-----------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 9, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
IHS ACQUISITION XXXIV, INC.
AND
PARAGON REHABILITATIVE SERVICES, INC.
AND
XXXXXXX XXXXX
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TABLE OF CONTENTS
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PAGE
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ARTICLE I: MERGER..............................................................1
1.1 Merger.......................................................1
1.2 Taking of Necessary Action...................................1
ARTICLE II: MERGER CONSIDERATION...............................................2
2.1 Conversion of Stock; Form of Payment.........................2
2.2 Adjustments to the Merger Consideration......................2
2.3 Escrow.......................................................4
2.4 No Fractional Shares.........................................5
2.5 Assets.......................................................5
2.6 Liabilities..................................................5
2.7 Designated Contracts.........................................6
2.8 Tax Considerations...........................................6
ARTICLE III: IHS STOCK........................................................6
3.1 IHS Stock....................................................6
ARTICLE IV: THE CLOSING......................................................10
4.1 Time and Place of Closing...................................10
4.2 Filings at Closing..........................................10
4.3 Effective Time..............................................11
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
COMPANY..............................................................11
5.1 Organization and Standing of the Company....................11
5.2 Absence of Conflicting Agreements...........................11
5.3 Consents....................................................11
5.4 Company Stock...............................................11
5.5 Assets......................................................12
5.6 Trademarks..................................................12
5.7 Contracts...................................................12
5.8 Financial Statements........................................14
5.9 Material Changes............................................14
5.10 Licenses; Permits; Certificates of Need.....................14
5.11 Title, Condition of Personal Property.......................15
5.12 Legal Proceedings...........................................16
5.13 Employees...................................................16
5.14 Collective Bargaining, Labor Contracts, Employment
Practices, Etc..............................................16
5.15 ERISA.......................................................17
5.16 Insurance and Surety Agreements.............................18
(i)
5.17 Relationships...............................................18
5.18 Absence of Certain Events...................................18
5.19 Compliance with Laws........................................20
5.20 Finders.....................................................20
5.21 Taxes.......................................................21
5.22 Encumbrances Created by this Agreement......................21
5.23 Subsidiaries and Joint Ventures.............................21
5.24 No Untrue Statement.........................................21
5.25 Medicare and Medicaid.......................................21
5.26 Leasehold Interests.........................................22
5.27 Power and Authority.........................................22
5.28 Binding Effect..............................................22
5.29 Questionnaires..............................................22
5.30 Questionable Payments.......................................22
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLER ........................23
6.1 Authority...................................................23
6.2 Binding Effect..............................................23
6.3 Absence of Conflicting Agreements...........................23
6.4 Consents....................................................23
6.5 Ownership of Company Stock..................................23
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER.........................23
7.1 Organization and Standing...................................23
7.2 Power and Authority.........................................24
7.3 Binding Agreement...........................................24
7.4 Absence of Conflicting Agreements...........................24
7.5 Consents....................................................24
7.6 Securities and Exchange Commission Filings..................24
7.7 Duly Authorized Shares......................................25
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY AND
ITS SUBSIDIARIES.....................................................25
8.1 Access to Information and Records before Closing............25
8.2 Confidentiality.............................................25
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING..........................26
9.1 Conduct of Business Pending Closing.........................26
9.2 Negative Covenants of the Company...........................26
9.3 Affirmative Covenants.......................................26
9.4 Pursuit of Consents and Approvals...........................27
9.5 Supplementary Financial Information.........................28
9.6 Exclusivity.................................................28
(ii)
9.7 Purchase of Receivables.....................................28
9.8 Collection of Receivables..................................29
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.......................30
10.1 Representations and Warranties..............................30
10.2 Performance of Covenants....................................30
10.3 Delivery of Closing Certificate.............................30
10.4 Opinion of Counsel..........................................30
10.5 Legal Matters...............................................30
10.6 Authorization Documents.....................................31
10.7 Material Change.............................................31
10.8 Approvals...................................................31
10.9 Employment Agreement........................................31
10.10 Consents....................................................31
10.11 Estimated Closing Date Balance Sheet........................31
10.12 Real Property Consents......................................32
10.13 Cost and Expenses...........................................32
10.14 Stock Certificates..........................................32
10.15 Other Documents.............................................32
ARTICLE XI: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.....................32
11.1 Representations and Warranties..............................32
11.2 Performance of Covenants....................................32
11.3 Delivery of Closing Certificate.............................32
11.4 Opinion of Counsel..........................................33
11.5 Legal Matters...............................................33
11.6 Authorization Documents.....................................33
11.7 Employment Agreement........................................33
11.8 Other Documents.............................................33
ARTICLE XII: OBLIGATIONS OF THE PARTIES AFTER CLOSING.........................33
12.1 Survival of Representations and Warranties..................33
12.2 Indemnification by Seller and Company.......................33
12.3 Indemnification by Buyer....................................34
12.4 Assertion of Claims.........................................34
12.5 Indemnity Basket and Cap....................................35
12.6 Control of Defense of Indemnifiable Claims..................35
12.7 Restrictions................................................36
12.8 Records.....................................................37
12.9 Stub-Period Tax Return......................................37
ARTICLE XIII: TERMINATION....................................................37
13.1 Termination.................................................37
(iii)
13.2 Effect of Termination.......................................37
ARTICLE XIV: CASUALTY, RISK OF LOSS...........................................37
14.1 Casualty, Risk of Loss......................................37
ARTICLE XV: MISCELLANEOUS....................................................38
15.1 Costs and Expenses..........................................38
15.2 Performance.................................................38
15.3 Benefit and Assignment......................................38
15.4 Effect and Construction of this Agreement...................38
15.5 Cooperation - Further Assistance............................38
15.6 Notices.....................................................39
15.7 Waiver, Discharge, Etc......................................39
15.8 Rights of Persons Not Parties...............................39
15.9 Governing Law...............................................40
15.10 Amendments, Supplements, Etc................................40
15.11 Severability................................................40
15.12 Counterparts................................................40
15.13 Public Announcements........................................40
15.14 Arbitration.................................................40
15.15 No Contribution or Indemnity................................41
(iv)
SCHEDULES & EXHIBITS
Schedule 2.7 - Designated Contracts
Schedule 5.3 - Consent List of Seller
Schedule 5.4 - Company Stock
Schedule 5.6 - Trademarks
Schedule 5.7 - Contracts
Schedule 5.8(a) - Unaudited Financial Statements
Schedule 5.8(b) - Unaudited Interim Financial Statements
Schedule 5.8(c) - Material Liabilities
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses and Permits
Schedule 5.11(a) - Liens on Personal Property
Schedule 5.11(b) - Leases of Personal Property
Schedule 5.12 - Legal Proceedings
Schedule 5.13 - Employees
Schedule 5.15(b) - Employee Benefit Plans
Schedule 5.15(c) - Employees on Leave of Absence
Schedule 5.16 - Insurance and Surety Agreements
Schedule 5.17 - Relationships
Schedule 5.18 - Absence of Certain Events
Schedule 5.21 - Tax Returns
Schedule 5.25 - Medicare and Medicaid Programs
Schedule 5.26 - Leasehold Interests
Exhibit 2.3 - Escrow Agreement
Exhibit 5.29 - Questionnaire
Exhibit 9.7 - Xxxx of Sale and Assignment for Accounts Receivable
Exhibit 10.4 - Opinion of Counsel to Seller and Company
Exhibit 10.9 - Employment Agreement
Exhibit 11.4 - Opinion of Buyer's Counsel
(v)
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AGREEMENT AND PLAN OF MERGER
--------------------------
This Agreement and Plan of Merger (the "AGREEMENT") is made as of the 9th
day of January, 1998, among INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation ("BUYER"), IHS ACQUISITION XXXIV, INC., a Delaware corporation
("Newco"), XXXXXX XXXXX (the "SELLER") and PARAGON REHABILITATIVE SERVICES,
INC., an Ohio corporation (the "Company").
WHEREAS, the Company is in the business of providing contract
rehabilitation services to nursing homes, long-term care facilities and other
health care facilities (the "Services"); and
WHEREAS, all of the issued and outstanding shares of the capital stock of
the Company (the "Company Stock") is owned and held of record by the Seller; and
WHEREAS, Newco is a wholly-owned subsidiary of Buyer; and
WHEREAS, the Seller and the Boards of Directors of Buyer, Newco, and the
Company deem it advisable to merge the Company with and into Newco pursuant to
this Agreement (the "Merger"); and
WHEREAS, the parties intend and contemplate that the merger shall
constitute a forward triangular merger qualifying as a Type A reorganization
with the meaning of Section 368(a)(1)(A) and 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended; and
WHEREAS, pursuant to the Merger, all shares of the Company Stock will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1 of this Agreement).
NOW, THEREFORE, Company, Seller, Buyer and Newco, intending to be legally
bound, agree as follows:
ARTICLE I: MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at the
Effective Time of Merger (as defined in Article IV, below), the Company shall be
merged with and into Newco and the separate existence of the Company shall
cease.
1.2 TAKING OF NECESSARY ACTION. Prior to and after the Effective Time of
Merger, subject to the provisions of this Agreement, each of the Seller, Buyer,
Newco, and the Company shall take all such action as may be necessary or
appropriate in order to effect the Merger as contemplated hereunder. In case at
any time after the Effective Time of Merger any further action
is necessary or desirable to carry out the purposes of this Agreement, the
parties shall take all such necessary action.
ARTICLE II: MERGER CONSIDERATION
2.1 CONVERSION OF STOCK; FORM OF PAYMENT.
(A) At the Effective Time of Merger, the shares of Company Stock which
are issued and outstanding immediately prior to the Effective Time of Merger
shall, without any action by the holder thereof, be converted into the right to
receive that number of shares of the common stock of Buyer, par value $.001 per
share ("IHS Stock") determined as of the Closing Date in accordance with Section
3.1(a) hereof, as shall have an aggregate value, subject to adjustment pursuant
to Section 2.3 below, of ELEVEN MILLION TWO HUNDRED THOUSAND AND 00/100
($11,200,000) DOLLARS (the "Merger Consideration").
(B) At the Effective Time of Merger, the Seller, as the sole holder of
the certificate or certificates evidencing all of the outstanding shares of
Company Stock, upon surrender of such certificate or certificates, shall be
entitled to receive, and shall receive, in exchange therefor the Merger
Consideration represented by the certificate or certificates so surrendered.
Until so surrendered, each such outstanding certificate which, prior to the
Effective Time of the Merger, represented shares of Company Stock shall evidence
the right to receive the Merger Consideration represented by such certificate or
certificates. Upon surrender of such certificates, they shall be duly cancelled.
2.2 ADJUSTMENTS TO THE MERGER CONSIDERATION.
(A) At the Closing, the Company shall deliver a certificate
signed by its President certifying the amount of the Company's aggregate working
capital (as defined herein) as of the Closing Date on a consolidated basis (the
"ESTIMATED CLOSING DATE WORKING CAPITAL"). If the Estimated Closing Date Working
Capital is less than $2,500,000 (the "Minimum Working CAPITAL"), the Merger
Consideration will be reduced on a dollar-for-dollar basis by an amount equal to
the amount of such deficiency. Additionally, at the Closing, the Company shall
deliver to Buyer the balance sheet of the Company on a consolidated basis dated
as of the Closing Date, certified by the Company's President to be his best good
faith estimate thereof (the "Estimated Closing Date BALANCE SHEET"). In the
event that the Estimated Closing Date Balance Sheet discloses that the aggregate
amount of the Company's long-term liabilities as determined in accordance with
GAAP exceeds $5,000, the Merger Consideration will be reduced by an amount equal
to the amount of such excess. For the purposes hereof, "working capital" means
the excess of current assets over current liabilities, as determined in
accordance with generally accepted accounting principals, consistently applied
("GAAP"), and "long term liability" means any liability that would be set forth
as a long-term liability on a balance sheet in accordance with GAAP; provided,
that for purposes hereof "working capital" shall include, without limitation and
whether or not required by GAAP, all current liabilities for Taxes (defined in
Section 5.21), and "long term liability" shall include, without limitation and
whether or not required by GAAP, all long term liabilities for Taxes, in either
case
2
which Taxes are or would be attributable to the Company as of the Closing Date
giving effect to the transactions contemplated hereby, including any such Taxes
based on the change in status of the Company from an S corporation to a C
corporation or based on the change in status of the Company from a cash basis
taxpayer to an accrual basis taxpayer.
(B) As soon as is reasonably practicable, but in any event within
one hundred twenty (120) days following the Closing Date, Buyer shall complete a
review of the Company's Estimated Closing Date Balance Sheet and the following
shall occur:
(1) If such review reveals that the Company's working capital as of
the Closing Date was less than the lesser of (i) the Minimum Working
Capital, and (ii) the Estimated Closing Date Working Capital, the Merger
Consideration shall be deemed to have been reduced by the amount of such
deficiency, and not later than fifteen (15) business days after written
notice thereof is delivered by Buyer to Escrowee (as defined below) and to
Seller (which notice shall include a calculation of the amount of the
working capital deficiency), the Escrowee shall, subject to objection
raised pursuant to subparagraph (c) below, deliver over to Buyer shares of
IHS Stock having a value, determined in accordance with Section 2.3(a)(v)
below, equal to the amount of such deficiency. In the event the deficiency
exceeds the Escrow Deposit (as defined below) held by the Escrowee, the
Seller shall refund to Buyer the amount of such deficiency in IHS Stock,
valued in accordance with Section 2.3(a)(v) below.
(2) If such review reveals the aggregate amount of the Company's
long-term liabilities as of the Closing Date exceeded the greater of (i)
$5,000, or (ii) the amount of the Company's long-term liabilities as
indicated on the Estimated Closing Date Balance Sheet, the Merger
Consideration shall be deemed to have been reduced by the amount of such
excess, and not later than fifteen (15) business days after written notice
thereof is delivered by Buyer to Escrowee and to Seller (which notice shall
include a calculation of the excess long-term liabilities), the Escrowee
shall, subject to objection raised pursuant to subparagraph (c) below,
deliver over to Buyer shares of IHS Stock having a value, determined in
accordance with Section 2.3(a)(v) below, equal to the amount of such
excess. In the event the amount of such excess is greater than the Escrow
Deposit held by the Escrowee, the Seller shall refund to Buyer the amount
of such deficiency in IHS Stock, valued in accordance with Section
2.3(a)(v) below.
(C) If Seller shall in good faith dispute the amount of working
capital or long-term liabilities of the Company as set forth in any notice
delivered by Buyer pursuant to Section 2.2(b) above (an "Adjustment Notice"), he
shall, within fifteen (15) business days after delivery to him of an Adjustment
Notice, give notice to Buyer and to Escrowee (a "Delay Payment Notice") that all
or any portion of the payment specified should not be made and setting forth in
reasonable detail his objections and basis therefor, in which case the disputed
portion of any payment otherwise required to be made pursuant to Section 2.2(b)
above shall be delayed, the undisputed portion of any payment required to be
made pursuant to Section 2.2(b) above shall be made in accordance with said
subsection, and Buyer and Seller shall meet and in good faith attempt to resolve
any disagreements
3
within thirty (30) days after delivery to Buyer of the Delay Payment Notice.
Except to the extent expressly set forth in a Delay Payment Notice, the working
capital and long-term liabilities set forth in the Adjustment Notice(s) shall be
deemed accepted by the Seller and shall be conclusive and binding on all parties
hereto. If a Delay Payment Notice is timely delivered and the parties are unable
to resolve such disagreements within such time period, the disagreements
referred to in the Delay Payment Notice shall be referred to KPMG Peat Marwick
LLP ("Arbitrating Accountants"), and the determination of the Arbitrating
Accountants shall be final and binding on the parties hereto. The costs and
expenses of the services of the Arbitrating Accountants shall be borne by the
party against whom the Arbitrating Accountants shall rule; provided that if the
Arbitrating Accountants shall not clearly rule against any party, then such
costs and expenses shall be borne equally by Seller, on the one hand, and Buyer,
on the other hand. On the business day following the final resolution of any
matter covered by a Delay Payment Notice, Escrowee or Seller shall, as
applicable, pay to Buyer any delayed payment to the extent determined to be due
to Buyer in accordance with such resolution.
2.3 ESCROW.
(A) At the Closing, pursuant to an Escrow Agreement to be entered into
by the parties substantially in the form of Exhibit 2.3, a portion of the Merger
Consideration as shall be equal to FIVE HUNDRED THOUSAND ($500,000) DOLLARS (the
"Escrow Deposit"), based upon the valuation described in Section 3.1(a) below,
shall be delivered by Buyer, on behalf of the Seller, to CoreStates Bank, N.A.,
as escrow agent (the "Escrowee"). The Escrow Deposit shall be held to pay
post-Closing adjustments and to indemnify against any claim which may be
asserted, pursuant to Sections 12.2 and 12.4 hereof. The Escrow Deposit shall be
held and disbursed by the Escrowee in accordance with the following:
(I) In the event that the Seller becomes obligated to remit IHS
Stock back to Buyer pursuant to the post-Closing adjustments set forth in
Section 2.2(b), the Escrowee shall release to Buyer that portion of the Escrow
Deposit as shall have a value equal to the amount by which the Merger
Consideration is so reduced.
(II) In the event that the Buyer becomes entitled to
indemnification pursuant to Section 12.2, the Escrowee shall release to Buyer
that portion of the Escrow Deposit as shall be equal in value to such
indemnification.
(III) If no claim for indemnification on the part of Buyer is
outstanding upon the expiration of one (1) year following the Closing Date, any
remaining Escrow Deposit (less any amounts offset for claims pursuant to Section
2.3(a)(i) and (ii)) shall be released to the Seller.
(IV) If any claim(s) for indemnification on the part of Buyer is
(are) outstanding upon the expiration of one (1) year following the Closing
Date, then any Escrow Deposit (less any amounts offset for claims pursuant to
Section 2.3(a)(i) and (ii)) (including all accrued
4
interest thereon) remaining (after resolution of the outstanding claim(s) and
payment in respect thereof, if any is owing, shall be made), shall be released
to the Seller promptly after resolution of such claim(s).
(V) The value of any IHS Stock to be delivered to Buyer from the
Escrow Deposit shall be calculated based upon the average closing NYSE price of
such stock for the thirty (30) business day period immediately preceding the
date which is two (2) days before the date of such delivery.
(B) The costs, fees and expenses of the Escrowee shall be borne
equally by Buyer, on the one hand, and the Seller, on the other hand.
2.4 NO FRACTIONAL SHARES. No certificates or scrip representing fractional
shares of IHS Stock shall be issued upon the surrender or exchange of
certificates representing shares of Company Stock. Notwithstanding any other
provision of this Agreement, if the Seller would otherwise have been entitled to
receive a fraction of a share of IHS Stock for the shares of Company Stock
exchanged pursuant to the Merger, Seller shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of IHS
Stock multiplied by the value of such share determined in accordance with
Section 3.1(a) below.
2.5 ASSETS. As of the Closing Date, the consolidated assets of the Company
(the "ASSETS") will include all of the tangible and intangible assets of the
Company as presently constituted, including, without limitation, all contract
rights and claims, leasehold interests, fixed and moveable equipment, vehicles,
furnishings, tangible personal property, inventory and supplies (other than
inventory, and supplies disposed of in the ordinary course of business,
consistent with past practice), goodwill, trade names, trademarks, all patient
records, books and files, Medicare and Medicaid provider agreements and numbers,
provider agreements with third party payors, telephone numbers, and to the
extent permitted by law, all permits, licenses and other governmental approvals.
The Assets of the Company as of the Closing Date shall also include cash, bank
accounts, accounts receivable, deposits, tax refunds, and prepaid expenses.
2.6 LIABILITIES. As of the Closing, there will not be outstanding against
the Company any claim, lawsuit, liability, obligation or debt of any kind or
nature whatsoever (regardless of whether the same would constitute a liability
to be set forth on a balance sheet in accordance with GAAP), whether absolute,
accrued, due, direct or indirect, contingent or liquidated, matured or
unmatured, joint or several, whether or not for a sum certain, whether for the
payment of money or for the performance or observance of any obligation or
condition ("PROHIBITED LIABILITIES"), other than such liabilities as are taken
into account in the determination of the Estimated Closing Date Working Capital,
and obligations arising out of services or products or other benefits to be
provided by the Company after Closing under Designated Contracts (as defined in
Section 2.7 below) ("PERMITTED LIABILITIES"). It is expressly agreed that Seller
shall be responsible for all Prohibited Liabilities of the Company, including,
without limitation, (i) liabilities of the Company arising out of participation
in the Medicare or Medicaid programs, or arrangements with any other third party
payor, or arrangements with any person or entity that participates in the
5
Medicare or Medicaid programs or any other third party payor program, including
without limitation, with respect to any excess reimbursement, recapture,
adjustment or overpayment whatsoever, in each case, attributable to any period
on or prior to the Closing Date ("Reimbursement Liabilities"), (ii) malpractice
claims asserted by patients or any other tort claims asserted, claims for breach
of contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions occurring on or
before the Closing Date, (iii) any accounts payable or employment or other taxes
which have accrued prior to the Closing Date (except to the extent of the amount
thereof, if any, included in the calculation of the Estimated Closing Date
Working Capital), and (iv) accrued but unpaid compensation or other benefits to
any of the employees, agents, consultants or advisers of the Company, which have
accrued prior to the Closing Date, including accrued vacation (except to the
extent of the amount thereof, if any, included in the calculation of the
Estimated Closing Date Working Capital). At Closing, Sellers shall assume and
undertake in a writing satisfactory to Buyer to pay or perform all Prohibited
Liabilities when and as the same become due in accordance with their terms. The
Company and Buyer will not assume any liabilities of Seller or provide any
guaranty therefor or obtain any release of any of the same.
2.7 DESIGNATED CONTRACTS. Buyer has set forth on Schedule 2.7 each of the
Contracts identified on Schedule 5.7 that Newco shall retain as of the Closing
(the "Designated CONTRACTS"). Prior to the Closing, each Contract not set forth
on Schedule 2.7 shall be terminated (or the Company and its successors shall be
released from all liability with respect thereto) at the sole cost and expense
of the Seller.
2.8 TAX CONSIDERATIONS. The parties contemplate that the merger shall
constitute and be treated as a forward triangular merger qualifying as a Type A
Reorganization pursuant to Section 368(a)(1)(A) and 368(a)(2)(D) of the Code.
Each party shall report the transaction contemplated hereunder as it applies to
such party on its appropriate tax return consistent with such treatment. Each
party agrees and covenants that it will conduct its affairs both before, during
and after the Closing and the Merger in a manner that complies with the
requirements for the aforesaid triangular merger to be treated as a
"reorganization" for purposes of Section 368 of the Code, pursuant to the Code,
applicable Treasury Regulation, Rulings and Procedures.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. The entire Merger Consideration shall be payable by means of
the delivery of IHS Stock in accordance with the following:
(A) SHARE VALUE. The number of shares of IHS Stock issuable at Closing
shall be calculated based upon a price per share of such stock equal to the
average closing NYSE price of such stock for the thirty (30) trading day period
immediately preceding the date which is two (2) trading days before the Closing
Date.
(B) REGISTRATION RIGHTS. Buyer will use its best efforts to cause to
be prepared, filed and declared effective by the Securities and Exchange
Commission (the
6
"Commission") within sixty (60) days following the Closing Date, a registration
statement for the registration under the Securities Act of 1933, as amended (the
"Securities Act") of the IHS Stock issued to Seller pursuant to this Agreement,
and Buyer shall maintain the effectiveness of such registration statement for a
period of one (1) year following the date on which such registration statement
becomes effective, or until the Seller shall not own any of the IHS Stock issued
pursuant to this Agreement, whichever shall occur first, in each case except to
the extent that an exemption from registration may be available.
(C) REGISTRATION EXPENSES. Seller shall not be responsible for, and
Buyer shall bear, all of the reasonable expenses of Buyer related to such
registration including, without limitation, the fees and expenses of its counsel
and accountants, all of its other costs, fees and expenses incident to the
preparation, printing, registration and filing under the Securities Act of the
registration statement and all amendments and supplements thereto, the cost of
furnishing copies of each preliminary prospectus, each final prospectus and each
amendment or supplement thereto to underwriters, dealers and other purchasers of
IHS Stock and the costs and expenses (including fees and disbursements of its
counsel) incurred in connection with the qualification of IHS Stock under the
Blue Sky laws of various jurisdictions. Buyer, however, shall not be required to
pay underwriter's or brokerage discounts, commissions or expenses, or to pay any
costs and expenses in excess in the aggregate of $20,000 for Blue Sky
qualifications of Seller's (and any transferee's) IHS Stock, or to pay any costs
or expenses arising out of Seller's or any transferee's failure to comply with
its obligations under this Article III.
(D) RESALE LIMITATIONS. All resales of IHS Stock issued pursuant to
this Agreement shall be effected solely through Xxxxx Xxxxxx Inc., as broker,
and resales by Seller shall not at any time, in the aggregate, exceed
Seventy-Five Thousand (75,000) shares during any thirty (30) day period.
(E) REGISTRATION PROCEDURES, ETC. In connection with the registration
rights granted to the Seller with respect to the IHS Stock as provided in this
Section 3.1, Buyer covenants and agrees as follows:
(I) At Buyer's expense, Buyer will keep the registration and
qualification under this Section 3.1 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate or for a
period of one (1) year following the date on which the registration becomes
effective, or until the Seller shall not own any of the IHS Stock issued
pursuant to this Agreement, whichever shall occur first, in each case, except to
the extent that an exemption from registration may be available. Buyer will
promptly notify the Seller, at any time when a prospectus relating to a
registration statement under this Section 3.1 is required to be delivered under
the Securities Act, of the happening of any event known to Buyer as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
7
(II) Buyer shall furnish the Seller with such number of
prospectuses as shall reasonably be requested.
(III) Buyer shall take all necessary action which may be required
in qualifying or registering IHS Stock included in a registration statement for
offering and sale under the securities or Blue Sky laws of such states as
reasonably are requested by the Seller, provided that Buyer shall not be
obligated to qualify as a foreign corporation or dealer to do business under the
laws of any such jurisdiction.
(IV) The information included or incorporated by reference in the
registration statement filed pursuant to this Section 3.1 will not, at the time
any such registration statement becomes effective, contain any untrue statement
of a material fact, or omit to state any material fact required to be stated
therein as necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or necessary to correct
any statement in any earlier filing of such registration statement or any
amendments thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder. Buyer shall indemnify the holders of IHS Stock to be sold pursuant
to the registration statement, their successors and assigns, and each person, if
any, who controls such holders within the meaning of ss.15 of the Securities Act
or ss.20(a) of the Securities Exchange Act of 1934 ("EXCHANGE ACT"), against all
loss, claim, damage expense or liability (including all expenses reasonably
incurred in investigating, preparing or defending against any claim whatsoever)
to which any of them may become subject under the Securities Act, the Exchange
Act or any other statute, common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement executed by Buyer or based upon written information
furnished by Buyer filed in any jurisdiction in order to qualify IHS Stock under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, NYSE or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to Buyer by the Seller for use in such registration
statement (it being understood that Buyer may rely on the representations and
warranties of Seller made pursuant to this Agreement in preparing such
Registration Statement), any amendment or supplement thereto or any application,
as the case may be. If any action is brought against the Seller or any
controlling person of the Seller in respect of which indemnity may be sought
against Buyer pursuant to this subsection 3.1(e)(iv), the Seller or such
controlling person shall within thirty (30) days after the receipt thereby of a
summons or complaint, notify Buyer in writing of the institution of such action
and Buyer shall assume the defense of such actions, including the employment and
payment of reasonable fees and expenses of counsel (reasonably satisfactory to
the Seller or such controlling person). The Seller or such controlling person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the Seller or
such controlling person unless (A) the employment of such counsel shall have
been authorized in writing by Buyer in connection with the defense of such
action, or (B) Buyer shall not have employed counsel to have charge of the
defense of such action, or (C) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to Buyer (in which case,
Buyer shall not have the right to direct the defense of such action on behalf of
the indemnified party or parties), in any of which events the fees and expenses
of not more than one additional firm of attorneys for the Seller
8
and/or such controlling person shall be borne by Buyer. Except as expressly
provided in the previous sentence, in the event that Buyer shall not previously
have assumed the defenses of any such action or claim, Buyer shall not
thereafter be liable to the Seller or such controlling person in investigating,
preparing or defending any such action or claim.
(V) The holders of IHS Stock to be sold pursuant to a
registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify Buyer, its officers and directors and each person, if
any, who controls Buyer within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Exchange Act against all loss, claim, damage, or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising from information furnished in writing by or on behalf
of such holders, or their successors or assigns, for specific inclusion in such
registration statement.
(F) NOTICE OF SALE. If the Seller desires to transfer all or any
portion of IHS Stock, the Seller will deliver written notice to Buyer describing
in reasonable detail his intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective
registration statement as provided herein, the Seller will sell the IHS Stock in
compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer that the registration statement relating to
the IHS Stock being transferred is not "current" until Buyer gives further
notice that offers and sales may be recommenced. In the event of any such notice
from Buyer, Buyer agrees to file expeditiously such amendments to the
registration statement as may be necessary to bring it current during the period
specified in Section 3.1(b) and to give prompt notice to the Seller when the
registration statement has again become current. If the Seller desires to
transfer any IHS Stock without use of the registration statement, he shall
deliver to Buyer an opinion of counsel reasonably acceptable to Buyer and its
counsel to the effect that the proposed transfer of IHS Stock may be made
without registration under the Securities Act, and, in such event, the Seller
will be entitled to transfer IHS Stock in accordance with the terms of the
notice and opinion of his counsel.
(G) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Buyer to take any action pursuant to this Article III that
the Seller shall furnish to the Buyer in writing such information regarding
himself, the IHS Stock held by him, and the intended method of disposition of
such securities as shall be required to effect the registration of the IHS
Stock. In that connection, the Seller shall be required to represent to the
Buyer that all such information which is given is both complete and accurate in
all material respects. The Seller shall deliver to the Buyer a statement in
writing from the beneficial owner of such securities that they bona fide intend
to sell, transfer or otherwise dispose of such securities. The Seller will
promptly notify IHS at any time when a prospectus relating to a registration
statement covering the Seller's shares under this Section 3.1 is required to be
delivered under the Securities Act, or the happening of any event known to the
Seller as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the statements as then
existing.
9
(H) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be issued
hereunder will be newly issued shares of Buyer. The Seller represents and
warrants to Buyer that the IHS Stock being issued hereunder is being acquired,
and will be acquired, by the Seller for investment for his own account and not
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act or the applicable state securities law; the
Seller acknowledges that the IHS Stock constitutes restricted securities under
Rule 144 promulgated by the Commission pursuant to the Securities Act, and may
have to be held indefinitely, and the Seller agrees that no shares of IHS Stock
may be sold, transferred, assigned, pledged or otherwise disposed of except
pursuant to an effective registration statement or an exemption from
registration under the Securities Act, the rules and regulations thereunder, and
under all applicable state securities laws. The Seller represents and warrants
that he has the knowledge and experience in financial and business matters, is
capable of evaluating the merits and risks of the investment, and is able to
bear the economic risk of such investment. The Seller has had the opportunity to
make inquiries of and obtain from representatives and employees of Buyer such
other information about Buyer as he deems necessary in connection with such
investment.
(I) LEGEND. It is understood that, prior to sale of any shares of IHS
Stock pursuant to an effective registration pursuant to subsection (b) above,
the certificates evidencing such shares of IHS Stock shall bear the following
(or a similar) legend (in addition to any legends which may be required in the
opinion of IHS's counsel by the applicable securities laws of any state), and
upon sale of such shares pursuant to such an effective registration, new
certificates shall be issued for the shares sold without such legends except as
otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(J) CERTAIN TRANSFEREES. Prior to the effective date of registration
of the IHS Stock, the Seller shall not transfer any shares of IHS Stock to any
person or entity unless such transferee shall have agreed in writing to be bound
by the provisions applicable to the Seller under this Article III.
ARTICLE IV: THE CLOSING
4.1 TIME AND PLACE OF CLOSING. The closing (the "CLOSING") of the
transactions contemplated by this Agreement shall be held as promptly as
practicable, but not more than seven (7) business days following the
satisfaction of all conditions precedent specified in this Agreement, including
receipt of all necessary regulatory approvals, unless duly waived by the party
entitled to satisfaction thereof. In no event shall the Closing take place later
than January 31, 1998; provided,
10
however, that if Buyer shall not have obtained all necessary regulatory
approvals by such date, then Buyer may extend the Closing for a period
sufficient to obtain any of such approvals, but in no event more than thirty
(30) days from such date. The date on which the Closing is held is hereinafter
called the "CLOSING DATE." Subject to the conditions set forth herein, at the
Closing (a) the Seller shall deliver for cancellation all of the stock
certificates representing shares of Company Stock, duly endorsed, or accompanied
by one or more stock powers duly endorsed, and (b) Buyer shall deliver (i) to
the Seller and to the Escrowee (to the extent of the Escrow Deposit) stock
certificates representing that number of shares of IHS Stock into which the
shares of Company Stock so delivered are to be converted as of the Effective
Time of Merger.
4.2 FILINGS AT CLOSING. On the Closing Date, Buyer shall file a Certificate
of Merger or such other certificates, instruments and documents as shall be
required in order to effect the Merger in accordance with the Delaware General
Corporation Law, and the Company shall file a Certificate of Merger or such
other certificates, instruments and documents as shall be required in order to
effect the Merger in accordance with the Ohio General Corporation law. Each of
Buyer, the Company, Newco and Seller shall take all lawful actions and use their
respective best efforts to cause the Merger to become effective as of the
Closing Date (or as promptly thereafter as possible).
4.3 EFFECTIVE TIME. The Merger shall become effective at the time the
Certificate of Merger or such other instrument as the Delaware Secretary of
State shall require is made effective under the laws of the State of Delaware
(the "EFFECTIVE TIME OF MERGER").
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
COMPANY
The Company and the Seller hereby jointly and severally represent and
warrant to Buyer as follows (it being understood that "to the knowledge of the
Company" shall be deemed to refer collectively to the Seller and to all officers
and all managers of the Company):
5.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. Copies of the Company's Articles of Incorporation and Code of
Regulations, and all amendments thereof to date, have been delivered to Buyer
and are complete and correct. The Company has the power and authority to own the
property and assets now owned by it and to conduct the business presently being
conducted by it. The Company is not required to qualify to do business as a
foreign corporation in any other state.
5.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or delivery of
this Agreement including all Schedules and Exhibits hereto, or any of the other
instruments and documents required or contemplated hereby and thereby
("TRANSACTION DOCUMENTS") by the Seller and the Company, nor the performance by
the Seller and the Company of the transactions contemplated hereby and thereby,
conflicts with, or constitutes a breach of or a default under (i) the Articles
of Incorporation or Code of Regulations of the Company; or (ii) any applicable
law, rule, judgment, order, writ, injunction, or decree of any court, currently
in effect, provided that the
11
consents set forth in Schedule 5.3 are obtained prior to the Closing; or (iii)
any applicable rule or regulation of any administrative agency or other
governmental authority currently in effect; or (iv) any agreement, indenture,
contract or instrument to which the Company is now a party or by which any of
the assets of the Company is bound.
5.3 CONSENTS. Except as set forth in Schedule 5.3, no authorization,
consent, approval, license, exemption by, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by the Seller or the Company.
5.4 COMPANY STOCK. Schedule 5.4 sets forth a complete list and description
of the authorized capital stock of the Company and the number of shares issued
and outstanding of each class or series of such capital stock. Schedule 5.4 also
sets forth all outstanding warrants, options, or other rights to subscribe for
or purchase from the Company any shares of capital stock of the Company, and all
outstanding securities convertible or exchangeable for such shares of capital
stock of the Company. No shares of capital stock of the Company are held in the
treasury of the Company. The Seller is the record owner of all of the issued and
outstanding shares of capital stock of the Company and all of such stock is duly
authorized, validly issued, and fully paid and non-assessable. The Seller has
good and marketable title to such shares of Company Stock, free and clear of all
Liens (defined in Section 5.11(a)). On the Closing Date, there will be no
preemptive or first refusal rights to purchase or otherwise acquire shares of
capital stock of the Company pursuant to any provision of law or the Articles of
Incorporation or By-Laws of the Company or by agreement or otherwise. On the
Closing Date there shall not be outstanding any warrants, options, or other
rights to subscribe for or purchase from the Company any shares of capital stock
of the Company, nor shall there be outstanding any securities convertible into
or exchangeable for such shares.
5.5 ASSETS. Except as expressly set forth at Section 9.7 hereof, as of the
Closing, the consolidated Assets of the Company will include all of the tangible
and intangible assets of the Company as presently constituted, including,
without limitation, cash, bank accounts, and accounts receivable; provided,
however, that Assets shall not include inventory, supplies and other assets
disposed of in the ordinary course of business, consistent with the prior
practice of the Company's business. The Assets as of the Closing will constitute
all of the assets necessary or material for the operation of the business of the
Company as presently conducted. The accounts receivable of Company are reflected
properly on its books and records in accordance with GAAP, and have been billed
or invoiced in the ordinary course of business consistent with past practice.
The Assets are not subject to any Liens, except for Permitted Liens, if any (as
defined in Section 5.11(c)).
5.6 TRADEMARKS. Schedule 5.6 sets forth a complete and accurate list of all
trademarks, service marks, or applications for any of the same, copyrights, and
other items of intellectual property that are owned, possessed or used by the
Company. There are no claims or proceedings pending or, to the knowledge of the
Company, overtly threatened against the Company asserting that the use of any of
the aforementioned properties or rights infringes the rights of any
12
other person, and, to the knowledge of the Company, the Company is not
infringing on the intellectual property rights of any other person.
5.7 CONTRACTS. Schedule 5.7 sets forth a complete and correct list of all
agreements, contracts and commitments of the following type to which the Company
is a party or by which the Company or any of the Company's assets is bound or as
to which the Company has any outstanding material obligations as of the date
hereof (the "CONTRACTS"):
(A) each contract or agreement for the employment or retention of, or
collective bargaining, severance or termination agreement with, any director,
officer, employee, consultant, agent or group of employees of the Company;
(B) each profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement;
(C) each agreement or arrangement for the purchase or sale of any
assets, properties or rights outside the ordinary course of business (by
purchase or sale of assets, purchase or sale of stock, merger or otherwise)
which is currently in effect;
(D) each contract currently in effect which contains any provisions
requiring the Company to indemnify or act for, or guarantee the obligation of,
any other person or entity;
(E) each agreement restricting the Company from conducting business
anywhere in the world;
(F) each partnership or joint venture contract or similar arrangement
or agreement which is likely to involve a sharing of profits or future payments
with respect to the Company's business or any portion thereof;
(G) each licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency, purchasing, supply and rebate or other
similar contract, arrangement or commitment;
(H) each contract with respect to the provision of Services;
(I) each contract with any insurance company, health maintenance
organization, preferred provider organization or other managed care organization
or health care payor;
(J) each lease of real property;
13
(K) each agreement, consent order, settlement or similar arrangement
with any party, including any governmental Authority (as defined in Section
5.21); or
(L) any other agreement not made in the ordinary and normal course of
business which involves consideration of more than $15,000.
Except as indicated on Schedule 5.7, each of the Contracts was entered into
and requires performance in the ordinary course of business and is in full force
and effect. The Company is not in material default under any Contract and there
has not been asserted, either by or against the Company under any Contract, any
written notice of default, set-off or claim of default. To the knowledge of the
Company, the parties to the Contracts other than the Company are not in material
default of any of their respective obligations under the Contracts, and there
has not occurred any event which with the passage of time or the giving of
notice (or both) would constitute a material default or material breach under
any Contract. All amounts payable or receivable under the Contracts are, or will
at the Closing Date, be on a current basis or properly reflected on the
Estimated Closing Date Balance Sheet in accordance with GAAP. Each Contract with
respect to which consent is required by reason of the transactions contemplated
by this Agreement is identified on Schedule 5.7. Each Contract that is
terminable without cause upon notice of less than 91 days or that will lapse
less than 91 days after the Closing is so identified on Schedule 5.7. Neither
the Company nor the Seller has received written or oral notice or has reason to
believe that any of the Contracts will be terminated by any party thereto after
the date hereof.
5.8 FINANCIAL STATEMENTS.
(A) The unaudited balance sheets of the Company as of December 31,
1995 and December 31, 1996, and the related statements of operations and cash
flows for the years then ended, annexed hereto as Schedule 5.8(a) (the
"UNAUDITED FINANCIAL STATEMENTS"), present fairly in all material respects the
financial condition and results of operations and cash flows of the Company at
and for the periods therein specified and were prepared in accordance with GAAP,
except that the Unaudited Financial Statements dated December 31, 1995 are
prepared on a cash, rather than accrual, basis.
(B) The unaudited monthly balance sheets of the Company for each month
since January 1, 1997, and the related statements of operations and cash flows
for the periods then ended, annexed hereto as Schedule 5.8(b) (the "Unaudited
Interim Financial Statements"), present fairly in all material respects the
financial condition and results of operations and cash flows of the Company at
and for the periods then ended specified. The Unaudited Interim Financial
Statements for the eleven-month period ended November 30, 1997 (annexed hereto
as part of Schedule 5.8 (b)) were prepared in accordance with GAAP.
(C) Except as set forth on Schedule 5.8(c) or as expressly set forth
on the Unaudited Interim Financial Statements, the Company has no material
non-recurring or extraordinary income or expense reduction not identified
therein or material liabilities or obligations (whether
14
absolute, accrued, contingent or otherwise and whether due or to become due,
including, without limitation, any guarantees of any obligations of any other
person or entity) of any kind or nature whether or not required by GAAP to be
reflected on a balance sheet and/or the notes thereto.
5.9 MATERIAL CHANGES. Except as noted on Schedule 5.9, between the date of
the Unaudited Financial Statements and the date of this Agreement, there has not
been any material adverse change in the condition (financial or otherwise) of
the assets, properties or operations of the Company or any damage or destruction
of any of the Company's Assets or its place of business by fire or other
casualty, whether or not covered by insurance, and during such period of time
the Company has conducted its business only in the ordinary and normal course.
The Company and the Seller have not received any notice or other communication
regarding the intended departure of any of the Company's customers or
therapists.
5.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 5.10 sets forth a
description of (a) all licenses and other governmental or other regulatory
permits, authorizations or approvals required for the operation of the Company's
business that are now in effect, including all certificates of occupancy issued
with respect to the Company's business; and (b) each other license, permit,
accreditation or other authorization that is necessary for the operation of the
Company's business (a "License" and collectively, the "Licenses"). The Licenses
constitute all of the governmental, quasi-governmental and regulatory licenses,
permits, accreditations and authorizations necessary to the operation of the
businesses of the Company and its subsidiaries as they are operated on the date
hereof. The Company has delivered to Buyer copies of all of the Licenses. The
Company and its subsidiaries own, possess or otherwise have the exclusive legal
right to use the Licenses, free and clear of all Liens. The Company is not in
material default under any such License, and the Company and its subsidiaries
have not received any notice of any material default or any other material claim
or proceeding relating to any such License. Each License is in full force and
effect, and neither the Company nor any of its subsidiaries has received written
notice of any proceeding to terminate or suspend any License or of any condition
or event which, if uncured, would result in the termination or suspension of any
License. None of the Licenses are: (a) provisional, probationary, or restricted
in any way except to the extent qualified by any outstanding deficiencies or
citations, particulars of which have been set forth on Schedule 5.10; or (b)
subject to any investigation, cancellation, impairment, limitation, order,
complaint, proceeding, or suspension nor is such threatened or pending. Neither
the Seller, nor any director or officer, employee or former employee of the
Company, nor any person, firm or corporation other than the Company owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part in any of the Licenses.
5.11 TITLE, CONDITION OF PERSONAL PROPERTY.
(A) Except for the security interests listed and described on Schedule
5.11(a), the Company has good and marketable title to, or valid and subsisting
leasehold interests in, all of the personal property located at their places of
business or used in connection with the operation of its businesses, subject to
no mortgage, conditional sale, security interest, pledge, lien, claim,
encumbrance, charge, or restraint on transfer of any nature whatsoever
(collectively, "Liens") other than Permitted Liens (as defined below). No other
person has any right to the use or possession of any of such property which is
owned and, except as set forth on Schedule 5.11(a), no currently
15
effective financing statement with respect to such personal property has been
filed under the Uniform Commercial Code in any jurisdiction, and the Company has
not signed any such financing statement or any security agreement authorizing
any secured party thereunder to file any such financing statement. All of such
personal property comprising equipment, improvements, furniture and other
tangible personal property in use by the Company, whether owned or leased, is in
good operating condition and repair, subject to normal wear and tear, and is
sufficient to enable the Company to operate its business in a manner consistent
with its operation during the immediately preceding twelve (12) months.
(B) Except as set forth on Schedule 5.11(b), no tangible personal
property used by the Company in connection with the operation of its business is
subject to a lease, conditional sale, security interest or similar arrangement.
The Company has delivered to Buyer a complete and correct copy of each of the
leases and other agreements listed on Schedule 5.11(b). All of said personal
property leases are valid, binding and enforceable in accordance with their
respective terms and are in full force and effect. The Company is not in
material default under any of such leases and there has not been asserted,
either by or against the Company under any of such leases, any written notice of
default, set-off, or claim of default. To the best knowledge of the Company, the
parties to such leases other than the Company are not in default of their
respective obligations under any of such leases, and there has not occurred any
event which with the passage of time or giving of notice (or both) would
constitute such a default or breach under any of such leases.
(C) "Permitted Liens" shall mean:
(I) carriers', warehouseman's, mechanics, materialmen's,
repairmen's or other like liens arising in the ordinary course of business which
are (i) not overdue for a period of more than 30 days or (ii) which are being
contested in good faith and by appropriate proceedings, provided that if such
contest shall continue for more than 30 days, the amount thereof shall be bonded
or properly reserved against at the end of such 30-day period;
(II) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of like nature incurred in
the ordinary course of business;
(III) rights of lessors under leases set forth on Schedule
5.11(b);
(IV) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation.
16
5.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 5.12, there are
no claims, actions, suits or proceedings or arbitrations, either administrative
or judicial, pending, or, to the knowledge of the Company, overtly threatened
against or affecting the Company, or the Company's ability to consummate the
transactions contemplated herein, at law or in equity or otherwise, before or by
any court or governmental agency or body, domestic or foreign, or before an
arbitrator of any kind.
5.13 EMPLOYEES. Attached hereto as Schedule 5.13 is the most recent payroll
of the Company dated December , 1997, indicating the names, positions, and
compensation of each of its employees. All of such information is materially
correct as of such date and there has been no material change since then. To the
knowledge of the Company, each employee of the Company, where necessary, is
properly licensed or certified to perform his or her duties for the Company, and
none of the employees, while in the employ of the Company, has ever had his or
her professional license or certification denied, suspended, revoked,
terminated, or voluntarily relinquished under threat of disciplinary action, or
has ever been restricted in any way from performing the duties he or she is to
provide for the Company, and there is no proceeding pending, or threatened,
pursuant to which any of the foregoing may occur.
5.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES, ETC.
During the two years prior to the Closing Date, there has been no material
adverse change in the relationship between the Company and its employees nor any
strike or material labor disturbance by such employees affecting the Company's
business and, to the knowledge of the Company, there is no indication that such
a change, strike or labor disturbance is likely. The Company's employees are not
represented by any labor union or similar organization and the Company has no
reason to believe that there are pending or threatened any activities, the
purpose of which is to achieve such representation, of all or some of the
Company's employees. Except as set forth on Schedule 5.7 or Schedule 5.15(b),
the Company has no collective bargaining or other labor contracts, employment
contracts, pension, profit-sharing, retirement, insurance, bonus, deferred
compensation or other employee benefit plans, agreements or arrangements with
respect to their employees. The Company is in material compliance with the
requirements prescribed by all Federal, state and local statutes, orders and
governmental rules and regulations ("Government Requirements") applicable to any
of the employee benefit plans, agreements and arrangements identified on
Schedule 5.7 and Schedule 5.15(b), including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Immigration
Reform and Control Act, the Worker Adjustment and Retraining Notification Act of
1988, any such Government Requirements respecting employment determination,
equal opportunity, affirmative action, employee privacy, wrongful or unlawful
termination, workers' compensation, occupational safety and health requirements,
labor management relations and unemployment insurance, or related matters and
there are no threatened or pending claims relating thereto, in each case. In the
event of termination of employment of an employee of the Company, Buyer will
not, pursuant to any agreement with the Seller or the Company or by reason of
any representation made or plan adopted by the Seller or the Company prior to
the Closing, be liable to any employee of the Company for so-called "severance
pay", parachute payments or any other similar payments or benefits, including,
without limitation, post-employment healthcare (other
17
than pursuant to the continuation health care provisions of Section 4980B of the
Internal Revenue Code of 1986, as amended or Section 601 through 608 of ERISA
("COBRA")), insurance benefits, accrued vacation and sick days, except as
properly accrued for on the Estimated Closing Date Balance Sheet in accordance
with GAAP.
5.15 ERISA.
(A) The Company does not maintain or make contributions to and have
not at any time in the past maintained or made contributions to, any employee
benefit plan which is subject to the minimum funding standards of ERISA. The
Company does not now maintain or make contributions to, and has not at any time
in the past maintained or made contributions to, any multi-employer plan subject
to the terms of the Multi-employer Pension Plan Amendment Act of 1980 (the
"MULTI-EMPLOYER ACT").
(B) Schedule 5.15(b) sets forth each severance agreement, and each
plan, agreement or arrangement, bonus plan, deferred compensation agreement,
employee pension, profit sharing, savings or retirement plan, group life,
health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, any commitment arising
under severance, holiday, vacation, Christmas or other bonus plans (including,
but not limited to, "employee benefit plans", as defined in Section 3(3) of
ERISA maintained by the Company for any employees of the Company, or with
respect to which the Company has liability with respect to any employees of the
Company, or makes or has an obligation to make contributions on behalf of
employees of the Company ("Plans").
(C) Schedule 5.15(c) identifies all employees of the Company on leave
of absence eligible to receive health benefits, as required by COBRA. Notice of
the availability of COBRA coverage has been provided to all employees of the
Company on leave of absence entitled thereto, and all persons electing such
coverage are being (or have been, if applicable) provided such coverage.
5.16 INSURANCE AND SURETY AGREEMENTS. Schedule 5.16 contains a true and
correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by the Company (including but not limited to medical
malpractice insurance, and any state sponsored plan or program for worker's
compensation); and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by the Company, including a brief description of the
character of the bond or agreement and the name of the surety or indemnifying
party. Schedule 5.16 sets forth for each such insurance policy the name of the
insurer, the amount of coverage, the type of insurance, the policy number, the
annual premium and a brief description of the nature of insurance included under
each such policy and of any claims made thereunder during the past two years.
Such policies are owned by and payable solely to the Company, and said policies
or renewals or replacements thereof will be outstanding and duly in force at the
Closing Date. All insurance policies listed on Schedule 5.16 are in full force
and effect, all premiums due on or before the Closing Date have been or will be
paid, financed or accrued on or before the Closing Date, the
18
Company has not been advised by any of its insurance carriers of an intention to
terminate or modify any such policies other than under circumstances where the
Company has received a commitment for a replacement policy, nor has the Company
failed to comply with any of the material conditions contained in any such
policies.
5.17 RELATIONSHIPS. Except as disclosed on Schedule 5.17 hereto, neither
the Company nor any controlling shareholder, nor any principal, officer,
director, employee, partner or affiliate of the Company or any controlling
shareholder has, or at any time within the last two (2) years has had, a
material ownership interest in any business, corporate or otherwise, that is a
party to, or in any property that is the subject of, business relationships or
arrangements of any kind relating to the operation of the Company or its
business.
5.18 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 5.18, since
the date of the Unaudited Financial Statements, the Company has not:
(A) sold, assigned or transferred any of their assets or properties,
except as contemplated by Section 9.7 hereof and otherwise in the ordinary
course of business consistent with past practice;
(B) mortgaged, pledged or subjected to any Lien, other than a
Permitted Lien, any of the Company's assets;
(C) made or suffered any termination of any contract for the provision
of services by the Company;
(D) sold or assigned, or made or suffered any termination of any
Contract, or made or suffered any modification or amendment of any Contract
except for terminations, modifications and amendments of Contracts made in the
ordinary course of business consistent with past practice and which would not
affect earnings or otherwise be material, and the Seller and Company have not
received notice (written or oral) and have no knowledge that any Contract has
been terminated or will be terminated or modified or amended (as aforesaid);
(E) except in the ordinary course of business, or otherwise as
necessary to comply with any applicable minimum wage law, increased the salaries
or other compensation of any of their employees, or made any increase in, or any
additions to, other benefits to which any of such employees may be entitled;
(F) discharged or satisfied any Lien, or satisfied or paid any
material liabilities, other than in the ordinary course of business, consistent
with past practice, or failed to pay or discharge when due any liabilities, the
failure to pay or discharge of which has caused or may cause any actual damage
or give rise to a material risk of loss to the Company;
19
(G) changed any of the accounting principles followed by the Company
or the methods of applying such principles;
(H) incurred any material liability, other than current liabilities or
obligations incurred in the ordinary course of business consistent with past
practice;
(I) canceled, modified or waived any debts or claims held by it, other
than in the ordinary course of business consistent with past practice, or waived
any rights of substantial value, whether or not in the ordinary course of
business;
(J) issued any capital stock or other securities, or declared or paid
or set aside or reserved any amounts for payment of any dividend or other
distribution in respect of any equity interest or other securities, or redeemed
or repurchased any of its capital stock or other securities;
(K) dissolved, merged or entered into a share exchange with or into
any other entity;
(L) made any change to its by-laws or articles of incorporation;
(M) failed to collect, withhold and/or pay to any proper Governmental
Authority, any Taxes (as defined in Section 5.21) required by applicable law to
be so collected, withheld and/or paid;
(N) instituted, settled or agreed to settle any litigation, action or
proceeding before any Governmental Authority relating to it or its property or
received any threat thereof;
(O) except as permitted by Section 9.7 hereof, entered into any
transaction other than in the ordinary course of business consistent with past
practice, involving consideration in excess of $15,000; and
(P) agreed or otherwise become committed to do anything described in
any of subsections (a) through (o) above.
5.19 COMPLIANCE WITH LAWS.
(A) The Company is in compliance with all Governmental Requirements
(as defined herein) related to the following: (i) licensure relating to the
provision by the Company of Services; (ii) billing and reimbursement under the
Medicare and Medicaid programs and any other governmental health care programs;
(iii) patient self-referral, fee-splitting, patient brokering, payment of
remuneration to induce referrals and other "fraud and abuse" laws and
regulations; and (iv) laws and regulations concerning reports to and filings
with governmental agencies (collectively,
20
the "HEALTH CARE LAWS"). Other than the Health Care Laws set forth in the
immediately preceding sentence, the Companies are in compliance in all material
respects with all other Governmental Requirements. The Company has not, within
the period of twelve months preceding the date of this Agreement, received any
written notice that the Company or any of the Assets fail to comply in any
material respect with any applicable Federal, state, local or other governmental
laws or ordinances, or any applicable order, rule or regulation of any Federal,
state, local or other governmental agency having jurisdiction over their
businesses ("GOVERNMENTAL REQUIREMENTS"). The Company shall report to Buyer,
within five (5) business days after receipt thereof, any written notices that
the Company is not in compliance in any material respect with any of the
foregoing.
(B) Without limiting the generality of subsection (a) above, the
Company has at all times complied, and is complying in all respects, with all
federal, state and local environmental laws, rules or regulations applicable to
it, its leased properties, and all other real properties used by it in the
operation of its business, including, but not limited to, the Resource
Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act, and
subsequent amendments, the Federal Toxic Substances Control Act, as amended,
with respect to the environmental or healthful state, condition or quality of
any property (collectively "ENVIRONMENTAL LAWS"). The foregoing representation
and warranty applies to all aspects of the Company's operations and the use and
ownership of the Assets including, but not limited to, the use, handling,
treatment, storage, transportation and disposal of any hazardous, toxic or
infectious waste, material or substance (including medical waste), and to
petroleum products, material or waste, at any other location. No notice from any
Governmental Authority has ever been served upon the Company claiming any
violation of, or addressing any possible non-compliance with respect to, any
Environmental Law.
5.20 FINDERS. Seller has engaged JPS Capital Corporation as broker or
finder in connection with the transactions contemplated by this Agreement, and
Seller has agreed to pay such party a broker's fee at the Closing. Other than
JPS Capital Corporation, no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, understandings or arrangements with the Seller or the Company.
Seller has sole responsibility and liability with respect to all fees and
expenses of JPS Capital Corporation, and such fees shall neither be charged to
the Company nor reflected as a liability on the Company's Estimated Closing Date
Balance Sheet.
5.21 TAXES.
(A) The Company duly and properly filed an election to be treated as
an S corporation under Section 1362 of the Code and the rules and regulations
promulgated thereunder. Such election has been in full force and effect, without
interruption, for all periods from January 1, 1996 (the "S ELECTION DATE") until
the date hereof. From its inception to the S Election Date, the
21
Company was taxable as a C corporation for federal, state and local income tax
purposes. The Company's Federal S election has been recognized and given effect
in the State of Ohio and under local laws, such that the Company has been
treated as an S corporation for income tax purposes under Ohio state and local
laws for all periods, without interruption, from the S Election Date until the
date hereof. The Company has incurred no liability for federal, state and local
income taxes for any period from its inception to the date hereof, except as
reflected properly on the Company's Unaudited Financial Statements and the
Unaudited Interim Financial Statements.
(B) Except as set forth in Schedule 5.21, (i) all Tax (as defined
below) returns, statements, reports and forms or extensions with respect thereto
required to be filed with any Federal, state, local or other governmental
department or court or other authority having jurisdiction over it
("Governmental Authority") on or before the Closing Date by or on behalf of the
Company (collectively, the "Tax Returns"), have been or will be timely filed on
or before the Closing Date in accordance in all material respects with all
applicable Governmental Requirements; (ii) the Company has timely paid all Taxes
payable by it; and (iii) the Company is not a party to any pending Tax audit,
nor is any such Tax audit threatened by any Governmental Authority and there is
no basis for any deficiency notice, audit or similar assessment or collection
action with respect to Taxes.
(C) For purposes of this Agreement, "Tax" means any current or
deferred net income, gross income, sales, use, franchise, personal, pension or
real property tax.
5.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and delivery of
this Agreement, or any of the Company's Transaction Documents, does not, and the
consummation of the transactions contemplated hereby or thereby will not, create
any Liens on any of the Company's assets in favor of third parties.
5.23 SUBSIDIARIES AND JOINT VENTURES. The Company has no subsidiaries,
joint ventures or partnerships in which the Company is the record or beneficial
owner of any equity interest.
5.24 NO UNTRUE STATEMENT. None of the representations and warranties made
pursuant to this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary, in light of the circumstance under
which it was made, in order to make any such representation not misleading in
any material respect.
5.25 MEDICARE AND MEDICAID. The Company, to the extent necessary to conduct
its business in a manner consistent with past practice, is qualified for
participation in the Medicare and Medicaid programs. Except as disclosed on
Schedule 5.25, (A) the Company has not directly, or indirectly through third
parties (including, without limitation, nursing homes, long-term care facilities
and other health care facilities), received any notice of denial or recoupment
from the Medicare or Medicaid programs, or any other third party reimbursement
source with respect to the Company's operations, (B) to the knowledge of the
Company, there is no basis for the assertion after the Closing Date of any such
direct or indirect denial or recoupment claim, and (C) the Company has not
received directly, or indirectly through third parties (including, without
limitation, nursing homes, long-term care facilities and other health care
facilities), notice from any Medicare or
22
Medicaid program or from any other third party reimbursement source of any
pending or threatened investigations or surveys with respect to, or arising out
of, the Company's operations, and to the knowledge of the Company, no such
investigation or survey is pending, threatened or imminent.
5.26 LEASEHOLD INTERESTS. The Company owns no real property. Schedule 5.26
hereto sets forth a complete and correct list of all leases pursuant to which
the Company or any of its subsidiaries leases real property. Each of the Company
and its subsidiaries has valid leasehold interests in all such real property
free and clear of all Liens, except for Permitted Liens. The Company has
provided access to the Buyer to complete and correct copies of the leases
identified in Schedule 5.26. The operations and use by the Company of the leased
property complies with and does not violate the applicable lease or any zoning,
building or similar law, ordinance, order or regulation or any statement of
occupancy issued for or in respect of the Company's business. There has been no
violation by the Company, or to the knowledge of the Company, by any other
occupant of any leased property, of any Governmental Requirement affecting any
of the leased property, and no written notice of any such violation has been
issued to the Company or any Seller by any Governmental Authority.
5.27 POWER AND AUTHORITY. The Company has all requisite power and authority
to execute, deliver and perform this Agreement, including all Exhibits and
Schedules hereto, and as of the Closing, the Company will have all requisite
power and authority to execute and deliver the Transaction Documents required to
be delivered by the Company to the Buyer at the Closing.
5.28 BINDING EFFECT. This Agreement and all Transaction Documents executed
by the Company constitute the legal, valid and binding obligations of such
party, enforceable against such party in accordance with their respective terms.
5.29 QUESTIONNAIRES. The healthcare law questionnaire heretofore delivered
to the Company by Buyer (the "Questionnaire") will be attached hereto as Exhibit
5.29 and will as of the Closing Date have been fully and accurately completed
and will not contain any material misstatement of any fact and will not omit any
fact that would have to be stated in order not to render any response to such
questionnaire materially misleading.
5.30 QUESTIONABLE PAYMENTS. Neither the Company, nor any Seller, director,
officer, controlling person, employee or affiliate of the Company, (a) has used
any corporate funds of Company to make any illegal or unlawful payment to any
officer, employee, representative, agent of any government, or to any political
party or official thereof, including, without limitation, any of same that would
violate the Foreign Corrupt Practices Act of 1977, as amended; or (b) has made
or received any illegal payment, bribe, kickback, political contribution or
other similar questionable payment for any referrals or recommendations or
otherwise in connection with the operation of the Company's business.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLER
23
The Seller represents and warrants to Buyer as follows:
6.1 AUTHORITY. Such Seller has the full legal power and authority to make,
execute, deliver and perform this Agreement, including all Exhibits and
Schedules hereto, and the Transaction Documents. Such execution, delivery,
performance and consummation has been duly authorized by all necessary action,
corporate or otherwise, on the part of such Seller, and any necessary consents
of holders of indebtedness of such Seller have been obtained.
6.2 BINDING EFFECT. This Agreement and all Transaction Documents executed
by Seller constitute the valid and binding obligations of such party,
enforceable against Seller in accordance with their respective terms.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or delivery of
this Agreement or any of the Transaction Documents by Seller nor the performance
by Seller of the transactions contemplated hereby and thereby conflicts with, or
constitutes a breach of or a default under (i) any law, rule, judgment, order,
writ, injunction, or decree of any court currently in effect applicable to
Seller, or (ii) any rule or regulation of any administrative agency or other
governmental authority currently in effect applicable to Seller, or (iii) any
agreement, indenture, contract or instrument to which Seller is now a party or
by which any of the assets of Seller is bound.
6.4 CONSENTS. No authorization, consent, approval, license, exemption by,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary in connection with the execution, delivery and performance of this
Agreement or any of the Transaction Documents by Seller.
6.5 OWNERSHIP OF COMPANY STOCK. The Seller is the lawful record and
beneficial owner of all of the Company Stock with good and marketable title
thereto, free and clear of all Liens, claims and other charges thereon of any
kind. The Seller has the full legal power to transfer and deliver such Company
Stock in accordance with this Agreement, and delivery of such Company Stock to
Buyer pursuant hereto will convey good and marketable title thereto, free and
clear of all Liens, claims and other charges thereon or any kind. The shares of
Company Stock indicated on Schedule 5.4 as being owned by the Seller constitute
all of the issued and outstanding shares of the capital stock of the Company. On
the Closing Date there shall not be outstanding any warrants, options, or other
rights to subscribe for or purchase from the Company any shares of capital stock
of the Company, nor shall there be outstanding any securities convertible into
or exchangeable for such shares.
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the Seller as follows:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
24
7.2 POWER AND AUTHORITY. Buyer has the corporate power and authority to
execute, deliver and perform this Agreement, and as of the Closing, Buyer will
have the corporate power and authority to execute and deliver the Transaction
Documents required to be delivered by it to the Company at the Closing.
7.3 BINDING AGREEMENT. This Agreement has been duly executed and delivered
by Buyer. This Agreement is, and when executed and delivered by Buyer at the
Closing each of the Transaction Documents executed by Buyer will be, the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with their respective terms.
7.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or delivery of
this Agreement or any of the Transaction Documents by Buyer nor the performance
by the Buyer of the transactions contemplated hereby and thereby conflicts with,
or constitutes a breach of or a default under (i) the formation documents of the
Buyer, or (ii) any law, rule, judgment, order, writ, injunction, or decree of
any court currently in effect applicable to Buyer, or (iii) any rule or
regulation of any administrative agency or other governmental authority
currently in effect applicable to Buyer, or (iv) any agreement, indenture,
contract or instrument to which the Buyer is now a party or by which any of the
assets of the Buyer is bound.
7.5 CONSENTS. No authorization, consent, approval, license, exemption by,
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will be
necessary in connection with the execution, delivery and performance of this
Agreement or any of the Transaction Documents by Buyer.
7.6 SECURITIES AND EXCHANGE COMMISSION FILINGS. Buyer has made available to
the Seller a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Buyer with the Commission on
or after January 1, 1997 (the "SEC Documents"), which are all the documents
(other than preliminary material) that Buyer was required to file with the SEC
on or after January 1, 1997. As of their respective dates, none of the SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statements or omissions
of a material fact necessary so as not to render the statements therein
misleading, in light of the circumstances under which they were made, and the
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act or the Exchange Act, as the case
may be. The financial statements of the Buyer included in the SEC Documents
complied in all material respects with the then applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with GAAP during the periods
involved (except as may have been indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q promulgated by the SEC)
and fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the Buyer
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
25
7.7 DULY AUTHORIZED SHARES. The IHS Shares to be delivered at the Closing
will be, on the date said shares are delivered, duly authorized, validly issued,
fully paid and non-assessable, and such shares shall be listed, subject to
notice of issuance, on the NYSE.
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY
AND ITS SUBSIDIARIES
8.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING. Prior to the Closing
Date, Buyer may make, or cause to be made, such investigation of the Company's
(it being understood that, for the purpose of this Article VIII, "Company" shall
be deemed to refer collectively to the Company and its subsidiaries listed on
Schedule 5.23) financial and legal condition as Buyer deems necessary or
advisable to familiarize itself with the Company and/or matters relating to its
history or operation. The Company shall permit Buyer and its authorized
representatives (including legal counsel and accountants), to have full access
to the Company's books and records upon reasonable notice and during normal
business hours, and the Company will furnish, or cause to be furnished, to Buyer
such financial and operating data and other information and copies of documents
with respect to the Company's products, services, operations and assets as Buyer
shall from time to time reasonably request. The documents to which Buyer shall
have access shall include, but not be limited to, the Company's tax returns and
related work papers since their inception; and the Company shall make, or cause
to be made, extracts thereof as Buyer or their representatives may request from
time to time to enable Buyer and their representatives to investigate the
affairs of the Company and the accuracy of the representations and warranties
made in this Agreement. The Company shall cause their accountants to cooperate
with Buyer and to disclose the results of audits relating to the Company and to
produce the work papers relating thereto. Without limiting any of the foregoing,
it is agreed that Buyer will have full access to any and all agreements between
and among the previous and current shareholders regarding their ownership of
shares or the management or operation of the Company. The Company shall permit
Buyer and its authorized representatives to meet with employees and
representatives of the Company who are responsible for responses to, or who have
provided information with respect to, the questions set forth in the
Questionnaire.
8.2 CONFIDENTIALITY. Buyer shall retain in confidence all proprietary,
confidential or other non-public information (collectively, the "Information")
obtained pursuant to Section 8.1. If this Agreement is terminated prior to the
Closing pursuant to Article XIII, Buyer shall, upon written request, return all
Information disclosed to it, and shall not utilize in its own business or make
any other use of any Information disclosed to it by Seller. Notwithstanding the
foregoing, it is understood that Buyer may disclose any Information received by
it (i) to any governmental or regulatory authority in connection with obtaining
approval of the transactions contemplated hereby or as otherwise may be required
by applicable law, (ii) to its lenders in connection with obtaining their
approval of the transactions contemplated hereby, and (iii) to its attorneys,
accountants and other professional advisors, in connection with the transactions
contemplated hereby. Buyer's obligations with respect to any item of Information
disclosed to it shall terminate (x) upon the Closing of the transactions
contemplated hereby, or (y) in the event this Agreement is terminated prior to
the Closing pursuant to Article XIII, then, upon such item of Information
becoming disclosed in published literature or otherwise becoming generally
available to the public; provided, however,
26
that such public disclosure did not result, directly or indirectly, from any
act, omission, or fault of Buyer with respect to that item of Information. This
Section 8.2 shall not apply to any item of Information which at the time of
disclosure was already generally available to the public or which at the time of
disclosure was already in the possession of Buyer and was not acquired by Buyer,
directly or indirectly, from the Company or Sellers as protected information
under this Agreement.
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing, the Company and its subsidiaries shall maintain their existence
and, subject to Section 9.7 hereof, shall conduct their businesses in the
customary and ordinary course of business consistent with past practice.
9.2 NEGATIVE COVENANTS OF THE COMPANY. Without the prior written approval
of Buyer, between the date hereof and the Closing, the Company shall not, except
as contemplated by Section 9.7 hereof:
(A) cause or permit to occur any of the events or occurrences
described in Section 5.18 (Absence of Certain Events) of this Agreement, except
for S corporation distributions of cash to the Seller, to the extent fully
disclosed on Schedule 5.18;
(B) dissolve, reorganize, merge or enter into a share exchange with or
into any other entity;
(C) enter into any contract or agreement with any union or other
collective bargaining representative representing any employees without the
prior written consent of Buyer;
(D) sell or dispose of any Assets other than in the ordinary course of
business consistent with past practice;
(E) enter into any agreement, contract, commitment, lease or
instrument, except for agreements, in each case which are entered into in the
ordinary and customary course of business with unrelated third parties on
customary terms and conditions and for customary prices as disclosed to Buyer;
or
(F) make any change to their by-laws or articles of incorporation.
9.3 AFFIRMATIVE COVENANTS. Between the date hereof and the Closing, the
Company and each of its subsidiaries shall:
(A) maintain their businesses in substantially the same state of
repair, order and condition as on the date hereof, reasonable wear and tear or
loss by casualty excepted;
27
(B) maintain in full force and effect all Licenses currently in effect
with respect to their businesses unless such License is no longer necessary for
the operation of the Company and its subsidiaries;
(C) maintain in full force and effect the insurance policies and
binders currently in effect, or the replacements thereof, including without
limitation those listed on Schedule 5.16;
(D) use their reasonable efforts to preserve intact the present
business organization of the Company and its subsidiaries; keep available the
services of the Company's and its subsidiaries' present employees and agents;
and maintain the Company's and its subsidiaries' relations and goodwill with
suppliers, employees, affiliated medical personnel and any others having
business relating to the Company and its subsidiaries;
(E) maintain all of the books and records in accordance with their
past practices;
(F) comply in all material respects with all provisions of the
Contracts listed in Schedule 5.7 and with any other material agreements that the
Company and its subsidiaries have entered into in the ordinary course of
business since the date of this Agreement, and comply in all material respects
with the provisions of all material laws, rules and regulations applicable to
the Company's and its subsidiaries' businesses;
(G) cause to be paid when due, all taxes, assessments and charges or
levies imposed upon them or on any of their properties or which they are
required to withhold and pay over;
(H) promptly advise Buyer in writing of the threat or commencement
against the Company and its subsidiaries of any claim, action, suit or
proceeding, arbitration or investigation or any other event that would
materially adversely affect the operations, properties, assets or prospects of
the Company and its subsidiaries; and
(I) notify the Buyer in writing of any event involving the Company and
its subsidiaries which has had or may be reasonably expected to have a material
adverse effect on the business or financial condition of the Company and its
subsidiaries or may involve the loss of contracts with any of the Company's or
its subsidiaries' customers.
9.4 PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, Buyer shall
use its reasonable efforts to obtain all consents and approvals of governmental
agencies and all other parties necessary for the lawful consummation of the
transactions contemplated hereby and the lawful use, occupancy and enjoyment of
the Company's and its subsidiaries' businesses by Buyer in accordance herewith
("REQUIRED APPROVALS"). The Company and its subsidiaries shall cooperate with
and use their reasonable efforts to assist Buyer in obtaining all such
approvals.
9.5 SUPPLEMENTARY FINANCIAL INFORMATION. Within fifteen (15) days after the
end of each calendar month between the date of this Agreement and the Closing
Date, the Company
28
shall provide to Buyer unaudited financial statements (including at a minimum,
income statements, a balance sheet and a statement of cash flows) for such month
then ended that shall present fairly the results of the operations of the
Company and its subsidiaries, on a consolidated basis, at such date and for the
period covered thereby, all in accordance with GAAP, in each case, certified as
true and correct by the Company's Chief Financial Officer. If the Closing occurs
on or before the fifteenth day of any calendar month, then the financial
statements for the immediately preceding month, as required by this Section 9.5,
shall be provided on the day prior to the Closing Date.
9.6 EXCLUSIVITY. Until the earlier of Closing or the termination of this
Agreement pursuant to Section 13.1, neither the Company nor the Seller, nor any
of their respective affiliates, representatives or brokers shall enter into any
agreement, commitment or understanding with respect to, or engage in any
discussions or negotiations directly or indirectly with, or encourage or respond
to any solicitations from, any other party with respect to the sale, lease or
management of any of the Assets, or in respect of the sale of any shares of
capital stock in the Company.
9.7 PURCHASE OF RECEIVABLES.
(A) On the day immediately preceding the Closing Date (the
"Receivables PURCHASE DATE") the Seller shall purchase from the Company, and the
Company shall assign and sell to the Seller, all of the Company's accounts
receivable existing as of the close of business on the Receivable Purchase Date
(the "Pre-Closing A/R"). The purchase price payable by the Seller to the Company
for the Pre-Closing A/R shall be an amount equal to the book value of such Pre-
Closing A/R, net of any allowance for doubtful accounts, as reflected properly
on the Company's books and records in accordance with GAAP. The purchase price
payable for the Pre-Closing A/R shall be paid to the Company by wire transfer or
other form of immediately available funds.
(B) The purchase of the Pre-Closing A/R, as described in subsection
(a) above, shall be documented by a xxxx of sale and assignment in the form of
Exhibit 9.7 (a) hereto, which shall provide, among other things, that the sale
and assignment of said Pre-Closing A/R shall be deemed a final sale and
assignment, without recourse to the Company for any offset, deduction,
counterclaim, lien, encumbrance or any other claim or dispute relating to such
Pre-Closing A/R. Said purchase of the Pre-Closing A/R shall further be
documented by a written schedule or computer printout of the Pre-Closing A/R (a
copy of which shall be attached as an exhibit to the xxxx of sale and assignment
referred to above), indicating the name of each account debtor, the portion of
the Pre-Closing A/R and allowance for doubtful accounts attributable to such
account debtor, and an aging of the accounts receivable owed by such account
debtor. Such schedule or printout shall also indicate which, if any, of the
account debtors are related to or affiliates of the Company (including officers,
directors or employees thereof) or of the Seller.
(C) In addition to the representations and warranties of Seller and
the Company set forth in Articles V and VI hereof (which the Seller and the
Company expressly acknowledge are applicable to the transactions contemplated by
this Section 9.7), the Seller and the
29
Company jointly and severally further represent and warrant to Buyer as follows
with respect to the transactions contemplated by this Section 9.7:
(I) The Pre-Closing A/R arose from bona fide services fully
performed by the Company in accordance with the terms of enforceable contracts;
(II) The Company presently has, and immediately prior to the sale
and assignment thereof to the Seller shall have had, good and marketable title
to the Pre-Closing A/R, free of any Liens;
(III) The Pre-Closing A/R balances and the allowances for
doubtful accounts relating thereto as shown on the books and records of the
Company on the Receivables Purchase Date are fairly and accurately classified
and valued in accordance with GAAP;
(IV) The Pre-Closing A/R are not subject to any claim of
reduction, counterclaim, set-off, recoupment, or any claim for credits,
allowances or adjustments by the account debtors because of unsatisfactory
services or for any other reason; and
(V) Neither the contract or arrangement pursuant to which any
Pre- Closing A/R arose nor any Health Care Laws or other Governmental
Requirements prohibits the sale and assignment of such Pre-Closing A/R to the
Seller as contemplated herein, or renders such sale and assignment void or
unenforceable or subject to any fine, penalty or expense of any nature.
9.8 COLLECTION OF RECEIVABLES.
(A) After the Closing, Newco will provide exclusive billing and
collection services with respect to the Pre-Closing A/R assigned to and
purchased by Seller pursuant to Section 9.7 above. Newco's billing and
collection services with respect to the Pre-Closing A/R shall be substantially
the same services as those undertaken by Newco with respect to billing and
collecting its own accounts receivable; provided, however, that Newco shall have
no obligation to undertake any extraordinary measures (including, without
limitation, the taking of legal action or the referral of delinquent accounts to
third party collection agencies), or to incur any unusual or extraordinary
expense to collect the Pre-Closing A/R notwithstanding that it may undertake
such measures or incur such expenses on its own behalf.
(B) For the period indicated in Section 9.8(e) below Newco shall have
the exclusive right to xxxx and collect the Pre-Closing A/R and to establish
standards and procedures for such billing and collection process. In addition,
Newco shall retain sole charge and custody of the billing and collection records
relating to the Pre-Closing A/R; provided, however, that upon request, Seller
shall be permitted a right of reasonable access and review, subject to
supervision, of such billing records in order to confirm the reports prepared
pursuant to Section 9.8 (c) below.
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(C) Within twenty-five (25) days after the end of each month, Newco
shall send to Seller a summary of the Pre-Closing A/R which have been collected
during the immediately preceding month, along with payment of such collections.
Payment shall be made by wire transfer to the account designated in writing by
Seller.
(D) Any payment received by Newco from an account debtor that is a
Pre- Closing A/R account debtor, which payment is not identified as having been
made for a specific service rendered, shall be applied by Newco to the accounts
receivable balance of such account debtor so that the oldest receivables
(including for this purpose the Pre-Closing A/R) are paid before the current
receivables are paid.
(E) Newco shall cease all billing and collection services with respect
to the Pre-Closing A/R on the earlier of (x) twelve (12) months after the
Closing Date, or (y) thirty (30) days after written notice by Seller to Newco.
Upon the expiration or earlier termination of Newco's obligations under this
Section 9.8, all billing and collection services with respect to the Pre-Closing
A/R shall be undertaken by Seller in his own name.
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's obligations to consummate the Merger is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any one or more
of which may be waived by Buyer in writing. Upon failure of any of the following
conditions, Buyer may terminate this Agreement pursuant to and in accordance
with Article XIII herein.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company and the Seller made pursuant to this Agreement shall be true and
correct in all material respects at and as of the Closing Date (except for such
representations and warranties of Company and Seller which are, by their terms,
qualified by materiality, in which case such representations and warranties
shall be true in all respects), as though such representations and warranties
were made at and as of such time except to the extent affected by the
transactions herein contemplated.
10.2 PERFORMANCE OF COVENANTS. Each of the Seller and the Company shall
have performed or complied in all material respects with their respective
agreements and covenants required by this Agreement to be performed or complied
with by him or it prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. The Seller and the Company shall have
executed and delivered to Buyer a certificate, dated the Closing Date, upon
which Buyer may rely, certifying that the conditions contemplated by Sections
10.1 and 10.2 applicable to him and it have been satisfied.
10.4 OPINION OF COUNSEL. The Seller and the Company shall have delivered to
Buyer an opinion, dated the Closing Date, of their counsel, in substantially the
form attached hereto as Exhibit 10.4.
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10.5 LEGAL MATTERS. No preliminary or permanent injunction or other order
(including a temporary restraining order) of any governmental authority which
prevents the consummation of the transactions contemplated by this Agreement
shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. Buyer shall have received a certificate of
the Secretary or other officer of the Company certifying as of the Closing Date
a copy of the Resolutions of the Board of Directors authorizing the execution
and full performance of the Transaction Documents and the incumbency of its
officers.
10.7 MATERIAL CHANGE. Since the date of the Unaudited Financial Statements
there shall not have been any material adverse change in the condition
(financial or otherwise) of the assets, properties or operations of the Company
and its subsidiaries.
10.8 APPROVALS.
(A) The consent or approval of the following persons, to the extent
necessary for the consummation of the transactions contemplated hereby, shall
have been granted or obtained: (i) approvals from applicable Governmental
Authorities, (ii) approvals or consents required in connection with the transfer
of third party payor agreements and (iii) any other material Required Approvals.
(B) None of the foregoing consents or approvals (i) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, contract, commitment, agreement, license, easement, right or other
authorization with respect to the Company's and its subsidiaries' businesses,
other than as disclosed or approved hereunder, or (ii) shall impose on the Buyer
any material condition or provision or requirement with respect to the Company's
and its subsidiaries' businesses or their operation that is more restrictive
than or different from the conditions imposed upon such operation prior to
Closing.
10.9 EMPLOYMENT AGREEMENT. Xxxxxxx Xxxxx shall have executed and delivered
to Buyer his employment agreement in the form of Exhibit 10.9 hereto (the
"EMPLOYMENT AGREEMENT").
10.10 CONSENTS.
(A) Buyer shall have received the written consent from each party to
each Designated Contract where such consent is required by reason of the
transactions contemplated by this Agreement.
(B) With respect to Designated Contracts other than those referred to
in subsection (a) above, Seller shall have, within five (5) days after the
execution of this Agreement, given written notice of the intended change of
control of the Company contemplated hereunder to each party to each such
Designated Contract, and as of the Closing Date no such party shall have
32
expressed in writing or otherwise a present or future intent to terminate or
seek to modify its Contract with the Company.
10.11 ESTIMATED CLOSING DATE BALANCE SHEET. The Company shall have
delivered the Estimated Closing Date Balance Sheet to Buyer.
10.12 REAL PROPERTY CONSENTS. The Company shall have obtained the written
consent to assignment of each landlord with whom the Company or any of its
subsidiaries has a lease of real property which, by its terms, requires consent,
and the written consent of such landlords shall have been received by the Buyer.
Alternatively, the Company shall have delivered a waiver from each such landlord
of any provision contained in any of such leases which would require the
landlord's consent upon any assignment of the lease. Buyer shall have received
notice from the Company by the Closing Date, identifying any landlord that has
not given any necessary consent as of such date.
10.13 COST AND EXPENSES. The Seller shall have paid all costs, fees and
expenses (including without limitation, filing fees, transfer taxes, stamp
taxes, legal fees and broker, audit and appraisal fees) incurred by Seller and
the Company or any of its subsidiaries in connection with the transactions
contemplated by this Agreement, including, without limitation, fees payable to
JPS Capital Corp. Seller shall retain sole responsibility and liability with
respect to all such fees and expenses, and such fees and expenses shall neither
be or have been charged to the Company nor reflected as a liability on the
Estimated Closing Date Balance Sheet.
10.14 STOCK CERTIFICATES. Seller shall have delivered to Buyer all stock
certificates representing Company Stock duly endorsed in blank.
10.15 OTHER DOCUMENTS. The Seller and the Company shall have furnished
Buyer with all other documents, certificates and other instruments required to
be furnished to Buyer by the Seller and the Company pursuant to the terms
hereof.
ARTICLE XI: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Seller's obligation to consummate the Merger is subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any one or more
of which may be waived by the Seller in writing. Upon failure of any of the
following conditions, the Seller may terminate this Agreement pursuant to and in
accordance with Article XIII herein:
11.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer in this Agreement shall be true at and as of the Closing Date as though
such representations and warranties were made at and as of such time, except to
the extent affected by the transactions herein contemplated.
11.2 PERFORMANCE OF COVENANTS. Buyer shall have performed or complied with
each of its agreements and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
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11.3 DELIVERY OF CLOSING CERTIFICATE. Buyer shall have delivered to the
Seller a certificate of a senior or executive vice president of Buyer dated the
Closing Date upon which the Company can rely, certifying that the conditions
contemplated by Sections 11.1 and 11.2 applicable to it have been satisfied.
11.4 OPINION OF COUNSEL. Buyer shall have delivered to the Company an
opinion, dated the Closing Date, of Blass & Xxxxxx, Esqs., counsel for Buyer, in
the form attached as Exhibit 11.4.
11.5 LEGAL MATTERS. No preliminary or permanent injunction or other order
(including a temporary restraining order) of any governmental authority which
prevents the consummation of the transactions contemplated by this Agreement
shall have been issued and remain in effect.
11.6 AUTHORIZATION DOCUMENTS. Seller shall have received a certificate of
the Secretary or other officer of Buyer certifying a copy of Resolutions of the
Board of Directors of Buyer authorizing Buyer's execution and full performance
of the Transaction Documents and the incumbency of the officers of Buyer.
11.7 EMPLOYMENT AGREEMENT. The Buyer shall have entered into the Employment
Agreement with Xxxxxxx Xxxxx.
11.8 OTHER DOCUMENTS. Buyer shall have furnished the Company with all
documents, certificates and other instruments required to be furnished to the
Company by Buyer pursuant to the terms hereof.
ARTICLE XII: OBLIGATIONS OF THE PARTIES AFTER CLOSING
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Absent fraud, all
representations and warranties made by each party in this Agreement and in each
Schedule and Transaction Document shall survive the Closing Date and for a
period of one (1) year after the Closing, notwithstanding any investigation at
any time made by or on behalf of the other party, provided that the
representations and warranties contained in Section 5.30 (Questionable
Payments), Section 5.25 (Medicare and Medicaid) and Section 5.21 (Tax), shall
survive until thirty (30) days after the applicable period of limitations for
audits by the applicable Governmental Authority shall have expired, including
extensions for any necessary appeals, the representations and warranties
contained in Section 6.5 (Ownership of Company Stock) shall have no expiration
date, and the representations and warranties contained in Sections 5.28 and
Section 6.2 (Binding Effect) insofar as it relates to the legality, validity,
binding effect and enforceability of the covenants set forth in Section 12.7
shall survive for the term of such covenants. All representations and warranties
related to any claim asserted in writing prior to the expiration of the
applicable survival period shall survive (but only with respect to such claim)
until such claim shall be resolved and payment in respect thereof, if any is
owing, shall be made.
34
12.2 INDEMNIFICATION BY SELLER AND COMPANY. Subject to the limitations set
forth in Sections 12.1, 12.4 and 12.5, the Company, prior to the Closing, and
the Seller, prior to and after the Closing, jointly and severally, shall
indemnify and defend Buyer and hold it harmless against and with respect to any
and all damage, loss, liability, deficiency, cost and expense (including,
without limitation, reasonable attorney's fees and expenses) (all of the
foregoing hereinafter collectively referred to as "LOSS") resulting from:
(A) any inaccuracy in any representation or certification, or breach
of any warranty, made by the Seller or the Company pursuant to this Agreement;
(B) the breach of any covenant or undertaking made by the Seller or
the Company in this Agreement;
(C) the ownership or operation of the Company or its business or
assets prior to the Closing Date, including, without limitation, (i) any Excess
Reimbursement Liabilities (as defined in Section 2.7) and any other Prohibited
Liabilities; (ii) any Taxes resulting from the operation of the business of the
Company or ownership of any of the Assets for any period ending before the
Closing Date; (iii) any Loss arising out of the noncompliance of the Company
with COBRA or any like statute for any period ending on or before the Closing
Date; (iv) any claim of the type that would be covered by a standard liability
insurance policy, including, without limitation, professional liability,
malpractice, general liability, automobile liability, worker's compensation or
employer's liability insurance, arising out of the operation of the Company's
business prior to the Closing Date, including payments of any deductibles
applicable to the aforesaid policies; and
(D) any and all actions, suits, proceedings, demands, assessments,
judgments, settlements (to the extent approved by the Seller, such approval not
to be unreasonably withheld, delayed or conditioned), costs and legal expenses
incident to any of the foregoing; but excluding current liabilities and
long-term liabilities that are reflected on the Estimated Closing Date Balance
Sheet or that otherwise are taken into account in any adjustment to the Merger
Consideration under Section 2.3.
12.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend the Seller
and Company and hold them harmless against and with respect to any and all Loss
resulting from:
(A) any inaccuracy in any representation or certification, or breach
of any warranty, made by Buyer pursuant to this Agreement; or
(B) the breach of any covenant or undertaking made by Buyer in this
Agreement; or
(C) the ownership or operation of the Company or its subsidiaries or
its business or assets after the Closing Date.
35
12.4 ASSERTION OF CLAIMS. Any claims for indemnification under Sections
12.2(a) or 12.3(a) must be asserted by written notice by a date which is no
later than one (1) year following the Closing Date, except that (i) any claim
based upon a breach of the representations and warranties contained in Section
5.30 (Questionable Payments), Section 5.25 (Medicare and Medicaid) or Section
5.21 (Tax) may be asserted until thirty (30) days after the applicable period of
limitations for audits by the applicable Governmental Authority shall have
expired, including extensions for any necessary appeals, (ii) any claim based
upon a breach of the representations and warranties contained in Section 6.5
(Ownership of Company Stock) may be asserted at any time following the Closing
Date, and (iii) any claim based upon a breach of the representations and
warranties contained in Sections 5.28 and 6.2 (Binding Effect), insofar as it
related to the legality, validity, binding effect and enforceability of the
covenants set forth in Section 12.6, may be asserted at any time during the term
of such covenants.
12.5 INDEMNITY BASKET AND CAP. Notwithstanding any other provision of this
Article XII, no claim for indemnification made under Sections 12.2(a) or 12.3(a)
shall be made unless and until Buyer or Seller, as the case may be, has incurred
Loss in excess of Twenty-five Thousand ($25,000) Dollars in the aggregate, in
which case the party seeking indemnification shall be entitled to assert claims
including such initial ($25,000 ) Dollars. The maximum aggregate liability
(excluding any Loss arising from fraud) of any party for indemnification
hereunder shall not exceed an amount equal to the Merger Consideration.
12.6 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS.
(A) Each indemnified party (each, an "Indemnitee") shall give the
indemnifying party (the "Indemnitor") prompt notice of each claim for which it
seeks indemnification. Failure to give such prompt notice shall not relieve any
Indemnitor of its indemnification obligation, provided that such indemnification
obligation shall be reduced by any damages the Indemnitor demonstrates it has
suffered resulting from a failure to give prompt notice hereunder. The
Indemnitors shall be entitled to participate in the defense of such claim. If at
any time the Indemnitor acknowledges in writing that the claim is fully
indemnifiable by it under this Agreement, and, if requested by the Indemnitee,
the Indemnitor posts adequate bond or security, the Indemnitor shall have the
right to assume control of the defense (but not the settlement, if such a
settlement may adversely affect Indemnitee or its current or future operations)
of such claim at its own expense; unless (i) Indemnitee shall have been
authorized in writing by the Indemnitor to defend such action with counsel of
its own choice in connection with the defense of such action, or (ii) the
Indemnitor shall not have employed counsel to have charge of the defense of such
action within twenty (20) days after the date of notice of the claim for which
indemnification is sought is given to the Indemnitor or (iii) the Indemnitor
shall have failed to undertake and reasonably pursue the defense of such action,
or (iv) the Indemnitee shall have reasonably concluded that there may be
material defenses available to it or them which are different from or additional
to those available to the Indemnitor. If any event described in clauses (i)
through (iv) above shall occur, then the Indemnitor shall not have the right to
direct the defense of such action on behalf of the Indemnitee with counsel of
its own choice, and the reasonable fees and expenses of the Indemnitee shall be
borne by the Indemnitor, provided that such counsel shall be reasonably
acceptable to the
36
Indemnitor. If the Indemnitors do assume control of the defense of any such
claim in accordance with the foregoing, then: (x) the Indemnitor shall not
defend the claim for which indemnification is being sought in any manner that
would likely have a material adverse effect on the Indemnitee or on any
relationship that the Indemnitee may have with any customers, vendors, suppliers
or others, and (y) the Indemnitee shall not settle such claim without the
written consent of the Indemnitor, which consent shall not be unreasonably
withheld, delayed or conditioned. Nothing contained in this Section 12.6 shall
prevent either party from assuming control of the defense and/or settling any
claim against it for which indemnification is not sought under this Agreement.
(B) Notwithstanding anything to the contrary contained in this
Agreement, if there shall be any claim for Reimbursement Liabilities with
respect to which Buyer shall be seeking indemnification, Buyer will have the
sole right to contest or appeal such claim (using at least the same standard of
care as it would apply to contests or appeals with respect to reimbursement
liabilities in general)in accordance with the procedures set forth in its
manual; provided, however, that if there shall be no procedure set forth in its
appeals manual with respect to the contest or appeal of any type of Excess
Reimbursement Liabilities, then Buyer shall diligently pursue same in good
faith. Buyer may, in its sole and absolute discretion, at any time discontinue
any such contest or appeal or enter into a settlement with respect thereto prior
to the final determination thereof (a "Final DETERMINATION").
12.7 RESTRICTIONS.
(A) From and after the Closing Date, the Seller shall not disclose,
directly or indirectly, to any person outside of Buyer's employ without the
express authorization of the Buyer, any patient lists, customer lists, pricing
strategies, customer files, or patient files and records of the Company and its
subsidiaries, any proprietary data or trade secrets owned by the Company and its
subsidiaries or any financial or other information about the Company and its
subsidiaries not then in the public domain; provided, however, that the Seller
shall be permitted to make such disclosures as may be required by law or by a
court or governmental authority, or to its accountants and legal counsel,
provided such parties agree to be bound by the confidentiality restrictions set
forth herein.
(B) After the Closing Date, the Seller shall not engage or participate
in any effort or act to induce any of the customers, physicians, suppliers,
associates, employees or independent contractors of the Company and its
subsidiaries to cease doing business, or their association or employment, with
the Company and its subsidiaries.
(C) The Seller shall not, for a period of five (5) years after the
Closing Date, directly, or indirectly, for or on behalf of himself or any other
person, firm, entity or other enterprise, be employed by, be a director or
manager of, act as a consultant for, be a partner in, have a proprietary
interest in, give advice to, loan money to or otherwise associate with, in a
business fashion, any person, enterprise, partnership, association, corporation,
joint venture or other entity which is directly or indirectly in the business of
owning, operating or managing any entity of any type, licensed or unlicensed,
which is engaged in or provides the Services anywhere within the State
37
of Ohio; provided, however, that this provision shall not be deemed to prohibit
Seller from owning or acquiring up to two (2%) percent of the capital stock of
any corporation whose capital stock is publicly traded.
(D) The Seller acknowledges that the restrictions contained in this
Section 12.7 are reasonable and necessary to protect the legitimate business
interests of Buyer and that any violation thereof by him would result in
irreparable harm to Buyer. Accordingly, the Seller agrees that upon the
violation by him of any of the restrictions contained in this Section 12.7,
Buyer shall be entitled to obtain from any court of competent jurisdiction a
preliminary and permanent injunction as well as any other relief provided at law
or equity, under this Agreement or otherwise. In the event any of the foregoing
restrictions are adjudged unreasonable in any proceeding, then the parties agree
that the period of time or the scope of such restrictions (or both) shall be
adjusted in such a manner or for such a time (or both) as is adjudged to be
reasonable.
12.8 RECORDS. On the Closing Date, the Seller and the Company shall
deliver, or cause to be delivered, to Buyer all records and files not then in
Buyer's possession relating to the operations of the Company and its
subsidiaries.
12.9 STUB-PERIOD TAX RETURN. Buyer, Seller and the Company agree that the
income of the Company in its final taxable year, or part thereof, shall be based
on a closing of the books by the Company as of the close of business on the
Closing Date. After the Closing, Seller shall prepare and timely file any and
all Tax Returns attributable to such final taxable year in accordance with all
applicable Governmental Requirements, and shall timely pay all Taxes payable by
him with respect to such final taxable year. Seller shall be permitted
reasonable access to financial books and records regarding the Company, to the
extent necessary for Seller to comply with this Section 12.9.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time at or prior
to the Closing by:
(A) Buyer, if any condition precedent to Buyer's obligations
hereunder, including without limitation those conditions set forth in Article X
hereof, have not been satisfied by the Closing Date or pursuant to Section 14.1
if any portion of the Assets is damaged or destroyed as a result of fire, or for
any other casualty reason whatsoever;
(B) Company, if any condition precedent to the obligations of the
Seller or the Company hereunder, including without limitation those conditions
set forth in Article XI hereof, have not been satisfied by the Closing Date; or
(C) the mutual consent of Buyer and Company.
13.2 EFFECT OF TERMINATION. If a party terminates this Agreement because
one of its conditions precedent has not been fulfilled, or if this Agreement is
terminated by mutual consent,
38
or if it is terminated pursuant to Section 14.1, this Agreement shall become
null and void without any liability of any party to the other; provided,
however, that if such termination is by reason of the breach by any party of any
of its representations, warranties or obligations under this Agreement, the
other party shall be entitled to be indemnified for any Losses incurred by it by
reason thereof in accordance with Article XII hereof (and for such purposes such
Article XII shall survive the termination of this Agreement).
ARTICLE XIV: CASUALTY, RISK OF LOSS
14.1 CASUALTY, RISK OF LOSS. The Company and the Seller shall bear the risk
of all loss or damage to any of the Assets from all causes which occur prior to
the Closing. If at any time prior to the Closing any portion of the Assets is
damaged or destroyed as a result of fire, other casualty or for any reason
whatsoever, the Company and the Seller shall immediately give notice thereof to
Buyer. Buyer shall have the right, in its sole and absolute discretion, within
ten (10) days of receipt of such notice, to (1) elect not to proceed with the
Closing and terminate this Agreement, or (2) proceed to Closing and consummate
the transactions contemplated hereby and receive any and all insurance proceeds
received or receivable by the Seller or the Company on account of any such
casualty. Nothing contained in this Section 14.1 shall limit or adversely affect
the right of Buyer to receive indemnification for any Losses incurred by reason
of any breach by the Seller or the Company of any representation, warranty or
obligation under this Agreement in accordance with Section 12.2 hereof (and for
such purposes such Section 12.2 shall survive the termination of this
Agreement).
ARTICLE XV: MISCELLANEOUS
15.1 COSTS AND EXPENSES. Except as expressly otherwise provided in this
Agreement, Buyer, Seller and the Company shall bear their own costs and expenses
in connection with this Agreement and the transactions contemplated hereby;
provided, however, that no such costs and expenses shall be charged to the
Company and its subsidiaries.
15.2 PERFORMANCE. In the event of a breach by any party of its obligations
hereunder, the other party shall have the right, in addition to any other
remedies which may be available, to obtain specific performance of the terms of
this Agreement, and the breaching party hereby waives the defense that there may
be an adequate remedy at law. Should any party default in its performance, or
other remedy, the prevailing party shall be entitled to its reasonable
attorneys' fees.
15.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the benefit
of each party hereto and its successors and proper assigns. Neither Buyer nor
Company or Seller may assign their interests under this Agreement to any other
person or entity without the prior written consent of the other parties;
provided, however, that prior to Closing Buyer may assign its rights,
39
duties and obligations hereunder to one or more subsidiaries or affiliates of
Buyer; and further provided that after the Closing Buyer may assign its rights,
duties and obligations hereunder without restriction.
15.4 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and the
Exhibits and Schedules hereto embody the entire agreement and understanding of
the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein. The captions used herein
are for convenience only and shall not control or affect the meaning or
construction of the provisions of this Agreement. This Agreement may be executed
in one or more counterparts, and all such counterparts shall constitute one and
the same instrument.
15.5 COOPERATION - FURTHER ASSISTANCE. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed and delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably requested or
necessary to carry out the intent and purposes of this Agreement, and to vest in
Buyer good title to, possession of and control of the Company and its assets.
15.6 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given or made when personally
delivered to the party or parties entitled to receive the notice or five (5)
days after sent by certified or registered mail, postage prepaid, or on the next
business day if sent for next day delivery by a nationally recognized overnight
courier, in either case, properly addressed to the party or parties entitled to
receive such notice at the address stated below:
If to the Company: Paragon Rehabilitative Services, Inc.
00000 Xxxxxxxx Xxxxx
Xxxxx, Xxxx 00000
If to the Seller: Xxxxxxx Xxxxx
00000 Xxxxxxxx Xxxxx
Xxxxx, Xxxx 00000
with a copy to: Xxxx Xxxxxxxx Xxxxxxxx and Xxxxxx
Tower at Erieview, Xxx. 0000
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx
If to the Buyer: Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxx, Executive Vice-President
cc: Xxxxxxxx X. Xxxxxx, General Counsel
with a copy to: Xxxxxxx X. Xxxxx, Esq.
Blass & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
40
15.7 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
15.8 RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this Agreement
shall be deemed to create rights in persons not parties hereto, other than the
successors and proper assigns of the parties hereto.
15.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, disregarding any rules relating
to the choice or conflict of laws.
15.10 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after the
execution and delivery of this Agreement by the parties hereto, this Agreement
may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any portion of the transactions contemplated hereby. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties.
15.11 SEVERABILITY. Any provision, or distinguishable portion of any
provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 12.7 shall be
determined to be overly broad in any respect, then it should be enforceable to
the maximum extent permissible under the law. To the extent permitted by
applicable law, the parties waive any provision of law which renders a provision
hereof prohibited or unenforceable in any respect.
41
15.12 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and all of which shall together
constitute one and the same instrument.
15.13 PUBLIC ANNOUNCEMENTS. Any general public announcements or similar
media publicity with respect to this Agreement or the transactions contemplated
herein shall be at such time and in such manner as Buyer shall determine;
provided that nothing herein shall prevent either party, upon as much prior
notice as shall be possible under the circumstances to the other, from making
such written announcements as such party's counsel may consider advisable in
order to satisfy the party's legal and contractual obligations in such regard.
15.14 ARBITRATION. Any dispute or controversy between any of the parties
hereto pertaining to the performance or interpretation of this Agreement shall
be settled by binding arbitration pursuant to the rules of the American
Arbitration Association. The cost of such proceeding shall be shared equally by
all parties thereto, and each such party shall bear its own costs incurred as a
result of its participation in any such arbitration.
15.15 NO CONTRIBUTION OR INDEMNITY. After the Closing the Seller shall not
have any right of contribution or indemnity from the Company and no right of
subrogation to proceed against the Company with respect to any liability for
representations, warranties and covenants made by Seller or the Company pursuant
to this Agreement or otherwise.
[SIGNATURES TO FOLLOW]
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
COMPANY:
PARAGON REHABILITATIVE
SERVICES, INC.
By:
-----------------------------------
Xxxxxxx Xxxxx, President
SELLER:
--------------------------------------
XXXXXXX XXXXX
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:
-----------------------------------
Executive Vice President
Corporate Development
NEWCO:
IHS ACQUISITION XXXIV, INC.
By:
-----------------------------------
Executive Vice President
43
