EXHIBIT 2.3
-----------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 27, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
IHS ACQUISITION NO. 35, INC.,
IHS ACQUISITION NO. 36, INC.,
AND
THE MAGNOLIA GROUP, INC.
AND
MEDI-SERVE, INC.
AND
XXXXX X. XXXX
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TABLE OF CONTENTS
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PAGE
ARTICLE I: MERGERS..................................................................2
1.1 Mergers..................................................................2
1.2 Merger Time..............................................................3
1.3 Payment of Merger Consideration..........................................3
1.4 Surviving Corporation....................................................3
ARTICLE II: CONVERSION..............................................................4
2.1 Consideration............................................................4
2.2 Adjustments to the Purchase Price........................................6
2.3 Assets and Liabilities...................................................8
2.4 Designated Contracts....................................................10
2.5 Escrow Indemnification..................................................10
2.6 New Greenville Lease....................................................11
2.7 Golden Age and Xxxxx Health Care Facilities.............................11
2.8 Xxxxxx Litigation.......................................................11
2.9 Employment Undertaking..................................................12
2.10 Medi-Serve Dividend.....................................................12
ARTICLE III: IHS STOCK.............................................................12
3.1 IHS Stock...............................................................12
4.1 Time and Place of Closing...............................................18
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER,
MEDI-SERVE AND COMPANY........................................................18
5.1 Organization and Standing of the Company and Medi-Serve;
Subsidiaries............................................................18
5.2 Authority...............................................................19
5.3 Binding Effect..........................................................19
5.4 Absence of Conflicting Agreements.......................................19
5.5 Consents................................................................20
5.6 Schedule of Assets and Properties.......................................20
5.7 Contracts...............................................................22
5.8 Financial Statements....................................................24
5.9 Material Changes........................................................25
5.10 Licenses; Permits; Certificates of Need.................................26
5.11 The Magnolia Facilities and Medi-Serve Facilities.......................26
5.12 Legal Proceedings.......................................................28
5.13 Employees...............................................................28
5.14 Collective Bargaining, Labor Contracts, Employment Practices, etc.......28
5.15 ERISA...................................................................29
5.16 Questionnaire...........................................................29
5.17 Insurance and Surety Agreements.........................................29
5.18 Relationships...........................................................30
5.19 Assets Comprising the Business..........................................30
5.20 Absence of Certain Events...............................................30
(i)
5.21 Compliance with Laws....................................................31
5.22 Taxes...................................................................32
5.23 Encumbrances Created by this Agreement..................................33
5.24 Questionable Payments...................................................33
5.25 Reimbursement Matters...................................................33
5.26 Capital Stock of the Company and Medi-Serve.............................34
5.27 Finders.................................................................35
5.28 Shareholder Untrue Statement............................................35
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF BUYER, NEWCO 1
AND NEWCO 2....................................................................35
6.1 Organization and Standing...............................................35
6.2 Power and Authority.....................................................35
6.3 Binding Agreement.......................................................35
6.4 SEC Documents...........................................................35
6.5 Absence of Conflicting Agreements.......................................36
6.6 Capital Stock...........................................................36
6.7 Material Changes........................................................36
6.8 Buyer Untrue Statement..................................................36
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE COMPANY
AND MEDI-SERVE.................................................................36
7.1 Access to Information and Records before Closing........................36
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING.............................37
8.1 Conduct of Business Pending Closing.....................................37
8.2 Negative Covenants of the Company and Medi-Serve........................38
8.3 Affirmative Covenants...................................................38
8.4 Pursuit of Consents and Approvals.......................................40
8.5 Pursuit of Nondisturbance Agreements and Estoppel Certificates..........40
8.6 Supplementary Financial Information.....................................40
8.7 Exclusivity.............................................................40
8.8 Surveys.................................................................41
8.9 Zoning Report...........................................................41
ARTICLE IX: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................41
9.1 Representations and Warranties..........................................41
9.2 Performance of Covenants................................................41
9.3 Delivery of Closing Certificate.........................................42
9.4 Opinions of Counsel.....................................................42
9.5 Legal Matters...........................................................42
9.6 Authorization Documents.................................................42
9.7 Material Change.........................................................42
9.8 Required Approvals......................................................42
9.9 Xxxx-Xxxxx Xxxxxx Act...................................................42
9.10 Non-competition Agreement...............................................43
9.11 Cost and Expenses.......................................................43
9.12 Consents................................................................43
9.13 Closing Date Balance Sheet..............................................43
(ii)
9.14 Resignation of Company and Medi-Serve Boards of Directors and
Officers................................................................43
9.15 Estimated Closing Date Long Term Liabilities............................43
9.16 INTENTIONALLY DELETED...................................................43
9.17 Xxxxxxxx Facility.......................................................44
9.18 Shareholder Settlements.................................................44
9.19 Escrow Agreement........................................................44
9.20 IHS Stock Price.........................................................44
9.21 Section 338(h)(10) Election.............................................44
9.22 Articles of Merger......................................................44
9.23 Other Documents.........................................................44
ARTICLE X: CONDITIONS PRECEDENT TO SHAREHOLDER'S
OBLIGATIONS....................................................................44
10.1 Representations and Warranties..........................................44
10.2 Performance of Covenants................................................45
10.3 Delivery of Closing Certificate.........................................45
10.4 Opinion of Counsel......................................................45
10.5 Legal Matters...........................................................45
10.6 Authorization Documents.................................................45
10.7 Xxxx-Xxxxx Xxxxxx Act...................................................45
10.8 INTENTIONALLY DELETED...................................................45
10.9 Escrow Agreement........................................................45
10.10 IHS Stock Price.........................................................45
10.11 Other Documents.........................................................45
ARTICLE XI: SURVIVAL AND INDEMNIFICATION...........................................46
11.1 Survival of Representations and Warranties..............................46
11.2 Indemnification by Shareholder..........................................46
11.3 Indemnification by Buyer................................................46
11.4 Assertion of Claims.....................................................47
11.5 Control of Defense of Indemnificable Claims.............................47
11.6 Limitations on Indemnification Obligations..............................48
11.7 WARN Act Liability......................................................49
11.8 Certain Waivers.........................................................49
ARTICLE XII: TERMINATION............................................................49
12.1 Termination.............................................................49
12.2 Effect of Termination...................................................50
ARTICLE XIII: CASUALTY, RISK OF LOSS................................................50
13.1 Casualty, Risk of Loss..................................................50
ARTICLE XIV: MISCELLANEOUS.........................................................50
14.1 Performance.............................................................50
14.2 Benefit and Assignment..................................................50
14.3 Effect and Construction of this Agreement...............................51
14.4 Cooperation - Further Assistance........................................51
(iii)
14.5 Notices.................................................................51
14.6 Waiver, Discharge, Etc..................................................52
14.7 Rights of Persons Not Parties...........................................52
14.8 Governing Law...........................................................52
14.9 Amendments, Supplements, Etc............................................52
14.10 Severability............................................................52
14.11 Joint and Several.......................................................53
14.12 Records.................................................................53
14.13 Certain Costs...........................................................53
(iv)
SCHEDULES & EXHIBITS
--------------------
Schedule 2.4 - Designated Contracts
Schedule 5.1(a) - Organization and Standing of the Company, Medi-Serve;
Subsidiaries
Schedule 5.1(b) - Organization and Standing of the Company, Medi-Serve;
Subsidiaries
Schedule 5.5 - Consents
Schedule 5.6(a)-1
and 2 - Schedule of Assets and Properties
Schedule 5.6(a)(ii) - Proprietary Rights
Schedule 5.6(a)(iii) - Personal Effects
Schedule 5.6(b) - Liens
Schedule 5.6(c) - Permitted Liens
Schedule 5.6(d) - Personal Property Leases
Schedule 5.7(b) - Contracts
Schedule 5.8(a)-1 - Magnolia Financial Statements
Schedule 5.8(a)-2 - Medi-Serve Financial Statements
Schedule 5.8(b) - Balance Sheet Liabilities
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses, Permits, Certificates of Need
Schedule 5.11(a) - Magnolia Facilities; Medi-Serve Facilities
Schedule 5.11(c) - Facility Leases
Schedule 5.11(e) - Zoning, etc.
Schedule 5.11(f) - Engineering Reports
Schedule 5.12 - Legal Proceedings
Schedule 5.13 - Employee Information
Schedule 5.14 - Collective Bargaining, Labor, Contracts, Employment
Practices, etc.
Schedule 5.15 - ERISA
Schedule 5.17 - Insurance and Surety Agreements
Schedule 5.18 - Relationships
Schedule 5.20 - Absence of Certain Events
Schedule 5.22 - Taxes
Schedule 5.25 - Reimbursement Matters
Schedule 5.26 - Capital Stock
Schedule 6.7 - Material Changes
Exhibit 2.1(f)-1 - Cash Note
Exhibit 2.1(f)-2 - Cash Stock Pledge Agreement
Exhibit 2.3(b) - Undertaking
Exhibit 2.5(a) - Escrow Agreement
Exhibit 5.11(f) - Engineering Reports
Exhibit 5.16 - Questionnaire
Exhibit 5.21(b) - Environmental Reports
Exhibit 9.4 - Shareholder's Opinion
Exhibit 9.10 - Non-competition Agreement
Exhibit 10.4 - Buyer's Opinion
(1)
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AGREEMENT AND PLAN OF MERGER
--------------------------
This Agreement and Plan of Merger (this "AGREEMENT") is made as of the
27th day of February, 1998, among INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation ("BUYER"), IHS ACQUISITION NO. 35, INC., a South Carolina
corporation ("NEWCO 1"), IHS ACQUISITION NO. 36, INC., a South Carolina
corporation ("NEWCO 2"), and THE MAGNOLIA GROUP, INC., a South Carolina
corporation ("MAGNOLIA", or the "COMPANY"), XXXXX X. XXXX, an individual with an
address at 000 Xxxxxxxxx Xxxx, Xxxxxxx, XX 00000 ("SHAREHOLDER") and MEDI-
SERVE, INC., a South Carolina corporation ("MEDI-SERVE"). The Shareholder, the
Company and Medi-Serve are sometimes herein referred to collectively as the
"GROUP", and each individually as a "GROUP PARTICIPANT" or "GROUP MEMBER".
PREMISES
--------
WHEREAS, the Shareholder is the owner of all of the issued and
outstanding shares of capital stock of Magnolia (the "MAGNOLIA SHARES"), a
corporation that[, through its subsidiaries,] is the operator in South Carolina
of 12 skilled nursing facilities (all of which are leased by it) (the "MAGNOLIA
FACILITIES"); and
WHEREAS, Shareholder is also the owner of all of the issued and
outstanding shares of capital stock of Medi-Serve (the "MEDI-SERVE SHARES", and
together with the Magnolia Shares, the "SUBJECT SHARES"), a corporation that is
the operator in South Carolina of one (1) pharmacy (the "MEDI-SERVE FACILITIES")
which provides pharmaceutical and Medicare Part B services, and Shareholder is
unwilling to merge Magnolia with Buyer unless Buyer also effects a merger with
Medi-Serve; and
WHEREAS, concurrently herewith Buyer is entering into an Agreement and
Plan of Merger (the "PREMIERE MERGER AGREEMENT") with the owners (the "PREMIERE
SHAREHOLDERS") of all of the issued and outstanding shares of capital stock of
Premiere Associates, Inc., a North Carolina corporation ("PREMIERE") that
through its subsidiaries, is the owner in fee simple in the State of Florida of
1 skilled nursing facility, the operator in Georgia and Florida of skilled
nursing facilities (all of which are leased by it), and the manager of skilled
nursing facilities in the States of South Carolina, Georgia and Florida,
including all of the Magnolia Facilities; and
WHEREAS, the Shareholder also owns all of the issued and outstanding
shares of capital stock (the "XXXXXXXX SHARES") of Xxxxxxxx & Associates, Inc.
("XXXXXXXX"), which in turn owns an 88-bed skilled nursing facility known as the
"Xxxxxxxx Skilled Nursing Facility" (the "XXXXXXXX FACILITY"); although the
Xxxxxxxx Shares shall not be purchased by Buyer pursuant to this Agreement or
the Premiere Merger Agreement, it shall be a condition to Buyer's obligations
hereunder that the Xxxxxxxx Facility shall be leased to a subsidiary of Magnolia
pursuant to a "triple-net" lease with a term of at
2
least 25 years, with annual base rent (subject to due diligence) of $330,000 per
year (subject to annual 2% escalations), and otherwise with terms and conditions
satisfactory to Buyer; and
WHEREAS, it is understood that Magnolia is a party to a lease (the "NEW
GREENVILLE LEASE") with respect to a 120- bed skilled nursing facility under
construction in Greenville, South Carolina (the "NEW GREENVILLE FACILITY"); and
WHEREAS, each of Newco 1 and Newco 2 is an indirectly wholly owned
subsidiary of Buyer;
WHEREAS, the Boards of Directors of Buyer, Newco 1, Newco 2, and the
Company deem it advisable to merge Newco 1 with and into Magnolia and Newco 2
with and into Medi-Serve pursuant to this Agreement (the "MERGERS");
WHEREAS, pursuant to the Mergers each outstanding share of capital
stock of Magnolia shall be converted into the right to receive the Magnolia
Merger Consideration (as hereinafter defined) and each outstanding share of
capital stock of Medi-Serve shall be converted into the right to receive the
Medi-Serve Merger Consideration (as hereinafter defined); and
WHEREAS, to effectuate the foregoing, the parties desire to adopt plans
of merger and reorganization; and
WHEREAS, all of the holders of capital stock in Magnolia and Medi-Serve
have approved this Agreement and the plans of merger described herein and the
transactions contemplated hereby in accordance with all applicable laws, and the
Certificates of Incorporation and By-laws of each of Magnolia and Medi-Serve;
and
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, Shareholder, Buyer, the Shareholder, Newco
1, Newco 2, Buyer, Magnolia and Medi-Serve, intending to be legally bound, agree
as follows:
ARTICLE I: MERGERS
------------------
1.1 MERGERS. Upon the terms and subject to the conditions set forth in
this Plan of Merger (as defined herein) and in accordance with the General
Corporation Law of the State of South Carolina (the "SCGCL"), at the Merger Time
(as defined herein), Newco 1 shall be merged with and into Magnolia and Newco 2
shall be merged with and into Medi-Serve in accordance with the provisions of
Section 00-00-000, et al of the SCGCL. In furtherance thereof, on the Closing
Date Magnolia and Newco 1, on the one hand, and Medi-Serve and Newco 2, on the
other hand, shall each execute, deliver, and cause to be filed with the
Secretary of State of the State of South Carolina, the Articles and Plan of
Merger in the forms respectively of Exhibit 1.1-A and 1.1-B hereto (each, a
"PLAN OF MERGER" or "ARTICLES OF MERGER"). Following the applicable
3
Merger Time, the separate existence of Newco 1, on the one hand, and Newco 2, on
the other hand, shall cease, and Magnolia, on the one hand, and Medi-Serve, on
the other hand, shall continue as the surviving corporations in the Mergers
(hereinafter each sometimes referred to as the "SURVIVING CORPORATION") as
business corporations incorporated under the laws of the State of South
Carolina, and shall succeed to and assume all the rights and obligations of
Magnolia and Newco 1, on the one hand, and Medi-Serve and Newco 2, on the other
hand, in accordance with the SCGCL.
1.2 MERGER TIME. Each Merger shall become effective at such time (the
applicable "MERGER TIME") as the duly applicable executed Articles of Merger is
filed with the Secretary of State of the State of South Carolina.
1.3 PAYMENT OF MERGER CONSIDERATION. Buyer agrees that in connection
with and as part of the Closing (as hereinafter defined), it will make payment
of the Magnolia Merger Consideration and the Medi-Serve Merger Consideration to
the extent set forth in, and in accordance with the terms of, this Agreement.
1.4 SURVIVING CORPORATION.
(A) CERTIFICATE OF INCORPORATION. The respective Certificates of
Incorporation of Newco 1 and Newco 2 as in effect immediately prior to the
applicable Merger Time shall be the Certificate of Incorporation of the
respective Surviving Corporation until duly amended in accordance with the terms
thereof and of the SCGCL.
(B) BY-LAWS. The respective By-laws of Newco 1 and Newco 2 as in
effect immediately prior to the applicable Merger Time shall be the By-laws of
the respective Surviving Corporation until duly amended in accordance with their
terms and as provided by the applicable Certificate of Incorporation of the
respective Surviving Corporation and the SCGCL.
(C) DIRECTORS. The respective directors of Newco 1 and Newco 2 at
the applicable Merger Time shall, from and after the applicable Merger Time, be
the directors of the respective Surviving Corporation until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the respective
Surviving Corporation's Certificate of Incorporation and By-laws.
(D) OFFICERS. The respective officers of Newco 1 and Newco 2 at the
applicable Merger Time shall, from and after the applicable Merger Time, be the
officers of the respective Surviving Corporation until their respective
successors have been duly elected or appointed and qualified or until their
earlier death, resignation, or removal in accordance with the respective
Surviving Corporation's Certificate of Incorporation and By-laws.
(E) FURTHER ACTION. If at any time after the applicable Merger
Time, Buyer shall consider that any further deeds, assignments, conveyances,
4
agreements, documents, instruments, or assurances in law or any other things are
necessary or desirable to vest, perfect, confirm, or record in either Surviving
Corporation the title to any property, rights, privileges, powers, and
franchises of Newco 1 and Magnolia, on the one hand, or Newco 2 and Medi-Serve,
on the other hand, by reason of, or as a result of, either of the Mergers, or
otherwise to carry out the provisions of this Agreement and the Plan of Merger,
the officers of Newco 1 and Magnolia, on the one hand, or Newco 2 and
Medi-Serve, on the other hand, shall execute and deliver, upon Buyer's request,
any instruments or assurances, and do all other things necessary or proper to
vest, perfect, confirm, or record title to such property, rights, privileges,
powers, and franchises in the applicable Surviving Corporation, and otherwise to
carry out the provisions of this Agreement and the Plans of Merger.
(F) APPROVAL. The Shareholder represents, warrants and agrees that
he has reviewed the Plan of Merger for each Merger, and he hereby approves each
Plan of Merger.
ARTICLE II: CONVERSION
----------------------
2.1 CONSIDERATION. For purposes of this Agreement the terms:
(A) (I) "MERGER CONSIDERATION" shall mean $16,000,000.
(II) "MAGNOLIA BASE AMOUNT" shall mean $12,000,000.
(III) "MAGNOLIA MERGER CONSIDERATION" shall mean the Magnolia
Base Amount, as adjusted pursuant to this Agreement; and the "MAGNOLIA
MERGER CONSIDERATION PER SHARE" shall mean the Magnolia Merger
Consideration divided by the number of issued and outstanding shares of
Magnolia Shares at the applicable Merger Time.
(IV) "MEDI-SERVE MERGER CONSIDERATION" shall mean $4,000,000;
and the "MEDI-SERVE MERGER CONSIDERATION PER SHARE" shall mean the
Medi-Serve Merger Consideration divided by the number of issued and
outstanding shares of Medi-Serve Shares at the applicable Merger Time.
(B) CONVERSION OF SHARES. At the applicable Merger Time:
(I) each Magnolia Share which is issued and outstanding at the
applicable Merger Time shall by reason of the applicable Merger, without
any action by the holder thereof, be converted into the right to receive,
in accordance with the procedures hereinafter described, the Magnolia
Merger Consideration Per Share;
(II) each Medi-Serve Share which is issued and outstanding at
the applicable Merger Time shall by reason of the applicable
5
Merger, without any action by the holder thereof, be converted into the
right to receive, in accordance with the procedures hereinafter described,
the Medi-Serve Merger Consideration Per Share; and
(III) each share of Newco 1 common stock and each share of
Newco 2 common stock outstanding immediately prior to the applicable Merger
Time shall, by reason of the applicable Merger, without any action on the
part of Buyer, be converted into one share of common stock of the
applicable surviving corporation.
(C) MANNER OF EXCHANGE. The Magnolia Merger Consideration and
Medi-Serve Merger Consideration shall be paid as follows:
(I) Buyer shall deliver to the Escrowee (as defined in Section
2.5, below) newly issued shares of IHS Stock having an aggregate value
(using the Closing Date as the date of determination in accordance with
Section 3.1(a) below) equal to FIVE HUNDRED THOUSAND DOLLARS ($500,000)
(the "ESCROW DEPOSIT") which payment will be credited against the Magnolia
Merger Consideration payable to the Shareholder; and
(II) the balance of the Magnolia Merger Consideration and Medi-
Serve Merger Consideration shall be paid by the delivery by Buyer to the
Shareholder of IHS Stock having a value (determined using the Closing Date
as the date of determination in accordance with Section 3.1(a), below)
equal to the amount of such balance, and registered in the name of the
Shareholder.
(D) MAGNOLIA OR MEDI-SERVE TRANSMITTAL. Upon delivery to Buyer of
stock certificates representing any Magnolia or Medi-Serve Shares, Buyer shall
promptly deliver to the Shareholder certificates representing the number of
shares to which the Shareholder is entitled, as provided above. No interest will
be paid or accrued on any Merger Consideration payable upon the surrender of any
certificate or certificates or other instruments. Until surrendered in
accordance with the provisions of this subsection (d), the certificate or
certificates or instruments which immediately prior to the applicable Merger
Time represented issued and outstanding Magnolia or Medi-Serve Shares shall
represent for all purposes the right only to receive the applicable Merger
Consideration set forth in this Agreement. After the applicable Merger Time,
there shall be no further registration of transfers on the records of Medi-Serve
or Magnolia of any Medi-Serve or Magnolia Shares.
(E) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of IHS Stock shall be issued upon the surrender for exchange
of certificates representing any Medi-Serve or Magnolia Shares, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of IHS. Notwithstanding any other provision of this
Agreement, each holder of Medi-Serve or Magnolia Shares exchanged pursuant to
the applicable Merger (after taking into account all certificates representing
Magnolia or Medi-Serve Shares delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of IHS Stock multiplied by the value of such share determined in
accordance with Section 3.1(a) below.
6
(F) CASH LOAN. Immediately prior to the Closing, the Shareholder
shall make a capital contribution to Magnolia in the amount of $500,000 by
issuing his promissory note in such amount to Magnolia. Such promissory note
issued by Cash shall be in the form of Exhibit 2.1(f)-1 hereto (the "CASH
NOTE"), and shall be secured pursuant to a Stock Pledge Agreement (the "CASH
STOCK PLEDGE AGREEMENT") in the form of Exhibit 2.1(f)-2 hereto by Magnolia
Shares that will be converted pursuant to the Merger into shares of IHS Stock
having a value approximately equal to the amount of the Closing Loan (using the
Closing Date as the date of determination in accordance with Section 3.1(a)
below) (the "T. CASH SECURITY SHARES"). The number of T. Cash Security Shares
shall be subject to adjustment as hereinafter provided in Article III.
2.2 ADJUSTMENTS TO THE PURCHASE PRICE.
(A) WORKING CAPITAL; LONG-TERM LIABILITIES.
(I) (A) At the Closing, the Shareholder shall deliver a
certificate executed by the Shareholder certifying his best good faith estimate
of the amount of the aggregate working capital (as defined in clause (vi) below)
of Magnolia, Medi-Serve and their respective subsidiaries as of the Closing Date
on a combined basis (the "ESTIMATED CLOSING DATE WORKING CAPITAL"). If the
Estimated Closing Date Working Capital is a negative amount, the Magnolia Base
Amount, and the amount of the Magnolia Merger Consideration payable in respect
of the Magnolia Shares, will be reduced by an amount equal to such negative
amount with such reduction to be made by reducing the number of shares of IHS
Stock (valued using the Closing Date as the date of determination in accordance
with Section 3.1(a) below) otherwise deliverable to the Shareholder (as opposed
to the portion deliverable to the Escrowee) at the Closing.
(B) If the Estimated Closing Date Working Capital shall be
a positive amount, the Magnolia Base Amount, and the amount of the Magnolia
Merger Consideration payable in respect of the Magnolia Shares will be increased
by an amount equal to such positive amount, with such increase to be made by
increasing the number of shares of IHS Stock (valued using the Closing Date as
the date of determination in accordance with Section 3.1(a) below) otherwise
deliverable to the Shareholder (as opposed to the portion deliverable to the
Escrowee) at the Closing.
(II) Additionally, at the Closing, Magnolia and Medi-Serve
shall deliver to Buyer the balance sheet of Magnolia, Medi-Serve and their
respective subsidiaries on a combined basis as of the Closing Date, certified by
the Shareholder to be his best good faith estimate thereof (the "ESTIMATED
CLOSING DATE BALANCE SHEET"). The Magnolia Base Amount, and the amount of the
Magnolia Merger Consideration payable in respect of the Magnolia Shares, will be
reduced by an amount equal to the aggregate amount of the long-term liabilities
of the Company, Medi-Serve and their respective subsidiaries on a combined basis
as determined in accordance with generally accepted accounting principles,
applied consistently with past practices of the Company and Medi-Serve ("GAAP")
as set forth on the Estimated Closing Date Balance Sheet (and applied to the
Magnolia Shares). Such reduction shall be made by reducing the amount of the
number of shares of IHS Stock (valued using the Closing Date as the date of
determination in accordance with Section 3.1(a) below) otherwise
7
deliverable to the Shareholder (as opposed to the portion deliverable to the
Escrowee) at the Closing.
(III) Within one hundred twenty (120) days following the
Closing Date, Buyer shall use its best efforts to complete a review ("BUYER'S
REVIEW") of the balance sheet of the Company, Medi-Serve and their respective
subsidiaries on a combined basis as of the Closing Date (the "CLOSING DATE
BALANCE SHEET"). If the Magnolia Base Amount, after giving effect to any
adjustments made at the Closing pursuant to Section 2.2(a)(i) and (ii), above,
shall be subject to further adjustment based upon the Buyer's Review indicating
that the aggregate working capital of the Company, Medi-Serve and their
respective subsidiaries on a combined basis as of the Closing Date (the "ACTUAL
WORKING CAPITAL") was different from the Estimated Closing Date Working Capital,
then the parties shall make such payments to each other as shall result in the
Magnolia Base Amount (and correspondingly the amount of the Magnolia Merger
Consideration) being the amount that it would have been had the Actual Working
Capital been used at Closing in lieu of the Estimated Closing Date Working
Capital. Any increase to the Magnolia Base Amount (and correspondingly the
amount of the Magnolia Merger Consideration) shall be in IHS Stock having a
value, determined in accordance with Section 3.1(a), below, by Buyer to
Shareholder, and if the Magnolia Base Amount (and correspondingly the amount of
the Magnolia Merger Consideration) is reduced, then the Escrowee (as defined
below) shall deliver over to Buyer shares of IHS Stock having a value determined
in accordance with Section 3.1(a), below, equal to such deficiency. In the event
the deficiency exceeds the Escrow Deposit (as defined above) held by Escrowee,
the Shareholder shall be obligated to refund to Buyer the amount of such
deficiency in IHS Stock valued in accordance with Section 3.1(a), below.
Furthermore, if the Buyer's Review reveals that the aggregate amount of the
Company's, Medi-Serve's and their respective subsidiaries' long-term liabilities
(on a combined basis) as of the Closing Date (the "ACTUAL LONG-TERM
LIABILITIES") exceeded the amount of the Company's, Medi-Serve's and their
subsidiaries' long-term liabilities (on a combined basis) as indicated on the
Estimated Closing Date Balance Sheet, the Magnolia Base Amount (and
correspondingly the amount of the Magnolia Merger Consideration) shall be deemed
to have been reduced by the amount of such excess, and the Escrowee shall
deliver over to Buyer IHS Stock having a value equal to such excess. In the
event the amount of such excess is greater than the Escrow Deposit held by
Escrowee, the Shareholder shall be obligated to refund to Buyer the amount of
such excess in IHS Stock. The value of any IHS Stock to be distributed to the
Buyer from the Escrowee will be as set forth in Section 3.1(a), below. If the
Buyer's review reveals that the aggregate amount of the Company's, Medi-Serve's,
and their respective Subsidiaries' Actual Long- term Liabilities was less than
the amount of the Company's, Medi-Serve's, and their Subsidiaries' long-term
liabilities (on a combined basis) as indicated on the Estimated Closing Date
Balance Sheet, the Magnolia Base Amount (and correspondingly the amount of the
Magnolia Merger Consideration) shall be deemed to have been increased by the
amount of such excess, and the Buyer shall deliver over to the Shareholder IHS
Stock having a value, determined in accordance with Section 3.1(a), below, equal
to the amount of such excess. Unless a Delay Payment Notice (as defined in
clause (iv) below) shall have been given, any such
8
payment shall be made within two (2) business days after demand by the party
entitled to the adjustment.
(IV) If the Shareholder shall in good faith dispute the amount
of working capital or long-term liabilities of the Company, Medi-Serve and their
respective subsidiaries on a combined basis as of the Closing Date as set forth
in Buyer's Review, he shall give notice to Buyer (a "DELAY PAYMENT NOTICE")
within thirty (30) days after delivery to him of Buyer's Review that all or any
portion of the payment specified should not then be made and setting forth in
reasonable detail his objections and the basis therefor, in which case, the
disputed portion of any payment otherwise required to be made pursuant to clause
(iii) above shall be delayed, and Buyer and the Shareholder shall meet and in
good faith attempt to resolve any disagreements within thirty (30) days after
delivery to Buyer of the Delay Payment Notice. If the Shareholder shall fail to
timely deliver a Delay Payment Notice, the working capital and long-term
liabilities amounts set forth in Buyer's Review shall be deemed accepted by the
Shareholder and shall be conclusive and binding on all parties hereto, absent
fraud. If a Delay Payment Notice is timely delivered and the parties are unable
to resolve such disagreements within such time period, the disagreements shall
be referred to a "Big 4" accounting firm independent of the Buyer and the
Shareholder selected by agreement between the Buyer and the Shareholder, or, if
the Buyer and the Shareholder cannot so agree within the 30 day period referred
to above, by lot (the "ARBITRATING ACCOUNTANTS"), and the determination of the
Arbitrating Accountants shall be final, conclusive and binding on the parties
hereto. The Arbitrating Accountants shall be directed to use their best efforts
to reach a determination not more than thirty (30) days after such referral. The
costs and expenses of the services of the Arbitrating Accountants shall be borne
by the party whose proposal is further (by dollar amount) from the amount
finally determined by the Arbitrating Accountants. Within two (2) business days
after the final resolution of any matter covered by a Delay Payment Notice, any
delayed payment shall be made to the extent determined to be due in accordance
with such resolution.
(V) If there shall be discovered any liability that should have
been included as a current liability or long-term liability on the Closing Date
Balance Sheet but that was not so included, then Buyer, in its sole discretion,
may elect to include such liability as a Permitted Liability, in which case such
liability shall be included as a current liability or long-term liability, as
the case may be, in the determination of the Actual Working Capital Amount or
long-term liabilities, as the case may be, or to exclude such liability
therefrom, in which case such liability shall be a Prohibited Liability and
shall not be included as a current liability in the determination of the Actual
Working Capital Amount, or in the Actual Long-term Liabilities.
(VI) For the purposes hereof, "WORKING CAPITAL" means the
excess of current assets over current liabilities, as determined in accordance
with GAAP, applied consistently with the past application of GAAP by the Company
and Medi-Serve; and "LONG-TERM LIABILITY" means any liability that would be set
forth as a long-term liability on a balance sheet in accordance with GAAP,
applied consistently
9
with the past application of GAAP by the Company and Medi-Serve, except all
inter-company assets and liabilities among the Company and Medi-Serve and among
their respective subsidiaries shall be excluded. At or prior to Closing, either
or both of Magnolia and Medi-Serve may assume the obligation to pay closing
costs of the Shareholder in an amount not to exceed $150,000, in which case such
assumed obligation shall constitute current liabilities for purposes hereof.
2.3 ASSETS AND LIABILITIES.
(A) As of the Closing Date, the owned, leased and managed assets
(the "ASSETS") of the Company, Medi-Serve and their Subsidiaries (as hereinafter
defined in Section 5.1 (a)) will include all of the tangible and intangible
assets which comprise or are utilized or are held for use in connection with the
business of the Company, Medi-Serve or any of the Subsidiaries or are necessary
to the operation of the business of the Company, Medi-Serve or any of the
Subsidiaries as presently constituted (collectively, the "BUSINESS"), including,
without limitation, all property, plant, and equipment, contract rights,
leasehold interests, fixed and moveable equipment, vehicles, furnishings,
tangible personal property, inventory, supplies, cash, cash equivalents, prepaid
expenses and accounts receivable (other than accounts receivable collected, cash
expended and inventory, supplies, and other assets consumed, used or disposed
of, in each case, in the ordinary course of business, consistent with prior
practice and otherwise in conformance with the requirements of this Agreement),
goodwill, tradenames, trademarks, all patient records and files, Certificates of
Need, Medicare and Medicaid provider agreements and numbers, provider agreements
with third party payors, telephone numbers, capital stock in subsidiaries, and
to the extent permitted by law, all permits, licenses and other governmental
approvals. As of the Closing, all of the Assets shall be free and clear of all
Liens other than Permitted Liens (as such term is defined in Section 5.6(c)
below).
(B) As of the Closing, there will not be outstanding against the
Company, Medi-Serve or any of the Subsidiaries any claim, lawsuit, liability,
obligation or debt of any kind or nature whatsoever (regardless of whether the
same would constitute a liability to be set forth on a balance sheet in
accordance with GAAP), whether absolute, accrued, due, direct or indirect,
contingent or liquidated, matured or unmatured, joint or several, whether or not
for a sum certain, whether for the payment of money or for the performance or
observance of any obligation or condition ("PROHIBITED LIABILITIES"), other than
(w) such liabilities as are taken into account in the determination of the
Actual Working Capital Amount or the Actual Long-term Liabilities under Section
2.2(a),(x) liabilities covered by insurance to the extent of insurance proceeds
collected (or reasonably expected to be collected) with respect thereto, (y)
obligations arising out of services or products or other benefits to be provided
to the Company, Medi-Serve or the Subsidiaries after Closing under Contracts (as
hereinafter defined in Section 5.7(a)) that are not to be terminated in
accordance with Section 2.4 below, and (z) liabilities listed in Schedule 5.12
to the extent that reserves therefor are included in the determination of the
working capital as of the Closing Date of the Company, Medi-Serve and the
Subsidiaries on a combined basis and to the extent that such liabilities are
covered by insurance proceeds collected (or reasonably expected to be collected)
by the Company, Medi-Serve or their Subsidiaries
10
("PERMITTED LIABILITIES"). It is expressly agreed that the Shareholder shall be
responsible for all Prohibited Liabilities of the Company, Medi-Serve or any of
the Subsidiaries, including, without limitation, all (i) liabilities of the
Company, Medi-Serve or any of the Subsidiaries arising out of participation in
the Medicare or Medicaid programs, or arrangements with any other third party
payor, or arrangements with any person or entity that participates in the
Medicare or Medicaid programs or any other third party payor program, including
without limitation, with respect to any excess reimbursement, recapture,
adjustment or overpayment whatsoever, in each case, attributable to any period
on or prior to the Closing Date ("REIMBURSEMENT LIABILITIES"), (ii) malpractice
claims asserted by patients or any other tort claims asserted, claims for breach
of contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions occurring on or
before the Closing Date (except to the extent of insurance proceeds collected
(or reasonably expected to be collected) with respect thereto), (iii) any
accounts payable or employment or other taxes (except to the extent of the
amount thereof, if any, included in the calculation of the Actual Working
Capital Amount or Actual Long-term Liabilities), and (iv) accrued but unpaid
compensation or other benefits to any of the employees, agents, consultants or
advisers of the Company, Medi-Serve or any of the Subsidiaries, including
accrued vacation (except to the extent of the amount thereof, if any, included
in the calculation of the Actual Working Capital Amount or Actual Long-term
Liabilities). At Closing, the Shareholder shall assume and undertake in a
writing in the form and substance of Exhibit 2.3(b) (the "UNDERTAKING") to
perform all Prohibited Liabilities when and as the same become due in accordance
with their terms. The Company, Medi-Serve, the Subsidiaries and Buyer will not
assume any liabilities of Shareholder or provide any guaranty therefor or obtain
any release of any of the same except as provided in Section 10.10, below.
2.4 DESIGNATED CONTRACTS. Within ten (10) business days after the date
hereof, Buyer shall deliver to the Shareholder Schedule 2.4 setting forth each
of the Contracts identified on Schedule 5.7(b) that the Company, Medi-Serve or
any of the Subsidiaries shall not retain as of the Closing (the "DESIGNATED
CONTRACTS"). Within five (5) days after Buyer shall have delivered Schedule 2.4
to Shareholder, the Shareholder may terminate this Agreement in accordance with
Section 12.1 by giving notice thereof during such five (5) day period if any
Contracts shall be listed on Schedule 2.4. If Shareholder shall not so notify
Buyer within such time period, then such right to terminate this Agreement shall
expire. Prior to the Closing (unless the Shareholder shall have terminated this
Agreement as provided above), each Designated Contract set forth on Schedule 2.4
shall be terminated (or the Company, Medi-Serve and the Subsidiaries shall
otherwise be released from all liability with respect thereto) at the sole cost
and expense of the Shareholder (or at the cost of the Company, Medi-Serve or the
Subsidiaries to the extent such cost is expressly included in the calculation of
the Actual Working Capital Amount or Actual Long-term Liabilities). It shall be
a condition precedent of Buyer to the Closing that all required consents shall
have been obtained from each party to each Contract (that is not a Designated
Contract) with respect to which the change in control contemplated by this
Agreement requires such consent ("CONSENT CONTRACTS"), except to the extent that
the failure to obtain such consents with respect to Consent Contracts is not
reasonably likely to have a material adverse effect on the Company, Medi-Serve
or the operation of the Business. If the
11
Company, Medi-Serve or any of the Subsidiaries shall enter into any agreement,
lease, contract, instrument or commitment after the date hereof and prior to
Closing that would be deemed to be "material" as defined in Section 5.7 below if
it were in existence on the date hereof, or if there shall be disclosed any
agreement, lease, contract, instrument or commitment that should have been
disclosed on Schedule 5.7(b) hereto but that was not so disclosed, then Buyer
shall have five (5) business days from the date on which so disclosed to Buyer
to notify the Shareholder as to whether such agreement, lease, contract,
instrument or commitment shall be a Designated Contract. If Buyer fails to so
notify the Shareholder then such agreement, lease, contract, instrument or
commitment shall not be deemed to be a Designated Contract.
2.5 ESCROW INDEMNIFICATION.
(A) At the Closing, pursuant to an Escrow Agreement to be executed
by the parties in substantially the form and substance of Exhibit 2.5(a) hereto,
the Escrow Deposit shall be deposited with CoreStates Bank, N.A. or another
escrow agent acceptable to Buyer and Shareholder (the "ESCROWEE") and shall be
held by the Escrowee, together with all interest or income, if any, earned
thereon in accordance with the Escrow Agreement, as a non-exclusive source of
indemnification from the Shareholder for any amount due to any Buyer Indemnitee
(as such term is hereinafter defined in Section 11.2) pursuant to Articles II,
XI, or otherwise. The Escrow Deposit (plus all interest or income earned thereon
in accordance with the Escrow Agreement) less any claims made in good faith for
Losses (as such term is defined in Section 11.2) and any amounts paid to Buyer
or the Shareholder in accordance with Section 2.2(b) above shall be released to
Shareholder on the second anniversary of the Closing Date (the "ESCROW RELEASE
DATE").
(B) Subject to the limitations set forth in Article III below
(including without limitation, with respect to the sale of shares of IHS Stock
issued pursuant to this Agreement), if Shareholder shall so request, the shares
of IHS Stock constituting all or part of the Escrow Deposit, shall be sold in a
bona fide third party transaction for the account of the Escrow Deposit, if the
entire gross proceeds of such sale shall become part of the Escrow Deposit, and
shall be deposited with the Escrowee and held pursuant to the Escrow Agreement,
and Buyer shall have reasonably determined that a satisfactory procedure shall
have been established so that at all times before, during and after such sale,
the escrowed shares of IHS Stock to be sold and said gross proceeds thereof
shall be subject to the sole possession and control of the Escrowee pursuant to
the terms of the Escrow Agreement, and shall be, free and clear of all Liens of
third parties (other than Liens in favor of the Escrowee to the extent, if any,
provided in the Escrow Agreement).
(C) If any shares of IHS Stock constituting any part of the Escrow
Deposit shall be sold, the gross proceeds thereof shall be held by the Escrowee
pursuant to the terms of the Escrow Agreement, and shall be invested in
accordance with the instructions of Shareholder (subject to the reasonable
approval of Buyer) as provided in the Escrow Agreement. Any interest or income
or dividends paid on or in
12
respect of all or any part of the Escrow Deposit ("ESCROW INCOME") shall be
added to, and shall thereafter constitute part of the Escrow Deposit.
(D) The costs, fees and expenses of the Escrowee shall be borne
equally by Buyer, on the one hand, and Shareholder, on the other hand.
2.6 NEW GREENVILLE LEASE. Upon the Commencement (as defined below)
of the New Greenville Lease, the Magnolia Base Amount (and correspondingly, the
Magnolia Merger Consideration,) shall be increased by $400,000, and Buyer shall
pay to the Shareholder such $400,000 amount by delivery of shares of IHS Stock
(valued using the Closing Date as the date of determination in accordance with
Section 3.1(a), below). "Commencement" of the New Greenville Lease shall be
deemed to have occurred upon the last to occur of the following: (x) the
completion of construction of the New Greenville Facility, (y) the granting of a
certificate of need by the State of South Carolina to the New Greenville
Facility, and (z) the granting of all other licensure necessary to permit the
opening of the New Greenville Facility to patients.
2.7 GOLDEN AGE AND XXXXX HEALTH CARE FACILITIES. The Shareholder
represents and warrants that on January 30, 1998, Magnolia purchased the stock
of each of X.X. Xxxxxxx, Inc. and Xxxxx Nursing Facilities, Inc., lessors of
facilities leased by Magnolia subsidiaries, Golden Age Xxxxx, Inc. and Xxxxx
Healthcare, Inc., respectively pursuant to certain leases (the "GOLDEN AGE/XXXXX
LEASES"), copies of which have been delivered to Buyer. The Shareholder
represents and warrants that Magnolia incurred long-term liabilities in the
amount of $1,840,000 (the "GOLDEN AGE/XXXXX DEBT") in connection with such
acquisition. Buyer agrees that such Golden Age/Xxxxx Debt shall not be included
as long-term liabilities for purposes of Section 2.2, above. In addition, based
on the foregoing, Buyer agrees that the Magnolia Base Amount (and
correspondingly, the Magnolia Merger Consideration) shall be increased by an
amount equal to $150,000.
2.8 XXXXXX LITIGATION. H. Xxxxxx Xxxxxx ("XXXXXX") is the landlord of
five properties that are currently leased by Magnolia from Xxxxxx and so
identified on Schedule 5.7(b)(ix), below (the "XXXXXX LEASES"). Each Xxxxxx
Lease contains a provision that rent will be equal to the cost of capital as of
the date thereof, which is the subject of current litigation between Xxxxxx and
Magnolia among other issues (the "XXXXXX LITIGATION"). Consequently, Magnolia
agrees to reserve $1,100,613 on its Estimated Closing Date Balance Sheet or to
resolve the Xxxxxx Litigation prior to Closing. Furthermore, Magnolia and
Shareholder represent and warrant that the base rent for all of the Xxxxxx
Leases shall be not more than $1,333,155 commencing on April 1, 1998 (absent any
changes made pursuant to any settlement agreement approved by Buyer). Magnolia
and the Shareholder also represent and warrant that in connection with the
Xxxxxx Litigation, Xxxxxx'x counsel, Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
is holding $383,785 and Magnolia's counsel, Xxxxx, Xxxxxxxxx & Xxxxxxx is
holding $247,948 in escrow of Magnolia (collectively. the "XXXXXX ESCROW
AMOUNT"), which amounts shall be applied against amounts due to Xxxxxx under the
Xxxxxx Leases or returned to the Company. Regardless of GAAP, the Xxxxxx Escrow
Amount will be treated as current assets for working capital purposes. Magnolia
and
13
Shareholder represent and warrant that, notwithstanding the Xxxxxx Litigation or
any disclosure made pursuant to Section 5.7(a) below, the Xxxxxx Litigation will
not result in the termination of any of the Xxxxxx Leases.
2.9 EMPLOYMENT UNDERTAKING. Buyer hereby undertakes to interview Xxxxx
Xxxxxxxxx, Magnolia's reimbursement specialist, and to give good faith
consideration to the prospect of continuing Xx. Xxxxxxxxx'x employment with
Magnolia in such capacity.
2.10 MEDI-SERVE DIVIDEND. The parties acknowledge that, on or prior to
the Closing Date, Medi-Serve may pay a cash dividend to the Shareholder in the
amount not to exceed $950,000. In connection therewith, Medi-Serve shall be
entitled to extend its line of credit, on terms and conditions reasonably
satisfactory to Buyer, with NationsBank, N.A. to borrow sufficient cash to pay
such dividend. Any amounts so borrowed and outstanding on the Closing Date shall
constitute current liabilities for purposes of Section 2.2(a) above, and any
guaranty by Shareholder of the repayment of such amounts shall be subject to
Section 11.3(d) hereof.
ARTICLE III: IHS STOCK
----------------------
3.1 IHS STOCK. As set forth in this Agreement, the Merger Consideration
and various adjustments to the Merger Consideration shall be payable by means of
the delivery of shares of IHS Stock. Such deliveries shall be made in accordance
with the following:
(A) SHARE VALUE. Notwithstanding anything to the contrary contained
in this Agreement, any reference in this Agreement or in any Transaction
Document to use of the Closing Date as the date of determination to value shares
of IHS Stock to be delivered in accordance with this Agreement shall be deemed
to mean that the number of shares of IHS Stock to be delivered shall be valued
by using the average closing New York Stock Exchange ("NYSE") price of IHS Stock
for the sixty (60) trading day period ending on (and including) April 14, 1998.
In all other cases, whenever shares of IHS Stock are to be delivered pursuant to
this Agreement, the number of shares of IHS Stock shall be valued as of the
Applicable Valuation Date (defined below) by using the average closing NYSE
price of IHS Stock for the sixty (60) trading day period ending on (and
including) the date which is two (2) trading days prior to the Applicable
Valuation Date. Unless otherwise expressly provided elsewhere in this Agreement,
the applicable valuation date (the "APPLICABLE VALUATION DATE") shall mean the
date on which the dollar amount to be paid (whether by reason of an
indemnification claim or Merger Consideration adjustment or otherwise) is
finally determined.
(B) REGISTRATION RIGHTS. Buyer will use its best efforts to cause
to be filed with the Securities and Exchange Commission (the "COMMISSION"),
within forty-five (45) days following the Closing Date, a registration statement
(a "SHELF REGISTRATION STATEMENT") for the registration of the IHS Stock issued
to Shareholder, under the Securities Act of 1933, as amended (the "SECURITIES
ACT") and Buyer shall use its best efforts to cause such registration statement
to be declared effective by the Commission within ninety (90) days following the
Closing Date, and Buyer shall
14
maintain the effectiveness of such registration statement for a period of one
(1) year following the Closing Date, or until Shareholder shall not own any of
the shares of IHS Stock issued pursuant to this Agreement, whichever shall occur
first, in each case except to the extent that an exemption from registration may
be available.
(C) REGISTRATION EXPENSES. Shareholder shall not be responsible
for, and Buyer shall bear, all of the reasonable expenses of the Buyer related
to such registration including, without limitation, the fees and expenses of its
counsel and accountants, all of its other costs, fees and expenses incident to
the preparation, printing, registration and filing under the Securities Act of
the Shelf 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 shares of IHS Stock and the costs and expenses (including fees and
disbursements of its counsel) incurred in connection with the qualification of
the shares of IHS Stock under the Blue Sky laws of various jurisdictions. Buyer,
however, shall not be required to pay or incur underwriter's or brokerage
discounts, commissions or expenses, or to pay or incur any costs or expenses
arising out of Shareholder's failure to comply with its obligations under this
Article III, or to pay or incur any costs or expenses arising out of the
inclusion of any transferee of Shareholder in the Shelf Registration Statement.
(D) RESALE LIMITATIONS. The Shareholder hereby covenants with Buyer
that all resales by the Shareholder and, if any, his transferees of such shares
(other than transferees acquiring shares pursuant to a sale pursuant to an
effective registration statement or Rule 144 promulgated pursuant to the
Securities Act ("RULE 144") and in accordance with subsection (d)) of shares of
IHS Stock issued pursuant to this Agreement shall be effected solely through
Xxxxxxx Xxxxx Xxxxxx, Inc., as broker, and resales by the Shareholder and, if
any, his transferees of such shares (other than transferees acquiring shares
pursuant to a sale pursuant to an effective registration statement or Rule 144
and in accordance with this subsection (d)), shall not at any time, in the
aggregate, during the period commencing on the Closing Date and ending 120 days
after the Effective Date (as defined in Section 3.1(l), below), exceed one
hundred and thirty thousand (130,000) shares (plus, if any shares of IHS Stock
are issued to the Shareholder pursuant to subsection (l) below, twenty-five
percent (25%) of the number of such additionally issued shares) during any
thirty (30) day period, or thereafter exceed One Hundred Thousand (100,000)
shares during any thirty (30) day period. For purposes of this subsection (d),
the term Shareholder shall include W. Xxxxxxx Xxxxx and X.X. Xxxxxx with respect
to any shares of IHS Stock received by them pursuant to the Premiere Merger
Agreement. Notwithstanding the foregoing, Buyer agrees that the foregoing volume
restrictions shall not apply to sales, until 150 days after the Shelf
Registration Statement is declared effective, of (i) shares of IHS Stock held in
escrow and made pursuant to Section 2.5(b) above to satisfy indemnification, or
(ii) Merger Consideration reduction obligations of the Shareholder.
(E) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Shareholder with respect to the shares of IHS
Stock as provided in this Section 3.1, after the Closing Buyer covenants and
agrees as follows:
15
(I) Buyer will promptly notify the Shareholder, at any time
when a prospectus relating to the Shelf Registration Statement is required to be
delivered under the Securities Act, of the happening of any event known to Buyer
as a result of which the prospectus included in the Shelf Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing.
(II) Buyer shall furnish the Shareholder with such number of
prospectuses as shall reasonably be requested by Shareholder in connection with
any actual or contemplated resales.
(III) Subject to the ultimate sentence in Section 3.1(c) above,
Buyer shall take all necessary action which may be required in qualifying or
registering the shares of IHS Stock included in a Shelf Registration Statement
for offering and resale under the securities or Blue Sky laws of such states as
reasonably are requested by the Shareholder, provided that Buyer shall not be
obligated to qualify as a foreign corporation or dealer to do business under the
laws of any such jurisdiction.
(IV) The information included or incorporated by reference in
the Shelf Registration Statement will not, at the time such Shelf 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 as necessary to correct any statement in any
earlier filing of such Shelf Registration Statement or any amendments thereto.
The Shelf Registration Statement will comply in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder. Buyer
shall indemnify the Shareholder and each person, if any, who controls such
Shareholder within the meaning of ss.15 of the Securities Act or ss.20(a) of the
Securities Exchange Act of 1934, as amended (the "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 Shelf Registration Statement executed by Buyer or based upon written
information furnished by Buyer filed in any jurisdiction in order to qualify
shares of IHS Stock under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NYSE or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading, unless such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by the
Shareholder specifically for use in such Shelf Registration Statement (it being
understood that Buyer may rely on the representations and warranties of
Shareholder made pursuant to this Agreement in preparing the Shelf Registration
Statement), any amendment or supplement thereto or any application, as
16
the case may be. If any action is brought against the Shareholder or any
controlling person of the Shareholder in respect of which indemnity may be
sought against Buyer pursuant to this subsection 3.1(e)(iv), such person shall
within thirty (30) days after the receipt thereby of a summons or complaint,
notify Buyer in writing of the institution of such action and Buyer shall assume
the defense of such action, including the employment and payment of reasonable
fees and expenses of counsel (reasonably satisfactory to the Shareholder or such
controlling person). Shareholder or such controlling person shall have the right
to employ her, his, its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of Shareholder or controlling
person unless (A) the employment of such counsel shall have been authorized in
writing by Buyer in connection with the defense of such action, or (B) Buyer
shall not have employed counsel to have charge of the defense of such action
within twenty (20) days of the request therefor, or (C) such indemnified party
or parties shall have reasonably concluded and notified Buyer that there may be
defenses available to her, him, it or them which are different from or
additional to those available to Buyer (in which case, Buyer shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys for the Shareholder and such controlling persons
shall be borne by Buyer.
(V) The Shareholder, and his successors and assigns, shall
severally, and not jointly, indemnify Buyer, its officers and directors and each
person, if any, who controls Buyer within the meaning of ss.15 of the Securities
Act or ss.20(a) of the Exchange Act against all loss, claim, damage, expense and
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 (Federal, State, local or otherwise), arising from
inaccuracies in or omissions from information furnished in writing by or on
behalf of Shareholder, or any of his successors or assigns specifically for
inclusion in the Shelf Registration Statement, any Exchange Act filing or any
State Blue Sky Law filing.
(F) NOTICE OF SALE. Shareholder shall not resell or otherwise
transfer any interest in any of the shares of IHS Stock issued to Shareholder
pursuant to this Agreement unless Shareholder shall have complied in all
material respects, with all of his obligations under this Agreement, and unless
Shareholder shall have given prior notice to Buyer, describing in reasonable
detail Shareholder's intention to effect the transfer and the manner of the
proposed transfer. If the transfer is to be pursuant to an effective Shelf
Registration Statement as provided herein, Shareholder will resell only in
compliance with the disclosure therein and discontinue any offers and sales
thereunder upon notice from Buyer to the Shareholder that the Shelf Registration
Statement relating to the shares of IHS Stock being transferred is not "current"
until Buyer gives further notice that offers and sales may be recommenced. In
the event of any such notice from Buyer, Buyer agrees to file expeditiously such
amendments to such Shelf Registration Statement as may be necessary to bring it
current during the period specified in this Section 3.1 and to give prompt
notice to Shareholder when the Shelf Registration Statement has again become
current. If the Shareholder delivers to Buyer an opinion of counsel reasonably
acceptable to Buyer and its counsel in form and substance reasonably acceptable
to them and to the effect that the proposed transfer
17
of shares of IHS Stock may be made without registration under the Securities Act
and all applicable state securities laws, Shareholder will, subject to Section
3.1(d) above, be entitled to transfer said shares of IHS Stock in accordance
with the terms of the notice and opinion of his counsel.
(G) CONDITIONS. It shall be a condition precedent to the
obligations of the Buyer to take any action pursuant to this Article III that
the Shareholder shall furnish to the Buyer such information regarding
themselves, the shares of IHS Stock held by them, the intended method of
disposition of such securities, and such other information as shall reasonably
be requested by Buyer to the extent necessary to effect the registration of
their shares of IHS Stock. In that connection, Shareholder shall be required to
represent and warrant to the Buyer that all such information which is given is
both complete and accurate in all material respects. It also shall be a
condition precedent to the obligations of the Buyer to take any action pursuant
to this Article III that the Shareholder shall deliver to the Buyer a statement
in writing that they bona fide intend to resell, transfer or otherwise dispose
of the shares of IHS Stock. Shareholder will, severally, promptly notify Buyer
at any time when a prospectus relating to a Shelf Registration Statement
covering Shareholder's shares under this Section 3.1 is required to be delivered
under the Securities Act, of the happening of any event known to Shareholder as
a result of which the prospectus included in such Shelf 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 under which such
statements are made.
(H) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be
issued hereunder will be newly issued shares of Buyer. Shareholder represents
and warrants to Buyer that the shares of IHS Stock being issued hereunder are
acquired, and will be acquired, by the Shareholder for investment for his own
accounts and not with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act or any applicable state
securities law other than pursuant to an effective registration statement or
Rule 144; the Shareholder acknowledges that the shares of IHS Stock issued to
them pursuant to this Agreement constitute restricted securities under Rule 144,
and may have to be held indefinitely, and the Shareholder agrees that no shares
of IHS Stock issued to him pursuant to this Agreement 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 represents and warrants that he has the
knowledge and experience in financial and business matters, is capable of
evaluating the merits and risks of the investment, is able to bear the economic
risk of such investment, and is an accredited investor within the meaning of
Regulation D promulgated pursuant to the Securities Act. The Shareholder
represents and warrants that he has had the opportunity to make inquiries of and
obtain from representatives and employees of Buyer such other information about
Buyer as he deems necessary in connection with such investment.
(I) LEGEND. It is understood that, prior to resale of any shares of
IHS Stock pursuant to an effective Shelf Registration Statement pursuant to
subsection (e) above, the certificates evidencing such shares of IHS Stock shall
bear the following (or a similar) legend (in addition to any legends which may
be reasonably
18
required in the opinion of Buyer's counsel by the applicable securities laws of
any state), and upon resale of such shares pursuant to such an effective
registration, new certificates shall be issued for the shares sold without such
legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE
SECURITIES ACT OF 1933 OR AN OPINION OF THE COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
(J) CERTAIN TRANSFEREES. Except in the case of any transfer of any
shares of IHS Stock issued pursuant to this Agreement to a person pursuant to
the laws of intestacy and succession upon the death of Shareholder or in an open
market transaction subsequent to the effective date of, and pursuant to, the
Shelf Registration Statement covering such shares of IHS Stock or in accordance
with Rule 144 promulgated under the Securities Act, Shareholder shall not
transfer any such shares of IHS Stock to any person or entity unless such
transferee shall have agreed in a writing, in form and substance satisfactory to
Buyer, to be bound by the provisions applicable to the Shareholder under this
Article III and such transfer shall be made in accordance with all applicable
Federal and state securities laws as set forth in subsection (g) above and
otherwise in accordance with this Article III.
(K) RULE 144 REPORTING. With a view to making available the
benefits of the certain rules and regulations of the Commission which may permit
the resale of restricted securities to the public without registration under
certain circumstances, the Buyer agrees, so long as there shall be outstanding
in the hands of the Shareholder 100,000 shares of IHS Stock issued pursuant to
this Agreement, to furnish to Shareholder who so reasonably requests in writing,
a written statement by the Buyer as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy
of the most recent annual or quarterly report of the Buyer, and such other
reports and documents with the Commission so filed as Shareholder may reasonably
request from time to time in availing himself of any rule or regulation of the
Commission allowing such holder to sell any such shares without registration.
(L) If, notwithstanding the use of its best efforts as provided in
subsection (b) above, Buyer does not cause the Shelf Registration Statement to
be declared effective within one hundred and fifty (150) days after the Closing
Date, then as of the date that such Shelf Registration Statement shall become
effective (the "EFFECTIVE DATE"), the number of Additional Cash IHS Cash Shares
shall be adjusted so that the number of T. Cash Security Shares issued to the
Shareholder pursuant to this Agreement shall have an aggregate fair market value
equal to the original principal amount of the Closing Loan based upon a price
per share of such stock equal to the
19
average closing NYSE price of such stock for the sixty (60) trading day period
ending on the date which is two (2) trading days prior to such effective date
(the "ADJUSTED MARKET VALUE PER ADDITIONAL IHS SHARE"). Within five (5) business
days after such effective date Buyer shall deliver notice (the "ADJUSTMENT
NOTICE") to the Shareholder of the Adjusted Market Value Per Additional IHS
Share and the number of shares to be delivered by Buyer to Shareholder (if the
Adjusted Market Value Per Additional IHS Share shall be less than the average
market value per share used on the Closing Date (the "INITIAL MARKET VALUE PER
SHARE") or by the Shareholder to Buyer (if the Adjusted Market Value Per
Additional IHS Share shall be greater than the Initial Market Value Per Share)
so as to effect the adjustment described in this subsection 3.l(l). The number
of shares to be delivered or issued, as the case may be, shall be rounded up or
down so that no fractional shares need be issued. Within five (5) business days
the parties shall make the delivery of the shares of IHS Stock required in the
Adjustment Notice.
ARTICLE IV: THE CLOSING
-----------------------
4.1 TIME AND PLACE OF CLOSING. The closing (the "CLOSING") of the
transactions contemplated by this Agreement shall take place by mail through
escrow arrangements satisfactory to the parties hereto on the day that is one
(1) business day after satisfaction of all of the conditions to closing set
forth in this Agreement, shall have been tendered, made or expressly waived, but
in no event later than April 21, 1998, unless all necessary regulatory approvals
have not been obtained. In such event, the Closing shall take place at such
other time and place upon which the parties may agree. The date on which the
Closing is held is referred to in this Agreement as the "CLOSING DATE".
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE
------------------------------------------------
SHAREHOLDER, MEDI-SERVE AND COMPANY
-----------------------------------
The Company (prior to the Closing only) and Medi-Serve (prior to the
Closing only) and Shareholder hereby jointly and severally represent and warrant
to Buyer as follows:
5.1 ORGANIZATION AND STANDING OF THE COMPANY AND MEDI-SERVE;
SUBSIDIARIES.
(A) Except as set forth on Schedule 5.1(a), neither the Company nor
Medi- Serve has any equity interest or investment, directly or indirectly, in
any other corporation, limited liability company or partnership, limited or
general partnership, joint venture, or other entity, organization or
association. Schedule 5.1(a) also sets forth the percentage equity interest and
percentage voting interest held directly or indirectly (in which case the nature
of such indirect interest also is set forth on Schedule 5.1(a)) in the entities,
if any, listed on Schedule 5.1(a) and whether or not such equity interest or
voting interest is held beneficially and of record. The parties agree that each
entity in which the Company or Medi-Serve holds an equity interest and that is
identified as a "Subsidiary" on Schedule 5.1(a) is sometimes referred to in
20
this Agreement as a "SUBSIDIARY". Except as set forth on Schedule 5.1(a), the
financial results of each Subsidiary are included in the Financial Statements
(as such term is hereinafter defined in Section 5.8) on a combined basis in
accordance with GAAP.
(B) Except as set forth on Schedule 5.1(b), each of the Company,
Medi- Serve and each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
Copies of the Articles of Incorporation and By-Laws of the Company and
Medi-Serve and copies of the Articles of Incorporation and By-Laws or other
governance documents of the Subsidiaries (such as certificates of limited
partnerships and limited partnership agreements in the case of limited
partnerships or articles of organization and operating agreements in the case of
limited liability companies) ("GOVERNING DOCUMENTS"), and all amendments thereof
to date, have been delivered to Buyer and are complete and correct. Each of the
Company, Medi-Serve and each Subsidiary has the power and authority to own the
property and assets now owned by it and to conduct the business presently being
conducted by it and to enter into this Agreement and each of the Transaction
Documents (as defined below in Section 5.2) to which it is a party and to
perform its obligations hereunder and thereunder. Each of the Company, Medi-
Serve and each Subsidiary is qualified to do business as a foreign corporation
in each state where the ownership of its assets or the conduct of its business
would make such qualification necessary.
5.2 AUTHORITY. The Company and Medi-Serve have the full corporate power
and authority to make, execute, deliver and perform this Agreement (including
all Schedules and Exhibits hereto), and all other agreements, instruments,
certificates and documents required or contemplated hereby or thereby
(collectively "TRANSACTION DOCUMENTS") to be executed or delivered by it, and to
consummate all of the transactions contemplated hereby and thereby. Such
execution, delivery, performance and consummation have been duly authorized by
all necessary action, corporate or otherwise, on the part of the Company and
Medi-Serve. Any rights of appraisal or dissenter's rights with respect to the
transactions contemplated by this Agreement have been waived.
(B) Shareholder has the full legal power and capacity to make,
execute, deliver and perform this Agreement (including all Schedules and
Exhibits hereto), and all Transaction Documents to be executed or delivered by
him, and to consummate all of the transactions contemplated hereby and thereby.
Such execution, delivery, performance and consummation have been made in the
exercise of Shareholder's free will and volition, and any necessary consents of
holders of indebtedness of Shareholder to the transactions contemplated by this
Agreement have been obtained.
5.3 BINDING EFFECT. This Agreement constitutes, and when delivered at
or prior to the Closing, each Transaction Document executed by Shareholder,
Medi-Serve or the Company will constitute, the legal, valid and binding
obligations of such Shareholder, Medi-Serve or the Company, as the case may be,
enforceable against it or him or, as the case may be, in accordance with their
respective terms.
21
5.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by Shareholder,
Medi-Serve or the Company nor the performance by Shareholder, Medi-Serve or the
Company of the transactions contemplated hereby and thereby, conflicts with, or
constitutes a breach of or a default under or will cause the termination of (A)
in the case of the Company, Medi-Serve, any Subsidiary or Shareholder that is
not an individual person, its Certificate of Incorporation or other Governing
Document; or (B) any judgment, order, writ, injunction, decree, statute, law,
rule, regulation, directive, mandate or ordinance ("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") applicable to it or him or the operation of the Business or the
ownership of any of the Assets; or (C) any agreement, indenture, contract or
instrument to which Shareholder is now a party or by which he or any of his
assets is bound.
5.5 CONSENTS. Except as set forth on Schedule 5.5, no authorization,
consent, approval, license, filing or registration by the Company, Medi-Serve,
any Subsidiary, Shareholder or, to the best knowledge of the Group, the Buyer,
with any Governmental Authority, is or will be necessary in connection with the
entry into, execution, delivery and performance of this Agreement or any of the
Transaction Documents by the Company, Medi-Serve or Shareholder, or for the
consummation of the transactions contemplated hereby and thereby.
5.6 SCHEDULE OF ASSETS AND PROPERTIES; TITLE; CONDITION.
(A) (I) Set forth on Schedule 5.6(a)(i)-1 is a complete and
accurate list, arranged by Magnolia Facility and Medi-Serve Facility, of all
material items of machinery, and all material items of equipment, office
equipment, and furniture, and any other material items of personal property, in
each case that comprise or are utilized or are held for use in connection with
the Company, Medi-Serve or any of the Subsidiaries or are necessary to the
operation of the Business. For purposes of the foregoing, "material" means an
item having a value in excess of $10,000. Set forth on Schedule 5.6(a)(i)-2 is a
complete and accurate list, arranged by Magnolia Facility and Medi-Serve
Facility (and indicating the interest held therein), of all vehicles used in
connection with the Business or owned or leased by the Company, Medi-Serve or
any Subsidiary. Said Schedules 5.6(a)(i)-1 and 5.6(a)(i)-2 also set forth which
of such assets are owned by the Company, Medi-Serve or any of the Subsidiaries
(the "OWNED ASSETS"), leased by the Company, Medi-Serve or any of the
Subsidiaries (the "LEASED ASSETS"), or managed by the Company, Medi- Serve or
any of the Subsidiaries (the "MANAGED ASSETS").
(II) Set forth on Schedule 5.6(a)(ii) is a complete and
accurate list of all patents, trademarks, service marks, copyrights, or
applications for any of the same, franchises, proprietary rights and other
authorizations (other than Licenses as set forth on Schedule 5.10 hereof), if
any, and any other items of intangible or intellectual property that are owned,
possessed or used by the Company or Medi-
22
Serve (owned, managed, leased or licensed) that comprise or are utilized or are
held for use in connection with the Company, Medi-Serve or any of the
Subsidiaries or are necessary to the operation of the Business (the "PROPRIETARY
RIGHTS"). There is no basis for any claim of infringement or misappropriation by
or against the Company, Medi-Serve or any Subsidiary with respect to any of the
Proprietary Rights.
(III) Shareholder represents and warrants that set forth on
Schedule 5.6(a)(iii) is a list of excluded items or personal effects, which will
be removed by him at or about the time of the Closing. Based on the foregoing,
Buyer agrees that such personal effects shall not constitute Assets.
(B) Except as set forth on Schedule 5.6(b), the Company, Medi-Serve
or one of their Subsidiaries has good and marketable title to all of the Owned
Assets or a good and valid leasehold interest in all of the Leased Assets, or
the unrestricted right to use all of the Managed Assets, subject to no liens,
claims, security interests, mortgages, pledges, charges, easements, rights of
set off, restraints on transfers, restrictions on use, options, or encumbrances
of any kind or nature whatsoever ("LIENS"), other than Permitted Liens (as
defined below in subsection (c)). Except as set forth on Schedule 5.6(b), no
person other than the Company, Medi-Serve or one of their Subsidiaries has any
right to the use or possession of any of such property and no currently
effective financing statement (other than financing statements granted by
lessors of any Magnolia Facilities leased to the Company or one of the
Subsidiaries) with respect to any of such personal property has been filed in
any jurisdiction, and none of the Company, Medi-Serve and the Subsidiaries has
signed any such financing statement or any security agreement authorizing any
secured party thereunder to file any such financing statement. Since formation,
each of the Company, Medi-Serve and each Subsidiary has conducted its business
activities only under the corporate and/or trade names set forth in Schedule
5.6(b) hereto. All of such personal property comprising equipment, improvements,
furniture and other tangible personal property, whether owned, leased, managed
or licensed, is in good operating condition and repair except for normal wear
and tear in the ordinary course of business and except for items to be replaced
in the ordinary course of business consistent with past practice, and is
functioning in the manner and for the purpose for which it was intended and is
in compliance with (and the operation thereof is in compliance with) all
applicable Governmental Requirements, and is sufficient and suitable to operate
the Business in a normal and efficient manner.
(C) "PERMITTED LIENS" means:
(I) each lien, if any, described on Schedule 5.6(c) hereto;
(II) carriers', warehouseman's, mechanics, materialmen's,
repairmen's or other like liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days, that in the aggregate do not
exceed $50,000;
(III) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and
23
appeal bonds, performance bonds and other obligations of like nature incurred in
the ordinary course of business, provided that each such deposit shall be
included in the Assets and shall not exceed $15,000 in any one case, or $75,000
in the aggregate;
(IV) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation;
(V) (A) liens in favor of Premiere or its wholly owned
subsidiaries, or (B) the rights of lessors of Leased Assets under the leases
thereof, or (C) Liens created by the owners of any Leased Facilities (as
hereinafter defined in Section 5.11(b)) to the extent permitted by the
applicable Tenancy Leases (as hereinafter defined in Section 5.11(b)) (but only
to the extent that such Liens will not have a material adverse effect on the
operation of the applicable Leased Facility); and
(VI) easements, rights-of-way, restrictions and other
encumbrances which, in the aggregate, are not substantial in amount with respect
to any Magnolia Facility or Medi- Serve Facility, and which do not in any case
materially interfere with the ordinary conduct of such Magnolia Facility or
Medi-Serve Facility.
(D) Except as set forth on Schedule 5.6(d), none of the personal
property referred to in subsection (a) above is subject to a lease, sublease,
license, sublicense, conditional sale, or similar arrangement. Schedule 5.6(d)
sets forth the annual rental and unexpired lease term of each such item, and all
the information set forth thereon is true, complete and correct.
(E) The accounts receivable of the Company, Medi-Serve and the
Subsidiaries are reflected properly on each of their books and records in
accordance with GAAP, have been billed or invoiced in the ordinary course of
business consistent with past practice, are not in dispute, and are bona fide.
(F) The quantities of inventory and supply items referred to in
subsection (a) above are reasonable in light of the present and anticipated
volume of the business of the Company, Medi-Serve and the Subsidiaries and the
inventory and supplies are good, usable, merchantable, and salable in the
ordinary course of the business of the Company, Medi-Serve and the Subsidiaries,
in each case, as determined by the Company in good faith and consistent with
past practice.
5.7 CONTRACTS.
(A) The Shareholder has made available for review by Buyer true,
complete and correct copies of each agreement, lease, contract, instrument or
commitment relating to the Business or to which the Company, Medi-Serve or any
Subsidiary is a party or by which the Company, Medi-Serve or any Subsidiary or
any of the Assets are bound ("CONTRACTS") that is in writing, and a written
description of each material oral Contract. Each material Contract was entered
into and requires performance in the ordinary course of business and is in full
force and effect. Except as set forth on Schedule 5.7(b), none of the Company,
Medi-Serve and the Subsidiaries
24
is in default under any material Contract and there has not been asserted,
either by or, to the knowledge of the Group, against the Company, Medi-Serve or
any Subsidiary under any material Contract, any notice of default, set-off or
claim of default. Except as set forth on Schedule 5.7(b), to the knowledge of
the Group, the parties to the material Contracts, other than the Company,
Medi-Serve and the Subsidiaries, are not in default of any of their respective
obligations under any of the Contracts, and there has not occurred any event
which with the passage of time or the giving of notice (or both) would
constitute a default or breach under any material Contract. Except as set forth
in Schedule 5.7(b), all amounts payable or receivable under each of the
Contracts are, and will at the Closing Date, be on a current basis. Except as
set forth in Schedule 5.7(b), the change of control in the Company, Medi-Serve
or any Subsidiary to Buyer will not be deemed an assignment of, or require
consent under any material Contract. None of the Company, Medi-Serve, the
Subsidiaries and the Shareholder has received notice or has reason to believe
that any of the material Contracts will be terminated by any party thereto
within 90 days after the date hereof pursuant to any provision thereof
permitting any such party to terminate such material Contract with or without
cause. For purposes of this Agreement, a Contract shall not be deemed to be
"material" if: (i) it is not required to be disclosed pursuant to subsection (b)
below, and (ii) (x) it is terminable by the Company, Medi-Serve or Subsidiary
within ninety (90) days at a cost set forth in the contract not to exceed
$10,000 or (y) it involves annualized payments of less than $50,000 and it is
terminable at no cost within ninety (90) days.
(B) Except as listed on Schedule 5.7(b), neither Company nor
Medi-Serve or any Subsidiary has any continuing rights or obligations under any
written or express, oral or implied:
(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, agent or group of
employees, or any non-competition, non-solicitation, confidentiality or similar
agreement with any such person or persons (provided that the foregoing shall not
require the disclosure of immaterial oral agreements or oral commitments such as
"at will" contracts);
(II) contract, agreement or arrangement for the acquisition or
disposition of any assets, property or rights having a value in excess of
$10,000 or in excess of $25,000 in any series of related transactions 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), including without limitation, option agreements;
(III) contract, agreement, instrument or commitment involving
annual payments in excess of $10,000 which contains any provisions requiring the
Company, Medi- Serve or any Subsidiary to indemnify or act for any other person
or entity or contract, agreement, instrument or commitment which contains any
provisions requiring the Company, Medi-Serve or any Subsidiary to guaranty or
act as surety for any other person or entity;
25
(IV) contract, agreement or commitment restricting the Company,
Medi-Serve or any Subsidiary from, or in favor of the Company, Medi-Serve or any
Subsidiary 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 that involves annual payments in excess of $10,000;
(VII) contract, agreement or arrangement granting a leasehold
or other interest in personal property to the Company, Medi-Serve or any
Subsidiary, including without limitation, subleases, licenses and sublicenses
that involves annual payments in excess of $10,000;
(VIII) contract, agreement or arrangement granting a leasehold
or other interest in real property by Company, Medi-Serve or any Subsidiary,
including without limitation, subleases, licenses and sublicenses, other than
ordinary and customary rights of residents and patients of the Magnolia
Facilities;
(IX) contract, agreement or arrangement granting a leasehold or
other interest in real property to Company, Medi-Serve or any Subsidiary,
including without limitation, Tenancy Leases (the "LEASES");
(X) management agreement with respect to any Magnolia Facility
or Medi-Serve Facility (the "MANAGEMENT AGREEMENTS");
(XI) 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 Company, Medi-Serve or
any Subsidiary not covered by clause (i) above;
(XII) agreement, consent order, plea bargain, settlement or
stipulation or similar arrangement with any Governmental Authority;
(XIII) agreement with respect to the settlement of any
litigation or other proceeding with any third person or entity;
(XIV) agreement relating to the ownership, transfer, voting or
exercise of other rights with respect to any equity in the Company, Medi-Serve,
any
Subsidiary or any other entity, including without limitation, registration
rights agreements, voting trust agreements and shareholder and proxy agreements;
or
(XV) agreement not set forth in subsections (i) through (xiv)
above which (x) was not made in the ordinary and normal course of business and
consistent with past practice, or (y) not terminable by the Company, Medi-Serve
or the applicable subsidiary at any time within ninety (90) days at a cost of
not more than $10,000 or (z) involves annualized payments of in excess of
$50,000 and is not terminable within ninety (90) days.
5.8 FINANCIAL STATEMENTS.
(A) Attached hereto as Schedule 5.8(a)-1 are the unaudited
financial statements of the Company and its Subsidiaries on a consolidated basis
for the fiscal quarters ended March 31, 1997, June 30, 1997, and September 30,
1997, and for the three-month period ended December 31, 1997, the audited
financial statements of the Company and its Subsidiaries on a consolidated basis
for the fiscal year ended September 30, 1997, and the audited financial
statements of the Company, and its Subsidiaries on a consolidated basis for the
fiscal year ended September 30, 1996. Also attached hereto as Schedule 5.8(a)-2
are the unaudited financial statements of Medi- Serve for the fiscal quarters
ended March 31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997,
the audited financial statements of Medi-Serve for the fiscal year ended
December 31, 1997, and the unaudited financial statements of Medi-Serve for the
fiscal year ended December 31, 1996. The foregoing described financial
statements of the Company, Medi-Serve and the Subsidiaries are referred to
hereinafter, collectively, as the "FINANCIAL STATEMENTS". The Financial
Statements (including any related notes thereto) are true and correct in all
material respects and present fairly the financial condition and results of
operations of the Company and Medi-Serve as, at and for the periods therein
specified and were prepared in accordance with GAAP except as expressly set
forth on Schedules 5.8(a)-1 and 5.8(a)-2. Each of the Financial Statements has
been accompanied by the written certification of the Chief Financial Officer of
the Company and Medi- Serve, the Shareholder, to be true and correct in all
material respects, to present fairly the financial condition and results of
operations of the Company, Medi-Serve and the Subsidiaries, as the case may be,
at and for the periods therein specified, and to have been prepared in
accordance with GAAP except as expressly set forth on Schedules 5.8(a)-1 and
5.8(a)-2. The books of account of the Company, Medi-Serve and the Subsidiaries
from which the Financial Statements were prepared accurately reflect all of the
items of income and expense, assets, liabilities and accruals of the Company,
Medi-Serve and the Subsidiaries. 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 except as expressly specified therein, and such financial statements
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation.
(B) The audited balance sheet of the Company and its Subsidiaries
contained in the Financial Statements as of September 30, 1997 reflects
27
all liabilities as of the date thereof, and none of the Company and its
Subsidiaries has any liabilities that are not reflected thereon, whether or not
in accordance with GAAP, except for such current liabilities as have been
incurred since the date of such balance sheet in the ordinary course of business
consistent with past practice, and liabilities for the items and in the amounts
listed on Schedule 5.8(b). The unaudited balance sheet of Medi-Serve contained
in the Financial Statements as of September 30, 1997 reflects all liabilities of
Medi-Serve as of the date thereof, and Medi-Serve has no liabilities that are
not reflected thereon, whether or not in accordance with GAAP, except for such
current liabilities as have been incurred since the date of such balance sheet
in the ordinary course of business consistent with past practice, and
liabilities for the items and in the amounts listed on Schedule 5.8(b). Such
balance sheets of the Company and its Subsidiaries, and of Medi-Serve, are
referred to herein, collectively, as the "BALANCE SHEET" and the dates of such
balance sheets, respectively, are referred to herein, collectively, as the
"BALANCE SHEET DATE". Except to the extent set forth or reserved against on the
Balance Sheet there is no basis for the assertion against the Company,
Medi-Serve or any Subsidiaries of any liability of any nature or in any amount
(other than current or scheduled liabilities as aforesaid).
5.9 MATERIAL CHANGES. Except as specifically described on Schedule 5.9
hereto, since the Balance Sheet Date, there has not been any material adverse
change in the condition or prospects (financial or otherwise), of the assets,
properties or operations of the Company, Medi- Serve or any of the Subsidiaries,
and each of the Company and Medi-Serve and each of the Subsidiaries has
conducted its business only in the ordinary course, consistent with past
practice. The Company and Medi-Serve have identified and communicated to Buyer
all material information that is peculiar or unique to the Business (but not
applicable generally to all persons or entities in such business) with respect
to any fact or condition that, to the knowledge of the Group, might adversely
affect the future prospects (financial or otherwise) of any of the Business.
5.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 5.10 sets forth
a description of each license, approval, permit, right or other authorization,
other than immaterial local business licenses, that is necessary for the
operation of any part of the Business (collectively, the "LICENSES"). The
Company and Medi-Serve have delivered to Buyer true, correct and complete copies
of all of the Licenses and the applications therefor. Schedule 5.10 also sets
forth a description of each accreditation of the Business, copies of which the
Shareholder has delivered to Buyer. The Company, Medi-Serve or one of the
Subsidiaries, as applicable, owns, possesses or has the legal right to use the
Licenses, free and clear of all Liens. None of the Company, Medi-Serve and the
Subsidiaries is in default under, and none of the Company, Medi-Serve and the
Subsidiaries has received any notice of any claim or default or any other claim
or proceeding relating to, any such License. Except as set forth on Schedule
5.10, none of the Licenses will expire prior to the first anniversary of the
Closing Date or which may not be renewed in the ordinary course of business. The
Business is, as it is currently conducted, licensed by all Governmental
Authorities from which Licences are required to carry on the Business. No
stockholder, director or officer, employee or
28
former employee of the Company, Medi-Serve or any Subsidiary, or any other
person, firm or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part in any License, except for the licensors
to the Company, Medi-Serve or each Subsidiary, and except for licenses of
employees described on Schedule 5.10 as such.
5.11 THE MAGNOLIA FACILITIES AND MEDI-SERVE FACILITIES.
(A) Schedule 5.11(a) is a list of all of the Magnolia Facilities
and Medi-Serve Facilities, and sets forth for each Magnolia Facility and
Medi-Serve Facility all of the following information:
(I) the name of such Magnolia Facility and Medi-Serve Facility;
(II) the owner of the fee simple title to such Magnolia
Facility and Medi-Serve Facility, the lessee of such Magnolia Facility (if
applicable) and Medi-Serve Facility (if applicable), and the manager of such
Magnolia Facility (if applicable) and Medi-Serve Facility (if applicable);
(III) (A) the number of licensed long-term care beds at such
Magnolia Facility, (B) the current rates charged by such Magnolia Facility to
its patients or residents, (C) the number of beds or units presently occupied
in, and the occupancy percentage at, such Magnolia Facility, (D) the number of
patients or residents at such Magnolia Facility: (x) who receive reimbursement
from, or are participants in, any federal or state Medicare or Medicaid program
or (y) for whom payment is not made by Medicare of Medicaid; and
(IV) whether said Magnolia Facility is subject to the New
Greenville Lease, any Xxxxxx Lease or the lease related to the Xxxxxxxx
Facility.
(B) The Company or one or more of the Subsidiaries has good and
marketable title to the Magnolia Facility and Medi-Serve Facilities that it
listed as owned by it on Schedule 5.11(a) (each an "OWNED FACILITY"), and has a
good and valid leasehold interest for the term specified in the applicable lease
(each a "TENANCY LEASE") for each Magnolia Facility and Medi-Serve Facility that
it listed as leased by it on Schedule 5.11(a) (each a "LEASED FACILITY"), the
Company and Medi-Serve do not have knowledge that any person or entity listed as
the owner of any Leased Facility does not have good and marketable title to such
Leased Facility, in each case, subject to no Liens other than Permitted Liens;
(C) Except as set forth on Schedule 5.11(c), there are no leases or
other agreements of the Company or Medi-Serve as lessor or operator, granting to
any third party the right to use, occupy or manage any Magnolia Facility or
Medi-Serve Facility (except the ordinary and customary rights of the patients
and residents of the
29
Magnolia Facilities), and no person has any ownership interest or option or
right of first refusal to acquire any ownership interest in any Magnolia
Facility or Medi-Serve Facility or any building or improvements thereon;
(D) No written notices of violation have been received by the
Company, Medi-Serve or any Subsidiary, or to the best knowledge of the Company
and Medi-Serve (but without independent investigation), by any owner of any
Leased Facility, from any Governmental Authority that remains in effect which
prohibits or restricts the existing use of the structures presently comprising
the Magnolia Facilities and Medi-Serve Facilities;
(E) Except as set forth on Schedule 5.11(e), to the best knowledge
of the Company and Medi-Serve, there is no plan, study or effort by any
Governmental Authority that would in any material way affect the present use or
zoning of any Magnolia Facility or Medi-Serve Facility or any part thereof, and
to the best knowledge of the Company and Medi-Serve, there are no assessments or
proposed assessments and there is no existing, proposed or contemplated plan to
widen, modify or realign any street or highway or any existing, proposed or
contemplated eminent domain proceedings that would in any material way affect
any Magnolia Facility or Medi-Serve Facility;
(F) Except as set forth on Schedule 5.11(f), and except to the
extent set forth on the engineering reports attached hereto as Exhibit 5.11(f),
the buildings and other improvements comprising each Magnolia Facility and
Medi-Serve Facility and all of their systems, including without limitation, the
heating, ventilating and air conditioning systems, and the plumbing, electrical,
mechanical and drainage systems, and roofs are in good operating condition,
repair and working order, normal wear and tear excepted;
(G) No assessment for public improvements has been made against any
Magnolia Facility or Medi-Serve Facility that remains unpaid and for which the
Company, Medi- Serve or any Subsidiary is liable, and all public improvements
ordered, commenced or completed with respect to any Magnolia Facility or
Medi-Serve Facility prior to the date of this Agreement and for which the
Company, Medi-Serve or any Subsidiary is liable, shall be paid for in full by
the Company or Medi-Serve prior to the Closing; and
(H) None of the Company, Medi-Serve, and the Subsidiaries has
received any written notice of material noncompliance from any Governmental
Authority regarding any of the improvements constructed at any Magnolia Facility
or Medi-Serve Facility or the use or occupancy thereof which remains uncured.
5.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 5.12, there
are no disputes, claims, actions, suits or proceedings, arbitrations or
investigations, either administrative or judicial, pending, or, to the knowledge
of the Company or Medi-Serve, threatened or contemplated, nor, to the knowledge
of the Company or Medi-Serve, is there any basis therefor, against or affecting
the Company, Medi-Serve, any
30
Subsidiary or any of the Assets, or the rights of the Company, Medi-Serve or any
Subsidiary therein or the ability of Shareholder, Medi-Serve or the Company to
consummate the transactions contemplated herein, at law or in equity or
otherwise, before or by any Governmental Authority, including, without
limitation, any of the foregoing relating to the infringement of Proprietary
Rights. None of the Company, Medi-Serve and the Subsidiaries has received any
requests for information with respect to the transactions contemplated hereby
from any Governmental Authority.
5.13 EMPLOYEES. With respect to any employee of the Company, Medi-Serve
or any Subsidiary receiving an annual salary of $75,000 or more, Schedule
5.7(b)(i), Schedule 5.7(b)(xi) and Schedule 5.13 together contain a true,
complete and correct list of the name, position, current rate of compensation
(together with a description of any specific arrangements or rights concerning
such persons that are not reflected in any agreement or document referred to in
Schedule 5.7). Each of the Company, Medi-Serve and each Subsidiary is in
compliance with all Governmental Requirements applicable to any and all of the
employee benefit plans, agreements and arrangements referred to on Schedule
5.7(b)(i) or 5.7(b)(xi), including, without limitation, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). No such employee, consultant
or agent has any vested or unvested retirement benefits or other termination
benefits, except as described on Schedule 5.7(b)(i) or 5.7(b)(xi). The Balance
Sheet contains an adequate reserve for vacation accruals and paid time off
accruals. There are no severance obligations of Company, Medi- Serve or any
Subsidiary. Each employee, agent and consultant of the Company, Medi-Serve or
any Subsidiary has all licenses necessary to carry on his or her obligations as
an employee of the Company, Medi-Serve or any Subsidiary and to the knowledge of
the Company or Medi-Serve (but without independent investigation), each such
licensee is in compliance with all of the terms of all such licenses held by him
or her. Except as set forth on Schedule 5.13, none of the Company, Medi- Serve
and the Subsidiaries has received notice that any senior executive, facility
administrator or director of nursing will terminate his or her employment within
180 days after the Closing Date, and none of the Company, Medi-Serve and the
Shareholder has reason to believe that any such termination will be likely by
reason of any change of control in the Company or Medi-Serve (or any Subsidiary)
contemplated by this Agreement.
5.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES, ETC.
Since the date that is two (2) years prior to the date hereof, there has been no
material adverse change in the relationship between the Company, Medi-Serve or
any Subsidiary and their 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. Except as set forth on Schedule
5.14, no employees of the Company, Medi-Serve or any Subsidiary are represented
by any labor union or similar organization in connection with their employment
by or relationship with, the Company, Medi-Serve or any Subsidiary, and to the
knowledge of the Company or Medi-Serve, there are no pending or threatened
activities the purpose of which is to achieve such representation of all or some
of such employees. Except as set forth on Schedule 5.14, there are no pending
suits, actions or proceedings against the Company, Medi-Serve or any Subsidiary
relating to any of its past or present employees, and there
31
are no threats of strikes, work stoppages or pending filed grievances by any
such employees. Except as set forth on Schedule 5.14, none of the Company,
Medi-Serve and the Subsidiaries has any collective bargaining or other labor
contracts.
5.15 ERISA. Except as set forth on Schedule 5.15, none of the Company,
Medi-Serve and the Subsidiaries maintains or make contributions to and none of
the Company, Medi-Serve and the Subsidiaries has at any time in the past
maintained or made contributions to any employee benefit plan which is subject
to the minimum funding standards of ERISA. Each plan identified on Schedule 5.15
is in compliance with ERISA and is fully funded. None of the Company, Medi-Serve
and the Subsidiaries maintains or makes contributions to and none of them has,
at any time in the past, maintained or made contributions to any multi-employer
plan subject to the terms of the Multi-employer Pension Plan Amendment Act of
1980 (the "MULTI-EMPLOYER ACT").
5.16 QUESTIONNAIRE. The healthcare law questionnaire heretofore
delivered to the Company and Medi-Serve by Buyer (the "QUESTIONNAIRE") and
attached hereto as Exhibit 5.16 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.
5.17 INSURANCE AND SURETY AGREEMENTS. Schedule 5.17 contains a true and
correct list of: (A) all policies of fire, liability and other forms of
insurance held or owned by the Company, Medi-Serve or any Subsidiary or
otherwise in force and providing coverage for the Business or any of the
Magnolia Facilities or Assets (including but not limited to medical malpractice
insurance, and any state sponsored plan or program for worker's compensation);
(B) all bonds, indemnity agreements and other agreements of suretyship made for
or held by the Company or Medi-Serve or otherwise in force and relating to the
Business or any of the Magnolia Facilities and Medi-Serve Facilities or Assets,
including a brief description of the character of the bond or agreement, the
name of the surety or the indemnifying party. Schedule 5.17 sets forth for each
such insurance policy the name of the insurer, the amount of coverage, the type
of insurance, the policy number, the annual premium and a brief description of
the nature of insurance included under each such policy and of any claims made
thereunder or increases in premiums therefore during the past two years. Such
policies are owned by and payable solely to the Company, Medi-Serve or one of
the Subsidiaries, and said policies or renewals or replacements thereof will be
outstanding and duly in force at the Closing Date. All insurance policies listed
on Schedule 5.17 are in full force and effect, all premiums due on or before the
Closing Date have been or will be paid on or before the Closing Date, none of
the Company, Medi-Serve and the Subsidiaries has been advised by any of its
insurance carriers of an intention to terminate or modify or materially raise
the premiums for any such policies, nor have any of them failed to comply with
any of the material conditions contained in any such policies.
5.18 RELATIONSHIPS. Except as disclosed on Schedule 5.18, no officer,
director or employee of the Company, Medi-Serve or of any Subsidiary, and
neither Shareholder, nor any member of Shareholder's immediate
32
family or of the immediate family of any principal or partner of Shareholder,
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. Except as set forth on Schedule 5.18, no Shareholder
or Affiliate is guaranteeing any obligations of the Company, Medi-Serve or of
any Subsidiary.
5.19 ASSETS COMPRISING THE BUSINESS. The Assets, including without
limitation, all Owned Assets, Leased Assets and Managed Assets (including
without limitation, all inventory included therein), Magnolia Facilities,
Medi-Serve Facilities, Contracts, Proprietary Rights and Licenses listed on the
Schedules to this Agreement, are all of the tangible and intangible properties
(real, personal and mixed), including, without limitation, all licenses,
intellectual property, permits and authorizations, contracts, leases and other
agreements that are necessary or material to the operation of the Business as
now operated.
5.20 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 5.20,
since the Balance Sheet Date, none of the Company, Medi-Serve and the
Subsidiaries has:
(A) sold, assigned, transferred or disposed of any Assets, except
in the ordinary course of business consistent with past practice;
(B) mortgaged, pledged or subjected to any Lien of any nature
whatsoever any of the Assets, other than Permitted Liens;
(C) entered into any Contract, or made or suffered any termination
of any Contract, or made or suffered any modification or amendment of any
Contract except for terminations, modifications and amendments of Contracts made
in the ordinary course of business consistent with past practice and which would
not adversely affect earnings or otherwise be material, and none of the Company,
Medi-Serve and the Subsidiaries has received notice or has knowledge that any
Contract has been terminated or will be terminated or modified or amended (as
aforesaid);
(D) except in the ordinary course of business, consistent with past
practice, or otherwise to comply with any applicable minimum wage law, 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;
(E) 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 Company or Medi-Serve or any
Subsidiary or the Business or the Assets;
33
(F) incurred any liabilities, other than trade payables and other
operating liabilities that would be reflected on the date incurred as current
liabilities on a balance sheet of the Company, Medi-Serve and the Subsidiaries,
on a combined basis, in accordance with GAAP, and in the ordinary course of
business consistent with past practice;
(G) failed to collect accounts receivable in the ordinary course of
business consistent with past practice;
(H) changed any of the accounting principles followed by it or the
methods of applying such principles;
(I) canceled, modified or waived any debts or claims held by it,
other than in the ordinary course of business consistent with past practice, or
waived any rights of substantial value, whether or not in the ordinary course of
business; or
(J) 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
Affiliate except for payments of compensation in the ordinary course of business
consistent with past practice and disclosed to Buyer as such;
(K) failed to collect, withhold and/or pay to any proper
Governmental Authority, any Taxes (as hereinafter defined in Section 5.22)
required by applicable Governmental Requirement to be so collected, withheld
and/or paid;
(L) instituted, settled or agreed to settle any litigation, action
or proceeding before any Governmental Authority relating to it or its property
or received any threat thereof, except for settlements of cost report claims in
the ordinary course of business consistent with past practice and that have not
had a material adverse effect on the Company, Medi-Serve or the Business;
(M) entered into any material transaction other than in the
ordinary course of business consistent with past practice; or
(N) agreed or otherwise become committed to do any thing described
in any of subsections (a) through and including (m) above.
5.21 COMPLIANCE WITH LAWS.
(A) The Company, Medi-Serve, each Subsidiary and to the Group's
knowledge, each of their respective licensed employees are in compliance with
all Governmental Requirements applicable to them, the Assets or the operation of
the Business. None of the Company, Medi-Serve and the Subsidiaries has received
any claim or notice that any of the Magnolia Facilities, Medi-Serve Facilities
or Assets is not in compliance with any applicable Governmental Requirement. The
Company and Medi-Serve shall report to Buyer, within five (5) days after its
receipt thereof, any written or oral claims or notices that any of the licensed
employees of either of them
34
or any Subsidiary, any of the Magnolia Facilities or Medi-Serve Facilities, or
any of the Assets is not in compliance with any of the foregoing.
(B) Except as set forth on the environmental reports relating to
the Magnolia Facilities and Medi-Serve Facilities as identified on as Exhibit
5.21(b), at all times, each of the Company and Medi-Serve and each Subsidiary
has complied, and is complying in all respects with all environmental and
related Governmental Requirements applicable to it, the Magnolia Facilities and
Medi-Serve Facilities, and its Assets, including, but not limited to, the
Resource Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act, and
subsequent amendments, the Federal Toxic Substances Control Act, as amended,
with respect to the environmental or healthful state, condition or quality of
any property (collectively "ENVIRONMENTAL LAWS"). The foregoing representation
and warranty applies to all aspects of the operation of the Business and the use
and ownership of the Assets including, but not limited to, the use, handling,
treatment, storage, transportation and disposal of any hazardous, toxic or
infectious waste, material or substance (including medical waste), and to
petroleum products, material or waste whether performed on any of the Leased
Properties, at any Magnolia Facility and Medi-Serve Facility, or at any other
location. No uncured notice from any Governmental Authority has been served upon
the Company, Medi-Serve or any Subsidiary, or any of its agents or
representatives claiming any violation of any Environmental Law, or requiring or
calling attention to the need for any work, repairs, or demolition, on or in
connection with any of such properties in order to comply with any Environmental
Law.
5.22 TAXES. Except for Taxes that have accrued in the ordinary course
of business since the Balance Sheet Date, the Balance Sheet sufficiently
provides for all accrued, deferred and unpaid federal, state, local and foreign
net or gross income, profits, property, sales, use, excise, license, franchise,
severance, stamp, occupation, premium, windfall profits tax, alternative and
add-on minimum taxes, customs duty, added value, payroll, employer's income,
withholding and social security taxes, excise or other taxes ("TAXES") and any
penalties, interest, governmental charges, assessments and deficiencies related
thereto, payable by the Company, Medi-Serve or any Subsidiary. All Taxes payable
by the Company, Medi-Serve or any Subsidiary, and all interest and penalties
thereon, whether disputed or not, have been paid in full when due, all tax
returns, declarations of estimated tax and other reports required to be filed in
connection therewith ("TAX RETURNS") have been accurately prepared and completed
on an appropriate basis and duly and timely filed in accordance with all
Governmental Requirements, all computations and taxable income correctly and
accurately made and reported in accordance with all Government Requirements, and
all withholdings and deposits required by Governmental Requirements to be made
by the Company, Medi-Serve or any Subsidiary with respect to employee's
withholding taxes have been duly made. Except as set forth on Schedule 5.22,
neither the Company, Medi-Serve nor any of the Subsidiaries has any tax
deficiency or claim outstanding, proposed or assessed against it, and there is
no basis for any such deficiency or claim. There is not now in force any
extension of time with respect to the date on which any Tax Return was or is due
to be filed by or with respect to the Company, Medi-Serve or any Subsidiary or
any waiver or agreement by the Company, Medi-Serve or any Subsidiary for the
extension of time for assessment of any Tax. None of the Company, Medi-Serve and
35
the Subsidiaries is a party to any pending action or proceeding, and, to the
knowledge of the Company or Medi-Serve, no action or proceeding has been
threatened by any Governmental Authority for assessment or collection of any
Taxes, nor has any claim for assessment or collection of Taxes been asserted
against the Company, Medi-Serve or any Subsidiary. None of the Company,
Medi-Serve and the Subsidiaries is a party to any tax sharing agreement or
arrangement. True and complete copies of all Federal and State Tax Returns of
the Company, Medi-Serve and the Subsidiaries for the tax years ending December
31, 1996 and 1995 have been delivered to Buyer.
5.23 ENCUMBRANCES CREATED BY THIS AGREEMENT. Neither the execution and
delivery of this Agreement nor the execution and delivery of any of the
Transaction Documents by the Company, Medi-Serve or the Shareholder creates, and
the consummation of the transactions contemplated hereby or thereby will not
create, any Liens on any of the Assets in favor of third parties.
5.24 QUESTIONABLE PAYMENTS. None of the Company, Medi-Serve,
Subsidiaries and Shareholder has, and to the knowledge of the Company or
Medi-Serve, no director, officer, agent or employee of the Company, Medi-Serve
or any Subsidiary has 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.
5.25 REIMBURSEMENT MATTERS. Except as set forth on Schedule 5.25, each
of the Company, Medi-Serve, each Subsidiary, 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, and each other third party
reimbursement source in which it participates. Except as set forth on Schedule
5.25, none of the Company, Medi-Serve, and any Subsidiary has any liability with
respect to recoupment from the Medicare or Medicaid programs or any other third
party reimbursement source (inclusive of managed care organizations) that would
exceed the reserves or allowances made therefor as set forth on the Balance
Sheet, and there is no basis for the assertion of any such recoupment claim, and
none of the Company, Medi-Serve, and any Subsidiary has received any notice of
any such assertion, including without limitation, any notice of denial or
recoupment from the Medicare or Medicaid programs, or any other third party
reimbursement source that arose out of any transactions completed prior to the
date hereof, and no Medicare or Medicaid investigation, survey, or audit is
pending or, to the knowledge of the Company or Medi-Serve, threatened with
respect to the operation of the business of any Facility. None of the Company,
Medi-Serve, and any Subsidiary nor, to the knowledge of the Company or
Medi-Serve, any of their respective licensed employees has been convicted of, or
pled guilty or nolo contendere to any criminal offense related to any Medicare
or Medicaid program while such person was an employee of any of them or after
the termination of such person's employment by any of them for acts committed
while employed by any of them, and, to the knowledge of the Company or
Medi-Serve, none of such employees has committed any offense which may serve as
the basis for suspension, restriction, or exclusion of the Company, Medi-Serve,
or any Subsidiary from the Medicare and Medicaid programs, or any other third
party reimbursement source. Since January 1, 1996, none of the Company,
Medi-Serve and any Subsidiary has received any notice from the Medicare or
Medicaid programs or any other third party reimbursement source to the effect
that
36
the basis on which it receives reimbursement for its services is to be changed.
The Company and Medi-Serve have made available to Buyer true, complete and
correct copies of the most recent surveys and inspection reports from, and plans
of correction provided by, the Company, Medi-Serve, or any Subsidiary to, any
governmental health care regulatory agency, intermediary or authority or any
other licensing organization and any and all correspondence between or on behalf
of any such regulatory agency, intermediary or authority or licensing
organization concerning any and all deficiencies, inadequacies or non-compliance
with regulations or standards applicable to any Magnolia Facility or Medi-Serve
Facility. Except as set forth on Schedule 5.25, there are no violations, orders
or deficiencies issued or recommended by any such Governmental Authority
(including, without limitation, licensing organizations), and except as set
forth on Schedule 5.25, there are (and within the past three (3) years there has
been) no inspections, license reviews, investigations or proceedings of any sort
pending by or before any such Governmental Authority that relate to any Magnolia
Facility or Medi-Serve Facility. All such violations and deficiencies have been
fully remedied by the applicable Company, Medi-Serve, or Subsidiary or withdrawn
by the applicable Governmental Authority. During the twelve-month period
immediately preceding the date hereof, no Magnolia Facility or Medi-Serve
Facility has been placed on "Vendor Hold" or similar status or become subject to
any other disciplinary or punitive action, or been cited for any violations that
are likely to lead to the Magnolia Facility or Medi-Serve Facility being placed
on "Vendor Hold" or similar status or subject to any other disciplinary or
punitive action. Except as set forth on Schedule 5.25, none of the Company,
Medi-Serve, and any Subsidiary has been served with any notice which (x)
requires the performance of any work or alterations on any Magnolia Facility or
Medi-Serve Facility, or in the streets bounding thereon, or (y) orders the
installation, repair or alteration of any public improvements on or about any
Magnolia Facility or Medi-Serve Facility or the streets bounding thereon. Each
Magnolia Facility and Medi-Serve Facility is in material compliance with all
"Conditions and Standards of Participation" in the Medicare or Medicaid
Programs. Each of the Company, Medi-Serve, and the Subsidiaries has timely filed
all required cost reports with respect to Medicare and Medicaid, and has
provided to Buyer its audited and unaudited cost reports for Medicare and
Medicaid and all other rate compensation and reimbursement reports, audits and
schedules prepared or issued by, or filed with, any Governmental Authority with
respect to the operations of any Magnolia Facility or Medi-Serve Facility for
the last three (3) years, and each such report is complete and accurate in all
material respects.
5.26 CAPITAL STOCK OF THE COMPANY AND MEDI-SERVE. Schedule 5.26 sets
forth a complete list and description of all of the authorized capital stock of
the Company and Medi-Serve, the number of shares issued and outstanding of such
capital stock of each of them and the identity of each holder thereof, in each
case indicating the number of shares held. No shares of the Company's or
Medi-Serve's capital stock are held in the treasury of the Company or
Medi-Serve, respectively. The Company and Medi-Serve each have only one class of
capital stock. The Shareholder is the lawful record and beneficial owner of all
of the Subject Shares as indicated on Schedule 5.26, free and clear of all
Liens, and all of such stock is duly authorized, validly issued, and fully paid
and non-assessable. Shareholder has the full legal power to transfer and
37
deliver the Subject Shares listed as owned by him on Schedule 5.26 in accordance
with this Agreement, and delivery of such Subject Shares to Buyer pursuant
hereto will convey good and marketable title thereto, free and clear of all
Liens. Except for the stock options granted as set forth on Schedule 5.26, there
are not now any and, on the Closing Date there will be no, subscription,
participation, preemptive or first refusal rights to purchase or otherwise
acquire shares of capital stock of the Company or Medi-Serve from the Company or
Medi-Serve or Shareholder or any one else pursuant to any provision of law or
the Articles of Incorporation or By-Laws of the Company or Medi-Serve or by
agreement or otherwise. There are not now any and, on the Closing Date there
shall not be any, outstanding warrants, options, or other rights to subscribe
for or purchase from the Company or Medi-Serve any shares of capital stock of
the Company or Medi-Serve or Shareholder or any one else, nor are there and
there shall not be outstanding on the Closing Date, any securities convertible
into or exchangeable for any such shares. Except as described on Schedule 5.26,
there are no voting agreements, arrangements, trusts or restrictions relating to
any of the Subject Shares.
5.27 FINDERS. No broker or finder has acted for Shareholder, the
Company or Medi-Serve in connection with the transactions contemplated by this
Agreement other than Xxxxxxxx-Xxxxxxxx Company, Inc. (the "BROKER"), and other
than the Broker, no other 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 Shareholder, Medi-Serve or the
Company.
5.28 SHAREHOLDER UNTRUE STATEMENT. None of the representations and
warranties of the Company, Medi-Serve or Shareholder made in or pursuant to this
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary, in light of the circumstance under which it was made,
in order to make any such representation not misleading in any material respect.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF BUYER, NEWCO 1
------------------------------------------------------------
AND NEWCO 2
-----------
Buyer, Newco 1, and Newco 2 represent and warrant to the Company,
Medi-Serve and the Shareholder as follows:
6.1 ORGANIZATION AND STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco 1 and Newco 2 are each corporations duly organized, validly existing and
in good standing under the laws of the State of South Carolina.
6.2 POWER AND AUTHORITY. Each of Buyer, Newco 1 and Newco 2 has the
corporate power and authority to execute, deliver and perform this Agreement,
and as of the Closing, each of Buyer, Newco 1 and Newco 2 will have the
corporate power and authority to execute and deliver the Transaction Documents
required to be executed and delivered by it to the Shareholder at the Closing.
6.3 BINDING AGREEMENT. This Agreement has been duly executed and
delivered by Buyer. This Agreement is, and when executed and delivered by Buyer
at the Closing, each of the Transaction Documents executed by Buyer will be, the
legal,
38
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with their respective terms.
6.4 SEC DOCUMENTS. Buyer has furnished the Company, Medi-Serve and the
Shareholder with a correct and complete copy of its report on Form 10-K for its
fiscal years ended December 31, 1996, its proxy statement prepared in connection
with its annual meeting held on June 20, 1997, and its special meeting held on
October 21, 1997, and each press release or other schedule or report required by
it to be publicly disclosed or filed with the Securities and Exchange Commission
(the "SEC") pursuant to the Exchange Act since January 1, 1997 (the "SEC
DOCUMENTS"). As of their respective dates, none of 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. Buyer has been notified that the most
recent registration statement on Form S-3 filed by it with the SEC is under
review and the SEC anticipates providing preliminary comments to Buyer by
approximately May 2, 1998.
6.5 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement and, as of the Closing Date, the execution and
delivery of the Transaction Documents, by Buyer, Newco 1 and Newco 2 nor the
performance by Buyer, Newco 1 and Newco 2 of the transactions contemplated
hereby and thereby conflicts with, or constitutes a breach of or a default under
(A) the Certificate of Incorporation or By-laws of Buyer, Newco 1 or Newco 2, or
(B) any law, rule, judgment, order, writ, injunction, or decree of any court
currently in effect applicable to Buyer, Newco 1 or Newco 2, or (C) any
Governmental Requirement applicable to Buyer, Newco 1 or Newco 2, or (d) any
agreement, indenture, contract or instrument to which the Buyer is now a party
or by which any of the assets of Buyer, Newco 1 or Newco 2 is bound.
6.6 CAPITAL STOCK. Buyer has duly authorized and reserved for issuance
the shares of IHS Stock to be issued in connection herewith, and, when issued in
accordance with the terms of Article III, such shares of IHS Stock will be
validly issued, fully paid, and nonassessable and free of preemptive rights.
6.7 MATERIAL CHANGES. Except as set forth in SEC Documents delivered to
the Shareholder, or as set forth on Schedule 6.7 hereto, since September 30,
1997, there has not been any material adverse change in the condition or
prospects (financial or otherwise), of the assets, properties or operations of
the Buyer and its subsidiaries. Each Group Member acknowledges that the
information set forth on Schedule 6.7 is not public information and is
confidential. Accordingly, the Group Members jointly and severally agree to hold
such information confidential, and to refrain from making any purchases or sales
of any shares of IHS Stock until such time as Buyer notifies the Shareholder
that such information has become publicly available.
39
6.8 BUYER UNTRUE STATEMENT. None of the representations and warranties
of the Buyer made in or pursuant to this Agreement contains any untrue statement
of material fact or omits to state a material fact necessary, in light of the
circumstance under which it was made, in order to make any such representation
not misleading in any material respect.
ARTICLE VII: INFORMATION AND RECORDS CONCERNING THE COMPANY
-----------------------------------------------------------
AND MEDI-SERVE
--------------
7.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING.
(A) Prior to the Closing Date, Buyer may make, or cause to be made,
such investigation of the financial and legal condition of the Company,
Medi-Serve, the Subsidiaries, the Magnolia Facilities and Medi-Serve Facilities
as Buyer deems necessary or advisable to familiarize itself therewith and/or
with matters relating to their history or operation. The Company and Medi- Serve
shall permit Buyer and its authorized representatives (including legal counsel
and accountants), to have full access to the books and records of the Company,
Medi-Serve, the Subsidiaries, the Magnolia Facilities and Medi-Serve Facilities
upon reasonable notice and during normal business hours, and the Company and
Medi-Serve will furnish, or cause to be furnished, to Buyer such financial and
operating data and other information and copies of documents with respect to the
products, services, operations and assets of the Company, Medi-Serve and the
Subsidiaries as Buyer shall from time to time reasonably request. The documents
to which Buyer shall have access shall include, but not be limited to, the Tax
Returns and related work papers since inception of the Company, Medi-Serve and
the Subsidiaries; and the Company and Medi-Serve shall make, or cause to be
made, extracts thereof as Buyer or its representatives may request from time to
time to enable Buyer and its representatives to investigate the affairs of the
Company, Medi-Serve and the Subsidiaries and the accuracy of the representations
and warranties made in this Agreement. The Company and Medi-Serve shall cause
its accountants to cooperate with Buyer and to disclose the results of audits
relating to the Company, Medi-Serve and the Subsidiaries and to produce the
working papers relating thereto. Without limiting any of the foregoing, it is
agreed that Buyer will have full access to any and all agreements between and
among the previous and current Shareholder regarding their ownership of shares
or the management or operation of the Company, Medi-Serve and the Subsidiaries.
The Company and Medi-Serve will, subject to mutually acceptable conditions and
schedules, permit Buyer (or its representatives) to meet with and interview the
employees and representatives of the Company, Medi-Serve and the Subsidiaries
that are responsible for the responses to, or have information with respect to,
the questions set forth on the Questionnaire. Notwithstanding anything to the
contrary contained in this Section 7.1(a), none of the Company, Medi-Serve and
the Subsidiaries shall be required to disclose or make available to Buyer prior
to Closing any information if it reasonably believes, based on the opinion of
its legal counsel, that the disclosure thereof can not be made without waiving
the attorney/client privilege with respect thereto; provided, however, that the
failure to disclose such information
40
by reason of this sentence shall not be deemed to limit or modify any
representations or warranties of the Company, Medi-Serve, any Subsidiary or
Shareholder.
(B) In the event that this Agreement is terminated as provided in
Article XII. or otherwise, the Buyer shall return to the Shareholder any and all
copies of financial and operating data and other information and documents and
any and all other papers, instruments and things that have been provided by or
taken from the Company, Medi-Serve and/or any of the Subsidiaries, or,
alternatively, at the Shareholder's direction, such materials shall be destroyed
and the Buyer shall certify to the Shareholder that such destruction has been
effected; provided, however, Buyer shall be entitled to retain any such
information in connection with any claims that have been asserted by or against
it in writing.
ARTICLE VIII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
------------------------------------------------------
8.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing, the Company and Medi-Serve shall, and shall cause
each Subsidiary to, maintain their existence and conduct their business in good
faith and in the customary and ordinary course of business consistent with past
practice.
8.2 NEGATIVE COVENANTS OF THE COMPANY AND MEDI-SERVE. Without the prior
written approval of Buyer, the Company and Medi-Serve shall not (and the Company
and Medi- Serve shall cause each Subsidiary not to), between the date hereof and
the Closing (or the earlier termination of this Agreement):
(A) cause or permit to occur any of the events or occurrences
described in Section 5.20 (Absence of Certain Events) of this Agreement;
(B) dissolve, reorganize, merge, consolidate or enter into a share
exchange with or into any other entity;
(C) enter into any contract or agreement with any union or other
collective bargaining representative representing any employees (provided that
the foregoing shall not prohibit the Company, Medi-Serve or any Subsidiary from
negotiating in good faith with any union to the extent required by applicable
Governmental Requirements and Buyer shall not unreasonably withhold its consent
to any such contract or agreement);
(D) sell or dispose of any Assets other than supplies, inventory
and obsolete equipment sold, consumed or used in the usual and ordinary course
of business and consistent with past practice; the Company, Medi-Serve or such
Subsidiary shall replace all items thus disposed of with Assets of at least the
same quality, type and quantity having an aggregate value at least equal to the
aggregate value of the items sold or otherwise disposed of;
(E) make any change to its by-laws or articles of incorporation;
41
(F) perform, take or fail to take any action or incur or permit to
exist any of the acts, transactions, events or occurrences of a type which would
have been inconsistent with the representations, warranties and covenants set
forth in this Agreement had the same occurred prior to the date hereof; provided
however, that the foregoing shall not prohibit the Company, Medi-Serve or any
Subsidiary from acquiring or disposing of assets, or incurring trade payables,
or entering into contracts or taking any other action that is in the ordinary
course of business and consistent with past practice and all Governmental
Requirements, in each case, to the extent not otherwise prohibited by this
Agreement;
(G) enter into any agreement, contract, commitment, lease or
instrument, except for agreements, in each case which are entered into in the
ordinary and customary course of business with unrelated third parties on
customary terms and conditions and for customary prices as disclosed to Buyer;
or
(H) except as permitted pursuant to Section 12.1(b) below, take any
action that would prevent consummation of the transactions contemplated by this
Agreement.
8.3 AFFIRMATIVE COVENANTS. Between the date hereof and the Closing, the
Company and Medi-Serve shall (and shall cause each Subsidiary to):
(A) maintain the Assets in substantially the state of repair, order
and condition as on the date hereof, reasonable wear and tear or loss by
casualty excepted;
(B) maintain in full force and effect all Licenses currently in
effect with respect to its business;
(C) maintain in full force and effect the insurance policies and
binders currently in effect, or the replacements thereof;
(D) use its reasonable efforts to preserve intact the present
business organization of the Company, Medi-Serve and the Subsidiaries; keep
available the services of the present employees and agents of the Company,
Medi-Serve and the Subsidiaries; and maintain the relations and goodwill with
suppliers, landlords, lessors, managed facility operators, employees, affiliated
medical personnel and any others having business relating to the Company,
Medi-Serve or any Subsidiary;
(E) maintain all of the books and records in accordance with its
past practices;
(F) comply in all material respects with all provisions of the
Contracts and with any other material agreements that the Company, Medi-Serve or
any Subsidiary enters into in the ordinary course of business after the date of
this Agreement, and comply in all material respects with the provisions of all
Governmental Requirements applicable to the business of the Company, Medi-Serve
or any Subsidiary;
42
(G) cause to be paid when due, all Taxes, imposed upon it or on any
of its properties or which it is required to withhold and pay over;
(H) promptly advise Buyer in writing of the threat or commencement
against the Company, Medi-Serve or any Subsidiary of any claim, action, suit or
proceeding, arbitration or investigation or any other event that could
materially adversely affect the operations, properties, assets or prospects of
the Company, Medi-Serve or any Subsidiary;
(I) promptly notify the Buyer in writing of the termination of any
material Contract; and
(J) promptly notify the Buyer in writing of any act, event or
occurrence that constitutes, or that will constitute on the Closing Date, a
breach by the Company or Medi-Serve of Shareholder of any representation,
warranty or covenant made pursuant to this Agreement; and
(K) promptly notify the Buyer in writing of any event involving the
Company, Medi-Serve or any Subsidiary which has had or may be reasonably
expected to have a material adverse effect on the business or financial
condition of the Company, Medi-Serve or any Subsidiary or may involve the loss
of relationships with any of the customers of the Company, Medi- Serve or any
Subsidiary.
8.4 PURSUIT OF CONSENTS AND APPROVALS.
(A) Prior to the Closing, the Company and Medi-Serve shall use
their best efforts to obtain all consents and approvals of all parties other
than Governmental Authorities, including without limitation, any landlords and
mortgagees, necessary for the lawful consummation of the transactions
contemplated hereby and the lawful use, occupancy and enjoyment of the business
of the Company, Medi-Serve and the Subsidiaries by Buyer in accordance herewith
("REQUIRED NON-GOVERNMENTAL APPROVALS"). Buyer shall cooperate with and use its
commercially reasonable efforts to assist the Company in obtaining all such
approvals.
(B) Prior to the Closing, the Buyer shall use its best efforts to
obtain all consents and approvals of Governmental Authorities necessary for the
lawful consummation of the transactions contemplated hereby and the lawful use,
occupancy and enjoyment of the business of the Company, Medi-Serve and the
Subsidiaries by Buyer in accordance herewith ("REQUIRED GOVERNMENTAL APPROVALS",
and together with the Required Non-Governmental Approvals, the "REQUIRED
APPROVALS"). The Company, Medi-Serve and Shareholder shall cooperate with and
use its or his commercially reasonable efforts to assist the Buyer in obtaining
all such approvals.
(C) The Buyer, on the one hand, and the Company on the other hand,
each shall bear fifty percent (50%) of the filing fees required pursuant to the
H-S-R Act (as defined in Section 9.9).
43
8.5 PURSUIT OF NONDISTURBANCE AGREEMENTS AND ESTOPPEL CERTIFICATES.
Prior to the Closing, the Company and Medi-Serve shall use their best efforts to
obtain nondisturbance agreements (the "NONDISTURBANCE AGREEMENTS") (on terms and
conditions reasonably satisfactory to Buyer) from all applicable mortgagees with
respect to all Leased Facilities that will be subject to mortgages after the
Closing, and to obtain estoppel certificates (the "ESTOPPEL CERTIFICATES") from
all applicable landlords, and mortgagees with respect to all Leased Facilities
to the effect that there are no breaches of any representations, warranties or
covenants under any of the Tenancy Leases, Management Agreements or mortgages
affecting any of the Leased Facilities. Buyer shall cooperate to assist the
Company and Medi-Serve in obtaining all such approvals.
8.6 SUPPLEMENTARY FINANCIAL INFORMATION. Within forty-five (45)
days after the end of each calendar month between the date of this Agreement and
the Closing Date, the Company and Medi-Serve shall provide to Buyer unaudited
financial statements (including at a minimum, income statements and a balance
sheet for such month then ended that shall present fairly the results of the
operations of the Company, Medi-Serve and the Subsidiaries, on a combined basis,
at such date and for the period covered thereby, all in accordance with GAAP, in
each case, certified as true and correct by the Company's and Medi-Serve's chief
financial officers and the Shareholder.
8.7 EXCLUSIVITY. Until the earlier of the Closing Date or the
termination of this Agreement pursuant to Section 11.1, neither Shareholder nor
the Company or Medi-Serve, nor any of their respective Affiliates, shall solicit
or entertain any offers or engage in any discussions or negotiations or enter
into any agreement or letter of intent directly or indirectly with any other
party in respect of the sale of any capital stock of the Company, Medi-Serve or
any Subsidiary or of substantially all of the assets of the Company, Medi-Serve
or any Subsidiary, or in respect of any merger, consolidation or other sale of
the Company, Medi-Serve (any of said transactions being referred to herein as a
"PROHIBITED TRANSACTION"). The Company or Medi-Serve shall promptly advise Buyer
of any offer or solicitation that it receives for a Prohibited Transaction,
including, without limitation, the name of the person making such offer or
solicitation and the terms of such offer or solicitation.
8.8 SURVEYS. If Buyer shall have received a standard real estate
boundary and as built survey of any Magnolia Facility or Medi-Serve Facility,
prepared by a land surveyor licensed in the State in which such Magnolia
Facility or Medi-Serve Facility is located that constitutes a breach of a
representation or warranty, then such breach will not be subject to the
indemnification deductible described in Section 11.6(b). Nothing contained in
this Section 8.8 will be deemed to limit Buyer's right to terminate this
Agreement for any reason including, without limitation, the condition set forth
in Section 9.1 hereof.
8.9 ZONING REPORT. If Buyer shall have received reports from
qualified zoning inspectors approved by Buyer with respect to the compliance of
any Medi-Serve Facility with all applicable zoning requirements that constitutes
a breach of a representation or warranty, then such breach will not be subject
to the indemnification
44
deductible described in Section 11.6(b). Nothing contained in this Section 8.10
will be deemed to limit Buyer's right to terminate this Agreement for any reason
including, without limitation, the condition set forth in Section 9.1 hereof.
ARTICLE IX: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------------------
Buyer's obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction, prior to or at the Closing, of each of
the following conditions, any one or more of which may be waived by Buyer, with
any such waiver to be effective only if in writing. Upon failure of any of the
following conditions, Buyer may terminate this Agreement pursuant to and in
accordance with Article XI herein.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Company, Medi-Serve and Shareholder made pursuant to this Agreement shall be
true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) at and as of the Closing Date, as though such representations and
warranties were made at and as of such time.
9.2 PERFORMANCE OF COVENANTS. Each of the Shareholder, Medi-Serve and
the Company shall have performed or complied in all material respects with their
respective agreements and covenants required by this Agreement to be performed
or complied with by them prior to or at the Closing.
9.3 DELIVERY OF CLOSING CERTIFICATE. Each of the Shareholder,
Medi-Serve's President and the Company's President shall have executed and
delivered to Buyer a certificate dated the Closing Date, upon which Buyer may
rely, certifying that the conditions contemplated by Sections 9.1 and 9.2
applicable to them have been satisfied.
9.4 OPINIONS OF COUNSEL. The Shareholder shall have delivered to Buyer
an opinion, dated the Closing Date, of its counsel, in the form and substance of
Exhibit 9.4. Said opinion shall be addressed to and may be relied upon by Buyer.
9.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any Governmental Authority
which prohibits or prevents the consummation of the transactions contemplated by
this Agreement shall have been issued and remain in effect.
9.6 AUTHORIZATION DOCUMENTS. Buyer shall have received certificates of
the Secretary or other officer of the Company and Medi-Serve certifying as of
the Closing Date a copy of resolutions of each of their Boards of Directors
authorizing the
45
execution and full performance of this Agreement and the Transaction Documents
and the incumbency of each of their officers.
9.7 MATERIAL CHANGE. Since the date hereof, there shall not have been
any material adverse change in the condition (financial or otherwise) of the
assets, properties, operations or prospects of the Company, Medi-Serve and the
Subsidiaries, taken as a whole.
9.8 REQUIRED APPROVALS.
(A) Subject to Section 2.4 hereof, all Required Approvals shall
have been granted;
(B) None of the foregoing consents or approvals (i) shall have been
conditioned upon the modification, cancellation or termination of any material
lease, contract, commitment, agreement, license, easement, right or other
authorization with respect to the Business or any business of Buyer (or any of
its subsidiaries or affiliates), or (ii) shall impose on Buyer (or any
subsidiary or affiliate of Buyer) any material condition or provision or
requirement with respect to the Business or any business of Buyer or the
respective operation thereof that is more restrictive than or different from the
conditions imposed upon such operation prior to Closing.
9.9 XXXX-XXXXX XXXXXX ACT. All applicable waiting periods under the
Xxxx- Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the "H-S-R ACT") shall
have expired or been terminated, and no action shall have been taken or formal
protest made by the United States Department of Justice or the Federal Trade
Commission or any other person or entity to prohibit the transactions
contemplated by this Agreement by reason of a claimed violation of any antitrust
laws. Without limiting the foregoing, no obligation arising out of the H-S-R Act
shall have been imposed on Buyer to divest any material portion of its business
or to restrict any of its business conduct by reason of the transactions
contemplated by this Agreement.
9.10 NON-COMPETITION AGREEMENT. Shareholder shall have entered into a
Non- competition Agreement in the form and substance of Exhibit 9.10 (each a
"NON-COMPETITION AGREEMENT"), for no further consideration, with Buyer, pursuant
to which Shareholder shall agree that after the Closing Date for the period set
forth below (the "NON-COMPETE PERIOD"), Shareholder will not, directly or
indirectly, for himself, or on behalf of any other person, firm, entity or other
enterprise, be employed by, be an officer, director or manager of, act as a
consultant for, be a partner in, have a proprietary interest in, or loan money
to any person, enterprise, partnership, limited liability company, association,
corporation, joint venture or other entity which is directly or indirectly in
the business of owning, operating or managing any skilled nursing facility
business or institutional pharmacy business located in the State of South
Carolina; provided, the provisions of this Section 9.10 shall not apply to the
Xxxxxxxx Facility; and provided further, the Shareholder shall be permitted to
(i) be an officer, director, committee member or member of Spartanburg Regional
Medical Foundation from which the Shareholder receives no pecuniary benefit
(other than
46
reimbursement of expenses), (ii) be an officer, director, committee member or
member of the South Carolina Health Care Association from which the Shareholder
receives no pecuniary benefit (other than reimbursement of expenses), and (iii)
be an officer, director, committee member or member of the American Health Care
Association from which the Shareholder receives no pecuniary benefit (other than
reimbursement of expenses). The Non-Competition Agreement shall not prohibit the
ownership of less than 2% of the issued and outstanding stock of any competitive
business whose stock is listed on a national securities exchange or traded on
the NASDAQ national market system. The Non-Competition Agreement also shall
contain confidentiality and non-solicitation provisions reasonably acceptable to
Buyer. The Non-Compete Period for Shareholder shall commence on the Closing Date
and end five (5) years from the Closing Date.
9.11 COST AND EXPENSES. The Shareholder, the Company and Medi-Serve
shall have paid (or assumed the liability with respect to) all of their
respective costs, fees and expenses (including without limitation, filing fees,
transfer taxes, stamp taxes, legal fees and broker, audit and appraisal fees) in
connection with the transactions contemplated by this Agreement.
9.12 CONSENTS. The condition set forth in Section 2.4 shall have been
satisfied.
9.13 CLOSING DATE BALANCE SHEET. The Shareholder, Medi-Serve and
Company shall have furnished the Estimated Closing Date Balance Sheet to Buyer
certified as required by Section 2.2(a) hereof.
9.14 RESIGNATION OF COMPANY AND MEDI-SERVE BOARDS OF DIRECTORS AND
OFFICERS. Each director and officer of the Company, Medi-Serve and each
Subsidiary shall have submitted his or her resignation to be effective no later
than the Closing Date.
9.15 ESTIMATED CLOSING DATE LONG TERM LIABILITIES. The long-term
liabilities of the Company, Medi-Serve and the Subsidiaries on a combined basis
as set forth on the Estimated Closing Date Balance Sheet shall not exceed
$2,400,000.
9.16 INTENTIONALLY DELETED.
9.17 XXXXXXXX FACILITY. The Xxxxxxxx Facility shall be leased to a
subsidiary of Magnolia pursuant to a "triple-net" lease with a term of at least
25 years, with annual base rent of $330,000 per year (subject to annual 2%
escalations), and otherwise with terms and conditions reasonably satisfactory to
Buyer.
9.18 SHAREHOLDER SETTLEMENTS. All accounts receivable or other amounts
due from, and all current or other liabilities due to, Shareholder or any
Affiliate of Shareholder shall be settled immediately prior to Closing.
47
9.19 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
and delivered by each party thereto other than the Buyer.
9.20 IHS STOCK PRICE. The closing NYSE price of IHS Stock on the last
trading day prior to the Closing Date shall not be less than $10.
9.21 SECTION 338(H)(10) ELECTION. All of the parties shall cooperate to
cause Medi- Serve to elect under Section 338(h)(10) of the Internal Revenue Code
of 1986 (as amended) (and any comparable election under state or local tax law)
with respect to the Medi-Serve Merger.
9.22 ARTICLES OF MERGER. Each of the Articles of Merger shall have been
filed under, and accepted by the South Carolina Secretary of State.
9.23 OTHER DOCUMENTS.
(A) The Shareholder, Medi-Serve and Company shall have furnished
Buyer with all other documents, certificates and other instruments required to
be furnished to Buyer by the Shareholder, Medi-Serve and Company pursuant to the
terms hereof, including, without limitation, the Undertaking and all stock
certificates evidencing the Subject Shares.
(B) The Shareholder shall also have delivered to Buyer the stock
certificates representing all of the issued and outstanding shares of capital
stock of each Subsidiary, which stock certificates need not be endorsed in blank
or accompanied by stock powers.
ARTICLE X: CONDITIONS PRECEDENT TO SHAREHOLDER'S OBLIGATIONS
------------------------------------------------------------
The obligation of the Shareholder to consummate the transactions
contemplated by this Agreement is subject to the satisfaction, prior to or at
the Closing, of each of the following conditions, any one or more of which may
be waived by Shareholder, with any such waiver to be effective only if in
writing. Upon failure of any of the following conditions, Shareholder may
terminate this Agreement pursuant to and in accordance with Article XII herein.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer made pursuant to this Agreement shall be true and correct in all
material respects (except those representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) at
and as of the Closing Date as though such representations and warranties were
made at and as of such time.
10.2 PERFORMANCE OF COVENANTS. Buyer shall have performed or complied
in all material respects with each of its agreements and covenants required by
this Agreement to be performed or complied with by it prior to or at the
Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. Buyer shall have delivered to
Shareholder a certificate of an officer of Buyer dated the Closing Date upon
which
48
Shareholder may rely, certifying that the statements made in Sections 10.1 and
10.2 are true, correct and complete as of the Closing Date.
10.4 OPINION OF COUNSEL. Buyer shall have delivered to Shareholder an
opinion, dated the Closing Date, of its counsel, in the form and substance of
Exhibit 10.4.
10.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any Governmental Authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. Shareholder shall have received a
certificate of the Secretary or other officer of Buyer certifying a copy of
resolutions of the Board of Directors of Buyer, Newco 1 and Newco 2 authorizing
Buyer's, Newco 1's and Newco 2's execution and full performance of this
Agreement and the Transaction Documents and the incumbency of the officers of
Buyer, Newco 1 and Newco 2.
10.7 XXXX-XXXXX XXXXXX ACT. All applicable periods under the H-S-R Act
shall have expired or been terminated, and no action shall have been taken or
formal protest made by the United States Department of Justice or the Federal
Trade Commission or any other person or entity to prohibit the transactions
contemplated by this Agreement by reason of a claimed violation of any antitrust
laws.
10.8 INTENTIONALLY DELETED.
10.9 ESCROW AGREEMENT. The Escrow Agreement shall have been executed
and delivered by each party thereto other than the Shareholder.
10.10 IHS STOCK PRICE. The closing NYSE price of IHS Stock on the last
trading day prior to the Closing Date shall not be less than $10.
10.11 OTHER DOCUMENTS. Buyer shall have furnished Shareholder with all
documents, certificates and other instruments required to be furnished to
Shareholder by Buyer pursuant to the terms hereof.
ARTICLE XI: SURVIVAL AND INDEMNIFICATION
----------------------------------------
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by each party in this Agreement and in each Schedule and
Transaction Document shall survive the Closing Date and for a period of two (2)
years after the Closing notwithstanding any investigation at any time made by or
on behalf of the other party, provided that the representations and warranties
contained in
49
Sections 5.22 (relating to Tax matters), 5.24 (relating to Questionable
Payments), and 5.25 (relating to Medicare, Medicaid and other reimbursement
matters), shall survive until thirty (30) days after the end of the applicable
period of limitations for audits by the applicable Governmental Authority shall
have expired, the representations and warranties contained in Sections 5.26
(relating to capitalization) shall have no expiration date, and the
representation and warranty contained in Section 5.3 insofar as it relates to
the legality, validity, binding effect and enforceability of the Non-Competition
Agreement shall survive for the term of the Non-Competition Agreement. All
representations and warranties related to any claim asserted in writing prior to
the expiration of the applicable survival period shall survive (but only with
respect to such claim) until such claim shall be resolved and payment in respect
thereof, if any is owing, shall be made.
11.2 INDEMNIFICATION BY SHAREHOLDER. The Shareholder, Medi-Serve and
the Company (subject to the limitations set forth in Section 14.11 hereof)
jointly and severally, shall indemnify and defend Buyer and each of its
officers, directors, agents, employees and advisors, and their respective
successors and assigns ("BUYER INDEMNITEES") and hold each of them harmless
against and with respect to any and all damage, loss, liability, deficiency,
cost and expense (including, without limitation, reasonable attorney's fees and
expenses) (all of the foregoing hereinafter collectively referred to as "LOSS")
resulting from or arising out of the following:
(A) any inaccuracy in any representation, or breach of any warranty
or certification, made by Shareholder, Medi-Serve or the Company pursuant to
this Agreement;
(B) the breach of any covenant or undertaking by Shareholder,
Medi-Serve or the Company made pursuant to this Agreement;
(C) any Prohibited Liability, including, without limitation, any
Reimbursement Liabilities;
(D) the termination of any Xxxxxx Lease pursuant to the Xxxxxx
Litigation;
(E) any action, suit, proceeding, demand, claim, assessment,
judgment, settlement (to the extent approved by the Shareholder, such approval
not to be unreasonably withheld, delayed or conditioned), cost or legal or other
expense incident to any of the foregoing.
11.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend
Shareholder and, if there shall not be a Closing, Company and Medi-Serve, and
hold them and their respective advisors and their respective successors and
assigns harmless against and with respect to any and all Loss resulting from or
arising out of:
(A) any inaccuracy in any representation, or breach of any warranty
or certification, made by Buyer pursuant to this Agreement;
50
(B) the breach of any covenant or undertaking by Buyer made
pursuant to this Agreement;
(C) any Loss resulting solely from Buyer's operation of the
Business after the Closing Date and not arising out of any breach of any
representation or warranty or covenant of Shareholder, Medi-Serve or the
Company;
(D) any amount paid after the Closing or payable, in each case, by
reason of any obligation of the Company, Medi-Serve or any of the Subsidiaries
that is guaranteed by the Shareholder or for which the Shareholder is otherwise
responsible, which guarantee or other obligation causing the Shareholder to be
responsible has not been terminated at or prior to the Closing Date, but in each
case only to the extent such amount paid or payable constitutes Permitted
Liabilities; and
(E) any action, suit, proceeding, demand, claim, assessment,
judgment, settlement (to the extent approved by Buyer, such approval not to be
unreasonably withheld, delayed or conditioned), cost or legal or other expenses
incident to any of the foregoing.
11.4 ASSERTION OF CLAIMS. Any claims for indemnification under Section
11.2(a) or 11.3(a) must be asserted by written notice on or prior to the date on
which such representation or warranty expires.
11.5 CONTROL OF DEFENSE OF INDEMNIFICABLE CLAIMS.
(A) (I) Buyer shall give Shareholder prompt notice of each claim
for which it seeks indemnification. Failure to give such prompt notice shall not
relieve the Shareholder of his indemnification obligation, provided that such
indemnification obligation shall be reduced by any damages Shareholder
demonstrates he has suffered resulting from a failure to give prompt notice
hereunder. The Shareholder shall be entitled to participate in the defense of
such claim. If at any time the Shareholder acknowledges in writing that the
claim is fully indemnifiable by him under this Agreement, and, if requested by
Buyer, post adequate bond or security (as to the foregoing, the Buyer shall be
entitled to make such request only if Buyer reasonably believes that Shareholder
will not have funds available to pay any such claim, after taking into
consideration any amounts held in escrow), he shall have the right to assume
control of the defense of such claim at his own expense. If the Shareholder does
assume control of the defense of any such claim, the Buyer agrees not to settle
such claim without the written consent of the Shareholder, which consent shall
not be unreasonably withheld, delayed or conditioned. Nothing contained in this
Section 11.5 shall prevent either party from assuming control of the defense
and/or settling any claim against it for which indemnification is not sought
under this Agreement.
(II) Notwithstanding the foregoing in clause (i), if there
shall be any claim for any Reimbursement Liability or tax liability, Buyer will
diligently
51
and in good faith contest or appeal such claim using at least the same standard
of care as it would apply to contests or appeals with respect to reimbursement
liabilities or tax liabilities in general. Buyer may, in its sole and absolute
discretion, at any time discontinue any such contest or appeal prior to the
final determination thereof after all administrative appeals shall have been
taken (a "FINAL DETERMINATION"); provided, however, that if Buyer intends to
discontinue any such appeal or contest prior to Final Determination, then Buyer
must provide Shareholder with reasonable prior written notice of such intent and
of the current status of the appeal or contest, and upon request of Shareholder,
Buyer shall assign to the Shareholder all of its right, title and interest to
contest and appeal such Reimbursement Liability or tax liability on behalf of
and in the name of Buyer; it being understood, however, that any recovery with
respect to any such Reimbursement Liability or tax liability shall belong to
Buyer. Buyer may, in its sole discretion, elect not to so assign any of its
right, title and interest to contest and appeal any such Reimbursement Liability
or tax liability, in which case, Buyer shall not be entitled to be indemnified
by the Shareholder with respect to the otherwise appealable or contestable
portion thereof.
(B) The Shareholder shall give Buyer prompt written notice of each
claim for which Shareholder seeks indemnification. Failure to give such prompt
notice shall not relieve the Buyer of its indemnification obligation, provided
that such indemnification obligation shall be reduced by any damages Buyer
demonstrates it has suffered resulting from a failure to give prompt notice
hereunder. The Buyer shall be entitled to participate in the defense of such
claim. If at any time Buyer acknowledges in writing that the claim is fully
indemnifiable by it under this Agreement, and, if requested by Shareholder, post
adequate bond of security (as to the foregoing, the Shareholder shall be
entitled to make such request only if Shareholder reasonably believes that Buyer
will not have funds available to pay any such claim), it shall have the right to
assume control of the defense of such claim at its own expense. If the Buyer
assumes control of the defense of any such claim, the Shareholder shall not
settle such claim without the written consent of the Buyer, which consent shall
not be unreasonably withheld, delayed or conditioned. Nothing contained in this
Section 11.5 shall prevent either party from assuming total control of the
defense and/or settling any claim against it for which indemnification is not
sought under this Agreement.
11.6 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(A) Notwithstanding any other provision of this Agreement, the
aggregate indemnification obligations of the Shareholder, on the one hand, and
Buyer, on the other hand, shall not exceed $16,000,000.
(B) Notwithstanding any other provision of this Agreement, after
the Closing, the Shareholder, on the one hand, and Buyer, on the other hand,
shall not have any obligation to indemnify the other party hereto for any Losses
incurred by it or them unless, until and to the extent the aggregate amount of
such Losses equals or exceeds $250,000; provided, however, that the foregoing
shall not apply to: (i) any obligations with respect to payments of, or
adjustments to, the Magnolia Base Amount (and, correspondingly, the Magnolia
Merger Consideration) under Article II above, (ii)
52
claims made by Buyer pursuant to Sections 11.2(b) or (c) above, or claims made
by Shareholder under Section 11.3 (d), above, or (iii) claims arising out of any
breach of the representations and warranties contained in Section 5.26, Section
5.11(f) or Section 5.21(b) or described in Sections 8.8 and 8.9.
(C) Upon payment in full by an indemnifying party of any
indemnification claim, whether such payment is effected by setoff or otherwise,
or upon the payment in full by an indemnifying party of any judgment with
respect to a third-party claim, the indemnifying party shall be subrogated to
the extent of such payment to the rights of the indemnified party against any
insurance carrier, workmens' compensation fund, title insurance carrier,
engineers, surveyors, environmental inspectors, and zoning experts.
11.7 WARN ACT LIABILITY. In reliance on the representations and
warranties of the Company, Medi-Serve and the Shareholder made pursuant to this
Agreement, Buyer agrees to assume any liability arising under the Worker
Adjustment and Retraining Notification Act (the "WARN ACT") out of any failure
to give any required notices to appropriate persons with respect to any
employment loss that may arise as a result of the termination by Buyer of the
employment of any employees of the Company, Medi-Serve or any of the
Subsidiaries following the Closing Date, except to the extent that any
notifications are required by reason of actions taken by the Company, Medi-Serve
or any Subsidiary prior to the Closing Date.
11.8 CERTAIN WAIVERS. Effective as of the Closing, Shareholder hereby
knowingly waives any claims that he may have against Premiere or any of its
subsidiaries on or prior to Closing arising out of the transactions contemplated
by this Agreement or the Premiere Stock Purchase Agreement.
ARTICLE XII: TERMINATION
------------------------
12.1 TERMINATION. This Agreement may be terminated at any time at or
prior to the time of Closing by:
(A) Buyer, if any condition precedent to the obligations of Buyer
under this Agreement, including without limitation those conditions set forth in
Article IX hereof, have not been satisfied by the Closing Date or pursuant to
Section 13.1, or otherwise as expressly provided in this Agreement;
(B) Shareholder, if any condition precedent to the obligations of
the Shareholder hereunder, including without limitation those conditions set
forth in Article X hereof, have not been satisfied by the Closing Date, or
otherwise as expressly provided in this Agreement;
(C) the mutual consent of Buyer and Shareholder;
(D) Shareholder, as provided in Section 2.4, hereof.
53
12.2 EFFECT OF TERMINATION. If a party terminates this Agreement
because one of its conditions precedent has not been fulfilled, or if this
Agreement is terminated by mutual consent, this Agreement shall become null and
void without any liability of any party to the other; provided, however, that if
such termination is by reason of the breach by any party of any of its
representations, warranties or obligations under this Agreement, the other party
shall be entitled to be indemnified for any Losses incurred by it by reason
thereof in accordance with Section 11.2 or 11.3, as the case may be, hereof (and
for such purposes such Section 11.2 or 11.3, as the case may be, shall survive
the termination of this Agreement). Furthermore, nothing in this Section 12.2
shall affect Buyer's right to specific performance of the obligations of the
Shareholder at Closing hereunder.
ARTICLE XIII: CASUALTY, RISK OF LOSS
------------------------------------
13.1 CASUALTY, RISK OF LOSS. Shareholder shall bear the risk of all
loss or damage to any of the Assets from all causes which occur prior to the
Closing. If at any time prior to the Closing any of the Assets are damaged or
destroyed as a result of fire, other casualty or for any reason whatsoever and
such will likely have a material adverse effect on the operation or financial
condition of the Company and Medi-Serve, taken as a whole, Shareholder shall
immediately give notice thereof to Buyer. Buyer shall have the right, in its
sole and absolute discretion, within ten (10) days of receipt of such notice, to
(1) elect not to proceed with the Closing and terminate this Agreement, or (2)
proceed to Closing and consummate the transactions contemplated hereby and
receive any and all insurance proceeds received or receivable by the Company,
Medi-Serve, any Subsidiary or Shareholder on account of any such casualty (and
such insurance proceeds shall not be included as current assets for purposes of
determining Closing Date Working Capital). Nothing contained in this Section
13.1 shall limit or adversely affect the right of Buyer to receive
indemnification for any Losses incurred by it by reason of any breach by
Shareholder, Medi-Serve or the Company of any representation, warranty or
obligation under this Agreement in accordance with Section 11.2 hereof (and for
such purposes such Section 11.2 shall survive the termination of this
Agreement).
ARTICLE XIV: MISCELLANEOUS
--------------------------
14.1 PERFORMANCE. In the event of a breach by Shareholder, Medi-Serve
or the Company of its 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 the breaching party hereby
waives the defense that there may be an adequate remedy at law.
14.2 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the
benefit of each party hereto and its successors and proper assigns. Prior to
Closing, Shareholder, the Company, Medi-Serve and Buyer may not assign their
respective
54
interests under this Agreement to any other person or entity without the prior
written consent of the other parties hereto; provided, however, that Buyer may
assign its rights, duties and obligations hereunder to one or more subsidiaries
or affiliates of Buyer; and further provided that in the instance of such
assignment Buyer shall remain responsible for consummating the Closing as
provided in this Agreement and shall remain liable as to any and all of its
duties and obligations under this Agreement (such responsibility to include,
without limitation, delivery of IHS Stock (and not the stock of any other
entity) as provided herein). Buyer shall be entitled to assign its rights under
this Agreement after the Closing.
14.3 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and the
Exhibits and Schedules hereto embody the entire agreement and understanding of
the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein; provided, however that
any confidentiality agreements among the parties shall survive until the
Closing, at which time they shall terminate except to the extent provided in
this Agreement. The captions used herein are for convenience only and shall not
control or affect the meaning or construction of the provisions of this
Agreement. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same agreement.
14.4 COOPERATION - FURTHER ASSISTANCE. From time to time, as and when
reasonably requested by any party hereto after the Closing, the other parties
will (at the expense of the requesting party) execute and deliver, or cause to
be executed and delivered, all such documents, instruments and consents and will
use reasonable efforts to take all such action as may be reasonably necessary to
carry out the intent and purposes of this Agreement.
14.5 NOTICES. All notices 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:
If to the Company, Medi-Serve
or Shareholder at: Xxxxx X. Xxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
with a copy to: Xxxxxxxx Xxxx, Esq.
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
If to the Buyer, Newco 1
55
or Newco 2: Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxx,
Executive Vice President
and
with a copy to: Integrated Health Services, Inc.
00000 Xxx Xxx Xxxxxxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxx, General Counsel
and
Blass & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
14.6 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
14.7 RIGHTS OF PERSONS NOT PARTIES. Except as expressly provided with
respect to indemnification rights, nothing contained in this Agreement shall be
deemed to create rights in persons not parties hereto, other than the successors
and proper assigns of the parties hereto.
14.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina, disregarding any
contrary rules relating to the choice or conflict of laws.
14.9 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after the
execution and delivery of this Agreement by the parties hereto, this Agreement
may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required
56
for the consummation of any portion of the transactions contemplated hereby.
This Agreement may not be amended except by an instrument in writing signed by
each of the parties.
14.10 SEVERABILITY. Any provision, or distinguishable portion of any
provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction only, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the extent permitted by applicable law, the parties waive any provision of
law which renders a provision hereof prohibited or unenforceable in any respect.
14.11 JOINT AND SEVERAL. The Shareholder, Medi-Serve and Company shall
be jointly and severally (unless there shall be a Closing, in which case the
Company and Medi-Serve shall have no liability under this Agreement) liable for
all representations, warranties and covenants made by any of them pursuant to
this Agreement. After the Closing, Shareholder shall not have any right of
contribution or indemnity from the Company or Medi-Serve or any Subsidiary and
no right of subrogation to proceed against the Company or Medi-Serve or any
Subsidiary with respect to any of the foregoing or otherwise. For all purposes
of this Agreement, any reference to the "knowledge" of the Company or Medi-Serve
or to Company or Medi-Serve having received "notice" of any matter or any
similar qualification shall be deemed to include the knowledge of the
Shareholder, directors, facility administrators, directors of nursing, the
director of legal affairs, pharmacists and the executive officers of the
Company, Medi-Serve or any Subsidiary or notices to any of them, as the case may
be.
14.12 RECORDS. On the Closing Date, Shareholder shall deliver, or cause
to be delivered, to Buyer all records and files not then in Buyer's possession
relating to the operations of the Company and Medi-Serve; provided, however,
that the Shareholder's accountants and attorneys may retain duplicate copies of
the same; provided, further that such retention shall not relieve Shareholder of
any of his obligations under the Non-Competition Agreement.
14.13 CERTAIN COSTS. The parties agree that the Buyer shall bear any
corporate (Medi-Serve) level cost relating to or arising out of the 338(h)(10)
election. The parties agree that the Medi-Serve Merger Consideration shall be
allocated to Medi-Serve's assets on the Closing Date Balance Sheet in accordance
with the Federal income tax basis of such assets, and any excess shall be
allocated to goodwill.
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57
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
COMPANY:
THE MAGNOLIA GROUP, INC.
By:
----------------------------------------
Its:
---------------------------------------
SHAREHOLDER:
-------------------------------------------
Xxxxx X. Xxxx
MEDI-SERVE:
MEDI-SERVE, INC.
By:
----------------------------------------
Its:
---------------------------------------
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:
----------------------------------------
------------------------------------------,
Executive Vice President
IHS ACQUISITION NO. 35, INC.
By:
----------------------------------------
------------------------------------------,
Executive Vice President
IHS ACQUISITION NO. 36, INC.
By:
----------------------------------------
------------------------------------------,
Executive Vice President
INDEX OF DEFINED TERMS
"ACTUAL LONG-TERM LIABILITIES" ..................................... shall have the meaning as set forth in Section 2.2(a)(iii).
"ACTUAL WORKING CAPITAL".............................................shall have the meaning as set forth in Section 2.2(a)(iii).
"ADJUSTED MARKET VALUE PER ADDITIONAL IHS SHARE".....................shall have the meaning as set forth in Section 3.1(l).
"ADJUSTED NOTICE" .................................................. shall have the meaning as set forth in Section 3.1(l).
"AFFILIATE"..........................................................shall have the meaning as set forth in Section 5.18.
"XXXXXX".............................................................shall have the meaning as set forth in the Introduction hereto.
"AGREEMENT"..........................................................shall have the meaning as set forth in the Introduction hereto.
"XXXXXX".............................................................shall have the meaning as set forth in the Introduction hereto.
"XXXXXX GROUP".......................................................shall have the meaning as set forth in the Introduction hereto.
"XXXXXX GROUP NOTES".................................................shall have the meaning as set forth in the Introduction hereto.
"XXXXXX OPTIONS".....................................................shall have the meaning as set forth in the Introduction hereto.
"XXXXXX SHARES"......................................................shall have the meaning as set forth in the Introduction hereto.
"ARBITRATING ACCOUNTANTS" .......................................... shall have the meaning as set forth in Section 2.2(iv).
"ARTICLES OF MERGER".................................................shall have the meaning as set forth in Section 1.1.
"ASSETS".............................................................shall have the meaning as set forth in Section 2.3(a).
"APPLICABLE VALUATION DATE" ........................................ shall have the meaning as set forth in Section 3.1(a).
"BALANCE SHEET" .................................................... shall have the meaning as set forth in Section 5.8(b).
"BALANCE SHEET DATE" ............................................... shall have the meaning as set forth in Section 5.8(b).
"XXXXXX LEASES" .................................................... shall have the meaning as set forth in Section 2.2(c).
"BROKER" ........................................................... shall have the meaning as set forth in Section 5.27.
"BUSINESS" ......................................................... shall have the meaning as set forth in Section 2.3(a).
"BUYER"..............................................................shall have the meaning as set forth in the Introduction hereto.
"BUYER'S INDEMNITEES" .............................................. shall have the meaning as set forth in Section 11.2.
"BUYER'S REVIEW" ................................................... shall have the meaning as set forth in Section 2.2(a)(iii).
"XXXX FACILITIES"....................................................shall have the meaning as set forth in the Section 2.2(b).
"XXXX/XXXXXX LEASE" ................................................ shall have the meaning as set forth in Section 2.2(b).
"CASH NOTE" ........................................................ shall have the meaning as set forth in Section 2.1(e).
"CASH STOCK PLEDGE AGREEMENT" ...................................... shall have the meaning as set forth in Section 2.1(e).
"XXXXXXXX"...........................................................shall have the meaning as set forth in the Introduction hereto.
"XXXXXXXX SHARES"....................................................shall have the meaning as set forth in the Introduction hereto.
"CLOSING"............................................................shall have the meaning as set forth in Section 4.1.
"CLOSING DATE".......................................................shall have the meaning as set forth in Section 4.1.
"CLOSING DATE BALANCE SHEET" ....................................... shall have the meaning as set forth in Section 2.2(iii).
"COMPANY"............................................................shall have the meaning as set forth in the Introduction hereto.
"COMMISSION".........................................................shall have the meaning as set forth in Section 3.1(b).
"CONSENT CONTRACTS" ................................................ shall have the meaning as set forth in Section 2.4.
"CONTRACTS" ........................................................ shall have the meaning as set forth in Section 5.7.
"DADE COUNTY FACILITIES".............................................shall have the meaning as set forth in Section 2.2(e).
"DELAY PAYMENT NOTICE" ............................................. shall have the meaning as set forth in Section 2.2(iv).
"DESIGNATED CONTRACTS" ............................................. shall have the meaning as set forth in Section 2.4.
"EFFECTIVE DATE" ................................................... shall have the meaning as set forth in Section 3.1(l).
"EMPLOYMENT AGREEMENTS" ............................................ shall have the meaning as set forth in Section 9.16.
"ENVIRONMENTAL LAWS".................................................shall have the meaning as set forth in Section 5.21(b).
"ERISA"..............................................................shall have the meaning as set forth in Section 5.13.
"ESCROW DEPOSIT" ................................................... shall have the meaning as set forth in Section 2.1(c)(i).
"ESCROW INCOME" .................................................... shall have the meaning as set forth in Section 2.5(c).
"ESCROW INCOME"......................................................shall have the meaning as set forth in Section 2.5(c).
"ESCROWEE" ..........................................................shall have the meaning as set forth in Section 2.1(a).
"ESTIMATED CLOSING DATE BALANCE SHEET"...............................shall have the meaning as set forth in Section 2.2(a)(ii).
"ESTIMATED CLOSING DATE WORKING CAPITAL".............................shall have the meaning as set forth in Section 2.2(a)(i)(A).
"ESTOPPEL CERTIFICATES"..............................................shall have the meaning as set forth in Section 8.5.
"EXCHANGE ACT".......................................................shall have the meaning as set forth in Section 3.1(e)(iv).
"FACILITIES".........................................................shall have the meaning as set forth in the Introduction hereto.
"FINAL DETERMINATION"................................................shall have the meaning as set forth in Section 11.5(a)(ii).
"FINANCIAL STATEMENTS"...............................................shall have the meaning as set forth in Section 5.8(a).
"XXXXXX FACILITIES"..................................................shall have the meaning as set forth in Section 2.2(b).
"GAAP" ............................................................. shall have the meaning as set forth in Section 2.2(a)(ii).
"GOLDEN AGE/XXXXX LEASES"............................................shall have the meaning as set forth in Section 2.7.
"GOVERNMENTAL AUTHORITIES" ..........................................shall have the meaning as set forth in Section 5.4.
"GOVERNING DOCUMENTS" ...............................................shall have the meaning as set forth in Section 5.1(b).
"GOVERNMENTAL REQUIREMENTS" .........................................shall have the meaning as set forth in Section 5.4.
"GROUP"..............................................................shall have the meaning as set forth in the Introduction hereto.
"GROUP MEMBER".......................................................shall have the meaning as set forth in the Introduction hereto.
"GROUP PARTICIPANT"..................................................shall have the meaning as set forth in the Introduction hereto.
"H-S-R ACT" .........................................................shall have the meaning as set forth in Section 9.9.
"INITIAL MARKET VALUE PER SHARE" ....................................shall have the meaning as set forth in Section 3.1(l).
"LEASES".............................................................shall have the meaning as set forth in Section 5.7(b)(ix)
"LEASED ASSETS" .....................................................shall have the meaning as set forth in Section 5.6.
"LICENSES" ..........................................................shall have the meaning as set forth in Section 5.10.
"LIENS" .............................................................shall have the meaning as set forth in Section 5.6(b).
"LOSS" ..............................................................shall have the meaning as set forth in Section 11.2.
"MAGNOLIA BASE AMOUNT"...............................................shall have the meaning as set forth in Section 2.1(a)(i).
"MAGNOLIA MERGER CONSIDERATION"......................................shall have the meaning as set forth in Section 2.1(a)(ii).
"MAGNOLIA MERGER CONSIDERATION PER SHARE"............................shall have the meaning as set forth in Section 2.1(a)(ii).
"MAGNOLIA FACILITIES"................................................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA FACILITIES"................................................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA MERGER CONSIDERATION PER SHARE"............................shall have the meaning as set forth in Section 2.1(ii).
"MAGNOLIA SHARES"....................................................shall have the meaning as set forth in the Introduction hereto.
"MAGNOLIA SHAREHOLDER"...............................................shall have the meaning as set forth in the Introduction hereto.
"MAJORITY PREMIERE SHARES"...........................................shall have the meaning as set forth in the Introduction hereto.
"MANAGED ASSETS" ....................................................shall have the meaning as set forth in Section 5.6.
"MANAGEMENT AGREEMENTS" .............................................shall have the meaning as set forth in Section 5.7(x).
"MEDI-SERVE".........................................................shall have the meaning as set forth in the Introduction hereto.
"MEDI-SERVE MERGER CONSIDERATION"....................................shall have the meaning as set forth in Section 2.1(a)(iii).
"MEDI-SERVE MERGER CONSIDERATION PER SHARE"..........................shall have the meaning as set forth in Section 2.1(a)(iii).
"MEDI-SERVE FACILITIES"..............................................shall have the meaning as set forth in the Introduction hereto
"MEDI-SERVE SHARES"..................................................shall have the meaning as set forth in the Introduction hereto.
"MERGERS"............................................................shall have the meaning as set forth in the Introduction hereto.
"MERGER CONSIDERATION"...............................................shall have the meaning as set forth in Section 2.1(a)(i).
"MERGER TIME"........................................................shall have the meaning as set forth in Section 1.2.
"MINORITY SHAREHOLDER"...............................................shall have the meaning as set forth in the Introduction hereto.
"MULTI-EMPLOYER ACT" ................................................shall have the meaning as set forth in Section 5.15.
"NEW CASH MAGNOLIA/MEDI-SERVE SHARES" ...............................shall have the meaning as set forth in Section 2.1(e).
"NEWCO 1"............................................................shall have the meaning as set forth in the Introduction hereto.
"NEWCO 2"............................................................shall have the meaning as set forth in the Introduction hereto.
"NEW GREENVILLE FACILITY"............................................shall have the meaning as set forth in the Introduction hereto.
"NEW GREENVILLE LEASE"...............................................shall have the meaning as set forth in the Introduction hereto.
"NON-COMPETITION AGREEMENT" .........................................shall have the meaning as set forth in Section 9.10.
"NON-COMPETE PERIOD" ................................................shall have the meaning as set forth in Section 9.10.
"NON-DISTURBANCE AGREEMENTS".........................................shall have the meaning as set forth in Section 8.5.
"NYSE"...............................................................shall have the meaning as set forth in Section 3.1(a).
"OPERATIONS TRANSFER AGREEMENT" .....................................shall have the meaning as set forth in Section 2.2(e).
"OWNED ASSETS" ......................................................shall have the meaning as set forth in Section 5.6.
"OWNED FACILITY".....................................................shall have the meaning as set forth in Section 5.11(b).
"PERMITTED LIABILITIES" .............................................shall have the meaning as set forth in Section 2.3(b).
"PLAN OF MERGER".....................................................shall have the meaning as set forth in Section 1.1.
"PLEDGED SHARES".....................................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE"...........................................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE MANAGED FACILITIES"........................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE OWNED FACILITY"............................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE OPERATED FACILITIES".......................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE SHARES"....................................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE SHAREHOLDERS"..............................................shall have the meaning as set forth in the Introduction hereto.
"PREMIERE MERGER AGREEMENT"..........................................shall have the meaning as set forth in the Introduction hereto.
"PRINCIPAL SHAREHOLDERS".............................................shall have the meaning as set forth in the Introduction hereto.
"PROHIBITED LIABILITIES" ............................................shall have the meaning as set forth in Section 2.3(b).
"PROHIBITED TRANSACTION" ............................................shall have the meaning as set forth in Section 8.7.
"PROPRIETARY RIGHTS" ................................................shall have the meaning as set forth in Section 5.6(a)(ii).
"PURCHASE PRICE" ....................................................shall have the meaning as set forth in Section 2.1(a).
"QUESTIONNAIRE" .....................................................shall have the meaning as set forth in Section 5.16.
"REIMBURSEMENT LIABILITIES" .........................................shall have the meaning as set forth in Section 2.3(b).
"REQUIRED APPROVALS".................................................shall have the meaning as set forth in Section 8.4(b).
"REQUIRED NON-GOVERNMENTAL APPROVALS"................................shall have the meaning as set forth in Section 8.4(a).
"REQUIRED GOVERNMENTAL APPROVALS"....................................shall have the meaning as set forth in Section 8.4(b).
"RULE 144"...........................................................shall have the meaning as set forth in Section 3.1(d).
"SCHM AGREEMENTS"....................................................shall have the meaning as set forth in Section 2.2(d).
"SEC" ...............................................................shall have the meaning as set forth in Section 6.4.
"SEC DOCUMENTS" .....................................................shall have the meaning as set forth in Section 6.4.
"SECURITIES ACT".....................................................shall have the meaning as set forth in Section 3.1(b).
"SHAREHOLDER"........................................................shall have the meaning as set forth in the Introduction hereto.
"SHAREHOLDER'S REPRESENTATIVE" ..................................... shall have the meaning as set forth in Section 2.2(g).
"SHELF REGISTRATION STATEMENT".......................................shall have the meaning as set forth in Section 3.1(b).
"SUBSIDIARY".........................................................shall have the meaning as set forth in Section 5.1(a).
"SUBJECT SHARES".....................................................shall have the meaning as set forth in the Introduction hereto.
"SURVIVING CORPORATION"..............................................shall have the meaning as set forth in Section 1.1.
"T. CASH SECURITY SHARES" ...........................................shall have the meaning as set forth in Section 2.2(e).
"TAXES" .............................................................shall have the meaning as set forth in Section 5.22.
"TAX RETURN".........................................................shall have the meaning as set forth in Section 5.22.
"XXXXXX".............................................................shall have the meaning as set forth in Section 2.8.
"XXXXXX ESCROW AMOUNT"...............................................shall have the meaning as set forth in Section 2.8.
"XXXXXX LEASES"......................................................shall have the meaning as set forth in Section 2.8.
"XXXXXX LITIGATION"..................................................shall have the meaning as set forth in Section 2.8.
"TENANCY LEASES".....................................................shall have the meaning as set forth in Section 5.11(b).
"TITLE COMPANY"......................................................shall have the meaning as set forth in Section 8.11.
"TRANSACTION DOCUMENTS" .............................................shall have the meaning as set forth in Section 5.2.
"UNDERTAKING"........................................................shall have the meaning as set forth in Section 2.3(b).
"WARN ACT"...........................................................shall have the meaning as set forth in Section 11.7.
"XXXXXXXX FACILITY"..................................................shall have the meaning as set forth in the Introduction hereto.
