entitled to recover the amount of such
Claim in accordance with the following procedure.
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(b) Procedure if Seller Fails to Pay. If Seller fails to pay
any Claim in full to Buyer within ten (10) days from the date of such written
notice (said ten (10) day period hereinafter referred to as the "NOTICE
PERIOD"), Buyer shall have the right to make offset against the Escrow Fund, in
accordance with the terms and conditions of the Escrow Agreement, in amounts
from time to time equal to the amount of such Claim (subject, however, in the
case of a "DISPUTE", to the provisions of paragraph 17 hereof applicable
thereto), and Seller agrees to any such offset. Buyer's right to proceed against
the Escrow Fund shall not be exclusive of any other rights or remedies that it
may have under this Agreement, law, equity or otherwise.
(c) Escrow Costs. The fees of the Escrow Agent shall be borne
fifty percent (50%) by the Buyer and fifty percent (50%) by Seller.
(d) Escrow Period.
(i) The "ESCROW PERIOD" shall terminate twelve (12) months
following the Closing Date.
(ii) The balance, if any, of the Escrow Fund remaining
(the "REMAINING ESCROW FUNDS") at the close of business on the last day of the
Escrow Period, shall be disbursed to Seller within fifteen (15) days after the
last day of the Escrow Period.
(iii) Notwithstanding anything to the contrary contained
in this subparagraph (d), if any Claim made by Buyer is in dispute at the time
that any amounts are otherwise to be disbursed to Seller, then there shall be
withheld from such amount to be disbursed and there shall be retained in the
Escrow Fund, an amount such that there will be remaining in the Escrow Fund at
least twice the amount of the Claim asserted by Buyer until the final settlement
of such Claim or Claims.
6. Employees. It is expressly understood and agreed that Buyer's
purchase of the Assets does not involve any undertaking on the part of Buyer to
retain any of the employees of the Seller, although Buyer shall have the right
to offer employment to any such employees. Seller shall remain fully responsible
for any severance, benefits, costs or liabilities arising out of the termination
by Seller of any of its employees, all of which liabilities shall constitute
Closing Date Liabilities. Seller and the Shareholders shall also remain fully
responsible for any benefits, costs or liabilities incurred or accrued prior to
Closing with respect to each employee retained by Buyer.
7. IHS Stock. The Purchase Price shall be payable by means of the
delivery of IHS Shares in accordance with the following:
(a) Share Value. The number of IHS Shares issuable at Closing
(the "CLOSING DATE SHARE COUNT") or deliverable to any claimant from the Escrow
Fund shall be calculated based upon a price per share of such stock equal to the
average closing New York Stock Exchange ("NYSE") price of such stock for the
thirty (30) trading day period immediately preceding the Closing Date (the
"TRADE PRICE").
(b) Registration Rights. IHS will prepare and use its
reasonable commercial efforts to cause to be filed within one-hundred and twenty
(120) days following the Closing Date, and will use its reasonable commercial
efforts to have declared effective by the Securities and Exchange Commission
(the "COMMISSION"), a registration statement for the registration of the IHS
Shares issued to the Shareholders in connection with this transaction, under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and IHS shall
maintain the effectiveness of each such registration statement for a period of
one (1) year following the date it became effective (the "REGISTRATION DATE"),
except to the extent that an exemption from registration may be available.
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(c) Registration Expenses. Seller and the Shareholders shall
not be responsible for, and Buyer shall bear, all of the reasonable expenses of
IHS related to such registration including, without limitation, the fees and
expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of IHS Shares and the costs and
expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of IHS Shares under the Blue Sky laws of
various jurisdictions. Buyer, however, shall not be required to pay
underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs or expenses arising out of Seller's or any transferee's failure to comply
with its obligations under this Section 7.
(d) Resale Limitations. The Shareholders hereby covenant with
Buyer that all sales by the Shareholders shall be effected solely through Xxxxx
Xxxxxx, Inc.
(e) Registration Procedures, etc. In connection with the
registration rights granted to the Shareholders with respect to the IHS Shares
as provided in this Section 7, Buyer covenants and agrees as follows:
(i) At Buyer's expense, Buyer will keep the registration
and qualification under this Section 7 effective (and in compliance
with the Securities Act) by such action as may be necessary or
appropriate until the first anniversary of the Closing Date except to
the extent that an exemption from registration may be available. Buyer
will promptly notify the Shareholders, at any time when a prospectus
relating to a registration statement under this Section 7 is required
to be delivered under the Securities Act, of the happening of any event
known to Buyer as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(ii) Buyer shall furnish the Shareholders with such number
of prospectuses as shall reasonably be requested.
(iii) Buyer shall take all necessary action which may be
required in qualifying or registering IHS Shares included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by the
Shareholders, provided that Buyer shall not be obligated to qualify as
a foreign corporation or dealer to do business under the laws of any
such jurisdiction.
(iv) The information included or incorporated by reference
in the registration statement filed pursuant to this Section 7 will
not, at the time any such registration statement becomes effective,
contain any untrue statement of a material fact, or omit to state any
material fact required to be stated therein as necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading or necessary to correct any statement in
any earlier filing of such registration statement or any amendments
thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder. Buyer shall indemnify the Shareholders, their
successors and assigns, and each person, if any, who controls such
Sellers within the meaning of ss.15 of the Securities Act or ss.20(a)
of the Securities Exchange Act of 1934, as amended ("EXCHANGE ACT"),
against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained
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in such registration statement executed by Buyer or based upon written
information furnished by Buyer filed in any jurisdiction in order to
qualify IHS Shares under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NYSE or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to Buyer by any of the Shareholders expressly for
use in such registration statement, any amendment or supplement thereto
or any application, as the case may be. If any action is brought
against the Shareholders in respect of which indemnity may be sought
against Buyer pursuant to this subsection 7(e)(iv), such Shareholder
shall within thirty (30) days after the receipt thereby of a summons or
complaint, notify Buyer in writing of the institution of such action
and Buyer shall assume the defense of such actions, including the
employment and payment of reasonable fees and expenses of counsel
(reasonably satisfactory such Shareholder). The Shareholders shall have
the right to employ their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the
Shareholders unless (A) the employment of such counsel shall have been
authorized in writing by Buyer in connection with the defense of such
action, or (B) Buyer shall not have employed counsel to have charge of
the defense of such action, or (C) such indemnified party or parties
shall have reasonably concluded (after notice to Buyer) that there may
be defenses available to it or them which are different from or
additional to those available to Buyer (in which case, Buyer shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and
expenses of not more than one additional firm of attorneys for the
Shareholders and such controlling persons shall be borne by Buyer.
Except as expressly provided in the previous sentence, in the event
that Buyer shall not previously have assumed the defenses of any such
action or claim, Buyer shall not thereafter be liable to the
Shareholders or such controlling person in investigating, preparing or
defending any such action or claim.
(v) The Shareholders, and their successors and
assigns, shall severally, and not jointly, indemnify Buyer, its
officers and directors and each person, if any, who controls Buyer
within the meaning of ss.15 of the Securities Act or ss.20(a) of the
Exchange Act against all loss, claim, damage, or expense or liability
(including all expenses reasonably incurred in investigating, preparing
or defending against any claim whatsoever) to which they may become
subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from information furnished by
or on behalf of such Shareholders, or their successors or assigns for
specific inclusion in such registration statement.
(f) Notice of Sale. If the Shareholders desire to transfer all
or any IHS Shares, they will deliver prior written notice to Buyer, describing
in reasonable detail their intention to effect the transfer and the manner of
the proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Sellers will sell the IHS Shares
in compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer that the registration statement relating to
the IHS Stock being transferred is not "current" until Buyer gives further
notice that offers and sales may be recommenced. In the event of any such notice
from Buyer, Buyer agrees to file expeditiously such amendments to the
registration statement as may be necessary to bring it current during the period
specified in Section 7(b) and to give prompt notice to the Shareholders when the
registration statement has again become current. If the Shareholders deliver to
Buyer an opinion of counsel reasonably acceptable to Buyer and its counsel and
to the effect that the proposed transfer of IHS Shares may be made without
registration under the Securities Act, the Shareholders will be entitled to
transfer IHS Shares in accordance with the terms of the notice and opinion of
their counsel.
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(g) Furnish Information. It shall be a condition precedent to
the obligations of Buyer to take any action pursuant to this Section 7 that the
Shareholders shall furnish to Buyer such information regarding themselves, the
IHS Shares held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of their IHS Shares.
In that connection, each transferee of any Shareholder shall be required to
represent to Buyer that all such information which is given is both complete and
accurate in all material respects. Such Shareholders shall deliver to Buyer a
statement in writing from the beneficial owners of such securities that they
bona fide intend to sell, transfer or otherwise dispose of such securities. Each
transferee will, severally, promptly notify Buyer at any time when a prospectus
relating to a registration statement covering such transferee's shares under
this Section 7 is required to be delivered under the Securities Act, of the
happening of any event known to such transferee as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the statements as then existing.
(h) Investment Representations. All IHS Shares to be issued
hereunder will be newly issued shares of IHS. The Sellers represent and warrant
to Buyer that the IHS Shares being issued hereunder are being acquired, and will
be acquired, by the Shareholders for investment for their own accounts and not
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act or the applicable state securities law; the
Shareholders acknowledge that the IHS Shares constitute restricted securities
under Rule 144 promulgated by the Commission pursuant to the Securities Act, and
may have to be held indefinitely, and the Shareholders agree that no IHS Shares
may be sold, transferred, assigned, pledged or otherwise disposed of except
pursuant to an effective registration statement or an exemption from
registration under the Securities Act, the rules and regulations thereunder, and
under all applicable state securities laws. The Shareholders have the knowledge
and experience in financial and business matters, are capable of evaluating the
merits and risks of the investment, and are able to bear the economic risk of
such investment. The Shareholders have had the opportunity to make inquiries of
and obtain from representatives and employees of Buyer such other information
about IHS as they deem necessary in connection with such investment.
(i) Legend. It is understood that the certificates evidencing
the IHS Shares shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(j) Certain Transferees. Prior to the effective date of
registration of the IHS Shares, no Shareholder shall transfer any shares of IHS
Shares to any person or entity except as expressly permitted by this Agreement
and unless such transferee shall have agreed in writing to be bound by the
provisions applicable to the Shareholders under this Section 7.
8. Effective Date. The effective date (the "EFFECTIVE DATE") for
the transaction contemplated under this Agreement will be March 20, 1998. The
consummation of the transactions contemplated by this Agreement is sometimes
referred to as the "CLOSING", and the date on which such consummation occurs,
including, without limitation, the execution and delivery of this Agreement by
each of the parties hereto, is sometimes referred to as the "CLOSING DATE".
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9. Asset Condition and Quality. Seller and each Shareholder,
jointly and severally, represent, warrant and covenant that, as of the Closing
Date, all physical Assets of Seller are free of defects and in good working
order, condition and repair, except for ordinary wear and tear, and conform in
all material respects with all applicable ordinances, regulations, zoning and
other laws.
10. Instruments of Conveyance and Transfer. At the Closing:
(a) Seller will deliver to Buyer such bills of sale,
assignments, motor vehicle certificates of title, and other good and sufficient
instruments of conveyance and transfer in form sufficient to sell, assign and
transfer the Assets to Buyer as of the Effective Date, such documents to contain
full warranties of title, and which documents shall be effective to vest in
Buyer good, absolute, and marketable title to the Assets of the Business being
transferred to Buyer by Seller, free and clear of all Liens.
(b) Simultaneously with such delivery, Seller will take all
steps as may be requisite to put Buyer in actual possession, operation and
control of the Assets to be transferred hereunder.
(c) Seller will deliver to Buyer an opinion, dated the Closing
Date, of its counsel, in substantially the form attached hereto as Schedule
10(c).
(d) Seller will deliver a certificate of its Secretary or
other officer certifying as of the Closing Date a copy of resolutions of its
board of directors and, if applicable, its stockholders, authorizing the
execution, delivery and full performance of this Agreement and the Transaction
Documents (as defined in paragraph 13(a) below), and the incumbency of its
officers.
(e) Xxxxx Xxxxxx will deliver to Buyer a mutually acceptable
two year employment agreement between Buyer and Xxxxx Xxxxxx.
11. Sales and Transfer Taxes; Fees. All applicable sales,
transfer, use, filing and other taxes and fees that may be due or payable as a
result of the conveyance, assignment, transfer or delivery of the Assets of the
Business to be conveyed and transferred as provided herein, whether levied on
Seller or Buyer, shall be borne by Seller.
12. Restrictions on Operations of Seller. Seller and the
Shareholders, jointly and severally, represent, warrant and covenant that,
except as expressly disclosed on Schedules hereto, since the most recent
Financial Statement Date referred to in paragraph 13(o) below, through the
Closing Date, there has been no material adverse change in the condition
(financial or otherwise) or prospects of the Seller or the Business, and Seller
has not:
(i) sold, assigned or transferred any Assets, except in the
ordinary course of business, consistent with past practice;
(ii) subjected any Assets to any Liens;
(iii) entered into any contract or transaction binding the
Business other than contracts or transactions entered into in the ordinary
course of business, consistent with past practice;
(iv) incurred any liabilities or indebtedness other than in
the ordinary course of business, consistent with past practice;
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(v) except in the ordinary course of business, consistent with
past practice, or otherwise to comply with any applicable minimum wage law, paid
any bonuses, increased the salaries or other compensation of any of its
employees, or made any increase in, or any additions to, other benefits to which
any of such employees may be entitled;
(vi) discharged or satisfied any Lien or encumbrance, or
satisfied, paid or prepaid any material liabilities, other than in the ordinary
course of business consistent with past practice, or failed to pay or discharge
when due any liabilities, the failure to pay or discharge of which has caused or
may cause any actual damage or risk of loss to the Corporation or the Assets;
(vii) failed to collect any accounts receivable in the
ordinary course of business, consistent with past practice;
(viii) changed any of the accounting principles followed by it
or the methods of applying such principles;
(ix) canceled, modified or waived any debts or claims held by
it, other than in the ordinary course of business, consistent with past
practice, or waived any rights of substantial value, whether or not in the
ordinary course of business; or
(x) issued any capital stock, or declared or paid or set aside
or reserved any amounts for payment of any dividend or other distribution in
respect of any equity interest or other securities, or redeemed or repurchased
any of its capital stock or other securities, or made any payment to any of its
affiliates except for payments of compensation in the ordinary course of
business, consistent with past practice and disclosed to Buyer as such;
(xi) instituted, settled or agreed to settle any litigation,
action or proceeding before any Governmental Authority (as such term in defined
in paragraph 13(d) below) relating to it or its property or received any threat
thereof; or
(xii) entered into any material transaction other than in the
ordinary course of business, consistent with past practice.
13. Representations and Warranties by Seller and the Shareholders. As a
material inducement to Buyer to execute and perform its obligations under this
Agreement, Seller and the Shareholders hereby, jointly and severally, represent
and warrant to Buyer as follows as of the Closing Date:
(a) Organization of Seller; Enforceability.
(i) Seller is a corporation, organized, and in good
standing, respectively, in the State of New Mexico, and is qualified to do
business and is in good standing in each other State where the nature of its
business or the assets held by it requires such qualification, and has requisite
corporate power and authority to carry on its Business as presently being
conducted, to enter into this Agreement, and to carry out and perform the terms
and provisions of this Agreement. Each of this Agreement and each agreement,
instrument, certificate and document executed by Seller in connection with this
Agreement or the transactions contemplated hereby ("TRANSACTION DOCUMENTS")
constitutes the legal, valid and binding obligations of Seller, enforceable
against it in accordance with its respective terms. Seller does not have any
subsidiaries.
(ii) This Agreement and each Transaction Document to which
each Shareholder is a party constitutes the legal, valid and binding obligations
of Shareholder, enforceable against such Shareholder in accordance with its
terms.
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(b) Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any Governmental Authority or of any
party to any contract, agreement, instrument, commitment, lease, indenture or
understanding (written, oral or implied) by which Seller or any of the Assets is
bound ("CONTRACTS") or by which any such Shareholder or any such Shareholder's
assets is bound ("SHAREHOLDER CONTRACTS") is necessary in connection with the
execution, delivery and performance of this Agreement or any of the Transaction
Documents by Seller or any Shareholder.
(c) Litigation. Except as set forth on Schedule 13(c), there
are no actions, suits or proceedings affecting Seller or any of the Assets which
are pending or threatened against Seller or affecting any of its properties or
rights, at law or in equity, or before any Governmental Authority (as
hereinafter defined), nor is Seller or any of its respective officers or
directors or any Shareholder aware of any facts which to them or their knowledge
might reasonably be expected to result in any such action, suit or proceeding.
(d) Compliance with Laws and Contracts. Seller is not in
violation of, or in default under: any term or provision of its Articles of
Incorporation or By-Laws; or any judgment, order, writ, injunction, decree,
statute, law, rule, regulation, directive, mandate, ordinance or guideline
("GOVERNMENTAL REQUIREMENTS") of any Federal, state, local or other governmental
or quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES"); or of any Contract. The execution and delivery by
Seller and the Shareholders of, and the performance and compliance by each of
them with this Agreement, and the Transaction Documents and the transactions
contemplated hereby and thereby, does not and will not result in the violation
of or conflict with or constitute a default under any such term or provision or
result in the creation of any Lien on any of the properties or assets of Seller
or any Shareholder pursuant to any such term or provision or any term or
provision of any Governmental Requirement by which any Shareholder is bound or
of any Shareholder Contract.
(e) Corporate Acts and Proceedings. The execution, delivery
and performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the sale and transfer of
the Assets by Seller as provided for in this Agreement, have been approved and
consented to by the Board of Directors of Seller and, if applicable, by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable Governmental Requirement by the stockholders of
Seller with regard thereto have been appropriately authorized and accomplished.
(f) Title to Assets. Seller has good and indefeasible title to
all of the Assets, free and clear of all Liens.
(g) Contracts. Set forth on Schedule 13(g) hereto is a list of
all material Contracts of Seller including, without limitation, each:
(i) contract, agreement or commitment for the employment
or retention of, or collective bargaining, severance or termination of or with,
any director, officer, employee, consultant, sales representative, or agent or
group of employees, or any non-competition, non-solicitation, confidentiality or
similar agreement with any such person or persons;
(ii) contract, agreement or arrangement for the
acquisition or disposition of any assets, property or rights outside the
ordinary course of business or requiring the consent of any party to the
transfer and assignment of any such assets, property or rights (by purchase or
sale of assets, purchase or sale of stock, merger or otherwise), that is
executory or that was entered into during the three (3) year period ending on
the date hereof;
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(iii) contract, agreement or commitment which contains any
provisions requiring the Seller or the Business to indemnify or act for any
other person or entity or to guaranty or act as surety for any other person or
entity;
(iv) contract, agreement or commitment restricting the
Seller or the Business from, or in favor of either of the Seller or the Business
and restricting any other person or entity from, conducting business anywhere in
the world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(v) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to the Business or any portion thereof or the
business of any other person or entity;
(vi) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(vii) contract, agreement or arrangement granting a
leasehold or other interest in real property, including without limitation,
subleases, licenses and sublicenses (the "LEASES");
(viii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Seller or the Business
not covered by clause (i) above;
(ix) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(x) agreement with respect to the settlement of any
litigation or other proceeding with any third person or entity;
(xi) agreement relating to the ownership, transfer, voting
or exercise of other rights with respect to any equity in the Seller, or any
other entity, including without limitation, registration rights agreements,
voting trust agreements and shareholder and proxy agreements;
(xii) contract, agreement or commitment to provide
services or products, or
(xiii) agreement not made in the ordinary and normal
course of business and consistent with past practice, or involving consideration
in excess of $25,000 in each case, that is not set forth in subsections (i)
through (xii) above.
To the best of Seller's and Shareholders' knowledge, no party to any
Contract other than Seller is in default under any Contract. Seller has
delivered to Buyer true and complete copies of each written Contract (or a
description of each oral Contract) requested by Buyer.
(h) Brokers. Upon the receipt by Xxxxx & Associates, Inc. (the
"BROKER") of $50,000 (the "BROKERS FEE") in connection with the transactions
contemplated by this Agreement, no broker or finder will be entitled to any
additional broker's or finder's fee or other commission in respect thereof based
in any way on agreements, understandings or arrangements.
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(i) Employment Contracts; Employees. There are no Contracts of
employment between Seller and any officer or other employee of the Business,
except as set forth on Schedule 13(g)(i) above. The name, position, current rate
of compensation and any vacation or holiday pay, sick pay, personal leave,
severance and any other compensation arrangements or fringe benefits, of each
current employee, sales representative, consultant and agent of the Seller,
contained on the Schedule of Personnel Payrates and Advances attached hereto as
Schedule 13(i) is accurate and complete. No employee, consultant or agent of the
Seller has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 13(i). Since the date that is two (2)
years prior to the Closing Date, there has been no material adverse change in
the relationship between the Seller and its employees, nor any strike or labor
disturbance by any of such employees affecting the Business and there is no
indication that such a change, strike or labor disturbance is likely. No
employees of the Seller are represented by any labor union or similar
organization in connection with their employment by or relationship with,
Seller, and to the knowledge of the Seller and the Shareholders, there are no
pending or threatened activities the purpose of which is to achieve such
representation of all or some of such employees, and there are no threats of
strikes, work stoppages or pending grievances by any such employees. Seller is
not party to any collective bargaining or other labor contracts.
(j) Employee Benefit Plans. Seller has no pension, bonus,
profit-sharing, or retirement plans for officers or employees of the Business,
nor is Seller required to contribute to any such plan. Without limiting the
generality of the foregoing, Seller does not maintain or make contributions to
and has not at any time in the past maintained or made contributions to any
employee benefit plan which is subject to the minimum funding standards of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or to any
multi-employer plan subject to the terms of the Multi-employer Pension Plan
Amendment Act of 1980 (the "MULTI-EMPLOYER ACT").
(k) Insurance. All inventories, buildings and fixed assets
owned or leased by the Seller are and will be adequately insured against fire
and other casualty through the Closing Date. The information contained on the
Schedule of Insurance Policies, attached hereto as Schedule 13(k), is accurate
and complete. Schedule 13(k) also sets forth any claims made under any of the
insurance policies referred to above or increases in premiums therefore during
the past two years. True and complete copies of all policies of fire, liability
and other forms of insurance held or owned by the Seller or otherwise in force
and providing coverage for the Business or any of the Assets (including but not
limited to medical malpractice insurance, and any state sponsored plan or
program for worker's compensation) have been delivered to Buyer. Such policies
are owned by and payable solely to the Seller, and said policies or renewals or
replacements thereof will be outstanding and duly in force at the Closing Date,
and all premiums due on or before the Closing Date in respect thereof have been
paid. Seller purchased title insurance as set forth on Schedule 13(k).
(l) Disclosure. No representation or warranty by Seller or any
Shareholder in this Agreement or in any Transaction Document, contains any
untrue statement of material fact or omits to state any material fact, of which
any Shareholder or Seller or any of its officers, directors or stockholders has
knowledge or notice, required to make the statements herein or therein contained
not misleading.
(m) Officers, Directors and Shareholders of Seller. As of the
Closing Date, the Shareholders are the shareholders of Seller and the following
individuals are all of the officers and directors of Seller:
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Name Office/Position
---- ---------------
Xxxxx Xxxxxx President
Xxxxxx Xxxxxxx Vice President/Secretary/Treasurer
(n) Inventory and Fixed Assets. The information contained on
the Schedule of Inventory and Fixed Assets as of the most recent Financial
Statement Date, attached hereto as Schedule 1(a)(ii), is accurate and complete.
(o) Tax Returns and Financial Statements. Seller has furnished
Buyer with its tax returns (the "TAX RETURNS") for the periods ended December
31, 1995 and December 31, 1996, and has furnished Buyer with its financial
statements (the "FINANCIAL STATEMENTS") for the periods ended December 31, 1995,
December 31, 1996 and January 31, 1998 (the "FINANCIAL STATEMENT DATES"), copies
of which are attached hereto as Schedule 13(o). The Financial Statements: (i)
are in accordance with the books and records of the Seller; (ii) fairly present
the financial condition of the Seller at such date and the results of its
operations for the periods specified; (iii) were prepared in accordance with
GAAP applied on a basis consistent with prior accounting periods; (iv) with
respect to all Contracts of the Seller, reflect adequate reserves for all
reasonably anticipated losses and costs in excess of anticipated income; and (v)
with respect to any balance sheets, disclose all of the liabilities of the
Seller at the Financial Statement Dates and include the appropriate reserves for
all taxes and other accrued liabilities, except that certain contingent
liabilities, if not disclosed on such balance sheets, shall be considered to be
disclosed pursuant to this subparagraph, if expressly disclosed on an Schedule
to this Agreement. The income statements included in the Financial Statements do
not contain any items of special or nonrecurring income or expense or any other
income not earned or expense not incurred in the ordinary course of business,
consistent with past practice, except as expressly specified therein, and such
Financial Statements include all adjustments, which consist only of normal
recurring accruals, necessary for such fair presentation.
(p) Supplemental Tax Information. Seller has furnished Buyer
with its most recent (i) tax registration certificates, and (ii) tax returns
required of it by each state or other locality in which it conducts business,
which tax returns in all instances where applicable include, but shall not be
limited to franchise taxes, state and local tangible personal property tax
returns, and state and local sales tax returns, which registration certificates
and tax returns are set forth, collectively, on the Schedule of Supplemental Tax
Information, attached hereto as Schedule 13(p).
(q) Adverse Business Developments. No notice has been received
by Seller or any Shareholder of any new or substantially expanded firm or
individual engaged in a business directly competitive to Seller in its primary
service area within six (6) months before the date hereof. Neither Seller nor
any Shareholder has received, either orally or in writing, any notice specific
to it of pending or threatened adverse action with respect to any Medicare,
Medicaid, private insurance or third party payor reimbursement method, practice
or allowance as to any business activity engaged in by Seller, nor has Seller or
any Shareholder received, or been threatened with, any claim for refund specific
to it in excess of $500.00 by a Medicare or Medicaid carrier, except as
disclosed in the Schedule of Proceedings attached hereto as Schedule 13(q).
(r) Relationships. Except as disclosed on Schedule 13(r),
neither Seller, its officers, directors and employees, nor any Shareholder and
no member of any of their respective immediate families, and no person or entity
which is controlled by, under common control with, or controlling any of them
(each, an "AFFILIATE") has, or at any time within the last two (2) years has
had, a material ownership interest in any business, corporate or otherwise, that
is a party to, or in any property that is the subject of, business relationships
or arrangements of any kind relating to the operation of the Business. No
Affiliate of Seller or any Shareholder is guaranteeing any obligations of the
Seller.
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(s) Assets Comprising the Business. The Assets are all of the
tangible and intangible properties (real, personal and mixed), including,
without limitation, all licenses, intellectual property, permits and
authorizations, and contracts that are necessary or material to the operation of
the Business as now operated. The quantities of inventory and supply items
included in the Assets are reasonable in light of the present and anticipated
volume of the Business of the Seller in the ordinary course of the business of
the Seller, consistent with past practice, as determined by the Seller in good
faith and consistent with past practice.
(t) Questionable Payments. Seller has not, and to the
knowledge of the Seller and the Shareholders, none of their Affiliates or
employees have offered, made or received any illegal or unlawful payment, bribe,
kickback, political contribution or other similar questionable payment for any
referrals or otherwise in connection with the ownership or operation of the
Business, including, without limitation, any of the same that would constitute a
violation of the Foreign Corrupt Practices Act of 1977, as amended.
(u) Reimbursement Matters. Seller, to the extent necessary to
conduct its business in a manner consistent with past practice, is qualified for
participation in the Medicare and Medicaid programs. Except as disclosed on
Schedule 13(u), (i) Seller and Shareholder have not received any notice of
denial or recoupment from the Medicare or Medicaid programs, or any other third
party reimbursement source (inclusive of managed care organizations) with
respect to products or services provided by it, (ii) to Seller's and
Shareholder's knowledge, there is no basis for the assertion after the Closing
Date of any such denial or recoupment claim, and (iii) Seller and the
Shareholders have not received notice from any Medicare or Medicaid program or
any other third party reimbursement source (inclusive of managed care
organizations) of any pending or threatened investigations or surveys with
respect to, or arising out of, products or services provided by Seller or
otherwise, and to the knowledge of Seller and the Shareholders, no such
investigation or survey is pending, threatened or imminent.
(v) Environmental Compliance. Except as disclosed on Schedule
13(v), at all times during Seller's ownership of the Business, the Business has
not been, and currently is not, in violation of any environmental Governmental
Requirement and no notice has ever been served upon any Shareholder or Seller,
their agents or representatives or any prior owner of the Business, claiming any
violation of any Governmental Requirement concerning the environmental state,
condition or quality of any real or personal property in any related to the
Business, or requiring or calling attention to the need for any work, repairs or
demolition on or in connection with any of the real property in order to comply
with any governmental requirement concerning the environmental or healthful
state, condition or quality of the real property.
14. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller and the Shareholders that:
(a) Due Organization. Buyer is a duly organized, valid
corporation under the laws of the State of New Mexico.
(b) Due Authority. Buyer is duly authorized by law and
corporate policy and approval to: (i) enter into this Agreement and each
Transaction Document; (ii) make all warranties and representations made by Buyer
herein; and (iii) deliver all consideration provided for under the terms hereof.
(c) Binding Authority. All signatures and agents designated as
agents/officers for Buyer for signing purposes have the authority to bind Buyer
to the terms of this Agreement.
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(d) Cash Payment Authority. Buyer has the authority to cause
the cash payment of the Purchase Price to be delivered in accordance with the
terms of this Agreement.
(e) Brokers. Upon receipt by the Broker of the Broker's Fee,
no broker or finder will be entitled to any additional broker's or finder's fee
or other commission in respect thereof based in any way on agreements,
understandings or arrangements.
(f) IHS Stock. IHS has duly authorized and reserved for
issuance the IHS Shares to be issued in connection herewith, and, when issued in
accordance with the terms of Section 7, such IHS Shares will be validly issued,
fully paid, and nonassessable and free of preemptive rights. IHS has complied,
or will comply in a timely manner, and will act in compliance, with all
applicable Governmental Requirements with respect to the issuance of the IHS
Shares.
15. Survival of Representations and Warranties. The
representations and warranties of Seller, each Shareholder, and Buyer contained
and made pursuant to this Agreement shall survive the execution of this
Agreement.
16. Restrictive Covenants.
(a) Non-Compete. Seller and each Shareholder hereby agree that
until the fifth (5th) anniversary of the Closing Date (the "RESTRICTED PERIOD"),
it, he or she will not, directly or indirectly, own, manage, operate, join,
control or participate, or have a proprietary interest in, the ownership,
management, operation or control, of or be connected with, in any manner, any
home health care business within fifty (50) miles of any location set forth on
the Schedule of Locations attached hereto as Schedule 16(a).
(b) Confidential Information. Certain confidential and
proprietary information is included within the Assets ("TRADE SECRETS"),
including, without limitation, with respect to some or all of the following
categories of information: (i) financial information, including but not limited
to information relating to earnings, assets, debts, prices, pricing structure,
reimbursement matters, volume of purchases or sales or other financial data
whether related to Seller or generally, or to particular products, services,
geographic areas, or time periods; (ii) supply and service information,
including but not limited to information relating to goods and services,
suppliers' names or addresses, terms of supply or service contracts or of
particular transactions, or related information about potential suppliers to the
extent that such information is not generally known to the public, and to the
extent that the combination of suppliers or use of a particular supplier, though
generally known or available, may yield advantages to the Buyer, details of
which are not generally known; (ii) marketing information, including but not
limited to information relating to details about ongoing or proposed marketing
programs or agreements by or on behalf of the Seller, sales forecasts,
advertising formats and methods or results of marketing efforts or information
about impending transactions; (iv) personnel information, including but not
limited to information relating to employees' personal or medical histories,
compensation or other terms of employment, actual or proposed promotions,
hirings, resignations, disciplinary actions, terminations or reasons therefor,
training methods, performance, or other employee information; (v) customer and
patient information, including but not limited to information relating to names,
addresses or backgrounds of past, existing or prospective clients, customers,
payors, referral sources, and patients, records of agreements and prices,
proposals or agreements between any of them and Seller, status of accounts or
credit, patients' medical histories or related information as well as customer
lists; and (vi) inventions and technological information, including but not
limited to information related to proprietary technology, trade secrets,
research and development data, processes, formulae, data and know-how,
improvements, inventions, techniques, and information that has been created,
discovered or developed, or has otherwise become known to Seller or any
Shareholder, and/or in which property rights
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have been assigned or otherwise conveyed to Seller, which information has
commercial value in the business in which the Seller is engaged. Seller and any
Shareholder shall hold all Trade Secrets in confidence and will not discuss,
communicate or transmit to others, or make any unauthorized copy of or use any
of the Trade Secrets; and will take all reasonable actions that Buyer deems
reasonably necessary or appropriate, to prevent unauthorized use or disclosure
of or to protect the Buyer's interest in the Trade Secrets. The foregoing does
not apply to information that by means other than deliberate or inadvertent
disclosure by Seller, any Shareholder or any of their respective Affiliates,
becomes well known to the public; or disclosure compelled by judicial or
administrative proceedings after they diligently try to avoid each disclosure
and afford Buyer the opportunity to obtain assurance that compelled disclosures
will receive confidential treatment.
(c) Non-Solicitation and Non-Pirating. Seller and each
Shareholder hereby agree that, during the Restricted Period it, he or she will
not, directly or indirectly, for itself or himself or on behalf of any other
person, firm, entity or other enterprise: (i) solicit or in any way divert or
take away any person or entity that, prior to the Closing Date, was a patient,
client, customer, payor, referral source, facility or patient of the Seller; or
(ii) hire, entice away or in any other manner persuade any person who was an
employee, consultant, representative or agent of the Seller prior to the Closing
Date, to alter, modify or terminate their relationship with the Buyer.
(d) Necessary Restrictions. Each of Seller and each
Shareholder acknowledge that the restrictions contained in this Agreement are
reasonable and necessary to protect the legitimate business interests of the
Buyer and that any violation thereof by any of them would result in irreparable
harm to the Buyer, and that damages in the event of any such breach of this
Agreement will be difficult, if not impossible, to ascertain. Accordingly, the
Seller and each Shareholder agree that upon the violation of any of the
restrictions contained in this Agreement, the Buyer shall be entitled to obtain
from any court of competent jurisdiction a preliminary and permanent injunction
as well as any other relief provided at law, equity, under this Agreement or
otherwise, without the necessity of posting any bond or other security
whatsoever. In the event any of the foregoing restrictions are adjudged
unreasonable in any proceeding, then the parties agree that the period of time
or the scope of such restrictions (or both) shall be adjusted to such a manner
or for such a time (or both) as is adjudged to be reasonable.
(e) Remedies For Breach. Seller and each Shareholder
acknowledge that the covenants contained in this Agreement are independent
covenants and that any failure by the Buyer to perform its obligations under
this Agreement or any other agreement shall not be a defense to enforcement of
the covenants contained in this Agreement, including but not limited to a
temporary or permanent injunction.
17. Indemnification; Remedies.
(a) Indemnification by Seller and the Shareholders. Seller and
the Shareholders shall, jointly and severally, indemnify and hold harmless at
all times Buyer and its stockholders, directors, officers, employees, agents and
assigns, from and against any Damages (as hereinafter defined) resulting from:
(i) any inaccurate representation made by Seller or any Shareholder in, pursuant
to or under this Agreement or any Transaction Document; (ii) any breach of any
warranty made by Seller or any Shareholder in, pursuant to or under this
Agreement or any Transaction Document; (iii) any breach or default in the
performance by Seller or any Shareholder of any of the covenants to be performed
by Seller or any Shareholder hereunder or in any Transaction Document; and (iv)
any Closing Date Liabilities.
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(b) Indemnification by Buyer. Buyer shall indemnify and hold
harmless at all times Seller or the Shareholders from and against any Damages
resulting from: (i) any inaccurate representation made by Buyer in, pursuant to
or under this Agreement; (ii) any breach of any warranty made by Buyer in,
pursuant to or under this Agreement; and (iii) any breach or default in the
performance by Buyer of any of the covenants to be performed by Buyer hereunder.
(c) Definition of Damages. The term "DAMAGES" as used herein
shall include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, settlements, penalties, and damages, including, without limitation,
counsel fees incurred in investigating or in attempting to avoid or oppose the
imposition thereof. The term "Damages" shall include, but shall not be limited
to, any Liabilities Deficiency, as defined in paragraph 5 hereof.
(d) Remedies.
(i) Buyer's Remedies. If Buyer makes written request
to Seller or any Shareholder for the payment of Damages, then Seller
and/or such Shareholder shall pay to Buyer the amount of Damages
requested within ten (10) days from the date on which such request is
received (the "NOTICE PERIOD").
(ii) Seller's Remedies. If Seller or any Shareholder
makes written request to Buyer for the payment of Damages, then Buyer
shall pay to Seller or such Shareholder the amount of Damages requested
within the Notice Period.
(iii) Notice of Dispute. Notwithstanding the
foregoing provisions of this subparagraph (d), if a party (the
"DEMANDING PARTY") serves a request for payment on the other party (the
"OBLIGATED PARTY"), the Obligated Party shall have the option to
provide written notice to the Demanding Party (the "NOTE OF DISPUTE")
within the Notice Period that the Obligated Party disputes, in good
faith, the validity or amount of the Damages set out in the request for
payment of Damages, and if the affected parties cannot agree on the
validity or amount of such Damages within ten (10) days following the
Notice Period, the dispute as to the validity or amount of such claim
or liability (the "DISPUTE") shall be settled as set forth in
subparagraph (e) of this paragraph 17, with the non-prevailing party
bearing the prevailing party's costs of arbitration if such Dispute is
resolved by arbitration.
(iv) Arbitration. If arbitration is required pursuant
to this paragraph 17, Buyer and Seller or the applicable Shareholder
each shall select an arbitrator within ten (10) business days after the
Notice of Dispute is delivered; those two arbitrators will then select
a third arbitrator; and the three arbitrators so chosen will determine
the validity of the claim for Damages. If Seller or Buyer delays in
appointing an arbitrator when required, and ten (10) days or more has
elapsed, the arbitrator appointed by the other party shall arbitrate
the dispute. If the Seller and the applicable Shareholder shall be
subject to a Dispute with Buyer, they shall, unless Buyer elects
otherwise in its sole and absolute discretion, be required to act as a
group with respect to any and all rights and obligations with respect
to the resolutions of the Dispute as provided in this paragraph 17.
(e) Settlement of Disputes.
(i) Disputes Not Involving Third Parties. If a
Dispute involves claims not involving any third party, Buyer and Seller
or the applicable Shareholder shall settle the Dispute by submitting
the same to binding arbitration.
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(ii) Disputes Involving Claims Made by Third Parties.
If a Dispute involves claims made by one or more third parties (a
"THIRD PARTY CLAIM"), the party asserting its right to indemnification
for such Third Party Claim shall give written notice to the other party
as soon as practical after such asserting party receives notice of such
Third Party Claim; provided, however the failure to timely give such
notice shall not affect such party's right to indemnification except to
the extent the party to receive the notice is damaged by such delay.
Upon such notice to Seller or Shareholder, Buyer and Seller and/or
Shareholder shall submit the Dispute to arbitration, and the following
procedures shall apply:
(A) Solely for purposes of
determining the party responsible for defending the
Third Party Claim, the arbitrators shall deem such
Third Party Claim to be valid (although such
consideration shall not be an admission by any party
as to any liability to any party). The arbitrators
then shall decide which party shall be liable for the
Third Party Claim if it is successfully prosecuted by
such third party or parties, and the decision of such
arbitrators with respect to such liability shall be
final and binding as among the parties. (Such party
determined to be liable for such claim sometimes
shall be referred to herein as the "RESPONSIBLE
PARTY".)
(B) If the Responsible Party refuses
to settle (and pay the settlement amount of) the
Third Party Claim immediately, then the Responsible
Party immediately shall select one of the following
two options:
Option One: The Responsible Party,
at the Responsible Party's sole expense and
risk, can assume the defense of the Third
Party Claim, provided the Responsible Party
first places in escrow, in favor of the
other party, adequate collateral (as
determined by the arbitrators on
consideration of all relevant facts) to
protect the other party from all Damages
with respect to such Third Party Claim (in
which case the other party immediately shall
be reimbursed by the Responsible Party for
any amount the other party is required to
pay with respect to such Third Party Claim;
or
Option Two: The Responsible Party,
at the Responsible Party's expense and risk,
can co-defend the Third Party Claim with the
other party, with the Responsible Party also
responsible for paying all costs incurred by
the other Party in connection with such
defense, including, without limitation, the
legal fees and expenses of the other party's
counsel for its reasonable involvement in
such defense. If the other party is found to
be liable for any portion of such Third
Party Claim, the Responsible Party
immediately shall reimburse the other party
for any amount required to be paid by the
other party with respect thereto; provided,
however, if the Responsible Party selects
this option, the Responsible Party shall
attempt diligently to have the other party
removed as a party to any legal action
involving the Third Party Claim (and, upon
such removal, the involvement of the other
party's counsel shall cease unless requested
by the Responsible Party or the Responsible
Party's counsel); and
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(C) No party may settle any Third
Party Claim without the prior consent of the other
parties hereto unless the settlement will not have a
material adverse effect on the other party hereto.
The parties will resolve any Dispute with respect to
any such proposed settlement in accordance with this
paragraph 16.
(D) Any party responsible for
defending a Third Party Claim shall proceed with
diligence and in good faith with respect thereto.
18. Use of Corporate and Fictitious Names. Seller and the
Shareholders, jointly and severally, agree to take all actions necessary to
assist Buyer in obtaining the rights to use the corporate name and any
fictitious names used in its conduct of any of the Business, including but not
limited to the execution of any assignments and consents to use such name. If
Buyer attempts to use such name, Seller shall consent to Buyer's use of such
name if such consent is required by any state, county or local governmental
authority.
19. Prepaid Items; Deposits; Etc. All prepaid insurance premiums,
rent and utility deposits, and similar items paid by or owing to the Seller by
any person, shall be considered to be part of the Assets being purchased by
Buyer and, on consummation of the transactions contemplated by this Agreement,
shall be the property of Buyer.
20. Post-Closing Requirements of Seller.
(a) Payment Escrow. At Closing, Buyer shall pay over and
deliver to or on behalf of Seller (and shall be credited, dollar-for-dollar, as
partial payment of the Purchase Price) to the Paying Agent, in escrow (the
"PAYMENT ESCROW"), an amount equal to the Closing Date Liabilities as specified
in paragraph 2(b)(i), to be held by the Paying Agent subject to the terms,
conditions, and provisions of the Payment Escrow Agreement. The Paying Agent
shall be an attorney at law authorized to practice law in the state of New
Mexico or a trust company or bank having trust powers in such State, which
Paying Agent has been selected by Seller and approved by Buyer.
(i) Seller shall pay all costs and expenses of the Payment
Escrow, including without limitation, any fees or costs of the Paying
Agent.
(ii) Seller shall be obligated to see that the Paying
Agent timely and properly pays all Closing Date Liabilities, and that
the Paying Agent obtains and delivers to Buyer the "Final Release"
referred to in the Payment Escrow Agreement, or other reasonable
evidence of payment acceptable to Buyer.
(iii) The existence of the Payment Escrow shall not affect
the obligations of the Seller and the Shareholder to hold Buyer
harmless against any Closing Date Liabilities as provided in paragraph
17(a).
(b) Final Financial Information. Not later than thirty (30)
days following Closing, Seller, at Seller's sole cost and expense, shall deliver
to Buyer "FINAL FINANCIAL INFORMATION", which shall include:
(i) a balance sheet of Seller as of the Closing Date
prepared in accordance with GAAP;
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(ii) an income statement of Seller for the period
commencing on the date succeeding the last day of the most recent
Financial Statement Date and ending on the Closing Date;
(iii) an inventory of fixed assets of Seller as of the
Closing Date;
(iv) an inventory of supplies of Seller as of the Closing
Date; and
(v) a cash settlement statement of Seller as of the
Closing Date.
(c) Liabilities Deficiency. If all such Final Financial
Information is not delivered to Buyer within such thirty (30) day period
following Closing, Seller and the Shareholders shall be liable to Buyer in an
amount equal to $500.00 for each day after such thirty (30) day period until all
such Final Financial Information is delivered to Buyer, and such liability shall
constitute a Liabilities Deficiency under the provisions of paragraph 5, above.
20. Third Party Beneficiaries. Nothing in this Agreement, expressed
or implied, is intended to confer on any person, other than the parties hereto,
and their successors, any rights or remedies under or by reason of this
Agreement other the affiliates entitled to indemnification pursuant to paragraph
16.
21. Expenses. Except as otherwise stated herein, each of the
parties shall bear all expenses incurred by them in connection with this
Agreement and in consummation of the transactions contemplated hereby in
preparation thereof.
22. Notices. All notices, consents, waivers and other
communications required or permitted hereunder shall be in writing and shall be
deemed to be properly given when personally delivered to the party or parties
entitled to receive the notice or three (3) business days after sent by
certified or registered mail, postage prepaid, or on the business day after sent
by nationally recognized overnight courier, in each case, properly addressed to
the party or parties entitled to receive such notice at the address stated
below:
to Seller: Regional Medical Supply, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxx, President
to the Shareholders: Xxxxx Xxxxxx
0000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
with a copy to: Xxxxx X. Xxxxxxx, Esq.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, X.X. 00000
to Buyer: Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxx
Xxxxxxxx Xxxxxx
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with copies to:
c/o RoTech Medical Corporation
0000 X.X. XxXxxx Xxxx, Xxxxx X
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
and
Blass & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
23. Choice of Law. The laws of the State of New Mexico applicable
to contracts executed, delivered and to be fully performed in such State govern
the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
24. Sections and Other Headings. Section, paragraph, and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
25. Counterpart Execution. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which, together, shall constitute but one instrument.
26. Gender. All gender employed in this Agreement shall include
all genders, and the singular shall include the plural and the plural shall
include the singular whenever and as often as may be appropriate.
27. Parties in Interest. This Agreement shall be binding on and
shall inure to the benefit of, and be enforceable by, Seller, the Shareholders
and Buyer and their respective successors and assigns. Buyer shall be entitled
to assign its rights under this Agreement and the Transaction Documents after
the Closing. Seller and the Shareholders may not assign this Agreement or any of
their rights hereunder without the prior consent of Buyer.
28. Entire Agreement. This Agreement including all Schedules and
Exhibits hereto, and all Transaction Documents constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and there
are no agreements, understandings, restrictions, warranties, or representations
between the parties with respect to the subject matter hereof other than as set
forth herein or as herein provided.
29. Performance. In the event of a breach by Seller or any
Shareholder of any of their respective obligations hereunder, the Buyer shall
have the right, in addition to any other remedies which may be available, to
obtain specific performance of the terms of this Agreement, and Seller and each
Shareholder hereby waives the defense that there may be an adequate remedy at
law.
30. Waiver, Discharge, Etc. This Agreement and the Transaction
Documents and the obligations hereunder and thereunder shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement or any Transaction
Document shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or such Transaction
Document, as the case may be, or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement or any Transaction Document shall be held to be a waiver of any
other or subsequent breach.
-22-
31. Cooperation Further Assistance. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed or delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably requested or
necessary to carry out the intent and purpose of this Agreement, and to vest in
Buyer good title to, possession of and control of all the Assets.
32. Joint and Several. Seller and the Shareholders shall be
jointly and severally liable for all representations, warranties and
obligations, including, without limitation, indemnification obligations, and
covenants made by any of them pursuant to this Agreement, including, without
limitation, any made pursuant to any Transaction Document. For all purposes of
this Agreement, any representation or warranty that is qualified to be "to the
knowledge of Seller" or by a requirement that Seller shall have received
"notice" of any matter, or any similar qualification shall be deemed to include
the knowledge of any Shareholder or notices to any Shareholder, as the case may
be.
33. Independent Legal Counsel. Seller and each Shareholder
represent and warrant that each party has had the opportunity to seek the advice
of independent legal counsel prior to signing this Agreement, and that the Buyer
has recommended to Seller and each Shareholder that such party obtain legal
counsel.
[SIGNATURES ON THE FOLLOWING PAGE]
-23-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
BUYER:
INTEGRATED HEALTH SERVICES
AT JEFFERSON HOSPITAL, INC.
By: /s/ Xxxx Xxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxx
Title:SVP Corporate Development
INTEGRATED HEALTH
SERVICES, INC.
By:/s/ Xxxx Xxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxx
Title:SVP Corporate Development
SELLER:
REGIONAL MEDICAL SUPPLY, INC.
By:/s/ Xxxxx Xxxxxx
---------------------------
Name: Xxxxx Xxxxxx
Title: President
SHAREHOLDERS:
/s/ Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
------------------------------
Xxxxxx Xxxxxxx
STATE OF NEW MEXICO
COUNTY OF LINCOLN
The foregoing instrument was acknowledged before me by, Xxxxx Xxxxxx,
as President of Regional Medical Supply, Inc., a New Mexico corporation, on
behalf of the corporation, and who is personally known to me; or has produced
N/A as identification.
3/23/98 /s/ Xxxxx Xxxxxxx
------------------------- -----------------------------
Date Notary Signature
Xxxxx Xxxxxxx
------------------------------
Notary Name Printed
My Commission Expires: 3/23/02
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STATE OF NEW MEXICO
COUNTY OF LINCOLN
The foregoing instrument was acknowledged before me by Xxxxx Xxxxxx,
and who is personally known to me; or has produced N/A as identification.
3/23/98 /s/ XXXXX XXXXXXX
----------------------------- -----------------------------
Date Notary Signature
Xxxxx Xxxxxxx
Notary Name Printed
My Commission Expires: 3/23/02
STATE OF NEW MEXICO
COUNTY OF LINCOLN
The foregoing instrument was acknowledged before me by Xxxxxx Xxxxxxx,
and who is personally known to me; or has produced N/A as identification.
3/23/98 /s/ XXXXX XXXXXXX
----------------------------- -----------------------------
Date Notary Signature
Xxxxx Xxxxxxx
Notary Name Printed
My Commission Expires: 3/23/02
SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(v)(B) - Patients' List of the Business
Schedule 1(a)(v)(C) - Telephone Numbers
Schedule 2(a) - Allocation of Purchase Price
Schedule 2(b)(iii) - Wire Instructions
Schedule 4(a) - Closing Date Liabilities
Schedule 4(b) - Unassumed Contracts
Schedule 10(c) - Seller's Opinion
Schedule 13(c) - Litigation
Schedule 13(g) - Contracts
Schedule 13(i) - Employment Contracts; Employees
Schedule 13(k) - Insurance
Schedule 13(o) - Tax Returns and Financial Statements
Schedule 13(p) - Supplemental Tax Information
Schedule 13(q) - Adverse Business Developments
Schedule 13(r) - Relationships
Schedule 13(u) - Reimbursement Matters
Schedule 13(v) - Environmental Compliance
Schedule 16(a) - Locations
Exhibit 2(b)(i)-A - Stock Pledge Agreement
Exhibit 2(b)(i) - Escrow Agreement
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