EXHIBIT 2.3
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
AND RESTRICTIVE COVENANTS
THIS AGREEMENT is made as of November 18, 1998, by and among INDIANA
RESPIRATORY CARE, INC., an Indiana corporation, having its principal place of
business at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 (the "SELLER" or
the "CORPORATION"), J. XXXX XXXXXXX, the sole shareholder of Seller (the
"SHAREHOLDER"), [and Shareholder's spouse, , if a community property state],
INTEGRATED OF WESTCLIFF PARK, INC., a Delaware corporation (the "BUYER") and
INTEGRATED HEALTH SERVICES, INC., a Delaware corporation ("IHS").
W I T N E S S E T H :
WHEREAS, Seller operates a home respiratory care and durable medical
equipment business in the State of Indiana (the "BUSINESS"); and
WHEREAS, Shareholder is the sole shareholder of the Seller; and
WHEREAS, Buyer is a wholly owned subsidiary of IHS;
WHEREAS, Seller wishes to transfer its business and substantially all
of its assets to the Buyer in exchange for voting shares of IHS and a limited
amount of cash in a transaction intended to qualify as a "reorganization" within
the meaning of ss.368(a)(1)(c) of the Internal Revenue Code of 1986, as amended
(the "CODE"), it being contemplated by the Seller and Buyer that the Seller will
thereafter, as an integral part of the transaction, distribute the IHS shares to
the Shareholder in compile liquidation of the Seller and dissolve, and Buyer
also desires to acquire from Seller and Shareholder, and each of Seller and
Shareholder desire to grant to Buyer, covenants not to compete and other
restrictive covenants as described in paragraph 16 hereof (the "RESTRICTIVE
COVENANTS"); and
WHEREAS, the consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby has been obtained,
including without limitation, all approvals of governmental authorities and
parties to any contracts to be assigned to Buyer in connection herewith.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Sale of Assets and Restrictive Covenants.
(a) The Assets. As of the Closing Date referred to below in
paragraph 8, Seller shall be deemed to have sold, transferred, conveyed and
assigned, free and clear of all liens, claims, security interests, pledges,
restrictions on transfer or use and other encumbrances of any kind or nature
whatsoever ("LIENS"), all of Seller' rights, title and interest in, to or under:
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(i) Accounts Receivable. All of the accounts
receivable of the Business including, without limitation, all accounts
receivable set forth on the Schedule of Accounts Receivable Data
attached hereto as Schedule 1(a)(i); and
(ii) Inventory; Fixed Assets. All inventory and fixed
assets of the Business, including, without limitation, all of the same
set forth on the Schedule of Inventory and Fixed Assets attached hereto
as Schedule 1(a)(ii); and
(iii) Motor Vehicles. Except as set forth below, all
motor vehicles of the Business, including without limitation, all of
the same set forth on the Schedule of Motor Vehicles attached hereto as
Schedule 1(a)(iii); and
(iv) Other Assets. All other assets of any kind,
tangible or intangible, real, personal or mixed, owned and used or held
for use by Seller in connection with the Business, including, without
limitation, all of the following: (A) the Patients' List of the
Business, as described in Schedule 1(a)(iv)(A); (B) the telephone
numbers listed on the Schedule of Telephone Numbers and Licenses
attached hereto as Schedule 1(a)(iv)(B); (C) all personal property,
machinery and equipment including, but not limited to, the equipment as
set forth on Schedule 1(a)(iv) attached hereto; (D) all of Seller's
prepaid assets; (E) rights under contracts, agreements, including,
without limitation, franchise agreements, and instruments; (F) any
Assets used in the operation of the Business, but not owned by the
Seller; and (G) all intangible rights of Seller of every kind and
description used in, or held for use in connection with, the operation
of the Business, including, without limitation, all intangible assets,
and to the extent permitted by applicable law, all licenses, permits
and authorizations.
(b) Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and Seller shall not be deemed to have sold, transferred,
conveyed or assigned the following assets to Buyer: Seller's real property
located at 0000 Xxxxxxxx Xxxx, Xxxxxxxxxxxx, XX 00000, two leased 1998 Chevrolet
Blazers, cash on hand and an anticipated tax refund in the amount of
approximately $30,000, Certificate of Incorporation, qualification to do
business in any jurisdiction, taxpayer identification number, minute books,
stock transfer records and other documents related specifically to Seller's
corporate organization and maintenance (collectively, "EXCLUDED ASSETS").
(c) Restrictive Covenants. Pursuant to paragraph 17 hereof,
each of Seller and Shareholder is granting to Buyer the Restrictive Covenants.
2. Purchase Price; Method of Payment.
(a) Purchase Price. The aggregate "PURCHASE PRICE" for the
Assets and the Restrictive Covenants shall be One Million Two Hundred Thousand
Dollars ($1,200,000). The Purchase Price shall be allocated among the Assets and
the Restrictive Covenants in the manner set forth on the Allocation Schedule
attached hereto as Schedule 2(a), and the parties hereto expressly consent to
the allocation stated therein.
(b) Method of Payment. At the Closing (as defined in paragraph
9), Buyer shall pay, disburse, and deliver the Purchase Price as follows:
(i) by delivery of shares of common stock, $.001 par
value, of IHS ("IHS SHARES" or "IHS STOCK") having a value equal to
Fifty Thousand Dollars ($50,000) using the Trade Price (as such term is
defined in paragraph 7(a) to value such shares (the "GENERAL ESCROW
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AMOUNT" or "ESCROW FUND") and IHS Shares having a value equal to Two
Hundred Thousand Dollars ($200,000) using the Trade Price to value such
shares (the "CLAW-BACK AMOUNT") (the General Escrow Amount, the
Claw-back Amount, and all accrued interest and income earned thereon
shall be referred to as the "ESCROW FUND") to CoreStates Bank, N.A. as
escrow agent ("ESCROW AGENT"), to be held by Escrow Agent during the
Escrow Period (as defined in paragraph 6(d), below) pursuant to the
terms of an Escrow Agreement, in the form attached hereto as Exhibit
2(b)(i)-A (the "ESCROW AGREEMENT") pursuant to which, among other
things, the Escrow Agent shall acknowledge that it is holding the
Escrow Shares as the agent of Buyer pursuant to the Stock Pledge
Agreement in the form of Exhibit 2(b)(i)-B hereto (the "STOCK PLEDGE
AGREEMENT"). The entire Escrow Fund shall be subject to the provisions
of paragraphs 6 and 18 hereof.
(ii) $200,000 in cash, shall be paid and delivered to
the "PAYING AGENT" designated by Seller (and reasonably satisfactory to
Buyer), to be held and administered pursuant to the "PAYMENT ESCROW
AGREEMENT" attached hereto as Exhibit 2(b)(ii); and
(iii) by delivery of IHS Shares having a value equal
to Forty Thousand Dollars ($40,000) using the Trade Price to value such
shares (the "INITIAL BROKER'S FEE") on behalf of Seller, to Xxxxxxxxx,
Inc. (the "BROKER"), in satisfaction of all fees and compensation due
to the Broker at Closing in connection with the transactions
contemplated by this Agreement. Buyer shall also pay to Broker on
behalf of Seller an additional two percent (2%) of any portion of the
Claw- back Amount upon its release to Seller; and any such payment
shall be credited against the amount of the Claw-back Amount payable to
Seller. Seller represents and warrants to Buyer that the Broker has
acted as Seller's representative and broker in connection with the
transactions contemplated by this Agreement, and authorizes and directs
Buyer to withhold such sums from the Purchase Price and disburse such
sums directly to the Broker.
(iv) by delivery of IHS Shares having a value equal
to Seven Hundred Ten Thousand Dollars ($710,000) using the Trade Price
to value such shares (the balance of the Purchase Price) shall be paid
to Seller.
(c) Other Obligations. From and after the Closing Date, the
Seller will not engage in any business, will promptly liquidate and dissolve as
a corporation and will distribute the IHS Stock received pursuant to this
paragraph 2 to the Shareholder in complete cancellation and redemption of the
Seller's IHS Shares.
3. Purchase Price Adjustment. The parties acknowledge that the Purchase
Price was determined using a multiple of the expected Annual Operating Profit
(as hereinafter defined) of the Business after the Closing, and such expected
Annual Operating Profit was based upon the Seller's best good faith estimate
thereof. Accordingly, if the average Annual Operating Profit during the period
commencing on December 1, 1998 and ending November 30, 2000 (the "APPLICABLE
PERIOD") shall be less than $300,000, then the Buyer shall be entitled to
receive an amount from the Seller equal to five times (5x) the amount of such
deficiency (the "CLAW-BACK PAYMENT"); provided that the Claw-back Payment shall
not exceed the amount of the Claw-back Amount. For purposes hereof, the term
"ANNUAL OPERATING PROFIT" shall be determined as set forth on Exhibit 3 attached
hereto.
The parties further acknowledge that they have used their best efforts
to determine that the Purchase Price is consistent with the fair market value of
the Business and its assets as of the Closing, based in part on the projected
future revenues of the Business. The foregoing provisions of this paragraph 3
are intended solely to adjust the Purchase Price, if necessary, to reflect fair
market value and not to induce Seller or the Shareholder to refer or influence
the referral of any prospective client, customer or patient (collectively,
"PROSPECTIVE PATIENTS") to the Business or to recommend the Business to any
Prospective Patients. Accordingly, (i) prior to the Closing, Seller and the
Shareholders shall not engage in any marketing activities
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(including any direct solicitation of Prospective Patients) except in the
ordinary and usual course of conducting the Business, consistent with lawful
past practices, and (ii) after the Closing, Seller and Shareholders shall not
take any action, directly or indirectly, to induce any Prospective Patients to
become patients of the Business.
4. Indemnity Against Creditors Claims; No Assumption of Liabilities.
Seller has requested that Buyer waive the requirements of the bulk sales and
transfer laws of the State of Indiana. Seller and Shareholder agree to indemnify
Buyer and save and hold Buyer harmless against all Damages (as defined in
paragraph 16(c)) arising out of any claims made by creditors (including, without
limitation, any Federal, state or local taxing authority) of Seller that relate
to the Business, or that arise out of the failure to comply with any of such
laws.
5. Closing Date Liabilities.
(a) Seller and Shareholder represent and warrant that, to the
best of Seller's and Shareholder's knowledge and belief after diligent inquiry,
all of Seller's liabilities, as of the Closing Date are listed on the Schedule
of Liabilities attached hereto as Schedule 5(a) the "LISTED LIABILITIES"). For
purposes of this Agreement "LIABILITIES" shall mean and include all claims,
lawsuits, liabilities, obligations or debts of any kind or nature whatsoever,
whether absolute, accrued, due, direct or indirect, contingent or liquidated,
matured or unmatured, joint or several, whether or not for a sum certain,
whether for the payment of money or for the performance or observance of any
obligation or condition, whether or not asserted as of the date hereof, and
whether or not of a type which would be reflected as a liability on a balance
sheet (including, without limitation, federal, state and local taxes of any
nature) in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), including without limitation, any liabilities
relating to any Excluded Assets, malpractice or other tort claims, claims for
breach of contract, any claims of any kind asserted by patients, former
patients, employees and former employees of Seller or any other party that are
based on acts or omissions by Seller occurring on or before the Closing Date,
amounts due or that may become due in connection with the participation of
Seller in the Medicare or Medicaid programs or due to any other health care
reimbursement or payment intermediary, or that may be due by Seller to any other
third party payor, accounts payable, notes payable, trade payables, lease
obligations, indebtedness for borrowed money, accrued interest, and contractual
obligations. Seller and Shareholder acknowledge that the Purchase Price for the
Assets is based on the accuracy of Seller's and Shareholder's representations
and warranties contained in this Agreement, including, but not limited to,
Seller's and Shareholder's representations and warranties contained in this
paragraph 5(a). Without limiting the generality of the foregoing, Buyer will not
assume any, and Seller shall remain liable for each, liability of Seller arising
out of any facts, circumstances, matter or occurrences existing on or prior to
the Closing Date (whether or not known) ("CLOSING DATE LIABILITIES").
(b) Without limiting the generality of the provisions of
subparagraph (a) above, Buyer shall not assume the Contracts (as hereinafter
defined in paragraph 14(b)), if any, set forth on Schedule 5(b), or any
liabilities with respect thereto, and shall not, in any case, assume any
liabilities under any Contracts (whether or not such Contracts are assumed by
Buyer) to the extent such liabilities arise out of facts or circumstances in
existence, or obligations to be satisfied, on or prior to the Closing Date.
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6. Right of Offset Against the Escrow Fund.
(a) Event of Deficiency. If:
(i) Buyer pays for any Closing Date Liabilities, then
Seller and Shareholder shall jointly and severally reimburse Buyer for
such payment (a "LIABILITIES DEFICIENCY"); or
(ii) the aggregate value of the Corporation's
collectible accounts receivable as of the Closing Date is determined to
be less than $215,000 as determined by actual net cash collections of
such receivables during the 365-day period immediately following the
Closing Date, then Seller and Shareholder, jointly and severally, shall
pay to Buyer the amount of such deficiency ("ASSET VALUE DEFICIENCY");
or
(iii) Buyer is entitled to any payment pursuant to
paragraph 3 above (an "ADJUSTMENT CLAIM"); or
(iv) Buyer shall be entitled to be indemnified for
any Damages pursuant to this Agreement ("INDEMNIFICATION CLAIMS", and
together with any Liabilities Deficiencies and Asset Value
Deficiencies, and Adjustment Claims, collectively "CLAIMS" and each, a
"CLAIM") provided, however, that Seller's indemnification obligations
arising from any Asset Value Deficiencies and Adjustment Claims shall
not exceed the lesser of the value of the balance of shares held in
escrow or $250,000;
then, and in any of such events, Buyer may provide written notice to Seller of
the Claim, in which case Buyer shall be entitled to recover the amount of such
Claim in accordance with the following procedure.
(b) Procedure if Seller Fails to Pay. If Seller fails to pay
any Claim in full to Buyer within ten (10) days from the date of such written
notice (said ten (10) day period hereinafter referred to as the "NOTICE
PERIOD"), Buyer shall have the right to make offset against the Escrow Fund, in
accordance with the terms and conditions of the Escrow Agreement, in amounts
from time to time equal to the amount of such Claim (subject, however, in the
case of a "DISPUTE", to the provisions of paragraph 16 hereof applicable
thereto), and Seller agrees to any such offset. Buyer's right to proceed against
the Escrow Fund shall not be exclusive of any other rights or remedies that it
may have under this Agreement, law, equity or otherwise.
(c) Escrow Costs. The fees of the Escrow Agent shall be borne
fifty percent (50%) by Buyer and fifty percent (50%) by Seller.
(d) Escrow Period.
(i) The "ESCROW PERIOD" shall terminate on the date that
is ninety (90) days after the second anniversary of the Closing Date.
(ii) To the extent funds remain in the Escrow Fund:
(A) an amount equal to (x) the General Escrow
Amount, less (y) the amount of any Asset Value Deficiencies, Indemnification
Claims and Liabilities Deficiencies Claims claimed pursuant to paragraph 6(a)
above, shall be paid to Seller on the first anniversary of the Closing Date; and
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(B) The balance, if any, of the Escrow Fund
remaining (the "REMAINING ESCROW FUNDS") at the close of business on the last
day of the Escrow Period, shall be disbursed to Seller within fifteen (15) days
after the last day of the Escrow Period.
(iii) Notwithstanding anything to the contrary contained
in this subparagraph (d), if any Claim made by Buyer is in dispute at the time
that any amounts are otherwise to be disbursed to Seller, then there shall be
withheld from such amount to be disbursed and there shall be retained in the
Escrow Fund, an amount such that there will be remaining in the Escrow Fund at
least twice the amount of the Claim asserted by Buyer until the final settlement
of such Claim or Claims.
(iv) Any interest accruing or income earned on any
portion of the Escrow Fund shall be paid to the party receiving such portion of
the Escrow Fund.
7. IHS Stock. The Purchase Price shall be payable by means of the
delivery of IHS Shares in accordance with the following:
(a) Share Value. The number of IHS Shares issuable at Closing (the
"CLOSING DATE SHARE COUNT") shall be calculated based upon a price per share of
such stock equal to the average closing New York Stock Exchange ("NYSE") price
of such stock for the thirty (30) trading day period ending on the date that is
two (2) business days immediately preceding the Closing Date (the "TRADE
PRICE").
(b) Registration Rights. IHS will prepare and use its reasonable
commercial efforts to cause to be filed within one-hundred and twenty (120) days
following the Closing Date, and will use its reasonable commercial efforts to
have declared effective by the Securities and Exchange Commission (the
"COMMISSION"), a registration statement for the registration of the IHS Shares
issued to the Seller or Shareholder in connection with this transaction,
including the shares, if any, issuable as a share adjustment pursuant to
paragraph 7(c), under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and IHS shall maintain the effectiveness of each such registration
statement for a period of one (1) year following the date it became effective
(the "REGISTRATION DATE"), except to the extent that an exemption from
registration may be available.
(c) If the value of the IHS Shares (that have not previously been
transferred by the Seller) on the date that is two (2) trading days prior to the
Registration Date is more than $2.00 per share less than the Trade Price, then
IHS will issue an additional number of shares to Seller that would increase the
total number of shares issued to Seller to be equivalent to the number of IHS
Shares that Seller would have received had the price per share been no more than
$2.00 less per share than the Trade Price ("FLOOR PRICE"). Buyer shall promptly
deliver to Seller the number of IHS Shares as required hereunder. If the value
of the IHS Shares on the Registration Date is equivalent to or greater than the
Floor Price, Seller shall not be required to return any IHS Shares previously
delivered by Buyer.
(d) Registration Expenses. Seller and the Shareholder shall not be
responsible for, and IHS shall bear, all of the reasonable expenses of IHS
related to such registration including, without limitation, the fees and
expenses of its counsel and accountants, all of its other costs, fees and
expenses incident to the preparation, printing, registration and filing under
the Securities Act of the registration statement and all amendments and
supplements thereto, the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of IHS Shares and the costs and
expenses (including fees and disbursements of its counsel) incurred in
connection with the qualification of IHS Shares under the Blue Sky laws of
various jurisdictions. IHS, however, shall not be required to pay underwriter's
or brokerage discounts, commissions or expenses, or to pay any costs or expenses
arising out of any Shareholder's or any transferee's failure to comply with its
obligations under this Section 7.
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(e) Resale Limitations. The Shareholder hereby covenants with IHS
that all sales by the Shareholder shall be effected solely through X.X. Xxxxxxx.
(f) Registration Procedures, etc. In connection with the
registration rights granted to the Shareholder with respect to the IHS Shares as
provided in this Section 7, IHS covenants and agrees as follows:
(i) IHS will promptly notify the Shareholder, at any time when
a prospectus relating to a registration statement under this Section 7
is required to be delivered under the Securities Act, of the happening
of any event known to IHS as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing.
(ii) IHS shall furnish the Shareholder with such number of
prospectuses as shall reasonably be requested.
(iii) IHS shall take all necessary action which may be
required in qualifying or registering IHS Shares included in a
registration statement for offering and sale under the securities or
Blue Sky laws of such states as reasonably are requested by the
Shareholder, provided that IHS shall not be obligated to qualify as a
foreign corporation or dealer to do business under the laws of any such
jurisdiction.
(iv) The information included or incorporated by reference in
the registration statement filed pursuant to this Section 7 will not,
at the time any such registration statement becomes effective, contain
any untrue statement of a material fact, or omit to state any material
fact required to be stated therein as necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading or necessary to correct any statement in any
earlier filing of such registration statement or any amendments
thereto. The registration statement will comply in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder. IHS shall indemnify the Shareholder, his
successors and assigns, and each person, if any, who controls the
Shareholder within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACt"), against all loss, claim, damage, expense or liability (including
all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become
subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in such registration statement executed by IHS or based upon
written information furnished by IHS filed in any jurisdiction in order
to qualify IHS Shares under the securities laws thereof or filed with
the Commission, any state securities commission or agency, NYSE or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements contained therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to IHS by the Seller or Shareholder expressly for
use in such registration statement, any amendment or supplement thereto
or any application, as the case may be. If any action is brought
against the Shareholder in respect of which indemnity may be sought
against IHS pursuant to this subparagraph 7(f)(iv), such Shareholder
shall within thirty (30) days after the receipt thereby of a summons or
complaint, notify IHS in writing of the institution of such action and
IHS shall assume the defense of such actions, including the employment
and payment of reasonable fees and expenses of counsel (reasonably
satisfactory such Shareholder). The Shareholder shall have the right to
employ his own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Shareholder unless (A) the
employment of such counsel shall have been authorized in writing by
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IHS in connection with the defense of such action, or (B) IHS shall not
have employed counsel to have charge of the defense of such action, or
(C) such indemnified party or parties shall have reasonably concluded
(after notice to IHS) that there may be defenses available to him or
them which are different from or additional to those available to IHS
(in which case, IHS 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 Shareholder and such controlling persons shall be
borne by IHS.
(v) The Shareholder, and his successors and assigns, shall
indemnify IHS, its officers and directors and each person, if any, who
controls IHS within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Exchange Act against all loss, claim, damage, or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Securities Act, the Exchange
Act or any other statute, common law or otherwise, arising from
information furnished by or on behalf of such Shareholder, or his
successors or assigns for specific inclusion in such registration
statement.
(g) Notice of Sale. If the Shareholder desires to transfer all or
any IHS Shares, he will deliver prior written notice to IHS, 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 Shareholder will sell the IHS
Shares in compliance with the disclosure therein and discontinue any offers and
sales thereunder upon notice from IHS that the registration statement relating
to the IHS Stock being transferred is not "current" until IHS gives further
notice that offers and sales may be recommenced. In the event of any such notice
from IHS, IHS agrees to use it reasonable commercial efforts to file
expeditiously such amendments to the registration statement as may be necessary
to bring it current during the period specified in Section 7(b) and to give
prompt notice to the Shareholder when the registration statement has again
become current. If the Shareholder delivers to IHS an opinion of counsel
reasonably acceptable to IHS and its counsel and to the effect that the proposed
transfer of IHS Shares may be made without registration under the Securities
Act, the Shareholder will be entitled to transfer IHS Shares in accordance with
the terms of the notice and opinion of their counsel.
(h) Furnish Information. It shall be a condition precedent to the
obligations of IHS to take any action pursuant to this Section 7 that the
Shareholder shall furnish to IHS such information regarding himself, the IHS
Shares held by him, and the intended method of disposition of such securities as
shall be required to effect the registration of his IHS Shares. In that
connection, each transferee of the Shareholder shall be required to represent to
IHS that all such information which is given is both complete and accurate in
all material respects. Such Shareholder shall deliver to IHS a statement in
writing from the beneficial owners of such securities that they bona fide intend
to sell, transfer or otherwise dispose of such securities. Each transferee will,
severally, promptly notify IHS at any time when a prospectus relating to a
registration statement covering such transferee's shares under this Section 7 is
required to be delivered under the Securities Act, of the happening of any event
known to such transferee as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
statements as then existing.
(i) Investment Representations. The Shareholder and Seller represent
and warrant to IHS that the IHS Shares being issued hereunder are being
acquired, and will be acquired, by the Shareholder 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 Shareholder acknowledges that the IHS Shares constitute
restricted securities under Rule 144 promulgated by the
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Commission pursuant to the Securities Act, and may have to be held indefinitely,
and the Shareholder agrees that no IHS Shares may be sold, transferred,
assigned, pledged or otherwise disposed of except pursuant to an effective
registration statement or an exemption from registration under the Securities
Act, the rules and regulations thereunder, and under all applicable state
securities laws. The Shareholder 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
Shareholder has had the opportunity to make inquiries of and obtain from
representatives and employees of IHS such other information about IHS as he
deems necessary in connection with such investment.
(j) Legend. It is understood that the certificates evidencing the
IHS Shares shall bear a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION
OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT.
(k) Certain Transferees. Prior to the effective date of registration
of the IHS Shares, the Shareholder shall not transfer any shares of IHS Shares
to any person or entity except as expressly permitted by this Agreement and
unless such transferee shall have agreed in writing to be bound by the
provisions applicable to the Shareholder under this Section 7.
8. Employees. It is expressly understood and agreed that Buyer's
purchase of the Assets does not involve any undertaking on the part of Buyer to
retain any of the employees of the Seller, although Buyer shall have the right
to offer employment to any such employees. Seller shall remain fully responsible
for any severance, benefits, costs or liabilities arising out of the termination
by Seller of any of its employees, all of which liabilities shall constitute
Closing Date Liabilities. Seller shall also remain fully responsible for any
benefits, costs or liabilities incurred or accrued prior to Closing with respect
to each employee retained by Buyer.
9. Closing Date. The consummation of the transactions contemplated by
this Agreement is occurring concurrently herewith and is sometimes referred to
as the "CLOSING", and the date on which such consummation occurs, including,
without limitation, the execution and delivery of this Agreement by each of the
parties hereto, is sometimes referred to as the "CLOSING DATE".
10. Asset Condition and Quality. Seller and Shareholder, jointly and
severally, represent, warrant and covenant that, as of the Closing Date, all
physical Assets of Seller are free of defects and in good working order,
condition and repair, except for ordinary wear and tear, and conform in all
material respects with all applicable ordinances, regulations, zoning and other
laws.
11. Instruments of Conveyance and Transfer. At the Closing:
(a) Seller will deliver to Buyer such bills of sale, assignments,
motor vehicle certificates of title, and other good and sufficient instruments
of conveyance and transfer in form sufficient to sell, assign and transfer the
Assets to Buyer as of the Closing Date, such documents to contain full
warranties of
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title, and which documents shall be effective to vest in Buyer good, absolute,
and marketable title to the Assets of the Business being transferred to Buyer by
Seller, free and clear of all Liens.
(b) Simultaneously with such delivery, Seller will take all steps
as may be requisite to put Buyer in actual possession, operation and control of
the Assets to be transferred hereunder.
(c) Seller will deliver to Buyer an opinion, dated the Closing
Date, of its counsel, in substantially the form attached hereto as Schedule
11(c).
(d) Seller will deliver a certificate of its Secretary or other
officer certifying as of the Closing Date a copy of resolutions of its board of
directors and, if applicable, its stockholders, authorizing the execution,
delivery and full performance of this Agreement and the Transaction Documents
(as defined in paragraph 14(a) below), and the incumbency of its officers.
12. Sales and Transfer Taxes; Fees. All applicable sales, transfer,
use, filing and other taxes and fees that may be due or payable as a result of
the conveyance, assignment, transfer or delivery of the Assets of the Business
to be conveyed and transferred as provided herein, whether levied on Seller or
Buyer, shall be borne by Seller.
13. Restrictions on Operations of Seller. Seller and Shareholder,
jointly and severally, represent, warrant and covenant that, except as expressly
disclosed on Schedules hereto, since the most recent Financial Statement Date
referred to in paragraph 14(o) below, through the Closing Date, there has been
no material adverse change in the condition (financial or otherwise) or
prospects of the Seller or the Business, and Seller has not:
(i) sold, assigned or transferred any Assets, except in the
ordinary course of business, consistent with past practice;
(ii) subjected any Assets to any Liens;
(iii) entered into any contract or transaction binding the Business
other than contracts or transactions entered into in the ordinary course of
business, consistent with past practice;
(iv) incurred any liabilities or indebtedness other than in the
ordinary course of business, consistent with past practice;
(v) except in the ordinary course of business, consistent with past
practice, or otherwise to comply with any applicable minimum wage law, paid any
bonuses, increased the salaries or other compensation of any of its employees,
or made any increase in, or any additions to, other benefits to which any of
such employees may be entitled;
(vi) discharged or satisfied any Lien or encumbrance, or satisfied,
paid or prepaid any material liabilities, other than in the ordinary course of
business consistent with past practice, or failed to pay or discharge when due
any liabilities, the failure to pay or discharge of which has caused or may
cause any actual damage or risk of loss to the Corporation or the Assets;
(vii) failed to collect any accounts receivable in the ordinary
course of business, consistent with past practice;
(viii) changed any of the accounting principles followed by it or
the methods of applying such principles;
(ix) canceled, modified or waived any debts or claims held by it,
other than in the ordinary course of business, consistent with past practice, or
waived any rights of substantial value, whether or not in the ordinary course of
business; or
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(x) issued any capital stock, or declared or paid or set aside or
reserved any amounts for payment of any dividend or other distribution in
respect of any equity interest or other securities, or redeemed or repurchased
any of its capital stock or other securities, or made any payment to any of its
affiliates except for payments of compensation in the ordinary course of
business, consistent with past practice and disclosed to Buyer as such;
(xi) instituted, settled or agreed to settle any litigation, action
or proceeding before any Governmental Authority (as such term in defined in
paragraph 13(d) below) relating to it or its property or received any threat
thereof; or
(xii) entered into any material transaction other than in the
ordinary course of business, consistent with past practice.
14. Representations and Warranties by Seller and Shareholder. As a
material inducement to Buyer to execute and perform its obligations under this
Agreement, Seller and Shareholder hereby, jointly and severally, represent and
warrant to Buyer as follows as of the Closing Date:
(a) Organization of Seller; Enforceability.
(i) Seller is a corporation, organized, and in good standing,
respectively, in the State of Indiana, and is qualified to do business and is in
good standing in each other State where the nature of its business or the assets
held by it requires such qualification, and has requisite corporate power and
authority to carry on its Business as presently being conducted, to enter into
this Agreement, and to carry out and perform the terms and provisions of this
Agreement. Each of this Agreement and each agreement, instrument, certificate
and document in connection with this Agreement or the transactions contemplated
hereby ("TRANSACTION DOCUMENTS") constitutes the legal, valid and binding
obligations of Seller, enforceable against it in accordance with its respective
terms. Seller does not have any subsidiaries.
(ii) This Agreement and each Transaction Document to which
Shareholder is a party constitutes the legal, valid and binding obligations of
Shareholder, enforceable against Shareholder in accordance with its terms.
(b) Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any Governmental Authority or of any
party to any contract, agreement, instrument, commitment, lease, indenture or
understanding (written, oral or implied) by which Seller or any of the Assets is
bound ("CONTRACTS") or by which Shareholder or any Shareholder's assets is bound
("SHAREHOLDER CONTRACTS") is necessary in connection with the execution,
delivery and performance of this Agreement or any of the Transaction Documents
by Seller or Shareholder.
(c) Litigation. Except as set forth on Schedule 14(c), there are no
actions, suits or proceedings affecting Seller or any of the Assets which are
pending or threatened against Seller or affecting any of its properties or
rights, at law or in equity, or before any Governmental Authority (as
hereinafter defined), nor is Seller or any of its respective officers or
directors or Shareholder aware of any facts which to them or their knowledge
might reasonably be expected to result in any such action, suit or proceeding.
(d) Compliance with Laws and Contracts. Seller is not in violation
of, or in default under: any term or provision of its Articles of Incorporation
or By-Laws; or any judgment, order, writ, injunction, decree, statute, law,
rule, regulation, directive, mandate, ordinance or guideline ("GOVERNMENTAL
REQUIREMENTS") of any Federal, state, local or other governmental or
quasi-governmental agency, bureau, board, council, administrator, court,
arbitrator, commission, department, instrumentality, body or other authority
("GOVERNMENTAL AUTHORITIES"); or of any Contract. The execution and delivery by
Seller and Shareholder of, and the performance and compliance by each of them
with this Agreement, and the
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Transaction Documents and the transactions contemplated hereby and thereby, does
not and will not result in the violation of or conflict with or constitute a
default under any such term or provision or result in the creation of any Lien
on any of the properties or assets of Seller or Shareholder pursuant to any such
term or provision or any term or provision of any Governmental Requirement by
which any Shareholder is bound or of any Shareholder Contract.
(e) Corporate Acts and Proceedings. The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the
transactions contemplated hereby and thereby, including the sale and transfer of
the Assets by Seller as provided for in this Agreement, have been approved and
consented to by the Board of Directors of Seller and, if applicable, by the
requisite number of holders of its outstanding capital stock, and all action
required by any applicable Governmental Requirement by the stockholders of
Seller with regard thereto have been appropriately authorized and accomplished.
(f) Title to Assets. Seller has good and indefeasible title to all
of the Assets, free and clear of all Liens.
(g) Contracts. Set forth on Schedule 14(g) hereto is a list of all
material Contracts of Seller including, without limitation, each:
(i) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or termination of or with, any
director, officer, employee, consultant, sales representative, or agent or group
of employees, or any non-competition, non-solicitation, confidentiality or
similar agreement with any such person or persons;
(ii) contract, agreement or arrangement for the acquisition or
disposition of any assets, property or rights outside the ordinary course of
business or requiring the consent of any party to the transfer and assignment of
any such assets, property or rights (by purchase or sale of assets, purchase or
sale of stock, merger or otherwise), that is executory or that was entered into
during the three (3) year period ending on the date hereof;
(iii) contract, agreement or commitment which contains any
provisions requiring the Seller or the Business to indemnify or act for any
other person or entity or to guaranty or act as surety for any other person or
entity;
(iv) contract, agreement or commitment restricting the Seller
or the Business from, or in favor of either of the Seller or the Business and
restricting any other person or entity from, conducting business anywhere in the
world for any period of time or restricting the use or disclosure of any
confidential or proprietary information or prohibiting the solicitation of
business or of employees, agents or others;
(v) partnership, joint venture or management contract or
similar arrangement, or agreement which involves a right to share profits or
future payments with respect to the Business or any portion thereof or the
business of any other person or entity;
(vi) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(vii) contract, agreement or arrangement granting a leasehold
or other interest in real property, including without limitation, subleases,
licenses and sublicenses (the "LEASES");
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(viii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement
applicable to any employee, consultant or agent of the Seller or the Business
not covered by clause (i) above;
(ix) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(x) agreement with respect to the settlement of any litigation
or other proceeding with any third person or entity;
(xi) agreement relating to the ownership, transfer, voting or
exercise of other rights with respect to any equity in the Seller, or any other
entity, including without limitation, registration rights agreements, voting
trust agreements and shareholder and proxy agreements;
(xii) contract, agreement or commitment to provide services or
products, or
(xiii) agreement not made in the ordinary and normal course of
business and consistent with past practice, or involving consideration in excess
of $25,000 in each case, that is not set forth in subsections (i) through (xii)
above.
To the best of Seller's and Shareholder's knowledge, no party to any
Contract other than Seller is in default under any Contract. Seller has
delivered to Buyer true and complete copies of each written Contract (or a
description of each oral Contract) requested by Buyer.
(h) Brokers. Seller has been represented solely by the Broker, and
as a result, a brokerage commission is due and payable by Seller to the Broker
by delivery of IHS Shares having a value equal to $40,000 (using the Trade Price
to value such shares) at the Closing and 2% of any portion of the Claw-back
Amount payable to Seller is due, and no other broker or finder is entitled to
any additional broker's or finder's fee or other commission in respect thereof
based in any way on agreements, understandings or arrangements with Seller.
(i) Employment Contracts; Employees. There are no Contracts of
employment between Seller and any officer or other employee of the Business,
except as set forth on Schedule 14(g)(i) above. The name, position, current rate
of compensation and any vacation or holiday pay, sick pay, personal leave,
severance and any other compensation arrangements or fringe benefits, of each
current employee, sales representative, consultant and agent of the Seller,
contained on the Schedule of Personnel Payrates and Advances attached hereto as
Schedule 14(i) is accurate and complete. No employee, consultant or agent of the
Seller has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 14(i). Since the date that is two (2)
years prior to the Closing Date, there has been no material adverse change in
the relationship between the Seller and its employees, nor any strike or labor
disturbance by any of such employees affecting the Business and there is no
indication that such a change, strike or labor disturbance is likely. No
employees of the Seller are represented by any labor union or similar
organization in connection with their employment by or relationship with,
Seller, and to the knowledge of the Seller and Shareholder, there are no pending
or threatened activities the purpose of which is to achieve such representation
of all or some of such employees, and there are no threats of strikes, work
stoppages or pending grievances by any such employees. Seller is not party to
any collective bargaining or other labor contracts.
(j) Employee Benefit Plans. Seller has no pension, bonus,
profit-sharing, or retirement plans for officers or employees of the Business,
nor is Seller required to contribute to any such plan. Without limiting the
generality of the foregoing, Seller does not maintain or make contributions to
and has not at any time in the past maintained or made contributions to any
employee benefit plan which is subject
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to the minimum funding standards of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or to any multi-employer plan subject to the
terms of the Multi-Employer Pension Plan Amendment Act of 1980 (the
"MULTI-EMPLOYER ACT").
(k) Insurance. All inventories, buildings and fixed assets owned or
leased by the Seller are and will be adequately insured against fire and other
casualty through the Closing Date. The information contained on the Schedule of
Insurance Policies, attached hereto as Schedule 14(k), is accurate and complete.
Schedule 14(k) also sets forth any claims made under any of the insurance
policies referred to above or increases in premiums therefore during the past
two years. True and complete copies of all policies of fire, liability and other
forms of insurance held or owned by the Seller or otherwise in force and
providing coverage for the Business or any of the Assets (including but not
limited to medical malpractice insurance, and any state sponsored plan or
program for worker's compensation) have been delivered to Buyer. Such policies
are owned by and payable solely to the Seller, and said policies or renewals or
replacements thereof will be outstanding and duly in force at the Closing Date,
and all premiums due on or before the Closing Date in respect thereof have been
paid. Seller purchased title insurance as set forth on Schedule 14(k).
(l) Disclosure. No representation or warranty by Seller or
Shareholder in this Agreement or in any Transaction Document, contains any
untrue statement of material fact or omits to state any material fact, of which
Shareholder or Seller or any of its officers, directors or stockholders has
knowledge or notice, required to make the statements herein or therein contained
not misleading.
(m) Officers, Directors and Shareholders of Seller. As of the
Closing Date, the Shareholder is the sole shareholder of Seller and the
following individuals are all of the officers and directors of Seller:
Name Office/Position
---- ---------------
J. Xxxx Xxxxxxx President/Secretary
------------------- -------------------------
------------------- -------------------------
------------------- -------------------------
(n) Inventory and Fixed Assets. The information contained on the
Schedule of Inventory and Fixed Assets as of the most recent Financial Statement
Date, attached hereto as Schedule 1(a)(ii), is accurate and complete.
(o) Tax Returns and Financial Statements. Seller has furnished Buyer
with its tax returns (the "TAX RETURNS") for the periods ended December 31, 1996
and December 31, 1997, and has furnished Buyer with its financial statements
(the "FINANCIAL STATEMENTS") for the periods ended December 31, 1997, April 30,
1998 and September 30, 1998 (the "FINANCIAL STATEMENT DATES"), copies of which
are attached hereto as Schedule 14(o). The Financial Statements: (i) are in
accordance with the books and records of the Seller; (ii) fairly present the
financial condition of the Seller at such date and the results of its operations
for the periods specified; and (iii) were prepared on a basis consistent with
prior accounting periods. The income statements included in the Financial
Statements do not contain any items of special or nonrecurring income or expense
or any other income not earned or expense not incurred in the ordinary course of
business, consistent with past practice, except as expressly specified therein,
and such Financial Statements include all adjustments, which consist only of
normal recurring accruals, necessary for such fair presentation.
(p) Supplemental Tax Information. Seller has furnished Buyer with
its most recent (i) tax registration certificates, and (ii) tax returns required
of it by the federal government and each state or other locality in which it
conducts business, which tax returns in all instances where applicable include,
but shall not be limited to franchise taxes, federal, state and local tangible
personal property tax returns, and federal, state and local sales tax returns,
which registration certificates and tax returns are set forth, collectively, on
the Schedule of Supplemental Tax Information, attached hereto as Schedule 14(p).
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(q) Adverse Business Developments. No notice has been received by
Seller or Shareholder of any new or substantially expanded firm or individual
engaged in a business directly competitive to Seller in its primary service area
within six (6) months before the date hereof. Neither Seller nor Shareholder has
received, either orally or in writing, any notice specific to it of pending or
threatened adverse action with respect to any Medicare, Medicaid, private
insurance or third party payor reimbursement method, practice or allowance as to
any business activity engaged in by Seller, nor has Seller or Shareholder
received, or been threatened with, any claim for refund specific to it in excess
of $500.00 by a Medicare or Medicaid carrier, except as disclosed in the
Schedule of Proceedings attached hereto as Schedule 14(q).
(r) Relationships. Except as disclosed on Schedule 14(r), neither
Seller, its officers, directors and employees, nor Shareholder and no member of
any of their respective immediate families, and no person or entity which is
controlled by, under common control with, or controlling any of them (each, an
"AFFILIATE") has, or at any time within the last two (2) years has had, a
material ownership interest in any business, corporate or otherwise, that is a
party to, or in any property that is the subject of, business relationships or
arrangements of any kind relating to the operation of the Business. No Affiliate
of Seller or Shareholder is guaranteeing any obligations of the Seller.
(s) Assets Comprising the Business. The Assets are all of the
tangible and intangible properties (real, personal and mixed), including,
without limitation, all licenses, intellectual property, permits and
authorizations, and contracts that are necessary or material to the operation of
the Business as now operated. The quantities of inventory and supply items
included in the Assets are reasonable in light of the present and anticipated
volume of the Business of the Seller in the ordinary course of the business of
the Seller, consistent with past practice, as determined by the Seller in good
faith and consistent with past practice.
(t) Questionable Payments. Seller has not, and to the knowledge of
the Seller and Shareholder, none of their Affiliates or employees have offered,
made or received any illegal or unlawful payment, bribe, kickback, political
contribution or other similar questionable payment for any referrals or
otherwise in connection with the ownership or operation of the Business,
including, without limitation, any of the same that would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended.
(u) Reimbursement Matters. Seller, to the extent necessary to
conduct its business in a manner consistent with past practice, is qualified for
participation in the Medicare and Medicaid programs. Except as disclosed on
Schedule 14(u), (i) Seller and Shareholder have not received any notice of
denial or recoupment from the Medicare or Medicaid programs, or any other third
party reimbursement source (inclusive of managed care organizations) with
respect to products or services provided by it, (ii) to Seller's and
Shareholder's knowledge, there is no basis for the assertion after the Closing
Date of any such denial or recoupment claim, and (iii) Seller and Shareholder
have not received notice from any Medicare or Medicaid program or any other
third party reimbursement source (inclusive of managed care organizations) of
any pending or threatened investigations or surveys with respect to, or arising
out of, products or services provided by Seller or otherwise, and to the
knowledge of Seller and Shareholder, no such investigation or survey is pending,
threatened or imminent.
(v) Environmental Compliance. Except as disclosed on Schedule 14(v),
at all times during Seller's ownership of the Business, the Business has not
been, and currently is not, in violation of any environmental Governmental
Requirement and no notice has ever been served upon Shareholder or Seller, their
agents or representatives or any prior owner of the Business, claiming any
violation of any Governmental Requirement concerning the environmental state,
condition or quality of any real or personal property related to the Business,
or requiring or calling attention to the need for any work, repairs or
demolition on or in connection with any of the real property in order to comply
with any governmental requirement concerning the environmental or healthful
state, condition or quality of the real property.
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(w) Questionnaires. The healthcare law questionnaire heretofore
delivered to the Seller by Buyer attached hereto as Exhibit 14(w) (the
"QUESTIONNAIRE") has been fully and accurately completed and does not contain
any material misstatement of any fact and does not omit any fact that would have
to be stated in order not to render any response to such questionnaire
materially misleading.
(x) Corporation Stock. Schedule 14(x) sets forth a complete list and
description of the authorized capital stock of the Corporation, the number of
shares issued and outstanding of each class or series of such capital stock, and
the identity of each Shareholder of the Corporation, in each case indicating the
class and number of shares held. No shares of the Corporation Stock are held in
the treasury of the Company. The Sellers are the record owners of all of the
Corporation Stock and all of such stock is duly authorized, validly issued, and
fully paid and non-assessable. On the Closing Date, there will be no preemptive
or first refusal rights to purchase or otherwise acquire shares of capital stock
of the Corporation pursuant to any provision of law or the Articles of
Incorporation or By-Laws of the Corporation 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 any of the Corporation any shares of
capital stock of the Corporation nor shall there be outstanding any securities
convertible into or exchangeable for such shares.
15. Representations and Warranties of Buyer and IHS. Buyer and IHS
represent and warrant to Seller and Shareholder that:
(a) Due Organization. Each of Buyer and IHS is a duly organized,
valid corporation under the laws of its respective state of incorporation.
(b) Due Authority. Each of Buyer and IHS is duly authorized by law
and corporate policy and approval to: (i) enter into this Agreement and each
Transaction Document; (ii) make all warranties and representations made by Buyer
or IHS herein; and (iii) deliver all consideration provided for under the terms
hereof.
(c) Binding Authority. All signatories and agents designated as
agents/officers for Buyer and IHS for signing purposes have the authority to
bind Buyer and IHS to the terms of this Agreement.
(d) Cash Payment Authority. Buyer has the authority to cause the
cash payment of the Purchase Price to be delivered in accordance with the terms
of this Agreement.
(e) Brokers. No broker or finder has acted for the Buyer or IHS in
connection with the transactions contemplated by this Agreement, and 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 Buyer or IHS.
(f) IHS Stock. IHS has duly authorized and reserved for issuance
the IHS Stock to be issued in connection herewith, and when issued in accordance
with the terms of paragraph 14 such IHS Stock will be validly issued, fully paid
and nonassessable and free of preemptive rights. IHS has complied, or will
comply in a timely manner, and will act in compliance with all applicable
Governmental Requirements with respect to the issuance of IHS Stock.
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(g) SEC Documents. Buyer has furnished the Seller and the
Shareholder with a correct and complete copy of its report on Form 10-K for its
fiscal year ended December 31, 1997 (the"10-K"), its reports on Form 10-Q for
its fiscal quarter ended December 31, 1997, (the"10-Q"), and its proxy statement
prepared in connection with its annual meeting held on April 30, 1998 (the
"PROXY STATEMENT"). As of their respective dates, none of the 10-K, 10-Q, and
Proxy Statements and no press release or other schedule or report required by
the Companies to be publicly disclosed or filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act since January 1, 1998 (all
of the foregoing being the "SEC DOCUMENTS") contained any untrue statements, or
omitted to make any disclosures, which, in light of the circumstances would
render any of such documents materially misleading, and the SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Exchange Act, and the rules and regulations promulgated by
the Commission thereunder.
16. Survival of Representations and Warranties. The representations and
warranties of Seller, Shareholder, IHS, and Buyer contained in or made pursuant
to this Agreement shall survive the execution of this Agreement.
17. Restrictive Covenants.
(a) Non-Compete. Seller and Shareholder hereby agree that until
the fifth (5th) anniversary of the Closing Date (the "RESTRICTED PERIOD"), each
of them will not, directly or indirectly, own, manage, operate, join, control or
participate, or have a proprietary interest in, the ownership, management,
operation or control, of or be connected with, in any manner, any home health
care business that provides services or products within fifty (50) miles of any
location set forth on the Schedule of Locations attached hereto as Schedule
17(a).
(b) Confidential Information. Certain confidential and proprietary
information is included within the Assets ("TRADE SECRETS"), including, without
limitation, with respect to some or all of the following categories of
information: (i) financial information, including but not limited to information
relating to earnings, assets, debts, prices, pricing structure, reimbursement
matters, volume of purchases or sales or other financial data whether related to
Seller or generally, or to particular products, services, geographic areas, or
time periods; (ii) supply and service information, including but not limited to
information relating to goods and services, suppliers' names or addresses, terms
of supply or service contracts or of particular transactions, or related
information about potential suppliers to the extent that such information is not
generally known to the public, and to the extent that the combination of
suppliers or use of a particular supplier, though generally known or available,
may yield advantages to the Buyer, details of which are not generally known;
(ii) marketing information, including but not limited to information relating to
details about ongoing or proposed marketing programs or agreements by or on
behalf of the Seller, sales forecasts, advertising formats and methods or
results of marketing efforts or information about impending transactions; (iv)
personnel information, including but not limited to information relating to
employees' personal or medical histories, compensation or other terms of
employment, actual or proposed promotions, hirings, resignations, disciplinary
actions, terminations or reasons therefor, training methods, performance, or
other employee information; (v) customer and patient information, including but
not limited to information relating to names, addresses or backgrounds of past,
existing or prospective clients, customers, payors, referral sources, and
patients, records of agreements and prices, proposals or agreements between any
of them and Seller, status of accounts or credit, patients' medical histories or
related information as well as customer lists; and (vi) inventions and
technological information, including but not limited to information related to
proprietary technology, trade secrets, research and development data, processes,
formulae, data
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and know-how, improvements, inventions, techniques, and information that has
been created, discovered or developed, or has otherwise become known to Seller
or Shareholder, and/or in which property rights have been assigned or otherwise
conveyed to Seller, which information has commercial value in the business in
which the Seller is engaged. Seller and Shareholder shall hold all Trade Secrets
in confidence and will not discuss, communicate or transmit to others, or make
any unauthorized copy of or use any of the Trade Secrets; and will take all
reasonable actions that Buyer deems reasonably necessary or appropriate, to
prevent unauthorized use or disclosure of or to protect the Buyer's interest in
the Trade Secrets. The foregoing does not apply to information that by means
other than deliberate or inadvertent disclosure by Seller, Shareholder or any of
their respective Affiliates, becomes well known to the public; or disclosure
compelled by judicial or administrative proceedings after they diligently try to
avoid each disclosure and afford Buyer the opportunity to obtain assurance that
compelled disclosures will receive confidential treatment.
(c) Non-Solicitation and Non-Pirating. Each of Seller and
Shareholder hereby agree that, during the Restricted Period it or he will not,
directly or indirectly, for itself or himself or on behalf of any other person,
firm, entity or other enterprise: (i) solicit or in any way divert or take away
any person or entity that, prior to the Closing Date, was a patient, client,
customer, payor, referral source, facility or patient of the Seller; or (ii)
hire, entice away or in any other manner persuade any person who was an
employee, consultant, representative or agent of the Seller prior to the Closing
Date, to alter, modify or terminate their relationship with the Buyer.
(d) Necessary Restrictions. Each of Seller and Shareholder
acknowledge that the restrictions contained in this Agreement are reasonable and
necessary to protect the legitimate business interests of the Buyer and IHS and
that any violation thereof by any of them would result in irreparable harm to
the Buyer and IHS, and that damages in the event of any such breach of this
Agreement will be difficult, if not impossible, to ascertain. Accordingly, each
of the Seller and Shareholder agree that upon the violation of any of the
restrictions contained in this Agreement, IHS and Buyer shall be entitled to
obtain from any court of competent jurisdiction a preliminary and permanent
injunction as well as any other relief provided at law, equity, under this
Agreement or otherwise, without the necessity of posting any bond or other
security whatsoever. In the event any of the foregoing restrictions are adjudged
unreasonable in any proceeding, then the parties agree that the period of time
or the scope of such restrictions (or both) shall be adjusted to such a manner
or for such a time (or both) as is adjudged to be reasonable.
(e) Remedies For Breach. Each of the Seller and Shareholder
acknowledge that the covenants contained in this Agreement are independent
covenants and that any failure by IHS or the Buyer to perform its obligations
under this Agreement or any other agreement shall not be a defense to
enforcement of the covenants contained in this Agreement, including but not
limited to a temporary or permanent injunction.
18. Indemnification; Remedies.
(a) Indemnification by Seller and Shareholder. Seller and
Shareholder shall, jointly and severally, indemnify and hold harmless at all
times Buyer and IHS and their respective stockholders, directors, officers,
employees, agents and assigns, from and against any Damages (as hereinafter
defined) arising out of: (i) any inaccurate representation made by Seller or
Shareholder in, pursuant to or under this Agreement or any Transaction Document;
(ii) any breach of any warranty made by Seller or Shareholder in, pursuant to or
under this Agreement or any Transaction Document; (iii) any breach or default in
the performance by Seller or Shareholder of any of the covenants to be performed
by Seller or Shareholder hereunder or in any Transaction Document; and (iv) any
Closing Date Liabilities.
-18-
(b) Indemnification by Buyer and IHS. Buyer and IHS shall
indemnify and hold harmless at all times Seller or Shareholder from and against
any Damages arising out of: (i) any inaccurate representation made by either of
them in, pursuant to or under this Agreement; (ii) any breach of any warranty
made by either of them in, pursuant to or under this Agreement; and (iii) any
breach or default in the performance by either of them of any of the covenants
to be performed by either of them hereunder.
(c) Definition of Damages. The term "DAMAGES" as used herein shall
include any demands, claims, actions, deficiencies, losses, delinquencies,
defaults, assessments, fees, costs, taxes, expenses, debts, liabilities,
obligations, settlements, penalties, and damages, including, without limitation,
counsel fees incurred in investigating or in attempting to avoid or oppose the
imposition thereof. The term "Damages" shall include, but shall not be limited
to, any Liabilities Deficiency, as defined in paragraph 5 hereof.
(d) Remedies.
(i) Buyer's Remedies. Seller and each Shareholder shall make
payment of any Claim made against it, him or her by no later than the
last day of the Notice Period as provided in paragraph 6(b) above.
(ii) Seller's Remedies. If Seller or Shareholder makes written
request to Buyer or IHS for the payment of Damages, then Buyer or IHS
shall pay to Seller or Shareholder the amount of Damages requested
within ten (10) days from the date that such notice is delivered to
Buyer or IHS (also a "NOTICE PERIOD").
(iii) Notice of Dispute. Notwithstanding the foregoing
provisions of this subparagraph (d), if a party (the "DEMANDING PARTY")
serves a request for payment on the other party (the "OBLIGATED
PARTY"), the Obligated Party shall have the option to provide written
notice to the Demanding Party (the "NOTE OF DISPUTE") within the
applicable Notice Period that the Obligated Party disputes, in good
faith, the validity or amount of the Damages set out in the request for
payment of Damages, and if the affected parties cannot agree on the
validity or amount of such Damages within ten (10) days following the
Notice Period, the dispute as to the validity or amount of such claim
or liability (the "DISPUTE") shall be settled as set forth in
subparagraph (e) of this paragraph 18, with the non-prevailing party
bearing the prevailing party's costs of arbitration if such Dispute is
resolved by arbitration.
(iv) Arbitration. If arbitration is required pursuant to this
paragraph 18, Buyer, on the one hand, and the affected Seller and
Shareholders, on the other hand, each shall select an arbitrator within
ten (10) business days after the Notice of Dispute is delivered; those
two arbitrators will then select a third arbitrator; and the three
arbitrators so chosen will determine the validity of the claim for
Damages. If Seller or Buyer delays in appointing an arbitrator when
required, and ten (10) days or more has elapsed, the arbitrator
appointed by the other party shall arbitrate the dispute. If the Seller
and the Shareholder shall be subject to a Dispute with Buyer, they
shall, unless Buyer or IHS elects otherwise in its sole and absolute
discretion, be required to act as a group with respect to any and all
rights and obligations with respect to the resolutions of the Dispute
as provided in this paragraph 18.
-19-
(e) Settlement of Disputes.
(i) Disputes Not Involving Third Parties. If a Dispute
involves claims not involving any third party, Buyer, IHS, Seller and
Shareholder shall settle the Dispute by submitting the same to binding
arbitration.
(ii) Disputes Involving Claims Made by Third Parties. If a
Dispute involves claims made by one or more third parties (a "THIRD
PARTY CLAIM"), the party asserting its right to indemnification for
such Third Party Claim shall give written notice to the other party as
soon as practical after such asserting party receives notice of such
Third Party Claim; provided, however the failure to timely give such
notice shall not affect such party's right to indemnification except to
the extent the party to receive the notice is damaged by such delay.
Upon such notice to Seller or Shareholder, Buyer and Seller and/or
Shareholder shall submit the Dispute to arbitration, and the following
procedures shall apply:
(A) Solely for purposes of determining the party
responsible for defending the Third Party Claim, the
arbitrators shall deem such Third Party Claim to be valid
(although such consideration shall not be an admission by any
party as to any liability to any party). The arbitrators then
shall decide which party shall be liable for the Third Party
Claim if it is successfully prosecuted by such third party or
parties, and the decision of such arbitrators with respect to
such liability shall be final and binding as among the
parties. (Such party determined to be liable for such claim
sometimes shall be referred to herein as the "RESPONSIBLE
PARTY".)
(B) If the Responsible Party refuses to settle (and pay
the settlement amount of) the Third Party Claim immediately,
then the Responsible Party immediately shall select one of the
following two options:
Option One: The Responsible Party, at the Responsible
Party's sole expense and risk, can assume the defense of
the Third Party Claim, provided the Responsible Party
first places in escrow, in favor of the other party,
adequate collateral (as determined by the arbitrators on
consideration of all relevant facts) to protect the other
party from all Damages with respect to such Third Party
Claim (in which case the other party immediately shall be
reimbursed by the Responsible Party for any amount the
other party is required to pay with respect to such Third
Party Claim; or
Option Two: The Responsible Party, at the Responsible
Party's expense and risk, can co-defend the Third Party
Claim with the other party, with the Responsible Party
also responsible for paying all costs incurred by the
other Party in connection with such defense, including,
without limitation, the legal fees and expenses of the
other party's counsel for its reasonable involvement in
such defense. If the other party is found to be liable
for any portion of such Third Party Claim, the
Responsible Party immediately shall reimburse the other
party for any amount required to be paid by the other
party with respect thereto; provided, however, if the
Responsible Party selects this option, the Responsible
Party shall attempt
-20-
diligently to have the other party removed as a party to
any legal action involving the Third Party Claim (and,
upon such removal, the involvement of the other party's
counsel shall cease unless requested by the Responsible
Party or the Responsible Party's counsel); and
(C) No party may settle any Third Party Claim without the
prior consent of the other parties hereto unless the
settlement will not have a material adverse effect on the
other party hereto. The parties will resolve any Dispute with
respect to any such proposed settlement in accordance with
this paragraph 18.
(D) Any party responsible for defending a Third Party
Claim shall proceed with diligence and in good faith with
respect thereto.
(E) Nothing contained in this paragraph 18(e) shall
prevent any party from assuming control of the defense and/or
settling any Third Party Claim against it for which
indemnification is not sought under this Agreement.
19. Use of Corporate and Fictitious Names. Seller and Shareholder,
jointly and severally, agree to take all actions necessary to assist Buyer in
obtaining the rights to use the corporate name and any fictitious names used in
its conduct of any of the Business, including but not limited to the execution
of any assignments and consents to use such name. If Buyer attempts to use such
name, Seller shall consent to Buyer's use of such name if such consent is
required by any state, county or local governmental authority.
20. Prepaid Items; Deposits; Etc. All prepaid insurance premiums, rent
and utility deposits, and similar items paid by or owing to the Seller by any
person, shall be considered to be part of the Assets being purchased by Buyer
and, on consummation of the transactions contemplated by this Agreement, shall
be the property of Buyer.
21. Post-Closing Requirements of Seller.
(a) Payment Escrow. At Closing, Buyer shall pay over and deliver to
or on behalf of Seller (and shall be credited, dollar-for-dollar, as partial
payment of the Purchase Price) to the Paying Agent, in escrow (the "PAYMENT
ESCROW"), an amount equal to the Listed Liabilities as specified in paragraph
2(b)(i), to be held by the Paying Agent subject to the terms, conditions, and
provisions of the Payment Escrow Agreement. The Paying Agent shall be an
attorney at law authorized to practice law in the state of Indiana or a trust
company or bank having trust powers in such State, which Paying Agent has been
selected by Seller and approved by Buyer.
(i) Seller shall pay all costs and expenses of the Payment
Escrow, including without limitation, any fees or costs of the Paying
Agent.
(ii) Seller shall be obligated to see that the Paying Agent
timely and properly pays all Listed Liabilities, and that the Paying
Agent obtains and delivers to Buyer the "Final Release" referred to in
the Payment Escrow Agreement, or other reasonable evidence of payment
acceptable to Buyer.
-21-
(iii) The existence of the Payment Escrow shall not affect the
obligations of the Seller and the Shareholder to hold Buyer harmless
against any Closing Date Liabilities as provided in paragraph (18)(a).
(b) Final Financial Information. Not later than forty-five (45)days
following Closing, Seller, at Seller's sole cost and expense, shall deliver to
Buyer (to the attention of Xxxx Xxxxxx) "FINAL FINANCIAL INFORMATION", which
shall include:
(i) a balance sheet of Seller as of the Closing Date prepared
on a basis consistent with prior accounting periods;
(ii) an income statement of Seller for the period commencing on
the date succeeding the last day of the most recent Financial Statement
Date and ending on the Closing Date which agrees with the balance sheet
submitted at Closing;
(iii) an inventory of fixed assets of Seller as of the Closing
Date which agrees with the balance sheet submitted at Closing; and
(iv) a listing of resale inventory of Seller as of the Closing
Date which agrees with the balance sheet submitted at Closing.
(v) a cash settlement summary of Seller in a form provided by
Buyer.
(c) Liabilities Deficiency. If all such Final Financial Information
or if any document, instrument or agreement required to be delivered in
accordance with paragraph 11(a), including, without limitation, original motor
vehicle certificates of title, properly endorsed, is not delivered to Buyer
within forty-five (45) days following Closing, Seller and Shareholder shall be
liable to Buyer in an amount equal to $500.00 for each day after such forty-five
(45) day period until all such Final Financial Information and other such
documents, instruments and agreements are delivered to Buyer, and such liability
shall constitute a Liabilities Deficiency under the provisions of paragraph 6,
above.
22. Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer on any person, other than the parties hereto, and
their successors, any rights or remedies under or by reason of this Agreement
other the affiliates entitled to indemnification pursuant to paragraph 18.
23. Expenses. Except as otherwise stated herein, each of the parties
shall bear all expenses incurred by them in connection with this Agreement and
in consummation of the transactions contemplated hereby in preparation thereof.
24. Notices. All notices, consents, waivers and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
properly given when personally delivered to the party or parties entitled to
receive the notice or three (3) business days after sent by certified or
registered mail, postage prepaid, or on the business day after sent by
nationally recognized overnight courier, in each case, properly addressed to the
party or parties entitled to receive such notice at the address stated below:
-22-
to Seller: Indiana Respiratory Care, Inc.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxxxxx, XX 00000
Attention: Xx. X. Xxxx Xxxxxxx
to Shareholder: J. Xxxx Xxxxxxx
0000 X. Xxxxxxxxxxxx Xx.
Xxxxxxxxxxxx, XX 00000
with a copy to: Xxxxxxx & Xxxxxxxx, P.C.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
to Buyer: c/o RoTech Medical Corporation
0000 X.X. XxXxxx Xxxx, Xxxxx X
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
with copies to: Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxx
and
Blass & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
25. Choice of Law. The laws of the State of Indiana applicable to
contracts executed, delivered and to be fully performed in such State govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.
26. Sections and Other Headings. Section, paragraph, and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
27. Counterpart Execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one instrument.
28. Gender. All gender employed in this Agreement shall include all
genders, and the singular shall include the plural and the plural shall include
the singular whenever and as often as may be appropriate.
-23-
29. Parties in Interest. This Agreement shall be binding on and shall
inure to the benefit of, and be enforceable by, Seller, Shareholder and Buyer
and their respective successors and assigns. Buyer shall be entitled to assign
its rights under this Agreement and the Transaction Documents after the Closing.
Seller and the Shareholder may not assign this Agreement or any of their rights
hereunder without the prior consent of Buyer.
30. Entire Agreement. This Agreement including all Schedules and
Exhibits hereto, and all Transaction Documents constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and there
are no agreements, understandings, restrictions, warranties, or representations
between the parties with respect to the subject matter hereof other than as set
forth herein or as herein provided.
31. Performance. In the event of a breach by Seller or Shareholder of
any of their respective obligations hereunder, the Buyer shall have the right,
in addition to any other remedies which may be available, to obtain specific
performance of the terms of this Agreement, and each of Seller and Shareholder
hereby waives the defense that there may be an adequate remedy at law.
32. Waiver, Discharge, Etc. This Agreement and the Transaction
Documents and the obligations hereunder and thereunder shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement or any Transaction
Document shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or such Transaction
Document, as the case may be, or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement or any Transaction Document shall be held to be a waiver of any
other or subsequent breach.
33. Cooperation Further Assistance. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed or delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably requested or
necessary to carry out the intent and purpose of this Agreement, and to vest in
Buyer good title to, possession of and control of all the Assets.
34. Joint and Several. Seller and the Shareholder shall be jointly and
severally liable for all representations, warranties and obligations, including,
without limitation, indemnification obligations, and covenants made by any of
them pursuant to this Agreement, including, without limitation, any made
pursuant to any Transaction Document. For all purposes of this Agreement, any
representation or warranty that is qualified to be "to the knowledge of Seller"
or by a requirement that Seller shall have received "notice" of any matter, or
any similar qualification shall be deemed to include the knowledge of the
Shareholder or notices to the Shareholder, as the case may be.
35. Independent Legal Counsel. Seller and Shareholder represent and
warrant that each party has had the opportunity to seek the advice of
independent legal counsel prior to signing this Agreement, and that the Buyer
has recommended to Seller and Shareholder that such party obtain legal counsel.
36. Drafting. Buyer's counsel has drafted this Agreement and the other
Transaction Documents as a matter of convenience for the parties hereto; and the
parties hereto have carefully reviewed and negotiated the terms of this
Agreement and the Transaction Documents; and accordingly any drafting errors,
ambiguities or inconsistencies shall not be interpreted against Buyer.
[SIGNATURES ON THE FOLLOWING PAGE]
-24-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first stated above.
IHS:
INTEGRATED HEALTH SERVICES,
INC.
By: /s/ XXXX XXXXXXXX
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
BUYER:
INTEGRATED OF WESTCLIFF
PARK, INC.
By: /s/ XXXX XXXXXXXX
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Senior Vice President
SELLER:
INDIANA RESPIRATORY CARE, INC.
By: /s/ J. XXXX XXXXXXX
-------------------------------
Name: J. Xxxx Xxxxxxx
Title: President
SHAREHOLDER:
/s/ J. XXXX XXXXXXX
----------------------------------
J. Xxxx Xxxxxxx
[SHAREHOLDER'S SPOUSE]
-25-
STATE OF INDIANA
COUNTY OF XXXXXX
The foregoing instrument was acknowledged before me by J. Xxxx Xxxxxxx,
as President and sole shareholder of Indiana Respiratory Care, Inc., a Indiana
corporation, and who is personally known to me; or has produced n.a. as
identification.
Nov. 18, 1998 /s/ Xxxxxxx X. Xxxxxxx
------------------------- ------------------------------
Date Notary Signature
Xxxxxxx X. Xxxxxxx
------------------------------
Notary Name Printed
My Commission Expires: 10/29/01
Resident of Xxxxxx County
STATE OF
COUNTY OF
The foregoing instrument was acknowledged before me by______________,
as spouse of Shareholder of Seller, an Indiana corporation, on behalf of the
corporation, and who is personally known to me; or has produced _______
__________________ as identification.
------------------------- ------------------------------
Date Notary Signature
------------------------------
Notary Name Printed
My Commission Expires:
-26-
SCHEDULES AND EXHIBITS
Schedule 1(a)(i) - Accounts Receivable
Schedule 1(a)(ii) - Inventory; Fixed Assets
Schedule 1(a)(iii) - Automobiles
Schedule 1(a)(iv) - Certain Medical Equipment
Schedule 1(a)(v)(B) - Other Assets
Schedule 1(a)(v)(C) - Telephone Numbers
Schedule 2(a) - Allocation of Purchase Price
Schedule 2(b)(iv) - Wire Instructions
Schedule 5(a) - Closing Date Liabilities
Schedule 5(b) - Unassumed Contracts
Schedule 11(c) - Seller's Opinion
Schedule 14(c) - Litigation
Schedule 14(g) - Contracts
Schedule 14(i) - Personnel Payrates; Employee Benefits
Schedule 14(k) - Insurance
Schedule 14(o) - Tax Returns and Financial Statements
Schedule 14(p) - Supplemental Tax Information
Schedule 14(q) - Adverse Business Developments
Schedule 14(r) - Relationships
Schedule 14(u) - Reimbursement Matters
Schedule 14(v) - Environmental Compliance
Schedule 17(a) - Locations
Exhibit 2(b)(i) - Escrow Agreement
Exhibit 2(b)(ii) - Payment Escrow Agreement
Exhibit 14(w) - Healthcare Questionnaire
-27-
SCHEDULE 1(A)(IV)
Equipment to Be Assumed and paid for by Buyer
QUANTITY ITEM NUMBER DESCRIPTION
10 265-25000-00 Assembly, 31LL Protege
(DF)(SB0115, SB0125,
SB0142, SB0146, SB0150,
SB0158, SB0167, SB0169,
SB0177, SB0178)
5 265-25020-00 Assembly, NPB Portable
(PB0285, PB0330,
PB0385, PB0422,
PB0437)
5 265025021-00 Assembly, Care Portable
(PB0170, PBO171,
PBO178
10 265025015-00 Assembly, Roller Base
10 265025006-00 Assembly FCV 0-6
L.P.M.
10 505 Alliance Concentrator with
OPI (50543109-
50543118)
10 0781-3007 O.C.P.R. Assembly
(CGA87)
10 1421-0064 Cantera Style Carrying Case
40 0916-0165 (HAX) CYLAL "M6"
OXY PO
10 970S SMARTMONITOR -
Enhanced Memory
(B80320, B80328,
B80422, B80488, B80735,
B80822, B80836, B91001,
B81012, B81069)
10 505 Alliance Concentrator with OPI, DOM/INT
(50543654, 50543655,
50543682-50543689)
Equipment Lease dated as of September 10, 1998 between Respironics and Indiana
Respiratory Care, Inc. regarding the following equipment to be assumed and
paid for by Buyer:
12 B-778966-00 31LL Side Fill
12 B-778966-00 31LL Side Fill
15 B-775099-00 C100
15 B-776090-00 Rollerbases
3 B0775910-00 C21
Equipment Lease, undated between Respironics and Indiana Respiratory Care,
regarding the following equipment to be assumed and paid for by Buyer:
10 701296-00 C41 Dual Fills
10 778965-00 31LL
2 701295-00 C31 Dual Fills
22 776090-00 Rollerbases
Equipment to be assumed and paid for by Buyer, with reimbursement by Seller in
the amount of $5,105.64.
QUANTITY ITEM NUMBER DESCRIPTION
12 7300 Tranquility Quest
(73080576, 73080582,
73080584, 73080616,
73080642, 73080720,
73080725, 7308060,
73080866, 73080888,
730889, 73080899)
12 7025-20 Mask, Med-Nar
24 100-0078-10 Air Inlet Filler
12 7800 CPAP Passover Humidifier
4 622093 Virtuoso LX Deluxe
N.A.M. (608223, 608250,
6-8260, 608300)
4 302328 Simple Strap
4 532116 Aria/Virtuosso/Solo Carry
Case
2 622093 Virtuoso LX Deluxe
N.A.M. (608013, 608016)
2 532116 Aria/Virtuoso/Solo Carry
Case
2 302328 Simple Strap
5 622093 Virtuoso LX Deluxe
N.A.M. (608571, 608578,
608618, 608620, 608630)
1 622093 Virtuoso LX Deluxe
N.A.M. (608303)
6 532116 Aria/Virtuoso/Solo Xxxxx
Xxxx
0 0000 Xxxxxxxxxxxx Xx-Xxxxx
System (17011268,
17011271, 17011275)
EXHIBIT
OPERATING PROFIT
1. General Standards.
(a) Performance. Except as otherwise expressly agreed in
writing, the parties intend that the financial and economic performance to be
determined and measured pursuant to this Exhibit "A" shall be determined solely
with respect to so much of the business operations of Corporation as consists of
the business enterprise previously conducted by the Acquired Entity (the
"ACQUIRED ENTERPRISE") before being acquired by Corporation. Accordingly, all
references herein to revenues, expenses, costs, profits, losses, and any other
transaction or activity, whether by reference to "Corporation", or in any other
manner, shall mean and refer only to so much thereof as pertains directly to the
Acquired Enterprise, unless such reference specifically provides otherwise. The
parties expressly intend all such calculations to provide a determination of the
profitability of the Acquired Enterprise, determined as if such Acquired
Enterprise at all times operated as an autonomous entity.
(b) Determination of Operating Profit. The Operating Profit to
be determined hereunder shall be calculated on a pre-tax basis in accordance
with generally accepted accounting principles, consistently applied ("GAAP"), as
further defined, limited, or explained as set forth herein.
2. Income and Cost.
(a) Income and Revenue. Income shall be accounted for on the
accrual method consistent with the prior accounting methods of the Acquired
Enterprise, and shall consist of all direct revenues, defined as all "Rental
Revenue" and "Sales Revenue", plus or minus the net change in unbilled revenue,
plus or minus gain or loss from equipment sales, plus or minus sales credits and
allowances, plus investment income.
(b) Costs and Expenses. Costs shall include the following:
(1) DIRECT EXPENSES incurred on behalf of Corporation as
kept on the accrual method, including salary paid to the Employee and related
payroll taxes.
(2) BAD DEBT expenses shall be the actual bad debts
written off, plus or minus the change in allowance for bad debts. For the
purpose of this calculation, the allowance for bad debts is considered equal to
the amount of all accounts receivable in excess of 120 days old.
(3) REASONABLE TRAVEL EXPENSES of employees or
representatives of ROTECH MEDICAL CORPORATION ("ROTECH") to and from its
corporate offices on behalf of Corporation's matters, to be allocated on a
reasonable basis.
(4) INTEREST on all or any net intercorporate borrowing
from Integrated Health Services, Inc. ("IHS") at the cost of such funds to IHS.
(5) GROUP OR CONSOLIDATED PURCHASES for items benefitting
the Acquired Enterprise purchased by IHS, RoTech or by Corporation, to be
allocated at actual cost in accordance with usage. Costs to be allocated include
costs, if any, of transportation, storage, etc.
(6) DEPRECIATION EXPENSES will be calculated on a
consistent basis as previously and historically calculated by the Acquired
Enterprise.
-28-
(7) CORPORATION'S OVERHEAD. The general, administrative,
and overhead costs of Corporation, to the extent allocable to the Acquired
Enterprise on a reasonable basis.
(c) Excluded Items. Costs and expenses for purposes of
calculating operating profits shall not include the following:
(1) BRANCH OFFICES. All start-up costs, operating profits,
and operating losses incurred by Corporation in the initial six (6) months on
the start-up, opening, or operation of a branch office or location opened after
the date hereof shall be excluded from calculations of Operating Profits for
purposes of this Agreement.
(2) IHS/ROTECH OVERHEAD. Unless otherwise mutually agreed
by Corporation and Employee, IHS and RoTech corporate overhead or costs will not
be allocated to Corporation or considered in Operating Profits.
(3) COSTS OF ACQUIRING THE ACQUIRED ENTERPRISE. The
calculation of Operating Profits will not include cost or amortization of costs
incurred in the acquisition of the Acquired Enterprise, and any liabilities
assumed by RoTech and subsequently paid off, which will be included in the
intercorporate borrowings in paragraph 2(b)(4), above.
(d) Acquisition of Enterprises. Nothing contained herein shall
be deemed to affect, limit or restrict the right of RoTech or IHS to make any
acquisitions.
3. Consultation and Advice. So long as employed by Corporation,
Employee shall consult with and advise Corporation and RoTech regarding the
Acquired Enterprise, including reviewing, advising on, and general control of
operations, expansion matters, and including marketing and cost control.
-29-
