AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HOUSECALL MEDICAL RESOURCES, INC.
XXXXXXX ACQUISITION CORP.
XXXXXXX HOMECARE, INC.
AND
CERTAIN OF THE SHAREHOLDERS OF
XXXXXXX HOMECARE, INC.
October 31, 1996
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS*
Page
1. THE MERGER 1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . 2
2. THE SURVIVING CORPORATION 2
2.1 Charter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. MERGER CONSIDERATION; CONVERSION 2
3.1 Company Shares and Options. . . . . . . . . . . . . . . . . . . . 2
3.2 Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Establishment of Escrow. . . . . . . . . . . . . . . . . . . . . 4
3.4 Other Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY AND THE MAJORITY
SHAREHOLDERS 4
4.1 Organization and Authority. . . . . . . . . . . . . . . . . . . . 4
4.2 Capital; Ownership of Shares; Subsidiaries. . . . . . . . . . . . 5
4.3 Authority; Inconsistent Obligations. . . . . . . . . . . . . . . 5
4.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 No Violation; Compliance with Laws. . . . . . . . . . . . . . . . 6
4.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.8 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . 7
4.9 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.10 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.11 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . 8
4.12 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.13 Authority to Conduct Business and Intellectual
Property Rights. . . . . . . . . . . . . . . . . . . . . . . . 10
4.14 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.16 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . 11
4.17 Contingencies. . . . . . . . . . . . . . . . . . . . . . . . . 12
4.18 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.19 Medicare Participation/Accreditation. . . . . . . . . . . . . 13
4.20 Employment and Labor Matters. . . . . . . . . . . . . . . . . 13
4.21 Employee Benefit Matters. . . . . . . . . . . . . . . . . . . 14
4.22 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 16
4.23 Absence of Certain Business Practices. . . . . . . . . . . . . 16
4.24 Government Reports. . . . . . . . . . . . . . . . . . . . . . 17
4.25 Agreements and Transactions with Related Parties. . . . . . . 17
4.26 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . 17
4.27 No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.28 Fraud and Abuse. . . . . . . . . . . . . . . . . . . . . . . . 19
4.29 Investment Representations. . . . . . . . . . . . . . . . Error!
4.30 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 20
* This Table of Contents does not constitute a part of this Agreement.
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5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 21
5.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Authorization; No Inconsistent Agreements. . . . . . . . . . . 21
5.3 Authorization of Parent Stock. . . . . . . . . . . . . . . . . 22
5.4 Parent Documents. . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 22
6. ADDITIONAL AGREEMENTS 22
6.1 Parent's and Merger Sub's Access and Inspection. . . . . . . . 22
6.2 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Franchise Termination Payment to Option Care, Inc. . . . . . . 23
6.5 Covenant Against Competition. . . . . . . . . . . . . . . . . . 23
6.6 Certain Actions by Company and Majority Shareholders. . . . . . 24
6.7 Certain Shareholder Guarantees. . . . . . . . . . . . . . . . . 24
6.8 Repayment of Subordinated Debt. . . . . . . . . . . . . . . . . 24
6.9 Repayment of Bank Debt. . . . . . . . . . . . . . . . . . . . . 25
6.10 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.11 Company Cost Reports. . . . . . . . . . . . . . . . . . . . . 25
6.12 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.13 Other Post-Closing Cooperation. . . . . . . . . . . . . . . . 26
6.14 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.15 Interim Financial Statements. . . . . . . . . . . . . . . . . 26
6.16 Update of Information. . . . . . . . . . . . . . . . . . . . . 26
6.17 Registration Rights. . . . . . . . . . . . . . . . . . . . . . 27
6.18 Certain Governmental Filings. . . . . . . . . . . . . . . . . 29
7. CONDUCT OF COMPANY'S BUSINESS PENDING CLOSING 30
7.1 Business in the Ordinary Course. . . . . . . . . . . . . . . . 30
7.2 No Material Changes. . . . . . . . . . . . . . . . . . . . . . 31
7.3 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . 31
8. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB 32
8.1 Proceedings and Documents Satisfactory. . . . . . . . . . . . . 32
8.2 Representations and Warranties. . . . . . . . . . . . . . . . . 32
8.3 Compliance with Agreements and Conditions. . . . . . . . . . . 33
8.4 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Resolutions. . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 33
8.7 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.8 Employment Agreements. . . . . . . . . . . . . . . . . . . . . 33
8.9 Interim Financial Statements. . . . . . . . . . . . . . . . . . 34
8.10 Bank Approvals. . . . . . . . . . . . . . . . . . . . . . . . 34
8.11 Regulation D Certification. . . . . . . . . . . . . . . . . . 34
8.12 Commercial Lease. . . . . . . . . . . . . . . . . . . . . . . 34
8.13 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . 34
8.14 No Inconsistent Requirements. . . . . . . . . . . . . . . . . 34
8.15 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 34
9. CONDITIONS TO OBLIGATIONS OF COMPANY AND THE MAJORITY SHAREHOLDERS 35
9.1 Proceedings and Documents Satisfactory. . . . . . . . . . . . . 35
9.2 Representations and Warranties. . . . . . . . . . . . . . . . . 35
9.3 Compliance with Agreements and Conditions. . . . . . . . . . . 35
9.4 Certificate of Parent and Merger Sub. . . . . . . . . . . . . . 35
9.5 Resolutions. . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 36
9.7 No Inconsistent Requirements. . . . . . . . . . . . . . . . . . 36
9.8 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 36
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10. INDEMNITIES 36
10.1 Indemnification of Parent and Merger Sub. . . . . . . . . . . 36
10.2 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.3 Defense of Claims. . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Liability Threshold. . . . . . . . . . . . . . . . . . . . . . 38
10.5 No Contribution by Surviving Corporation. . . . . . . . . . . 38
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 39
12. TERMINATION 39
12.1 Termination for Certain Causes. . . . . . . . . . . . . . . . 39
12.2 Procedure on and Effect of Termination. . . . . . . . . . . . 40
13. POWER-OF-ATTORNEY 40
13.1 Appointment of Agent. . . . . . . . . . . . . . . . . . . . . 40
13.2 Liability of Agent. . . . . . . . . . . . . . . . . . . . . . 41
13.3 Irrevocable; Binding on Successors, Etc. . . . . . . . . . . . 41
14. MISCELLANEOUS 41
14.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
14.2 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 43
14.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 43
14.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 43
14.5 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 43
14.6 Partial Invalidity and Severability. . . . . . . . . . . . . . 44
14.7 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.9 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . 44
14.10 Consented Assignment. . . . . . . . . . . . . . . . . . . . . 44
15. CERTAIN DEFINITIONS; INDEX OF DEFINITIONS 45
15.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . 45
15.2 Index to Definitions. . . . . . . . . . . . . . . . . . . . . 47
LIST OF EXHIBITS
EXHIBIT A ESCROW AGREEMENT
EXHIBIT B INDEMNIFICATION LETTER
EXHIBIT C LEGAL OPINION OF XXXXXXXXXXX AND XXXXXXXXXXX
EXHIBIT D COMMERCIAL LEASE AGREEMENT
EXHIBIT E LEGAL OPINION OF XXXXXXXXXX & CODY, L.L.P.
LIST OF SCHEDULES
SCHEDULE 4.1 ORGANIZATION AND AUTHORITY
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SCHEDULE 4.2 CAPITAL; OWNERSHIP OF SHARES; SUBSIDIARIES
SCHEDULE 4.3 AUTHORITY; INCONSISTENT OBLIGATIONS
SCHEDULE 4.4 CONSENTS
SCHEDULE 4.6 FINANCIAL STATEMENTS
SCHEDULE 4.7 LIABILITIES
SCHEDULE 4.11 PERSONAL PROPERTY
SCHEDULE 4.12 REAL PROPERTY
SCHEDULE 4.13 AUTHORITY TO CONDUCT BUSINESS AND INTELLECTUAL PROPERTY
RIGHTS
SCHEDULE 4.14 CONTRACTS
SCHEDULE 4.15 INSURANCE
SCHEDULE 4.16 CUSTOMERS AND SUPPLIERS
SCHEDULE 4.17 CONTINGENCIES
SCHEDULE 4.18 TAXES
SCHEDULE 4.19 MEDICARE PARTICIPATION/ACCREDITATION
SCHEDULE 4.20 EMPLOYMENT AND LABOR MATTERS
SCHEDULE 4.21 EMPLOYEE BENEFIT MATTERS
SCHEDULE 4.22 ENVIRONMENTAL MATTERS
SCHEDULE 4.24 GOVERNMENT REPORTS
SCHEDULE 4.25 AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES
SCHEDULE 4.26 ABSENCE OF CHANGES
SCHEDULE 4.27 NO DEFAULTS
SCHEDULE 6.6 CERTAIN SHAREHOLDER GUARANTEES
SCHEDULE 6.7 REPAYMENT OF SUBORDINATED DEBT
SCHEDULE 6.8 REPAYMENT OF BANK DEBT
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is made and entered into as of the 31st day
of October, 1996, by and among HOUSECALL MEDICAL RESOURCES, INC.,
a Delaware corporation ("Parent"); XXXXXXX ACQUISITION CORP., a
Tennessee corporation ("Merger Sub"); XXXXXXX HOMECARE, INC., a
Tennessee corporation ("Company"); and J. XXXXX XXXXXXX and XXXXX
X. XXXXXXXXXX, each an individual resident of the State of
Tennessee (collectively, the "Majority Shareholders", and
individually a "Majority Shareholder".)
RECITALS:
A. Company is engaged in the business of providing home
health care products and services, including home medical
equipment, infusion therapy services and respiratory therapy
services in the service areas listed on Schedule 4.19 hereto (the
"Business").
B. The Majority Shareholders own beneficially and of
record 79% of the presently issued and outstanding common stock
of Company.
C. Parent, Merger Sub and the Majority Shareholders deem
it advisable and in their respective best interests to effect the
merger of Merger Sub with and into Company.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT:
THE MERGER
1.1 The Merger.
At the Effective Time (such term and other capitalized terms used
herein being defined in this Agreement in either Paragraph 15.1
or at the places indicated in Paragraph 15.2 below), upon the
terms and subject to the conditions contained herein, and in
accordance with the Tennessee Business Corporation Act as then in
effect (the "Act"), Merger Sub shall be merged with and into
Company, the separate existence of Merger Sub shall cease, and
Company shall continue as the surviving corporation (the
"Merger"). Company after the Merger is sometimes hereafter
referred to as the "Surviving Corporation".
1.2 Effect of the Merger.
At the Effective Time, the Surviving Corporation shall continue
its corporate existence under the Laws of the State of Tennessee
and shall succeed to all rights, privileges, immunities,
franchises and powers, and be subject to all duties, liabilities,
debts and obligations, of Company and Merger Sub in accordance
with the provisions of the Act.
THE SURVIVING CORPORATION
2.1 Charter.
The Charter of Merger Sub as in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation
until thereafter amended in accordance with applicable Law and
such Charter.
2.2 By-Laws.
The By-Laws of Merger Sub as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation
until thereafter amended in accordance with applicable Law, the
Charter of such Surviving Corporation, and such By-Laws.
2.3 Board of Directors.
The directors of Merger Sub immediately prior to the Effective
Time shall be the initial board of directors of the Surviving
Corporation, each of such persons to serve until his or her
successor is duly elected and qualified.
2.4 Officers.
The officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation,
each of such officers to serve until his or her successor is duly
qualified.
3. MERGER CONSIDERATION
3.1 Company Shares and Options.
At the Effective Time, by virtue of the Merger, and without any
action on the part of the Majority Shareholders or any other
Shareholder, all of the shares of Company Common Stock and
Company Preferred Stock issued and outstanding immediately prior
to the Effective Time (collectively, the "Shares") and all
options and rights to acquire any of the capital stock of
Company, whether or not then vested and/or exercisable,
outstanding immediately prior to the Effective Time
(collectively, the "Options"), shall be canceled, retired and
converted into and become the right to receive the Merger
2
Consideration described in this Article 3. At the Closing, the
Majority Shareholders and the other Shareholders of the Company
shall surrender the certificates representing the Shares owned by
them, accompanied by blank stock powers and all necessary
transfer taxes and other revenue stamps (if any), to Parent, and
Parent shall deliver the Merger Consideration deliverable to
them. At the Closing, each Optionholder shall surrender the
instruments or other writings evidencing and representing the
Options owned by them, accompanied by all necessary transfer
taxes and other revenue stamps (if any), to Parent, and Parent
shall deliver the Merger Consideration deliverable to them.
3.2 Merger Consideration.
The "Merger Consideration" shall be equal to the aggregate sum of
$5,050,000. Subject to Paragraph 3.3, the Merger Consideration
is payable to the Shareholders and the Optionholders as follows:
(i) To the recordholders of the Common Stock, the
aggregate sum of $4,094,388.50 in cash,
(ii) To the recordholders of the Class A Preferred
Stock, the aggregate sum of $738,613.00 in
cash (against which no conversion price shall
be payable by any such recordholders to
Company, Parent or Merger Sub), and
(iii) To the Optionholders, and against the
delivery to Parent and Merger Sub of the
aggregate sum of $31,035.21 (being the
aggregate cash exercise price of the
Options), the aggregate sum of $216,998.50 in
cash.
Parent has previously deposited the sum of $50,000 with
Xxxxxxxxxxx and Xxxxxxxxxxx to hold in escrow pending the Closing
as an advance against the Merger Consideration, which sum is to
be distributed to the Shareholders and the Optionholders pro rata
in accordance with the percentages set forth in Exhibit A to the
Escrow Agreement upon consummation of the Merger and the
occurrence of the Closing. Each of the Shareholders and the
Optionholders acknowledges and agrees by their acceptance of the
Merger Consideration paid directly by, or on behalf of, Parent
and Merger Sub that its pro rata share of such $50,000,
representing the balance of the Merger Consideration payable to
such Shareholder or Optionholder, has been paid by Parent and
Merger Sub to such Shareholder or Optionholder and that neither
Parent nor Merger Sub has any further responsibility or liability
to such Shareholder or Optionholder for its pro rata share of
such $50,000. The amounts actually payable to each of the
recordholders of the Common Stock and the Class A Preferred Stock
and to the Optionholders shall be credited by a pro rata amount
of such $50,000 deposit.
3
3.3 Establishment of Escrow.
Notwithstanding Paragraph 3.2, $850,000 of the cash portion of
the Merger Consideration shall be paid over to SunTrust Bank,
Nashville, N.A. to be held, disbursed and invested pursuant to an
escrow agreement (the "Escrow Agreement") in the form attached
hereto as Exhibit A. By acceptance of the Merger Consideration,
each Shareholder and Optionholder shall be deemed to have agreed
to the establishment of the Escrow Fund (as defined in the Escrow
Agreement) with such cash portion of the Merger Consideration and
to be bound by, and subject to, the terms and conditions of the
Escrow Agreement.
3.4 Other Shares.
Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into
and become one share of common stock of the Surviving
Corporation.
3
3.5 Closing.
The consummation of the transactions contemplated in this
Agreement (the "Closing") shall take place at the offices of
Company, 000 Xxxxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxx, at 10:30
a.m., Murfreesboro Time, on the earlier to occur of (a) October
31, 1996, and (b) the first Business Day after all the conditions
set forth in Articles 8 and 9 hereof have been satisfied or
waived. On the date of the Closing, Company and Merger Sub shall
file the documents required by the Act to effect the Merger. The
Merger shall become effective at the close of business on the
date of the Closing (the "Effective Time").
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMPANY AND THE
MAJORITY SHAREHOLDERS
To induce Parent and Merger Sub to enter into and perform this
Agreement, to consummate the Merger, and to pay the Merger
Consideration as provided herein, Company and each Majority
Shareholder, jointly and severally, represent and warrant to, and
covenant and agree with, Parent and Merger Sub as follows:
4.1 Organization and Authority.
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee.
Company's principal office and its places of business are at the
locations specified in Schedule 4.1. Company has all requisite
corporate power and authority and is entitled to own or lease its
assets and to carry on Company's Business as and in all places
where such business is now conducted and such properties are
owned or leased. Company is duly authorized, licensed, qualified
4
or domesticated as a foreign corporation in the jurisdictions
listed in Schedule 4.1, which are all jurisdictions where the
character of the property owned by it or the nature of the
business transacted by it makes such authorization, license,
qualification or domestication necessary. Schedule 4.1 lists (i)
all locations where any of Company's assets are located, or where
Company has an office or place of business or maintains any
Inventory, and (ii) all names under which Company or its
predecessors have operated during the past five years, if
different from its present corporate name.
4.2 Capital; Ownership of Shares; Subsidiaries.
(a) Company has an authorized capital stock of (i) 100,000
shares of common stock, no par value (the "Common Stock" ), (ii)
50,000 shares of preferred stock, $1.00 par value per share (the
"Preferred Stock"), and (iii) 25,000 shares of Class A preferred
stock, $1.00 par value per share (the "Class A Preferred Stock").
The Common Stock, the Preferred Stock and the Class A Preferred
Stock are sometimes herein referred to collectively as the
"Stock". As of the date hereof, all outstanding shares of the
Stock are owned beneficially and of record by those Persons
identified on Schedule 4.2 hereto in the amounts set forth
opposite their respective names, and, with respect to each holder
of shares of Class A Preferred Stock, Schedule 4.2 also reflects
the number of shares of Common Stock into which such holder is
entitled to convert the Class A Preferred Stock. All of the
outstanding shares of the Stock are duly authorized, validly
issued, fully paid and nonassessable and were authorized,
offered, issued and sold in accordance with all applicable
securities and other Laws and all rights of Company's
shareholders and other Persons. No Person has any preemptive
rights with respect to shares of Stock of Company. Except as set
forth on Schedule 4.2, there are no outstanding securities
convertible into Stock or rights to subscribe for or to purchase,
or any options for the purchase of, or any agreements or
arrangements providing for the issuance (contingent or otherwise)
of, or any Actions relating to, the Stock. There are no voting
trusts, proxies or other agreements or understandings with
respect to the voting of any of the Stock. Company is not
subject to any obligation to repurchase or otherwise acquire or
retire any of its Stock, and Company has no Liability for
dividends declared or accrued, but unpaid, with respect to its
Stock. Company has not purchased or redeemed any of its Stock,
and, except as set forth in Schedule 4.2, has not paid any
dividend or made any other payment to any of the Shareholders or
other Related Parties within the past year.
(b) Company does not have any interest, direct or indirect, and
has no commitment to purchase or otherwise acquire any interest,
direct or indirect, in any other Person.
(c) Each Majority Shareholder is the record and beneficial owner
of that number of shares of Stock of each class set forth
opposite his or her name Schedule 4.2, in each case free and
clear of any and all Liens.
4.3 Authority; Inconsistent Obligations.
(a) Company has the full right, power and authority to execute
and deliver and to perform and comply with this Agreement in
accordance with its terms. Each Majority Shareholder has the
5
full right, power and capacity to execute and deliver and to
perform and comply with this Agreement in accordance with its
terms. All proceedings and actions required to be taken by
Company to authorize the execution, delivery, and performance of
this Agreement have been or will be properly taken. This
Agreement has been duly and validly executed and delivered on
behalf of Company by its duly authorized officers, and has been
duly and validly executed and delivered by each Majority
Shareholder. This Agreement constitutes the valid and legally
binding obligation, subject to general equity principles, of
Company and each of the Majority Shareholders, in each instance
enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization or similar
Laws affecting the rights of creditors generally.
(b) Except as disclosed in Schedule 4.3, neither the execution
and delivery of this Agreement nor the consummation of the
transactions contemplated herein will result in a violation or
breach of, or constitute a default under, (i) the Charter or By-
Laws of Company, (ii) any term or provision of any indenture,
note, mortgage, bond, security agreement, loan agreement,
guaranty, pledge, or other agreement, instrument or document,
(iii) any material Law, (iv) any other commitment or restriction,
to which Company or any Shareholder is a party or by which any of
them or any of the Company's assets, properties or businesses is
subject or bound; nor will such actions result in (v) the
creation of any Lien on any of the assets of Company, (vi) the
acceleration or creation of any obligation of Company, (vii) the
forfeiture of any material right or privilege of Company, or
(viii) the forfeiture of any material right or privilege of any
Shareholder which may affect such Shareholder's ability to
perform under this Agreement.
4.4 Consents.
The execution and delivery of this Agreement by Company and each
of the Majority Shareholders and the consummation of the
transactions contemplated by this Agreement (a) do not require
the consent, approval or action of, or any filing with or notice
to, any Person or Government, except as specified in Schedule
4.4, (b) do not require the consent or approval of any of
Company's shareholders, except such as have been obtained or will
be obtained prior to the Closing in accordance with Paragraph
6.6, and (c) do not impose any other term, condition or
restriction on Parent, Merger Sub or Company pursuant to any
business combination, takeover or other similar Law.
4.5 No Violation; Compliance with Laws.
Company is not in default under or in violation of its Charter or
By-Laws. Company has complied in all material respects with all
Laws applicable to the Business. Neither Company nor any
Majority Shareholder has received any notification of any
asserted present or past failure by Company to comply with any
Laws.
4.6 Financial Statements.
Prior to the date hereof, Company has delivered to Parent and
Merger Sub copies of Company's audited Balance Sheets as at
December 31, 1994 and 1995, and related audited Statements of
Earnings, for the fiscal years then ended, together with the
unqualified audit opinion thereon of Xxxxxxx, Xxxxxx & Co., P.C.,
6
independent certified public accountants. All of such financial
statements (including any related notes and schedules thereto)
(the "Audited Financial Statements") are true and correct and
have been prepared in accordance with GAAP consistently applied,
and present fairly the financial condition of Company as at the
respective dates thereof and the results of its operations and
cash flows for the respective periods then ended. Company has
also delivered to Parent and Merger Sub copies of Company's
unaudited Balance Sheet as of June 30, 1996 (the "Unaudited
Balance Sheet"), and unaudited Statements of Earnings for the
six-month period then ended (such unaudited Statements of
Earnings, Retained Earnings, and Cash Flows, together with the
Unaudited Balance Sheet, collectively, the "Unaudited Financial
Statements"). Except as disclosed in Schedule 4.6, the Unaudited
Financial Statements (including any schedules thereto) are true
and correct, have been prepared from the books and records of
Company in accordance with GAAP consistently applied, and present
fairly the financial condition of Company as at the date thereof
and the results of its operations for the six-month period then
ended, provided that such Unaudited Financial Statements do not
include footnotes and statement of cash flows required by GAAP.
4.7 Liabilities.
Company does not have any debt, liability or obligation of any
kind, whether accrued, absolute, known or unknown, contingent or
otherwise, except (i) those reflected on the audited Balance
Sheet of Company as at December 31, 1995 (the "Audited Balance
Sheet"), (ii) current liabilities incurred in the regular and
ordinary course of business consistent with Company's past
practices in connection with the purchase of goods and services
since December 31, 1995 (the "Reference Date") properly reflected
in Company's books, (iii) payroll and/or payroll taxes associated
with any exercise by Xxxxxxx X. Xxxxx of his Option, and (iv) as
specifically disclosed in Schedule 4.7 (such liabilities being
referred to herein as the "Disclosed Liabilities"). Company has
no liability whatsoever to Option Care, Inc., whether in
connection with the termination of the franchise agreement
between Company and Option Care, Inc. or otherwise.
4.8 Title to Properties.
Company has good and complete title to all properties and assets
reflected in the Audited Balance Sheet, except inventories and
other immaterial assets which have been disposed of in the
regular and ordinary course of business since the Reference Date,
and all other properties and assets necessary to conduct its
business as currently being conducted and as conducted during the
periods covered by the Audited Financial Statements (other than
any leased property), free and clear of Liens, except as may be
set forth in the notes to the Audited Balance Sheet.
4.9 Inventories.
The inventories of Company are merchantable, fit for the purpose
intended, and conform in all respects to all orders, contracts or
commitments for such goods. Each such item of inventory
7
reflected in the Audited Balance Sheet is so reflected on the
basis of a complete physical count and valued at the lower of
cost or market in accordance with GAAP. Each item of inventory
reflected on the Unaudited Balance Sheet and the books and
records of Company is valued at the lower of cost or market in
accordance with GAAP. The inventories of Company are sufficient
to meet the reasonably expected requirements of Company's
Business.
4.10 Receivables.
The accounts receivable shown on the Audited Balance Sheet, and
all such receivables now held by Company, represent valid claims
for goods, services or rental equipment provided to patients,
recognized at management's estimate of net realizable value, and
were not and are not subject to any offset or counterclaim.
Neither Company nor any Majority Shareholder makes any
representation or warranty concerning the collectability of any
such accounts receivable.
4.11 Personal Property.
(a) Except as set forth in Schedule 4.11, all of the equipment,
vehicles and other items of tangible personal property used by
Company in the conduct of the Business are in good condition and
repair and have been so maintained, subject to normal wear and
tear, are suited for the use intended and have been operated in
conformity with all applicable Laws, manufacturer's operating
manuals, manufacturer's warranties, and insurance requirements.
(b) Except as disclosed in Schedule 4.11, to the knowledge of
Company and the Majority Shareholders, all lessors of any
equipment or other tangible personal property leased to Company
have fully and completely performed and satisfied their
respective duties and obligations under such leases, and Company
has no claims, actions or causes of action against any such
lessor for failure to fully and completely perform and satisfy
its duties and obligations thereunder.
4.12 Real Property.
(a) Company neither owns nor has the right or option to acquire
any real property.
(b) All agreements with respect to leases, easements, rights of
way, licenses, usufructs and other non-fee simple interests
granted to Company in the Leased Real Property (collectively, the
"Real Property Leases") are listed in Schedule 4.12. The
interest of Company in and under each of the Real Property Leases
is free and clear of any defects, claims or Liens and subject to
no present Action or threatened Action.
(c) Company is lawfully in possession of all real property which
is the subject of a Real Property Lease and with respect to which
Company is a tenant or lessee or has been granted a possessory
interest in such Leased Real Property, and all conditions
precedent to the obligation of Company to take possession and
8
continue to occupy all Leased Real Property has been fulfilled.
Company has the exclusive right of possession and is presently
occupying the entirety of each parcel of its Leased Real Property
for the purposes set forth in the respective Real Property Lease.
(d) All of the Leased Real Property is free from any
development, use or occupancy restrictions, except those imposed
by applicable Laws, and from all special taxes or assessments,
except those generally applicable to other properties in the tax
districts in which the Leased Real Property is located. There is
lawfully available to all the Leased Real Property, through
private easements and facilities or properly dedicated public
easements and facilities, water, gas, sewer, electricity and
telephone service sufficient to allow Company's Business to
continue to be conducted as heretofore conducted by it, and all
of which are now being utilized. All the Leased Real Property
has reasonably suitable ingress and egress and each parcel of
Leased Real Property has reasonably suitable access to the
existing paved roads and other public rights of way, which access
is not limited or restricted.
(e) The present use, occupancy and operation of the Leased Real
Property, and all aspects of the improvements to the Leased Real
Property (the "Real Property Improvements"), are in compliance in
all material respects with all, and not in violation of any, Laws
and with all private restrictive covenants of record, and neither
Company nor any Majority Shareholder has any knowledge of any
proposed change therein that would affect any of the Leased Real
Property or its use, occupancy or operation. There exist no
conflicts or disputes with any Government or Person relating to
any Leased Real Property or the activities thereon. All Real
Property Improvements are located within the lot lines (and
within the mandatory set-backs from such lot lines established by
applicable Law or otherwise) and not over areas subject to
easements or rights of way. All Real Property Improvements are
in good condition and repair, suited for the operation of
Company's business.
(f) Neither Company nor any other Person has caused any work or
improvements to be performed upon or made to any of the Leased
Real Property for which there remains outstanding any payment
obligation that would or might serve as the basis for any Lien in
favor of the Person who performed the work.
(g) All requisite certificates of occupancy and other permits
and approvals required with respect to the Leased Real Property
Improvements and the use, occupancy and operation thereof have
been obtained and paid for and are currently in effect and free
of restrictions.
(h) Except as set forth on Schedule 4.12, as specifically
disclosed in a written lease disclosed in Schedule 4.12, or as
specifically set forth in the Unaudited Balance Sheet, no rent or
use fee has been paid in advance, no security deposit has been
paid and no brokerage commission is payable by Company with
respect to any Real Property Lease.
9
(i) Company has not received any notice that the owner of any
Leased Real Property has made any assignment, pledge or
hypothecation of such Real Property Lease or the rents or use
fees due thereunder.
(j) Except as set forth in Schedule 4.12 to the knowledge of
Company and the Majority Shareholders: (A) no portion of the
Leased Real Property is located within any Special Flood Hazard
Area designated by the Federal Emergency Management Agency, or in
any area similarly designated by any Government; (B) no portion
of the Leased Real Property has been designated "wetlands" within
the jurisdiction of the U.S. Army Corp. of Engineers, or has been
similarly designated by any Government; (C) no portion of the
Leased Real Property constitutes "wetlands" that have been
filled, whether or not pursuant to appropriate permits; and (D)
no portion of the Leased Real Property is subject to any
classification, designation or preliminary determination of any
Government or pursuant to any Law which would restrict the use,
development, occupancy or operation of the Leased Real Property
in connection with the business in any material respect.
4.13 Authority to Conduct Business and Intellectual Property
Rights.
Company has the means, rights and information required to sell,
offer for sale and use the items and perform the services as
presently being offered for sale, sold, used or performed by
Company, including, without limitation, the means, rights and
information required to offer for sale, sell and use all such
items and perform all such services without incurring any
liability for license fees or royalties or any claims of
infringement of patents, trade secrets, copyrights, trademark,
service xxxx or other proprietary rights. Schedule 4.13
describes all proprietary inventions, designs, ideas, processes,
methods and other know-how of Company which are valuable in the
operation of Company's Business and, with respect to each such
item, indicates whether Company holds any patent or patent
application therefor (in each such case, identifying the date(s)
and jurisdiction(s) in which the patent was granted or applied
for and the number of such patent or application) or has sought
any advice as to the patentability of the same (in each such
case, summarizing such advice) or believes it has trade secret
protection therefor (in each such case, providing a description
of the measures which have been taken to protect the secrecy of
the item). Company is not a party to, either as licensor or
licensee, and is not bound by or subject to, any license
agreement for any patent, process, trademark, service xxxx, trade
secrets, trade name, service name or copyright, except as
described in Schedule 4.13. All patents, copyrights, trademarks,
service marks and trade names, and applications therefor or
registrations thereof, owned or used by Company are listed in
Schedule 4.13 and, to the extent indicated thereon, have been
duly registered in, filed in or issued by the Patent and
Trademark Office, the Copyright Office or the corresponding
agency or office of the Forum identified therein. There are no
rights of third parties with respect to any patent, patent
application, invention, copyrights, trademark, service xxxx,
trade secrets, trade name or device which would have an adverse
effect on the operations or prospects of Company's Business.
10
4.14 Contracts.
Schedule 4.14 identifies all existing contracts and commitments
of Company (a) which are necessary to conduct Company's Business
in the same manner as currently conducted by Company, (b) by
which any of Company's assets may be bound or affected, (c) which
relate to or affect the Company's assets, or (d) which are
material to Company or Company's Business, in each case whether
written or oral (collectively, the "Company Contracts"). Company
has heretofore delivered to Parent and Merger Sub a true, correct
and complete copy of each such written Company Contract and a
complete and accurate summary of each such oral Company Contract.
All of the Company Contracts have been entered into in the
ordinary course of Company's Business. None of the Company
Contracts constitutes an illegal restraint of trade under any
applicable Law. No Company Contract will likely result in a loss
to Company upon completion of performance, or which cannot
readily be fulfilled or performed by Company in accordance with
its terms without undue or unusual expenditures of money or
effort. For purposes of identifying and listing the "Company
Contracts" as contemplated by this Paragraph 4.14, "Company
Contracts" with individuals shall only be required to be
identified and listed on Schedule 4.14 to the extent that the
revenues to be derived by Company thereunder exceeds $2,500.
4.15 Insurance.
Schedule 4.15 contains a complete list and description of all
fire, theft, casualty, health, life, accident, title, automobile,
liability, product liability, worker's compensation and other
policies of insurance maintained by Company, all of which are,
and will be maintained through the Closing Date, in full force
and effect. Schedule 4.15 also lists and describes the limits,
risks and deductibles for all such policies. Company has
delivered to Parent and Merger Sub a true, correct and complete
copy of each such insurance policy. All premiums due thereon
have been paid and Company has not received any notice of
cancellation with respect thereto. All such policies taken
together provide adequate coverage to insure the properties,
business and operations of Company against such risks and in such
amounts as are prudent and customary. Company will not as of the
Closing Date have any liability for premiums or for retrospective
premium adjustments for any period prior to the Closing Date,
except as set forth in Schedule 4.15. Schedule 4.15 also lists
and describes all occurrences which may form the basis for a
claim by or on behalf of Company under any such policy; and
Company has timely given notice of all such occurrences to the
appropriate insurer and has not waived (either intentionally or
inadvertently) its right to make the related claim under any such
policy.
4.16 Customers and Suppliers.
Schedule 4.16 sets forth the names and addresses of any sole
source suppliers of significant goods, equipment or services to
Company (other than public utilities) with respect to which
practical alternative sources of supply are not available, and
the names and addresses of each customer of Company that
purchased $100,000 in goods or services from Company in any of
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the three prior years ("Significant Customers"). Neither Company
nor the Majority Shareholders are aware, except as disclosed in
Schedule 4.16, (a) that any supplier or Significant Customers of
Company intends to discontinue or substantially diminish or
change its relationship with Company or the terms thereof, or (b)
that any supplier of Company intends to significantly increase
prices or charges for goods or services presently supplied.
4.17 Contingencies.
Except as set forth in Schedule 4.17, there are no Actions
pending or threatened against, by or affecting Company or any of
its assets, properties or businesses in any Forum, nor do there
exist any other "loss contingencies" (as such term is defined in
Statement of Financial Standards No. 5 of the Financial
Accounting Standards Board), the eventual outcome of which might
have an adverse effect on Company, its assets, properties or
businesses or the operation of Company's Business after the
Closing, or which would prevent or impede the transactions
contemplated by this Agreement. Except as set forth in Schedule
4.17, Company has not been charged with, nor is it under
investigation with respect to any charge concerning, any
violation of any provision of any Law. There are no unsatisfied
judgments against Company or any of the Majority Shareholders or
any Orders to which Company, any Shareholder or any of the
assets, properties or businesses of Company are subject.
4.18 Taxes.
Except as disclosed in Schedule 4.18, all taxes (including,
without limitation, all income, property, sales, use, customs,
franchise, value added, ad valorem, withholding, employees'
income withholding, and social security taxes, and all other
taxes imposed on Company or its income, properties, sales,
franchises, operations or Plans or trusts), and all deposits in
connection therewith required by applicable Law imposed by any
Government, and all interest and penalties thereon and additions
thereto (all of the foregoing hereafter collectively referred to
as "Taxes"), which are due and payable by Company for all periods
through the date hereof have been paid in full, and adequate
reserves for all other Taxes, whether or not due and payable, and
whether or not disputed, have been set up on the books of
Company. From and after the date of this Agreement and until the
Closing Date, Company will duly file all returns and reports with
respect to Taxes, and will pay all Taxes imposed on Company which
directly or indirectly affect the operation of Company's Business
after the Closing Date, or which might create a Lien on the
assets, properties or business of Company, or which could
adversely affect Company's Business after the Closing Date.
There is not now any proposed assessment against Company of
additional Taxes of any kind. Company has duly filed all
federal, state, and local tax returns and reports (including,
without limitation, returns for estimated tax), and all returns
and reports of all other Governments having jurisdiction, with
respect to all Taxes, all such returns and reports show the
correct and proper amount due, and all Taxes shown on such
returns or reports and all assessments received by Company have
been paid to the extent that such Taxes, or any estimates
thereon, have become due. No federal income tax returns of
Company have been examined by the Internal Revenue Service.
Schedule 4.18 sets forth any position taken by Company on its
12
federal income tax returns which is substantially at variance
with the published position of the Internal Revenue Service.
Company has obtained and received all applicable sales and use
tax exemptions and related certificates, and the same are and
shall remain in full force and effect through the Closing Date.
4.19 Medicare Participation/Accreditation.
Company is qualified for participation in the Medicare and
Medicaid programs, has current and valid provider contracts with
the Medicare and Medicaid programs, is in compliance with the
conditions of participation in such programs in all material
respects, and has received all approvals or qualifications
necessary for reimbursement pursuant to such programs. Company
presently has the Medicare certified provider numbers set forth
in Schedule 4.19 (collectively, the "Provider Numbers"). Such
Provider Numbers and contracts allow Company to provide
reimbursable home health services in the service areas listed on
Schedule 4.19 ("Service Areas") without further consent and
approval by any governmental agency, including without limitation
TennCare, the Tennessee Department of Health Division of Health
Care Facilities, the Tennessee Health Facilities Commission and
HCFA. Company has never filed, and has never been required to
file, Medicare cost reports.
4.20 Employment and Labor Matters.
(a) Schedule 4.20 lists all employees, consultants, or other
agents who on the date hereof perform services on a regular basis
in the business operations of or for Company and whose annualized
rate of compensation exceeds $40,000 per year. Except as
provided in Schedule 4.20, no such employee, consultant, or other
agent has terminated his employment or engagement, nor, to the
knowledge and belief of Company and the Majority Shareholders,
plans not to continue employment with Company after the Closing
Date if so offered by Company. Schedule 4.20 also lists any
employee, consultant, or other agent of Company who has a
contract for employment with or engagement by Company (whether
written or oral) that is not terminable by Company in its
discretion on not more than thirty (30) days' notice without
penalty or requirement of any severance or similar payment by
Company.
(b) Except as disclosed in Schedule 4.20, Company is not a party
to any collective bargaining agreement or agreement of any kind
with any union or labor organization, and no union or other
collective bargaining unit has been certified or recognized by
Company as representing any employee, nor, to the knowledge of
Company or any of the Majority Shareholders, is a union or other
collective bargaining unit seeking recognition for such purpose.
There are no controversies pending, or to the knowledge of
Company or the Majority Shareholders threatened, between Company
and any labor union or collective bargaining unit representing,
or seeking to represent, any of its employees. Except as
disclosed in Schedule 4.20, there has been no attempt by any
union or other labor organization to organize any of Company's
employees at any time in the past five years. Company has
complied with all applicable Laws relating to wages, hours,
health and safety, payment of social security, withholding and
other taxes, maintenance of worker's compensation insurance,
13
labor and employment relations, and employment discrimination,
including without limitation, the Americans with Disabilities
Act, Fair Labor Standards Act, Title VII of the Civil Rights Act,
and Age Discrimination in Employment Act.
4.21 Employee Benefit Matters.
(a) Schedule 4.21 lists all plans, programs, and similar
agreements, commitments or arrangements maintained by or on
behalf of Company or any other party that provide benefits or
compensation to, or for the benefit of, current or former
employees of Company ("Plan" or "Plans") and identifies each such
Plan that is an "employee benefit plan" as defined in Section
3(3) of ERISA ("ERISA Plan"), including any frozen or terminated
"employee pension benefit plan" which covers or covered any
employee. Copies of all Plans and, to the extent applicable, all
related trust agreements and/or insurance contracts, actuarial
reports, and valuations for the most recent three years, all
summary plan descriptions, prospectuses, Annual Report Form 5500s
or similar forms (and attachments thereto) for the most recent
three years, all Internal Revenue Service determination letters
and filings, and any related documents requested by Parent and
Merger Sub, including all amendments, modifications and
supplements thereto, have been delivered to Parent and Merger
Sub, and all of the same are true, correct and complete.
(b) With respect to each Plan, except as set forth on Schedule
4.21: (i) no litigation or administrative or other proceeding is
pending or threatened involving such Plan; (ii) such Plan has
been administered and operated in compliance with, and has been
amended to comply with, all applicable laws, rules, and
regulations, including, without limitation, ERISA, the Internal
Revenue Code, and the regulations issued under ERISA and the
Internal Revenue Code; (iii) Company and its predecessors, if
any, have made, and as of the Closing Date will have made or
accrued, all payments and contributions required, or reasonably
expected to be required, to be made under the provisions of such
Plan or required to be made under applicable laws, rules and
regulations, with respect to any period prior to the Closing
Date, such amounts to be determined using the ongoing actuarial
and funding assumptions of the Plan; (iv) such Plan is fully
funded in an amount sufficient to pay all liabilities accrued
(including liabilities and obligations for health care, life
insurance and other benefits after termination of employment) and
claims incurred to the date hereof, or the Unaudited Balance
Sheet contains adequate reserves, or paid-up insurance has been
provided, therefor; (v) on the Closing Date, such Plan will be
fully funded in an amount sufficient to pay all liabilities
accrued (including liabilities and obligations for health care,
life insurance and other benefits after termination of
employment) and claims incurred to the Closing Date, or adequate
reserves will be set up on Company's books and records, or paid-
up insurance will be provided, therefor; and (vi) such Plan has
been administered and operated only in the ordinary and usual
course and in accordance with its terms, and there has not been
in the four years prior hereto any material increase in the
liabilities of such Plan.
(c) No ERISA Plan is a "Multiemployer Plan" as defined in
Section 3(37) of ERISA. Company is not required to contribute to
any Multiemployer Plan, nor does Company have any liability to
14
any Multiemployer Benefit Plan. Company does not maintain nor
has ever maintained or been required to contribute to a Plan
which covers or is intended primarily to cover employees located
in a country other than the United States.
(d) With respect to each ERISA Plan, except as set forth on
Schedule 4.21, neither such Plan, nor any trustee, administrator,
fiduciary, agent or employee thereof, has at any time been
involved in a transaction which would constitute a "prohibited
transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code, unless such
transaction is specifically permitted under Section 407 or 408 of
ERISA, Section 4975 of the Internal Revenue Code or a class or
administrative exception issued by the Department of Labor, nor
has any such person been involved in or caused such Plan to be
involved in a breach of fiduciary duty under Section 404 of
ERISA.
(e) Of the ERISA Plans, only [ ]
(collectively, the "Company Pension Plans") are "employee pension
benefit plans" within the meaning of Section 3(2) of ERISA. With
respect to each Company Pension Plan, except as set forth on
Schedule 4.21: (i) such Company Pension Plan constitutes a
qualified plan within the meaning of Section 401(a) of the
Internal Revenue Code and the trust (if any) thereunder is exempt
from federal income tax under Section 501(a) of the Internal
Revenue Code; (ii) all minimum funding standards required by law
with respect to the funding of benefits payable or to be payable
under such Company Pension Plan have been met; (iii) there is no
"accumulated funding deficiency" within the meaning of Internal
Revenue Code Section 412 under such Company Pension Plan; (iv) no
reportable event as described in Section 4043 of ERISA has
occurred, or is continuing, with respect to such Company Pension
Plan, and Company has not incurred any liability to the Pension
Benefit Guaranty Corporation; (v) if such Company Pension Plan is
a defined benefit plan, the fair market value of the assets of
the Company Pension Plan trust are not less than the actuarial
present value of benefits (both vested and nonvested) accrued
under such Company Pension Plan with respect to participants and
beneficiaries, determined on a termination basis and as though
all such accrued benefits were fully vested and nonforfeitable as
of the Closing Date, taking into consideration the subsidies
required under the Internal Revenue Code and the regulations and
rulings thereunder and using the ongoing actuarial methods and
assumptions of such Company Pension Plan, which methods and
assumptions are reasonable both individually and in the
aggregate; and (vi) if the Company Pension Plan is a defined
contribution plan, it is funded in an amount equal to the
participants' account balances, whether or not vested.
(f) Except as set forth on Schedule 4.21, neither Company nor
any of the Plans has any obligation to provide, or liability for,
health care, life insurance or other benefits after termination
of employment ("Post-Employment Benefits"), except for retirement
benefits under the Company Pension Plans or except as required by
Section 601 of ERISA and Section 4980B of the Internal Revenue
Code. With respect to (i) all persons terminated or retired on
the Closing Date, and (ii) active employees and other
participants and beneficiaries, to the extent Post-Employment
Benefits (other than qualified retirement plan benefits under the
Company Pension Plans) have been, or are reasonably expected to
be, earned by service to the Closing Date, paid-up insurance or
plan funding will be provided, or the books and records of
15
Company will contain adequate reserves, in an amount not less
than the present value of all such benefits, determined as though
all such Post-Employment Benefits were fully vested and
nonforfeitable and assuming the continuation of all such Plans,
using actuarial methods and assumptions which are reasonable
individually and in the aggregate. As of the Closing Date, notice
of the availability of continuation coverage (as defined in
Section 602 of ERISA and Section 4980B of the Internal Revenue
Code) will have been provided to all persons entitled thereto,
and all persons electing such coverage have been or will be
provided such coverage.
(g) Except as provided in any of the employment agreements
referred to in Paragraph 8.8 and provided that the employees
referred to therein and Company shall have entered into such
employment agreements, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current
or former employee or officer of the Company to severance pay,
unemployment compensation or any other payment, or (ii)
accelerate the time of payment or vesting, or increase the
amount, of compensation due any such employee or officer.
4.22 Environmental Matters.
Except as set forth on Schedule 4.22, Company has all permits,
licenses, approvals and operating authorizations, including
without limitation, permits for disposal of hazardous waste, that
are required pursuant to all Environmental Laws for (i) the
conduct of its Business as it is now being conducted, and (ii)
the ownership of its properties and assets. Schedule 4.22
contains a true, correct and complete list of all permits,
licenses, approvals and operating authorizations pursuant to all
Environmental Laws with respect to the Company's Business, and
true, correct and complete copies of such permits, licenses,
approvals and operating authorizations have been delivered to
Parent and Merger Sub. Company is not in violation of any such
permits, licenses, approvals, or operating authorizations.
4.23 Absence of Certain Business Practices.
Neither Company nor any officer, employee or agent of Company,
nor any other person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to give
any gift or similar benefit to any customer, supplier,
Governmental employee or other Person who is or may be in a
position to help or hinder Company's Business (or assist Company
in connection with any actual or proposed transaction) which (a)
might subject Company, Parent or Merger Sub to any damage or
penalty in any civil, criminal or other governmental Action or
which might have an adverse effect on Company's Business or the
assets of Company, (b) if not given in the past, might have had
an adverse effect on Company's Business, or (c) if not continued
in the future, might adversely affect Company's assets, Company's
Business or the operations, cash flows or prospects of Company's
Business after the Closing, or which might subject Company,
Parent or Merger Sub to suit or penalty in any private or
governmental Action.
16
4.24 Government Reports.
Schedule 4.24 contains a true, correct and complete list, and
Company has heretofore furnished Parent and Merger Sub with true,
correct and complete copies of, all materials reports, if any,
filed during the past five years by Company with any Government.
For purposes of this Paragraph 4.24 only, "material reports"
shall include only those reports required to be filed, or
actually filed, with (i) any of Medicare, Medicaid, TennCare, the
Tennessee Department of Health Division of Health Care
Facilities, the Tennessee Health Facilities Commission, HCFA or
any other Government that has primary or secondary responsibility
for regulating or overseeing the Business or any material
component thereof, and (ii) any Government regulating the offer
for sale, sale or issuance of securities of any type or
character.
4.25 Agreements and Transactions with Related Parties.
Except as set forth in Schedule 4.25, Company is not directly or
indirectly a party to any contract, agreement or lease with, or
any other commitment to, (a) any party owning, or formerly
owning, beneficially or of record, directly or indirectly, any of
the Stock, (b) any person related by blood, adoption or marriage
to any such party, (c) any director or officer of Company, (d)
any Person in which any of the foregoing has, directly or
indirectly, at least a five percent (5%) beneficial interest in
the capital stock or other type of equity interest in such
Person, or (e) any partnership in which any such party is a
general partner (any or all of the foregoing being herein
referred to as "Related Parties"). Without limiting the
generality of the foregoing, except as disclosed in Schedule
4.25, (f) no Related Party, directly or indirectly, owns or
controls any assets or properties which are or have been used in
Company's Business, and (g) no Related Party, directly or
indirectly, engages in or has any significant interest in or
connection with any business (i) which is or which within the
last three years has been a competitor, customer or supplier of
Company or has done business with Company, or (ii) which as of
the date hereof sells or distributes products or services which
are similar or related to Company's products or services.
4.26 Absence of Changes.
Except as expressly provided for in this Agreement or as may be
set forth in Schedule 4.26, since the Reference Date:
(a) there has been no change in the Business, assets,
liabilities, results of operations, financial condition or
prospects of Company or in its relationships with suppliers,
customers, employees, lessors or others, other than changes in
the ordinary course of business, none of which have been or will
be, in the aggregate, adverse to Company's Business or the
condition (financial or otherwise) of Company;
(b) there has been no damage, destruction or loss to the
properties or Business of Company, whether or not covered by
insurance;
17
(c) the Business of Company has been operated in the ordinary
course and consistent with its prior practices;
(d) the books, accounts and records of Company have been
maintained in the usual, regular and ordinary manner on a basis
consistent with prior years;
(e) there has been no declaration, setting aside or payment of
any dividend or other distribution on or in respect of the Stock,
nor has there been any direct or indirect redemption, retirement,
purchase or other acquisition of any of the Stock;
(f) there has been no (i) increase in the compensation or in the
rate of compensation or commissions payable or to become payable
by Company to any director, officer, manager, employee,
consultant or other agent of Company earning $40,000 or more per
annum, (ii) general increase in the compensation or in the rate
of compensation payable or to become payable to hourly or
salaried personnel earning less than $40,000 per annum ("general
increase" for the purpose hereof shall mean any increase
generally applicable to a class or group of personnel and shall
not include increases granted to individual personnel for merit,
length of service, change in position or responsibility or other
reasons applicable to specific employees and not generally
applicable to a class or group thereof), (iii) employee hired at
a salary in excess of $40,000 per annum, or (iv) payment of or
commitment to pay any bonus, profit share or other extraordinary
compensation to any employee, consultant or other agent;
(g) no indebtedness, liability or obligation (whether absolute,
accrued, contingent or otherwise) has been discharged or
satisfied, other than current liabilities reflected in the
Audited Balance Sheet, and current liabilities incurred since the
date thereof in the ordinary course of business and consistent
with its prior practice;
(h) there have been no amendments or other corporate actions
having the effect of an amendment increasing past or future
liabilities or contributions of any kind to any Plan;
(i) Company has not (i) paid any judgment resulting from any
Action or (ii) made any payment to any party of more than $10,000
in settlement of any Action;
(j) Company has not discontinued or determined to discontinue
the provision or sale of any products or services previously
provided or sold by Company representing more than one percent
(1%) of Company's annual revenues during the period covered by
the Audited Financial Statements;
(k) There has been no sale, transfer, lease or other disposition
of any asset or assets of Company, except sales of inventory,
supplies and rental equipment in the ordinary course of Company's
Business.
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(l) Company has not acquired any capital stock or other equity
securities of any Person or otherwise made any loan or advance to
or investment in any Person; and
(m) Company has not failed to replenish its inventories,
supplies and rental equipment in a normal and customary manner
consistent with its prior practices and prudent business
practices prevailing in the industry, or made any purchase
commitment in excess of the normal, ordinary and usual
requirements of its Business or at any price in excess of the
then-current market price or upon terms and conditions more
onerous than those normal, customary and consistent with its
prior practices (which are prudent business practices prevailing
in the industry), or made any change in its selling, pricing,
advertising or personnel practices inconsistent with its prior
practice and prudent business practices prevailing in the
industry.
4.27 No Defaults.
Except as set forth in Schedule 4.27, each of the Company
Contracts is valid, binding and enforceable in accordance with
its terms and is in full force and effect; there are no existing
defaults by Company thereunder; no default has occurred (whether
with or without notice, lapse of time or the happening or
occurrence of any event) which would constitute an event of
default thereunder; and all parties thereto (other than Company)
have consented (where such consent is necessary) to the
consummation of the transactions contemplated by this Agreement
without requiring modification in the rights or obligations of
Company thereunder, as appropriate.
4.28 Fraud and Abuse.
To the best knowledge of Company and the Majority Shareholders,
Company and its Affiliates and officers and directors, and
persons who provide professional services under agreements with
any of Company and its Affiliates have not engaged in any
activities which are prohibited under federal Medicare and
Medicaid statutes, 42 U.S.C. Sections 1320a-7, 1320a-7(a) and 1320a-7b,
or the regulations promulgated pursuant to such statutes or
related state or local statutes or regulations, or which are
prohibited by rules of professional conduct, including but not
limited to the following:
(a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application
for any benefit or payment or for use in determining rights to
any benefit or payment;
(b) presenting or causing to be presented a claim for
reimbursement for services under Medicare, Medicaid, or any other
state health care program that is for an item or service that is
known or should be known to be (i) not provided as claimed or
(ii) otherwise false or fraudulent;
19
(c) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right
to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit or
payment;
(d) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or
in kind (i) in return for referring an individual to a person for
the furnishing (or arranging for the furnishing) of any item or
service for which payment may be made in whole or in part by
Medicare, Medicaid, or any other state health care program or
(ii) in return for purchasing, leasing, or ordering any good,
facility, service, or item for which payment may be made in whole
or in part by Medicare or Medicaid or other state health care
program;
(e) knowingly making a payment, directly or indirectly, to a
physician as an inducement to reduce or limit services to
individuals who are under the direct care of the physician and
who are entitled to benefits under Medicare, Medicaid, or any
other state health care programs;
(f) providing to any person information that is known or should
be known to be false or misleading that could reasonably be
expected to influence the decision when to discharge a hospital
in-patient from the hospital;
(g) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement
or representation (or omit to state a fact required to be stated
therein or necessary to make the statements contained therein not
misleading) of a material fact with respect to (i) the conditions
or operations of a facility in order that the facility may
qualify for Medicare, Medicaid or any other state health care
program certification, or (ii) information required to be
provided under Section 1124A of the Social Security Act (42 U.S.C.
Section 1320a-3); or
(h) knowingly and willingly (i) charging for any Medicaid
service money or other consideration at a rate in excess of the
rate established by the state, or (ii) charging, soliciting,
accepting or receiving, in addition to amounts paid by Medicaid,
any gift money, donation or other consideration (other than a
charitable, religious or other philanthropic contribution from an
organization or from a person unrelated to the patient) as a
precondition of the Company precertifying, providing or
continuing care for any patient.
4.29 Full Disclosure.
No representation, warranty, covenant, agreement or indemnity of
Company or the Majority Shareholders contained in this Agreement
or in any other document, instrument, agreement, paper or other
written statement or certificate delivered by Company or the
Majority Shareholders, or any of them, pursuant to this
Agreement, or in connection with the transactions contemplated
20
herein, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not
misleading. There is no fact known to Company or the Majority
Shareholders which materially and adversely affects, or in the
future may materially and adversely affect, the business,
operations, cash flows, affairs, prospects, properties or assets
or the condition (financial or otherwise) of Company which has
not been disclosed in this Agreement, the schedules attached to
this Agreement, or in the documents, instruments, agreements,
papers or other written statements or certificates furnished to
Parent and Merger Sub for use in connection with this Agreement
and the transactions contemplated hereby. The information
contained in any of the Schedules to this Agreement shall be
deemed to be part of and qualify only those representations and
warranties contained in Article 4 specifically referenced in such
Schedules.
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to Company and the Majority Shareholders to
enter into and perform this Agreement, Parent and Merger Sub,
jointly and severally, hereby represent, warrant and covenant as
follows:
5.1 Organization.
Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee.
5.2 Authorization; No Inconsistent Agreements.
Each of Parent and Merger Sub has full corporate power and
authority to make, execute and perform this Agreement and the
transactions contemplated hereby. This Agreement and all
transactions required hereunder to be performed by Parent or
Merger Sub have been or will be prior to the Closing duly and
validly authorized and approved by all necessary corporate action
on the part of Parent and Merger Sub, as appropriate. This
Agreement has been duly and validly executed and delivered on
behalf of Parent and Merger Sub by their duly authorized
officers, and this Agreement constitutes the valid and legally
binding obligation of Parent and Merger Sub, enforceable, subject
to general equity principles, in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights
of creditors generally. Neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will constitute a violation or breach of the
certificate or articles of incorporation or the bylaws of Parent
or Merger Sub, as appropriate, or any provision of any contract
or other instrument to which Parent or Merger Sub is a party or
by which any of the assets of Parent or Merger Sub may be
affected or secured, or any Law or Order to which Parent or
Merger Sub is subject, or will result in the creation of any Lien
on any of the assets of Parent or Merger Sub or acceleration of
any debt.
21
5.3 Full Disclosure.
No representation, warranty or covenant of Parent and Merger Sub
contained in this Agreement, or in any other written statement or
certificate delivered by Parent and Merger Sub pursuant to this
Agreement or in connection with the transactions contemplated
herein, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not
misleading.
6. ADDITIONAL AGREEMENTS
6.1 Parent's and Merger Sub's Access and Inspection.
Company shall provide Parent, Merger Sub and their
Representatives full access during normal business hours from and
after the date hereof until the Closing to all of the assets,
properties and businesses of Company and the books and records of
Company, and shall furnish such information concerning the
business and affairs of Company as may be requested, in each case
for the purpose of making such continuing investigation of
Company and Company's Business as Parent and Merger Sub may
desire. Company shall cause its Representatives to assist
Parent, Merger Sub and their Representatives in such continuing
investigation and shall cause the Representatives of Company to
be reasonably available to Parent, Merger Sub and their
Representatives in connection with their continuing
investigation. Neither Company nor any of the Majority
Shareholders shall provide any other Person with similar access
or information between the date hereof and any termination or
expiration of this Agreement. No investigation made heretofore
or hereafter by or on behalf of Parent or Merger Sub shall limit
or affect in any way the representations, warranties, covenants,
agreements and indemnities of Company or any of the Majority
Shareholders hereunder, each of which shall survive any such
investigation.
6.2 Confidentiality.
If the transactions contemplated herein are not consummated, then
Parent and Merger Sub shall return to Company all documents and
other written information furnished by Company to Parent or
Merger Sub, and Parent and Merger Sub shall not reveal to any
third party any of Company's trade secrets or other confidential
business information, provided that the foregoing obligations
shall not apply to (a) any information which was known by Parent
or Merger Sub prior to their disclosure by Company on, prior to
or after the date hereof; (b) any information which was generally
known in the industry; (c) any information which becomes
generally known in the industry through no fault of Parent or
Merger Sub; (d) any information which is disclosed to Parent or
Merger Sub by a third party (which term shall not include the
Representatives of Parent or Merger Sub) having the legal right
to make such disclosure; (e) any information which is required to
be disclosed by Law or Order of any Forum; or (f) commencing two
years after termination or expiration of this Agreement, any
information which does not contribute a trade secret under
applicable Law.
22
6.3 Franchise Termination Payment to Option Care, Inc.
Prior to the date hereof, Parent and Merger Sub have reimbursed
Company in the amount of $200,000 for the termination payment
made by Company to Option Care, Inc. in full and final
satisfaction of Company's obligations under and pursuant to, and
in connection with, Company's franchise agreement with Option
Care, Inc. Should the transactions contemplated hereunder not be
consummated, then such reimbursement shall remain the sole and
exclusive property of Company and neither Parent nor Merger Sub
shall have any claim therefor. The payment of such sum shall not
constitute, or be deemed to be, an unrecorded liability or an
Indemnified Loss.
6.4 Cooperation.
The parties shall cooperate fully with each other and with their
respective Representatives in connection with any steps required
to be taken as part of their respective obligations under this
Agreement, and all parties shall use their best commercial
efforts to consummate the transactions contemplated herein and to
fulfill their obligations hereunder, including, without
limitation, causing to be fulfilled at the earliest practical
date the conditions precedent to the obligations of the parties
to consummate the transactions contemplated hereby. Without the
prior written consent of the other parties, no party hereto may
take any intentional action that would cause the conditions
precedent to the obligations of the parties hereto to effect the
transactions contemplated hereby not to be fulfilled, including,
without limitation, taking or causing to be taken any action
which would cause the representations and warranties made by such
party herein not to be true, correct and complete as of the
Closing.
6.5 Covenant Against Competition.
(a) In order to induce Parent and Merger Sub to enter into and
perform this Agreement, each Majority Shareholder agrees that,
for a period of two years beginning on the Closing Date, he or
she shall not, without the prior written consent of Parent, for
his or her own account or jointly or in combination with another,
directly or indirectly, for or on behalf of any Person, as
principal, agent or otherwise: (i) engage in, consult with, or
own, control, manage or otherwise participate in the ownership,
control or management of a business engaged in the Company's
Business, except as an employee or otherwise for and on behalf of
Parent or Company; (ii) solicit, call upon, or attempt to
solicit the patronage of any Person within the Service Areas and
to whom Company provided services during the 12-month period
immediately preceding the Closing Date, for the purpose of
obtaining the patronage of any such Person for the purchase of
any products or services competitive with those of Company,
except as an employee and on behalf of Parent or Company; or
(iii) solicit or induce, or in any manner attempt to solicit or
induce, any individual who is employed by Company, Parent or
Merger Sub to leave such employment, whether or not such
employment is pursuant to a written contract with Parent or
Merger Sub or otherwise.
(b) Notwithstanding anything herein to the contrary, (i) it
shall not be a breach of the covenants contained in this
Paragraph 6.4 for any Majority Shareholder to own, of record or
23
beneficially, not more than two percent (2.0%) of the capital
stock or other equity interest of any Person whose shares or
equity interests are publicly traded, and (ii) the covenants
described in this Paragraph 6.5 shall apply only if the
transactions contemplated by this Agreement are consummated.
6.6 Certain Actions by Company and Majority Shareholders.
Company agrees to call a special meeting of the Shareholders in
accordance with its By-Laws and the Act for the purpose of
considering and voting upon the Merger as promptly after the date
hereof as is practicable. Each of the Majority Shareholders
covenants and agrees to vote all of his or her shares of Stock
entitled to vote thereon in favor of the Merger.
6.7 Certain Shareholder Guarantees.
Parent shall use its reasonable best efforts to cause the
guarantees of Company's bank indebtedness and other obligations
of Company listed on Schedule 6.7 executed and delivered by any
of the Shareholders to be released and terminated effective as of
the Effective Time, which reasonable efforts shall include,
without limitation, the execution and delivery by Parent of one
or more guarantees in form and substance mutually satisfactory to
Parent and the beneficiary of any such guarantees, the repayment
of such indebtedness by Parent or Merger Sub, or the execution
and delivery by Parent in favor of any such Shareholders of an
indemnification agreement in the form attached hereto as Exhibit
B.
6.8 Repayment of Subordinated Debt.
At the Closing and against delivery of the original instruments
evidencing the same, Parent and Merger Sub shall pay, or cause to
be paid, the $754,995.47 in principal amount (plus accrued but
unpaid interest thereon) of outstanding subordinated debt of
Company set forth on Schedule 6.8 to the holders thereof (the
"Subordinated Debtholders").
6.9 Repayment of Bank Debt.
At the Closing, Parent shall pay, or cause to be paid, all
indebtedness owed by Company to Union Planters Bank and listed on
Schedule 6.8.
6.10 Expenses.
All expenses incurred by Parent and Merger Sub in connection with
the authorization, preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including,
without limitation, all fees and expenses of their
Representatives, shall be paid by Parent and Merger Sub. All
expenses incurred by any or all of Company and the Shareholders
in connection with the authorization, preparation, execution and
performance of this Agreement and the transactions contemplated
24
hereby, including, without limitation, all fees and expenses of
their respective Representatives and any Representatives acting
for any one or more of Company and any of the Shareholders, shall
be paid by the Majority Shareholders, but shall not be paid from
or out of any of the assets of Company; provided, however, that
up to an aggregate of $25,000 of expenses may be accrued and/or
paid by Company in respect of this Agreement and the transactions
contemplated hereby.
6.11 Company Cost Reports.
In connection with any obligation to prepare or file after the
Effective Time any cost reports relating to Company for periods
ending on or prior to the Closing Date or required as a result of
the consummation of the transactions set forth herein, including,
without limitation, terminating cost reports for the Medicare and
Medicaid programs (the "Company Cost Reports"), Company and the
Majority Shareholders acknowledge and agree that the Surviving
Corporation shall control the process therefor, and the Majority
Shareholders further agree to provide such information or other
assistance in connection therewith as may be reasonably requested
by the Surviving Corporation or Parent. Parent and Merger Sub
agree to cause the Surviving Corporation to deliver a copy of any
such Company Cost Report to Agent on behalf of the Majority
Shareholders for their reasonable review prior to filing, and
thereafter use its best efforts to forward to Agent on behalf of
the Majority Shareholders any correspondence relating to the
Company Cost Reports within ten (10) business days after receipt
thereof.
6.12 Brokers.
Company and each Majority Shareholder, jointly and severally,
hereby represents and warrants to Parent and Merger Sub that no
broker or finder, other than The Xxxxxxx Capital Group, L.P. and
its affiliates (the fees and expenses of which shall be borne by
the Majority Shareholders), has acted on behalf of Company or any
of the Shareholders in connection with this Agreement or the
transactions contemplated herein, and each of them agrees,
jointly and severally, to indemnify Parent and Merger Sub and
their Affiliates from and against any and all claims or demands
for commissions or other compensation by any broker, finder or
similar agent claiming to have been employed by or on behalf of
such Person. Parent and Merger Sub represent and warrant that no
broker or finder, other than Legacy Investment Group, Inc. (the
fees and expenses of which shall be borne by Parent and Merger
Sub) has acted on their behalf in connection with this Agreement
or the transactions contemplated herein, and they agree to
indemnify the Shareholders and hold them harmless from and
against any and all claims or demands for commissions or other
compensation by any broker, finder or similar agent claiming to
have been employed by or on behalf of Parent and Merger Sub.
25
6.13 Other Post-Closing Cooperation.
The Majority Shareholders, jointly and severally, covenant and
agree that they shall cooperate fully and in good faith, and
shall use their reasonable best efforts to cause any and all
accountants, legal counsel, actuaries and other professional
advisors employed or engaged at any time prior to the Effective
Time to cooperate fully and in good faith, with the Surviving
Corporation and Parent in connection with the preparation and
filing of any and all documents, agreements, instruments,
certificates, consents, registration statements and other reports
or papers required or permitted to be filed, registered or
submitted in accordance with any Law, including, without
limitation, the federal securities Laws.
6.14 Publicity.
All press releases and other public announcements respecting the
subject matter hereof shall be made only with the mutual
agreement of Parent and Company, neither of which shall
unreasonably withhold its agreement.
6.15 Interim Financial Statements.
Company will deliver to Parent and Merger Sub within thirty
Business Days of the conclusion of any calendar month from the
date hereof through and including the Closing Date, copies of the
unaudited balance sheet of Company for the calendar month then
ended (which shall include year-to-date figures), and the related
unaudited statements of earnings for such calendar month (which
shall include year-to-date figures) (the "Interim Statements").
The Interim Statements will be true, correct and complete in all
material respects, will be prepared in accordance with GAAP on a
basis consistent with the audited financial statements of
Company, will fairly present the financial condition of Company
as at the date thereof and the results of its operations for the
period then ended, provided that such Interim Statements do not
include the footnotes and statement of cash flows required by
GAAP.
6.16 Update of Information.
All documents, agreements, instruments, statements and other
writings furnished to Parent, Merger Sub or any of their
Representatives pursuant to this Agreement are and shall be true,
correct and complete as of the date furnished, and any and all
amendments and supplements of the same have been or will be
delivered to Parent and Merger Sub (or to their Representatives
if and as requested) in a timely and expeditious manner prior to
the Closing. At all times prior to and including the Closing
Date, Company and the Majority Shareholders shall promptly
provide Parent and Merger Sub (and to their Representatives if
and as requested) with written notification of any event,
occurrence or other information of any kind whatsoever which
affects, or may affect, the continued truth, correctness or
completeness of any representation, warranty, covenant or
26
agreement made in this Agreement or any document, agreement,
instrument, certificate or writing furnished to Parent or Merger
Sub pursuant to or in connection with this Agreement, and each
such written notification shall specifically identify any and all
of the representations, warranties, covenants and agreements
affected by the fact, event, occurrence or information that
necessitated the giving of such notice. No such notification or
other disclosure shall be deemed to amend or supplement this
Agreement, the Schedules hereto, or any representation, warranty,
covenant, agreement or indemnity or any other document,
agreement, instrument, certificate or writing furnished to Parent
and Merger Sub pursuant to or in connection with this Agreement.
6.17 Certain Governmental Filings.
The parties will make, or cause to be made, all filings and
submissions required to be made to any Government in connection
with the transactions contemplated by this Agreement, including
as may be required by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended. Each of the parties will
furnish to the other parties such necessary information and
reasonable assistance as such other party may reasonably request
in connection with their preparation of necessary filings or
submissions to any governmental or other regulatory agency.
6.18 Post-Closing Insurance.
Parent and Merger Sub, at their expense, will cause Company (I)
to be covered under Parent's existing liability insurance
policies (and any replacements, renewals or substitutes therefor)
for matters arising prior to the Closing, and (ii) in respect of
matters arising after the Closing, under one of more liability
insurance policies, in each case subject to the terms, conditions
and limitations of such policies. For any claim against Company
which relates to a matter which occurred before Closing, the
Indemnitors will be responsible for the policy deductibles under
any such policies.
7. CONDUCT OF COMPANY'S BUSINESS PENDING CLOSING
Company and the Majority Shareholders covenant and agree that,
except as may otherwise be provided herein, without the prior
written consent of Parent and Merger Sub, between the date hereof
and the Closing Date:
7.1 Business in the Ordinary Course.
Company's Business shall be conducted only in the ordinary and
usual course and consistent with prior practices, without the
creation of any additional indebtedness for borrowed money,
provided that Company may continue to draw on its existing lines
of credit with Bank in a manner consistent with its past
practices. Without limiting the generality of the foregoing:
(a) Except as provided in Paragraphs 7.1(b) and 7.1(d), Company
shall not enter into any contracts, agreements or other
arrangements in connection with Company's Business, and except as
otherwise expressly provided herein, Company will not enter into
any contract nor effect any transaction with any Related Party.
27
(b) Company shall not enter into any contracts, agreements or
other arrangements to provide, sell, distribute or supply goods
or services to any customer or any third party except in the
ordinary course of Company's Business at prices and on terms
consistent with the prior operating practices of Company.
(c) Except for sales of inventory and normal disposal of used
equipment in the ordinary course of Company's Business, Company
shall not sell, assign, transfer, convey, pledge, mortgage,
encumber or otherwise dispose of, or cause the sale, assignment,
transfer, conveyance, pledge, mortgage, encumbrance or other
disposition of, any of its assets.
(d) All contracts or commitments of Company for the purchase of
services and supplies shall be entered into only in the ordinary
and regular course of business to enable Company to conduct its
normal business operations and to maintain its normal inventory
of supplies, at prices and on terms consistent with the prior
operating practices of Company.
(e) Company shall maintain, preserve and protect all of its
assets in good condition, except for ordinary wear and tear and
damage by fire or other casualty; and Company shall maintain in
full force and effect all insurance policies referred to in
Paragraph 4.15 or other insurance equivalent thereto.
(f) The books, records and accounts of Company shall be
maintained in the usual, regular and ordinary course of business
on a basis consistent with prior practices and in accordance with
GAAP.
(g) Company shall use its best efforts to preserve Company's
Business, to keep available the services of Company's present
employees, to preserve the goodwill of Company's suppliers,
customers and others having business relations with Company, and
if so requested by Parent and Merger Sub, to assist Parent and
Merger Sub in retaining the services of key employees and agents
of Company after the Closing Date on terms satisfactory to Parent
and Merger Sub.
7.2 No Material Changes.
No action shall be taken by Company or any Shareholder which
shall materially alter the organization, capitalization, or
financial structure, practices or operations of Company's
Business. Without limiting the generality of the foregoing:
(a) No change shall be made in the Charter or By-Laws of
Company.
(b) No change shall be made in the authorized or issued capital
stock of Company.
(c) Neither Company nor any Shareholder shall issue or grant any
right or option to purchase or otherwise acquire any capital
stock or other security of Company.
28
(d) No dividend or other distribution or payment shall be
declared or made with respect to any capital stock of Company,
and Company shall not, directly or indirectly, redeem, purchase
or otherwise acquire any capital stock.
(e) Company shall not liquidate or voluntarily declare
bankruptcy or seek the appointment of a receiver, trustee or
custodian.
7.3 Compensation.
No increase shall be made in the compensation payable or to
become payable to any director, officer, employee or agent of
Company, and no bonus or profit-share payment or other
arrangement (whether current or deferred) shall be made to or
with any such director, officer, employee or agent, other than
for the payment of the bonuses specifically identified as
performance bonuses on Schedule 4.26. No officer, director or
employee shall be hired, and no consultant or agent shall be
retained, by Company at a salary or fee in excess of $40,000 per
annum.
7.4 Employee Benefit Plans.
(a) Company shall not cause or permit any ERISA Plan to be
involved in any transaction which constitutes a "prohibited
transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code, unless such
transaction is specifically permitted under Sections 407 or 408
of ERISA, Section 4975 of the Internal Revenue Code or a class or
administrative exemption issued by the Department of Labor;
Company shall not cause or permit any ERISA Plan or fiduciary of
such ERISA Plan to be involved in a breach of fiduciary duty
under Section 404 of ERISA; and Company shall timely make all
filings, returns and reports, and timely give all notices, which
are required under ERISA or the Internal Revenue Code.
(b) With respect to the Company Pension Plans, Company shall
take such actions, and refrain from such actions, as are
necessary to maintain the qualification of each such Plan under
Section 401(a) of ERISA, and the exemption of the trust (if any)
maintained for each such Plan under Internal Revenue Code Section
501(a).
(c) Company shall timely make all contributions and other
payments to its Plans which it is obligated to make as of the
date hereof. Other than contributions or payments declared or
obligated to be paid to the Plans as of the date hereof, no
contribution shall be declared for or paid to any Plan including,
without limitation, the Company Pension Plans, other than in
respect of contributions not to exceed $41,000 for plan years
1994 and 1995 to cure noncompliance with the "top heavy"
provisions applicable to the Company Pension Plans.
(d) No amendment or change to the provisions of any Company
Pension Plan shall be made or adopted prior to the Closing Date.
29
8. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to consummate the
Merger, pay the Merger Consideration, and otherwise consummate
the transactions contemplated hereby are subject to the
fulfillment and satisfaction of each and every of the following
conditions on or prior to the Closing, any or all of which may be
waived in writing in whole or in part by Parent:
8.1 Proceedings and Documents Satisfactory.
All proceedings taken in connection with the consummation of the
transactions contemplated herein and all documents and papers
reasonably required in connection therewith shall be reasonably
satisfactory to Parent and its counsel, and Parent and its
counsel shall have timely received copies of such documents and
papers, all in form and substance satisfactory to Parent and its
counsel, as reasonably requested by Parent or its counsel in
connection therewith.
8.2 Representations and Warranties.
The representations and warranties contained in this Agreement
and in any certificate, instrument, Schedule, agreement or other
writing delivered by or on behalf of Company or any Majority
Shareholder in connection with the transactions contemplated by
this Agreement shall be true and correct as of the date when made
and shall be deemed to be made again at and as of the Closing
Date and shall be true and correct at and as of such time.
8.3 Compliance with Agreements and Conditions.
Company and each Majority Shareholder shall have performed and
complied with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by each such
party prior to or on the Closing Date.
8.4 Certificates.
Company and the Majority Shareholders shall have delivered to
Parent and Merger Sub a certificate executed by the President of
Company and by each Majority Shareholder, dated the Closing Date,
certifying in such detail as Parent may reasonably request as to
(a) the fulfillment and satisfaction of the conditions specified
in Paragraphs 8.2 and 8.3, and (b) the absence of any material
adverse change in Company's Business prior to the Closing.
30
8.5 Resolutions.
Parent and Merger Sub shall have received duly adopted
resolutions of the Board of Directors and Shareholders of
Company, certified by the Secretary or Assistant Secretary of
Company, as appropriate, dated the Closing Date, authorizing and
approving the execution of this Agreement, or approving the
Merger, as the case may be in compliance with the Act, and all
other action necessary to enable Company to comply with the terms
hereof.
8.6 Opinion of Counsel.
Parent and Merger Sub shall have received from Xxxxxxxxxxx and
Xxxxxxxxxxx, legal counsel for Company and the Majority
Shareholders, an opinion, dated as of the date of Closing, in
substantially the form set forth as Exhibit C.
8.7 Consents.
Parent and Merger Sub shall have received from any and all
Persons and Governments such consents, authorizations and
approvals as are necessary for the consummation of the
transactions contemplated by this Agreement and the conduct of
the Business after the Effective Time, and all notices required
to be given to any Government shall have been given and all
applicable waiting periods shall have expired.
8.8 Employment Agreements.
Company shall have entered into employment agreements
satisfactory to Parent and Merger Sub with J. Xxxxx Xxxxxxx,
Xxxxx X. Xxxxxxxxxx and Xxxxxxx X. Xxxxx for their continuation
of employment after the Effective Time.
8.9 Interim Financial Statements.
Company shall have delivered to Parent and Merger Sub any Interim
Statement within the prescribed time and the same shall be
acceptable to Parent.
8.10 Bank Approvals.
Parent shall have received from its lenders any required approval
of the transactions contemplated by and provided for in this
Agreement.
8.11 Commercial Lease.
Parent shall have received a fully executed counterpart original
of a Commercial Lease Agreement between Company and RKR
Enterprises (formerly known as Xxxxxxx Homecare Properties) with
respect to the offices and premises occupied by Company at 307
00
Xxxxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxx, in substantially the
form set forth as Exhibit E attached hereto.
8.12 Subordinated Debt.
Company shall have received from each Subordinated Debtholder the
original instrument held by such Subordinated Debtholder
evidencing the Subordinated Debt of Company held by such person.
8.13 No Inconsistent Requirements.
No Action shall have been commenced by any Government or Person
seeking to enjoin or prohibit the transactions contemplated
hereby.
8.14 Miscellaneous.
Parent and its counsel shall have received such other opinions,
certifications and documents from Company and the Majority
Shareholders as Parent and its counsel may reasonably request.
9. CONDITIONS TO OBLIGATIONS OF COMPANY AND THE MAJORITY
SHAREHOLDERS
The obligations of Company and the Majority Shareholders under
this Agreement are subject to the fulfillment and satisfaction of
each and every of the following conditions on or prior to the
Closing, any or all of which may be waived in writing in whole or
in part by Company and Agent on behalf of each of the Majority
Shareholders:
9.1 Proceedings and Documents Satisfactory.
All proceedings taken in connection with the consummation of the
transactions contemplated herein and all documents and papers
reasonably required in connection therewith shall be reasonably
satisfactory to Company and its counsel, and Company and its
counsel shall have timely received copies of such documents and
papers, all in form and substance satisfactory to Company and its
counsel, as reasonably requested by Company or its counsel in
connection therewith.
9.2 Representations and Warranties.
The representations and warranties contained in Article 5 shall
be true and correct as of the date when made and shall be deemed
to be made again at and as of the Closing Date and shall be true
and correct at and as of such time.
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9.3 Compliance with Agreements and Conditions.
Parent and Merger Sub shall have performed and complied with all
agreements and conditions required by this Agreement to be
performed or complied with by Parent and Merger Sub prior to or
on the Closing Date.
9.4 Certificate of Parent and Merger Sub.
Parent and Merger Sub shall have delivered to Agent a
certificate, dated the Closing Date, certifying in such detail as
Agent may reasonably request to the fulfillment and satisfaction
of the conditions specified in Paragraphs 9.1 and 9.2.
9.5 Resolutions.
Parent and Merger Sub shall have delivered to Company and Agent
duly adopted resolutions of the respective Boards of Directors
(or Executive Committees thereof) of Parent and Merger Sub,
certified by the Secretary or an Assistant Secretary of Parent or
Merger Sub, as the case may be, dated the Closing Date,
authorizing and approving the execution of this Agreement by
Parent and Merger Sub and all other action necessary to enable
Parent and Merger Sub to comply with the terms of this Agreement.
9.6 Opinion of Counsel.
Company and the Majority Shareholders should have received from
Xxxxxxxxxx & Cody, L.L.P., legal counsel for Parent and Merger
Sub, an opinion, dated the Closing Date, in substantially the
form set forth as Exhibit F attached hereto.
9.7 No Inconsistent Requirements.
No Action shall have been commenced by any Government or Person,
seeking to enjoin or prohibit the transactions contemplated
hereby.
9.8 Miscellaneous.
Company and its counsel shall have received such other opinions,
certifications and documents from Parent and Merger Sub as
Company and its counsel may reasonably request.
33
10. INDEMNITIES
10.1 Indemnification of Parent and Merger Sub.
In accordance with and subject to the provisions of this Article
10, each of the Majority Shareholders (collectively,
"Indemnitors") shall, jointly and severally, indemnify and hold
harmless Parent, Merger Sub, Company and their Affiliates, and
their respective officers, directors, agents and employees (other
than for any officer, director, agent or employee who is an
Indemnitor hereunder; collectively, "Indemnitees"), from and
against and in respect of any and all loss, damage, liability,
claim, cost and expense, including reasonable attorneys' fees and
amounts paid in settlement pursuant to Paragraph 10.3(b)
(collectively, the "Indemnified Losses"), suffered or incurred by
any one or more of the Indemnitees by reason of, or arising out
of:
(a) any misrepresentation, breach of warranty, or breach or
nonfulfillment of any agreement of Company or any of the Majority
Shareholders contained in this Agreement, or in any certificate,
schedule, document, agreement or instrument delivered to Parent
and Merger Sub by or on behalf of Company or any of the Majority
Shareholders pursuant to the provisions of this Agreement;
(b) all obligations and liabilities of Company other than the
Disclosed Liabilities, whether direct or indirect, fixed or
contingent, known or unknown, including, without limitation, all
obligations and liabilities resulting from or arising out of any
default, performance or non-performance by Company prior to the
Closing Date under or with respect to any Company Contract; and
(c) any claims, liabilities, obligations, damages, costs and
expenses, known or unknown, fixed or contingent, claimed or
demanded by third parties against Parent, Merger Sub or Company
arising out of or resulting from operation of Company's Business
prior to the Closing Date, including without limitation, any
liability or obligation related to any recoupment of an amount
previously paid or reimbursement to Company by any Government
under the Medicare, Medicaid or any other state health care
program or by any other third party payor with respect to health
care services. Without limiting the generality of the foregoing
or of any other provision of this Article 10, any amount that is
recouped, offset, or otherwise taken by a Government or other
Person acting as a third party payor for health care services in
a manner that reduces a payment or reimbursement otherwise
payable or due to an Indemnitee from such Person shall be deemed
to constitute an immediate damage to the Indemnitee and an
Indemnified Loss hereunder at the time of the recoupment, offset
or other such taking, notwithstanding any right of any Person to
appeal or otherwise protest with respect thereto; provided,
however, that any amount that is subsequently recovered by or
restored to the Indemnitee shall be immediately payable by the
Indemnitee to any Indemnitor who has previously paid
indemnification with respect thereto.
34
10.2 Payment.
Company and each of the Majority Shareholders shall, subject to
the provisions of Paragraph 10.3, reimburse Indemnitees, within
10 days of written demand on Agent, for any Indemnified Loss.
10.3 Defense of Claims.
(a) If any claim or Action by a third party arises after the
Closing Date for which an Indemnitor may be liable under the
terms of this Agreement, then Indemnitees shall notify Agent
within a reasonable time after such claim or Action arises and is
known to Indemnitees, and shall give the Indemnitors a reasonable
opportunity: (i) to conduct any proceedings or negotiations in
connection therewith and necessary or appropriate to defend
Indemnitees; (ii) to take all other required steps or
proceedings to settle or defend any such claim or Action; and
(iii) to employ counsel to contest any such claim or Action in
the name of Indemnitees or otherwise. The expenses of all
proceedings, contests or lawsuits with respect to such claims or
Actions shall be borne by the Indemnitors and such expenses shall
be deemed to apply against the "aggregate amount" set forth in
Paragraph 10.4. If the Indemnitors wish to assume the defense of
such claim or Action, then Agent shall give written notice to Indem-
nitees within 30 days after notice from Indemnitees of such claim
or Action (unless the claim or action reasonably requires a
response in less than 30 days after the notice is given to Agent,
in which event Agent shall notify Indemnitees at least 10 days
prior to such reasonably required response date), and the
Indemnitors shall thereafter assume the defense of any such claim
or Action through counsel reasonably satisfactory to Indemnitees.
Indemnitees may participate in such defense at their own expense.
In the event a claim or Action should involve a Government or
other Person acting as a third party payor for health care
services, then:
(1) Parent or Surviving Corporation may, in
good faith and in conjunction with
Indemnitors, participate in such defense.
(2) Subject to paragraph (3) below, no
Indemnitee may (i) settle or compromise or
(ii) consent to any judgment or award or
other non adjudicated disposition in respect
of any such claim or Action.
(3) If an Indemnitee nonetheless desires to
so settle, compromise or consent to any such
judgment, award or other non adjudicated
disposition, such Indemnitee shall be
entitled to do so if and only if such
Indemnitee waives its right to
indemnification in respect thereof with
respect to that portion of such claimed
indemnification to which the Indemnitors
(acting through the Agent) have objected.
(b) If the Indemnitors do not assume the defense of, or if after
so assuming the Indemnitors fail to defend, any such Action (or
if the Indemnitors are not permitted to assume such defense as a
result of the assertion of a material conflict of interests by an
Indemnitee), then Indemnitees may defend against such claim or
35
Action in such manner as they may deem appropriate (provided that
the Indemnitors may participate in such defense at their own
expense); Indemnitees may settle such claim or Action on such
terms as they may deem appropriate; and the Indemnitors shall
promptly reimburse Indemnitees for the amount of all expenses,
legal and otherwise, reasonably and necessarily incurred by
Indemnitees in connection with the defense against and settlement
of such claim or Action. If no settlement of such claim or
Action is made, the Indemnitors shall satisfy any judgment
rendered with respect to such claim or in such Action, before
Indemnitees are required to do so, and shall pay all expenses,
legal or otherwise, reasonably and necessarily incurred by
Indemnitees in the defense of such claim or Action. The expenses
of all proceedings, contests or lawsuits with respect to such
claims or Actions shall be borne by the Indemnitors and such
expenses shall be deemed to apply against the "aggregate amount"
set forth in Paragraph 10.4.
(c) If a judgment is rendered against any of the Indemnitees in
any Action covered by the indemnification hereunder, or any Lien
in respect of such judgment attaches to any of the assets of any
of the Indemnitees, the Indemnitors shall immediately upon such
entry or attachment pay such judgment in full or discharge such
Lien unless, at the expense and direction of the Indemnitors, an
appeal is taken under which the execution of the judgment or
satisfaction of the Lien is stayed. If and when a final judgment
is rendered in any such Action, the Indemnitors shall forthwith
pay such judgment or discharge such Lien before any of
Indemnitees is compelled to do so. The expenses of all
proceedings, contests or lawsuits with respect to such claims or
Actions shall be borne by the Indemnitors and such expenses shall
be deemed to apply against the "aggregate amount" set forth in
Paragraph 10.4.
10.4 Liability Threshold.
Notwithstanding anything in this Article 10 to the contrary, the
Indemnitors shall not have any liability to the Indemnitees
hereunder until the aggregate amount of Indemnified Losses
exceeds $200,000; provided that at such time as the aggregate of
all Indemnified Losses exceeds $200,000, the Indemnitees shall be
entitled to indemnification from the Indemnitors hereunder in
respect of any and all Indemnified Losses in excess of such
$200,000 threshold amount.
10.5 No Contribution by Surviving Corporation.
The Surviving Corporation shall not have any Liability to any
Shareholder as a result of any misrepresentation or breach of
representation or warranty by Company contained in this Agreement
or any certificate, schedule, instrument, agreement or other
writing delivered by or on behalf of any Shareholder or Company
pursuant to this Agreement or in connection with the transactions
contemplated herein, or the breach of any covenant or agreement
of any Shareholder or Company contained in this Agreement or any
certificate, schedule, instrument, agreement or other writing by
or on behalf of any Shareholder or Company pursuant to the
provisions of this Agreement or in connection with the
transactions contemplated herein. No Shareholder shall have any
right of indemnification or contribution against the Surviving
36
Corporation on account of any event or condition occurring or
existing prior to or on the date hereof at the Effective Time of
the Merger.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the parties contained in
this Agreement or in any writing delivered pursuant to the
provisions of this Agreement shall survive any investigation
heretofore or hereafter made by any other party or its
Representatives and the consummation of the transactions
contemplated herein and shall continue in full force and effect
for the periods specified below (the "Survival Period"):
(a) representations and warranties relating to the reporting,
payment or liability for Taxes or any obligations or liabilities
related to Indemnified Losses arising from environmental
liabilities or product liabilities shall survive until expiration
of any applicable statute or period of limitations, and any
extensions thereof;
(b) all other representations and warranties hereunder (other
than those contained in Paragraphs 4.19, 4.21, and 4.28 which
shall survive indefinitely) shall be of no further force and
effect after the expiration of three years from and after the
Closing Date.
Anything to the contrary notwithstanding, the Survival Period
shall be extended automatically to include any time period
necessary to resolve a claim for indemnification which was made
before expiration of the Survival Period but not resolved prior
to its expiration.
12. TERMINATION
12.1 Termination for Certain Causes.
This Agreement may be terminated at any time prior to or on the
Closing Date by Company and Agent on behalf of the Majority
Shareholders, on the one hand, or by Parent, on the other hand,
upon written notice to the other as follows:
(a) By Parent, if a material adverse change in the business,
properties, financial condition or actual or anticipated results
of operations of Company or Company's Business shall have
occurred.
(b) By Parent, if the terms, covenants or conditions of this
Agreement to be complied with or performed by any or all of
Company and the Majority Shareholders at or before the Closing
Date shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been waived by
Parent.
(c) By Parent, if there is any fact or condition with respect to
Company's Business, Company's assets, the business, properties,
financial condition or actual or anticipated results of
operations of Company or Company's Business which materially and
adversely affects such business, properties, financial condition,
37
results of operations, Company's Business or Company's assets, or
the value or continuance of Company's Business.
(d) By Company and Agent, if the terms, covenants or conditions
of this Agreement to be complied with or performed by Parent or
Merger Sub at or before the Closing Date shall not have been
complied with or performed and such noncompliance or
nonperformance shall not have been waived by Agent.
(e) By Company and Agent or by Parent, if any Action shall have
been instituted or threatened against any party to this Agreement
to restrain or prohibit, or to obtain substantial damages in
respect of, this Agreement or the consummation of the
transactions contemplated herein, which, in the reasonable and
good faith opinion of any party, makes consummation of the
transactions herein contemplated inadvisable.
12.2 Procedure on and Effect of Termination.
Pursuant to Paragraph 12.1 hereof, written notice thereof shall
be given to all other parties by the party electing to terminate,
and this Agreement shall terminate upon the giving of such
notice, without further action by any of the parties hereto, with
the consequence and effect set forth in this Paragraph 12.2. If
for any reason on the Closing Date there has been nonfulfillment
of an undertaking by or condition precedent for Parent and Merger
Sub, on the one hand, or Company and the Majority Shareholders,
on the other hand, not waived in writing by or on behalf of the
party in whose favor such undertaking or condition or undertaking
runs, the party in whose favor such undertaking or condition
runs, in addition to any other right or remedy available to it,
may refuse to consummate the transactions contemplated by this
Agreement without liability or obligation on its part whatsoever.
Notwithstanding the foregoing, the obligations of the parties
pursuant to Paragraphs 6.2, 6.10, 6.12 and 6.14 shall survive any
such termination.
13. POWER-OF-ATTORNEY
13.1 Appointment of Agent.
The Majority Shareholders, and each of them, hereby irrevocably
constitute and appoint J. Xxxxx Xxxxxxx ("Agent") as their agent
and attorney-in-fact to modify, amend or otherwise change this
Agreement or any of its terms or provisions (including
modifications, amendments or changes subsequent to Closing), to
take all actions and to execute all documents (including all
actions and documents required under Article 12 hereof) necessary
or desirable to consummate the transactions contemplated by this
Agreement, and to take all actions and to execute all documents
which may be necessary or desirable in connection therewith, to
give and receive consents and all notices hereunder, to negotiate
and settle claims for indemnification under Article 10 hereof,
and to perform any other act arising under or pertaining to this
Agreement and the transactions contemplated hereby.
38
Notwithstanding the preceding sentence, Agent shall not have the
right to so modify, amend or otherwise change this Agreement or
any of its terms or provisions after the Shareholders have
approved the Merger and the transactions contemplated hereby,
except in respect of any such modifications, amendments or
changes which do not reduce substantially the rights or benefits
of the Shareholders under this Agreement. The Majority
Shareholders, and each of them, agree that service of process
upon Agent in any Action arising under or pertaining to this
Agreement shall be deemed to be valid service of process upon the
Majority Shareholders, and each of them, as appropriate, and any
claim by any Indemnitee in respect to this Agreement may be
asserted against, and settled with, Agent. Agent shall be deemed
to have accepted the appointment herein upon Agent's execution of
this Agreement.
13.2 Liability of Agent.
Nothing contained herein shall be deemed to make Agent personally
liable to the Majority Shareholders, or any of them, or to impose
or enlarge any obligation of Agent to Parent, Merger Sub or
Company in his personal capacity as one of the Majority
Shareholders, or otherwise, because of service in Agent's
capacity as agent and attorney-in-fact. In performing any of
Agent's duties hereunder, Agent shall not incur any liability to
the Majority Shareholders, or any of them, for losses, damages,
liabilities, claims or expenses, except for his own willful
default.
13.3 Irrevocable; Binding on Successors, Etc.
It is expressly understood and agreed that this power of attorney
and the agency created hereby is coupled with an interest of the
respective parties hereto and shall be binding and enforceable on
and against the respective heirs, personal representatives,
successors and assigns of the Majority Shareholders, and each of
them, and this power of attorney shall not be revoked or
terminated by the death, disability, bankruptcy or incompetency
of any of the Majority Shareholders, but shall continue to be
binding and enforceable by Agent, Parent, and the Surviving
Corporation and their respective successors, and on and against
the heirs, personal representatives, successors and assigns of
each of the Majority Shareholders, in the manner provided herein.
14. MISCELLANEOUS
14.1 Notices.
(a) All notices, demands or other communications required or
permitted to be given or made hereunder shall be in writing and
(a) delivered personally, or (b) sent by pre-paid, first class,
certified or registered air mail, return receipt requested, or
(c) by an express courier service, or (d) by facsimile
transmission to the intended recipient thereof, at its address or
facsimile number set out below. Any such notice, demand or
communication shall be deemed to have been duly given immediately
(if given or made by confirmed facsimile), or three days after
39
mailing or the second day after delivery to an express courier
service, and in proving same it shall be sufficient to show that
the envelope containing the same was duly addressed, stamped and
posted (or that the envelope was delivered to the express courier
service), or that receipt of a facsimile was confirmed by the
recipient. The addresses and facsimile numbers of the parties
for purposes of this Agreement are:
(i) If to Parent or Merger Sub: Housecall Medical Resources, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxx 000, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile No.: 000-000-0000
Attention: Xxxxx X. Xxxx
With a copy to: Xxxxxxxxxx & Cody, L.L.P.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facsimile No.: 404-815-6555
Attention: W. Xxxxx Xxxxx
(ii) If to Company or
the Majority Shareholders: Xxxxxxx Homecare, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile No.: 000-000-0000
Attention: J. Xxxxx Xxxxxxx
(iii) If to Agent: J. Xxxxx Xxxxxxx
c/x Xxxxxxx Homecare, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile No.: 000-000-0000
With a copy to: Xxxxxxxxxxx and Xxxxxxxxxxx
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile No.: 000-000-0000
Attention: Xxxxxx X. Xxxxx
Any party may change the address to which notices, requests,
demands or other communications to such parties shall be
delivered or mailed by giving notice thereof to the other parties
hereto in the manner provided herein.
40
14.2 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
14.3 Entire Agreement.
This Agreement supersedes all prior discussions and agreements
between the parties with respect to the subject matter hereof,
and this Agreement contains the sole and entire agreement among
the parties with respect to the matters covered hereby. This
Agreement shall not be altered or amended except by an instrument
in writing signed by or on behalf of the party entitled to the
benefit of the provision against whom enforcement is sought.
14.4 Governing Law.
The validity and effect of this Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Tennessee, without regard to conflicts of laws
principles.
14.5 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and assigns.
14.6 Partial Invalidity and Severability.
All rights and restrictions contained herein may be exercised and
shall be applicable and binding only to the extent that they do
not violate any applicable Laws and are intended to be limited to
the extent necessary to render this Agreement legal, valid and
enforceable. If any term of this Agreement, or part thereof, not
essential to the commercial purpose of this Agreement shall be
held to be illegal, invalid or unenforceable by a court of
competent jurisdiction, it is the intention of the parties that
the remaining terms hereof, or part thereof, shall constitute
their agreement with respect to the subject matter hereof, and
all such remaining terms, or parts thereof, shall remain in full
force and effect. To the extent legally permissible, any
illegal, invalid or unenforceable provision of this Agreement
shall be replaced by a valid provision which will implement the
commercial purpose of the illegal, invalid or unenforceable
provision.
14.7 Waiver.
Any term or condition of this Agreement may be waived at any time
by the party which is entitled to the benefit thereof, but only
if such waiver is evidenced by a writing signed by such party.
No failure on the part of any party hereto to exercise, and no
41
delay in exercising, any right, power or remedy created hereunder
shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy by any such party
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. No waiver by any party hereto
of any breach of or default in any term or condition of this
Agreement shall constitute a waiver of or assent to any
succeeding breach of or default in the same or any other term or
condition hereof.
14.8 Headings.
The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a
part of this Agreement or serve as a limitation or expansion on
the scope of any term or provision of this Agreement.
14.9 Number and Gender.
Where the context requires, the use of the singular form herein
shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all
genders.
14.10 Consented Assignment.
Anything contained herein to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any claim,
right, contract, license, lease, commitment, sales order or
purchase order if an attempted assignment thereof without the
consent of another party thereto would constitute a breach
thereof or in any material way affect the rights of Company
thereunder, unless such consent is obtained. If such consent is
not obtained, or if an attempted assignment would be ineffective
or would materially affect Company's rights thereunder so that
Parent and Merger Sub would not in fact receive all such rights,
Company shall upon the request of Parent and Merger Sub cooperate
in any reasonable arrangement designed to provide for Parent and
Merger Sub the benefits under any such claim, right, contract,
license, lease, commitment, sales order or purchase order,
including, without limitation, enforcement of any and all rights
of Company against the other party or parties thereto arising out
of the breach or cancellation by such other party or otherwise.
15. CERTAIN DEFINITIONS; INDEX OF DEFINITIONS
15.1 Certain Definitions.
For purposes of this Agreement, the following capitalized terms
shall have the meanings specified with respect thereto below (all
terms used in this Agreement which are not defined in this
Article 15, but are defined elsewhere in this Agreement, shall
have for purposes of this Agreement the meanings set forth
elsewhere in this Agreement):
"Action" shall mean any action, suit, complaint, claim, counter-
claim, petition, set-off, inquiry, investigation, administrative
42
proceeding, arbitration, or private dispute resolution
proceeding, whether at law, in equity, by contract or agreement,
or otherwise, and whether conducted by or before any Government,
any Forum, or other Person.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by, or under direct or
indirect common control with the former Person. A Person shall
be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which commercial banks in Atlanta, Georgia, are
required or authorized to be closed.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Environmental Laws" shall mean all federal, state, local and
foreign laws, including but not limited to all statutes,
ordinances, rules, regulations, and common law, relating to
pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment
(including without limitation ambient air, surface water, ground
water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, and any and
all regulations, codes, plans, orders, decrees, judgments,
injunctions, consent agreements, stipulations, provisions and
conditions of permits, licenses and other operating
authorizations, notices or demand letters issued, entered,
promulgated or approved thereunder.
"Forum" shall mean any federal, state, local, municipal or
foreign court, governmental agency, administrative body or
agency, tribunal, private alternative dispute resolution system,
or arbitration panel.
"GAAP" shall mean generally accepted accounting principles as
applicable in the United States, consistently applied.
"Government" shall mean any federal, state, local, municipal, or
foreign government or any department, commission, board, bureau,
agency, instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean any substance, material or waste
designated as hazardous or toxic under any applicable
Environmental Laws including, without limitation, petroleum and
petroleum products, any substance which is (i) designated as a
"toxic pollutant" pursuant to the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1317; (ii) defined as a
"hazardous substance" pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C.
Section 9601 et seq.; or (iii) defined as a "hazardous waste"
43
pursuant to the Federal Resource Conservation and Recovery Act,
as amended, 42 U.S.C. Section 6901 et seq.
"HCFA" shall mean the Health Care Financing Administration.
"Hereof," "herein," "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and
"article", "paragraph", "Schedule", "Exhibit" and like references
are to this Agreement unless otherwise specified.
"Known," "to the knowledge of," "to the best knowledge of,"
"aware" or words of similar import employed in this Agreement
with reference to any individual or entity shall be conclusively
presumed to mean that the person or entity has made reasonable
and diligent efforts under the circumstances to become
knowledgeable; in the case of any Person other than a natural
person, the "knowledge" of such Person shall be deemed to be the
knowledge of its directors, officers or managers.
"Law" shall mean all federal, state, local, municipal or foreign
constitutions, statutes, rules, regulations, ordinances, acts,
codes, legislation, treaties, conventions and similar laws and
legal requirements, as in effect from time to time.
"Liability" shall mean shall mean any liability or obligation
whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated and
whether due or to become due.
"Lien" shall mean any mortgage, pledge, hypothecation, security
interest, encumbrance, lien or charge of any kind, or any rights
of others, however evidenced or created (including any agreement
to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction).
"Optionholders" shall mean, collectively, those Persons who are
the record or beneficial holders of Options immediately prior to
the Effective Time, and "Optionholder" shall mean any of them.
"Orders" shall mean all applicable orders, writs, judgments,
decrees, rulings and awards of any Forum.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a limited liability company, a
trust, an unincorporated association or organization, and a
Government.
"Representative" of a party shall mean such party's directors,
officers, partners, employees, agents, accountants, lenders,
lawyers, investment bankers, and other financial or professional
advisors or consultants.
44
"Shareholders" shall mean, collectively, those Persons who are
the record holders of the Shares immediately prior to the
Effective Time, and "Shareholder" shall mean any one of them.
15.2 Index to Definitions.
The definitions for the following defined terms used in
this Agreement can be found as follows:
Defined Term Paragraph or Article
------------ --------------------
Act 1.1
Agent 13.1
Audited Balance Sheet 4.6
Audited Financial Statements 4.7
Bank 8.10
Business Recital A
Class A Preferred Stock 4.2
Closing 3.5
Common Stock 4.2
Company Contracts 4.14
Company Cost Reports 6.3
Company Pension Plans 4.21
Disclosed Liabilities 4.7
Effective Time 3.5
ERISA Plan 4.21
Escrow Agreement 3.3
Indemnified Losses 10.1
Indemnitees 10.1
Indemnitors 10.1
Interim Statements 6.15
Internal Revenue Code 4.21
Leased Real Property 4.12(b)
Merger 1.1
Merger Consideration 3.2
Options 3.1
Plan or Plans 4.21
Post-employment Benefits 4.21
Preferred Stock 4.2
Provider Numbers 4.19
Real Property Improvements 4.12(e)
Real Property Leases 4.12(b)
Reference Date 4.7
45
Related Parties 4.25
Service Areas 4.19
Shares 3.1
Significant Customers 4.16
Stock 4.2
Survival Period 11.1
Surviving Corporation 1.1
Taxes 4.18
Unaudited Balance Sheet 4.6
Unaudited Financial Statements 4.6
[Signatures appear on following page]
46
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
HOUSECALL MEDICAL RESOURCES, INC.:
By: ______________________________
Name:
Title:
XXXXXXX ACQUISITION CORP.
By: ______________________________
Name:
Title:
XXXXXXX HOMECARE, INC..
By: _______________________________
Name:
Title:
[Signatures continued on following page]
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[Signatures continued from preceding page]
__________________________ ___________________________(SEAL)
Witness J. XXXXX XXXXXXX
_________________________ ____________________________(SEAL)
Witness XXXXX X. XXXXXXXXXX
_________________________ ____________________________(SEAL)
Witness J. XXXXX XXXXXXX
For purposes of accepting the
appointment as "Agent"
pursuant to Paragraph 13.1
48
EXHIBIT A
ESCROW AGREEMENT
49
EXHIBIT B
INDEMNIFICATION LETTER
50
EXHIBIT C
LEGAL OPINION OF XXXXXXXXXXX AND XXXXXXXXXXX
51
EXHIBIT D
COMMERCIAL LEASE AGREEMENT
52
EXHIBIT E
LEGAL OPINION OF XXXXXXXXXX & CODY
53
