Exhibit 10.121
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
MCKESSON MEDICAL SURGICAL MINNESOTA SUPPLY INC.
AS BUYER,
AND
ADVOCAT DISTRIBUTION SERVICES, INC.
AND
DIVERSICARE MANAGEMENT SERVICES, INC.
AS SHAREHOLDER
DATED AS OF NOVEMBER 4, 2004
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and dated
as of this 4th day of November, 2004, by and between McKesson Medical-Surgical
Minnesota Supply Inc. a Minnesota corporation ("Buyer"), Advocat Distribution
Services, Inc., a Tennessee corporation ("Seller") and Diversicare Management
Services, Inc. ("Shareholder").
RECITALS
A. Buyer desires to purchase certain assets owned or used by Seller
related exclusively to the medical supply business of Seller (the "Business"),
but not the internet based direct purchase business of Seller known as "Care
Products Direct" and/or "Senior Products Direct" (the "Retained Business"), on
the following terms and conditions. For purposes of certainty, the Retained
Business includes only the aspects of the business associated with direct
internet purchases.
B. Seller desires to sell such assets to Buyer, on the following terms
and conditions.
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants, representations, warranties, conditions, and agreement hereinafter
expressed, the Parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchased Assets.
In accordance with the terms and subject to the conditions hereof,
Seller hereby agrees to sell, convey, assign and deliver to Buyer, and Buyer
hereby agrees to purchase, assume and accept from Seller, all right, title and
interest of Seller in and to the following:
(a) The customer agreements, identified on Schedule 1.1(a) (the
"Customer Agreements"), including their successors and assigns.
(b) The customer lists described on Schedule 1.1(b), including
non-Avante and Avante customers as identified on Schedule 1.1(b) (all customers
identified on Schedule 1.1(a) and Schedule 1.1(b), are hereinafter "Customers");
(c) Copies of all business records and other documents, discs,
tapes and other records related to the assets detailed in subparts (a) and (b)
above, including (but not limited to) all sales data, customer lists and
records, accounts, bids, contracts, supplier records, drawings, designs,
specifications, process information, performance data, and other information or
data related to the Business.
(d) The foregoing assets and business to be purchased hereunder
are herein sometimes collectively called the "Assets". The Assets shall not
include cash, certificates
of deposit, investments, notes receivable, amounts due from officers or
employees, prepaid expenses, interest receivable, life insurance, refunds,
rebates, accounts receivable accrued through the execution of this Agreement or
any assets related to the Retained Business or any assets not described in
Sections 1.1 (a), (b) or (c) or listed on Schedule 1.1 (the "Excluded Assets").
1.2 Assumed Liabilities.
(a) Subject to the terms and conditions hereof, on the execution
hereof, Seller agrees to assign and transfer to Buyer and Buyer agrees to assume
only the obligations and liabilities of Sellers under the Customer Agreements
identified on Schedule 1.1(a). The obligations and liabilities referred to in
this Section 1.2(a) are herein sometimes collectively called the "Assumed
Liabilities".
(b) Notwithstanding the foregoing, if the assignment and transfer
of any of the Assumed Liabilities would cause a breach thereof and if no
required consent to such assignment and transfer has been obtained from the
third parties involved, then, without limiting the effects of any
representations and warranties hereunder, such Assumed Liabilities shall not be
assigned and transferred to Buyer, and Buyer shall not assume any of the
obligations and liabilities with respect thereto, but, instead, the Seller shall
continue to hold its interests in and be obligated under and for such Assumed
Liabilities, with such Assumed Liabilities to be held by Seller in trust for the
benefit of Buyer, and with Seller to receive in trust and remit as promptly as
possible to Buyer any money paid thereunder to Seller and Seller shall cooperate
in any reasonable arrangement or action requested by Buyer to secure for Buyer
all benefits under such Assumed Liabilities; provided however, at and effective
as of such time as any such required consent with respect to such Assumed
Liability shall be obtained, such Assumed Liability shall forthwith be
transferred and assigned to the Buyer, and all related obligations and
liabilities of Seller shall be simultaneously assumed by the Buyer hereunder.
(c) Except as expressly provided in Sections 1.2(a) and 1.2(b)
Buyer does not hereby and will not assume or become liable for or successor to
and shall not be obligated to pay or satisfy any obligation, debt or liability
whatsoever, contingent or otherwise, of Seller or its respective affiliates with
respect to the Business, the Retained Business or the Excluded Assets or
otherwise, including, without limitation, (i) any liability for any taxes or
governmental charges, assessments or contributions of any nature whatsoever,
(ii) any liability for employment matters (whether in connection with or related
to employee benefit matters, employment agreements, labor agreements, plans or
arrangements, employment discrimination matters, worker's compensation and
occupational safety and health matters, labor disputes, unfair labor practices,
claims for overtime, back wages, vacation or minimum wage or otherwise), or
(iii) any claim, liability or obligation relating to or arising out of
circumstances or occurrences or the operations of Seller, the Business or the
Customer Contracts on or prior to the consummation of the transactions
contemplated hereby. No other statement in or provision of this Agreement other
than in Section 1.2(a) and 1.2(b) and no other statement, written or oral,
action, or failure to act includes or constitutes any such assumption or
agreement, and any statement to the contrary by any person is unauthorized and
hereby disclaimed.
1.3 Unfulfilled Orders.
(a) Buyer agrees to fulfill, invoice and collect payments for any
orders for medical supplies received by Seller but not processed prior to the
date hereof, as set forth on Schedule 1.3 or received by Buyer and Seller on
November 4, 2004 (the "Unfulfilled Orders"). The Unfulfilled Orders are the
property of Buyer, and Seller shall have no rights with respect thereto,
including for the payments received with respect thereto.
1.4 Purchase Price.
(a) The purchase price (the "Purchase Price") to be paid to
Seller for the sale of the Assets to Buyer as provided for herein shall be Two
Hundred Twenty-five Thousand Dollars ($225,000) ("Preliminary Purchase Price"),
plus the Earn Out Consideration calculated pursuant to Section 1.4(c). One
Hundred Twenty-five Thousand Dollars of the Preliminary Purchase Price shall be
paid by Buyer to Seller in cashier's check or wire transfer of immediately
available funds upon execution hereof. The remaining One Hundred Thousand
Dollars of the Preliminary Purchase Price shall be paid by Buyer to Seller in
cashier's check or wire transfer of immediately available funds so long as Xxxxx
Xxxxx does not rescind the Non-Compete Agreement referenced in Section 1.6(c)
below. In the event Xxxxx Xxxxx does not rescind the Non-Compete Agreement,
Buyer shall pay Seller the remaining Preliminary Purchase Price eight (8)
calendar days from the date hereof.
(b) The Seller shall be entitled, in the aggregate, to additional
consideration (the "Earn Out Consideration") and Buyer shall also make
additional payments, if any calculated and payable in accordance with the terms
and provisions of Section 1.5 below.
(c) The Purchase Price provided for in this Agreement has been
determined by the parties through good faith arms-length bargaining to be the
fair market value of the assets transferred to Buyer hereunder and is in full
consideration of Seller's sale, transfer and delivery of Assets. No amount paid
hereunder is intended to be, nor shall it be construed as, an offer or payment
made, directly or indirectly, overtly or covertly, to induce the referral of
patients, the purchase, lease or order of any item or service, or the
recommending of or arranging for the purchase, lease or order of any item or
service.
1.5 Earn-Out Consideration.
(a) For each of the first eight three month periods following the
execution of this Agreement (each a "Measurement Period") and ending on the
second anniversary thereof, Buyer shall pay to Seller an amount equal to (A) 75%
of the total of (i) Gross Margin, if any, minus (ii) Bad Debt, relating to
Buyer's invoiced sales transactions for such period from all Avante Customers,
as identified on Schedule 1.1(b) and (B) 20% of the total of (i) Gross Margin,
if any, minus (ii) Bad Debt, relating to Buyer's invoiced sales transactions for
such period from all Non-Avante Customers, as identified on Schedule 1.1(b). The
maximum aggregate payout to Seller under this Section 1.5, Earn Out
Consideration, shall be Five Hundred Forty Thousand Dollars ($540,000.00).
(b) Within thirty (30) days following each of the Measurement
Periods, Buyer shall determine the amount due Seller, if any, under this Section
1.5. Specifically, within thirty (30) days following the end of each Measurement
Period, Buyer shall calculate the Gross Margin relating to Buyer's invoiced
sales transactions from the Customers for such period. Buyer shall deduct any
Bad Debt charged which relates to Buyer's invoiced sales transactions for such
period from the Customers during the Measurement Period from the Gross Margin as
calculated in the preceding sentence. To the extent any additional payments are
owed to Seller, such payments shall be made by Buyer within thirty (30) days
after the end of such Measurement Period. To the extent Buyer subsequently
determines it has overpaid Seller under this Section 1.5(b), such overpayment
shall be credited against payments owed by Buyer to Seller in any subsequent
Measurement Period, or if no additional payments are due hereunder, such
overpayment shall be refunded by Seller to Buyer as provided in the Bad Debt
Adjustment Amount calculation provided in Section 1.5(c).
(c) Within two hundred ten (210) days following the eighth
Measurement Period, Buyer shall calculate as of the one hundred eightieth
(180th) day following the end of eighth Measurement Period, the difference
between (i) the total invoiced amount from all sales transactions from the
Customers that remains uncollected from all Measurement Periods minus (ii) the
total amount of Bad Debt deducted from the earn-out payments made pursuant to
this Section 1.5 for all Measurement Periods (the "Bad Debt Adjustment Amount").
To the extent the Bad Debt Adjustment Amount is a negative number, Buyer shall
pay Seller its share of the resulting amount as set forth in 1.5(a) above. To
the extent the Bad Debt Adjustment Amount is a positive number, Seller shall
refund to Buyer Seller's share of the resulting amount as set forth in 1.5(a)
above. The payment of the Bad Debt Adjustment Amount due from Buyer shall be
made by Buyer within two hundred ten (210) days following the end of the eighth
Measurement Period. Any payment of the Bad Debt Adjustment Amount due from
Seller shall be made by Seller within thirty (30) days following the receipt by
Seller of the documentation of the calculation of Bad Debt Adjustment Amount as
provided in Section 1.5(d).
(d) Within thirty (30) days after the end of each Measurement
Period Buyer will provide to Seller documentation of the calculation of the
Gross Margin and Bad Debt according to Buyer's internal accounting practices as
specified by GAAP consistently applied and in accordance with this Agreement.
Within two hundred ten (210) days after the end of the eighth Measurement
Period, Buyer will provide to Seller documentation of the calculation of the Bad
Debt Adjustment Amount and in accordance with this Agreement. Seller or Seller's
duly authorized agent, who shall be subject to a non-disclosure agreement
reasonably satisfactory in form and substance to Buyer, shall have the right, at
all reasonable times, during normal business hours, and upon the giving of
reasonable notice, to examine, inspect and audit the records of Buyer pertaining
to such calculations. Seller agrees that any documentation pertaining to such
calculations that is copied by Seller will be used solely for the purpose of
evaluating such calculations, and that Seller will keep such documentation
strictly confidential. In the event that Seller disputes any payments made
pursuant to this Section 1.5, it shall notify Buyer within thirty (30) days
following payment by Buyer, or notification by Buyer that no amount is due, with
respect to a Measurement Period. If Seller does not so notify Buyer, Buyer's
calculations of Gross Margin, Bad Debt and payment, if any, to Seller shall be
deemed final.
(e) For the purposes of calculating any additional payments in
this Section 1.5, the following terms shall have the meanings specified.
"GROSS MARGIN" means (expressed in dollars) the purchase price of
all products sold by Buyer to all of the Customers invoiced by
Buyer during the applicable Measurement Period; less Sales
Returns, Allowances and other credits to customers; less Buyer's
weighted average cost of product; plus customer charge back
rebates.
"SALES RETURNS" means credit at original Customer invoice prices
for product returned by the Customer to Buyer less applicable
restocking charges plus any actual freight charges incurred by
Buyer for the return of the product, whether or not such return
is pursuant to a transaction occurring prior to or after
execution hereof.
"ALLOWANCES" means credits to the Customer related to adjustments
to the original invoice price and/or freight charged.
"BAD DEBT" means the estimate of invoices that will be deemed
non-collectible in the future pursuant to Buyer's policies and
where credit is not issued for pricing or return of products.
Seller expressly acknowledges and agrees that the determination
of Bad Debt shall be determined by Buyer, consistent with its
trade credit policies and practices, as disclosed in Schedule 1.5
to this Agreement.
"WEIGHTED AVERAGE COST OF PRODUCT" means Buyer's purchase order
acquisition cost from vendors plus freight to Buyer's warehouses,
and import duties and brokerage fees. Weighted average item costs
are obtained by combining beginning inventory item costs with
current daily purchase costs and by dividing the combined costs
by the beginning inventory units on hand plus daily units
received.
"CUSTOMER CHARGE BACK REBATES" means rebates from vendors or
manufacturers directed at specific Customers excluding any
rebates relating to Buyer's prompt pay discounts, annual purchase
incentive or volume incentive agreements.
(f) No portion of the payment calculation shall be based on, and
Gross Margin shall not include, any of the following:
(i) Revenues generated pursuant to the contracts for
supplies provided by the Buyer directly to a patient of a
Customer and billed directly to Medicare Part B or a State
Medicaid Program;
(ii) Revenues generated from use of software systems;
(iii) Revenues generated for billing services; or
(iv) Revenues from purchases of products by any current or
future customer of Buyer, except as set forth on Schedule
1.1.
(g) During the Term and following the expiration or earlier
termination of this Agreement, Seller shall not directly or indirectly, in any
manner, recommend, influence, encourage, or cause Customers to purchase products
from Buyer.
(h) The parties agree to negotiate in good faith to resolve any
disagreement over amounts owed. In the event the parties cannot resolve such
disagreement based on good faith negotiations within thirty (30) days of receipt
of such notice, the parties agree to arbitrate such issue as described in
paragraph 1.5(i) below.
(i) All payments shall be made in the form of cash, wire
transfer, certified check or bank check.
(j) The parties hereby agree to submit all disputes with respect
to payments to be made (or the methods of calculation thereof) under this
Section 1.5 ("Earn Out Disputes") to arbitration under the following provisions,
which arbitration shall be final and binding upon the parties, their successors
and assigns. The following provisions constitute a binding arbitration clause
under applicable law.
The arbitration shall be conducted in Minneapolis, Minnesota, by
a panel of three arbitrators selected by agreement of the parties not later than
10 days after delivery of a demand for arbitration, or failing such agreement,
appointed pursuant to the commercial Arbitration Rules of the American
Arbitration Association, as amended from time to time (the "AAA Rules"). If an
arbitrator becomes unable to serve, his or her successor(s) shall be similarly
selected or appointed. The arbitration shall be conducted pursuant to the
Federal Arbitration Act and the AAA Rules. All hearings shall be conducted on an
expedited schedule, and all proceedings shall be confidential. Any party may at
its expense make a stenographic record thereof.
Notwithstanding the foregoing: (i) each party shall be allowed to
conduct discovery through written requests for information, document requests,
requests for stipulations of fact, and depositions; (ii) the nature and extent
of such discovery shall be determined by the arbitrators, taking into account
the needs of the parties and the desirability of making discovery expeditious
and cost-effective; (iii) the arbitrators may issue orders to protect the
confidentiality of information to be disclosed in discovery; and (iv) the
arbitrators' discovery rulings may be enforced in any court of competent
jurisdiction.
The arbitrators shall complete all hearings not later than 90
days after selection or appointment and shall make a final determination not
later than 30 days thereafter. The determination shall be in writing and shall
specify the factual and legal bases for the determination. All reasonable,
out-of-pocket costs and expenses of the arbitration, including the
arbitrators' fees and expenses and fees and expenses of experts and attorneys
("Arbitration Costs") shall be paid by the non-prevailing party. In the event
that the final determination states that Buyer wrongfully offset or deducted
payments to Seller and Buyer is required to make a payment to Seller under such
final determination, such payment shall bear interest at the prime rate of
interest as published in the Wall Street Journal on the date of the final
determination for the period beginning on the date at which such payment should
have been made pursuant to this Section 1.5.
1.6 Documents at Signing
Simultaneously with the execution hereof, Seller is executing and
delivering to Buyer, or causing to be executed and delivered to Buyer, the
following (the "Related Agreements"):
(a) Xxxx of Sale transferring to Buyer good and marketable title
to the Assets by Seller, free from all liens and encumbrances to Buyer, in the
form attached hereto as Exhibit A.
(b) Assignment and Assumption Agreement in the form attached
hereto as Exhibit B.
(c) A copy of the executed Non-Compete Agreement between Seller
and its employee, Xxxxx Xxxxx, in substantially the form attached hereto as
Exhibit C.
1.7 Purchase Price Allocation. Buyer and Seller shall negotiate in
good faith the allocation of the Purchase Price among the Assets in accordance
with Sections 1060 of the Internal Revenue Code (the "Code"). The Parties will
prepare and file their tax returns and all other requested filings based on such
allocation and shall take no position contrary thereto. In the event that the
Buyer and Sellers do not agree upon such allocation prior to the date which is
sixty (60) days prior to the earliest date upon which either of Buyer or Seller,
as the case may be, U.S. federal tax return reflecting the transactions
contemplated by the this Agreement is due, each of the Parties may file IRS Form
8594 and any federal, state or local tax returns allocating the consideration in
the manner each believes appropriate, provided that such allocation is
reasonable and in accordance with Section 1060 of the Code and the regulations
thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Shareholder hereby jointly and severally make the following
representations and warranties to Buyer, each of which is true and correct on
the date hereof and each of which shall survive the execution of this Agreement,
as set forth in Section 6.1:
2.1 Corporate Organization, Qualification and Power.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee. Seller has all requisite
corporate power and authority to own, lease and use the Assets and to conduct
the Business and holds all authorizations, licenses and permits necessary and
required therefor. Seller is duly licensed or qualified to do business as a
foreign corporation and is in good standing in the state(s) or other
jurisdictions listed on Schedule 2.1.
2.2 Corporate Power and Authority.
(a) Each of Seller and Shareholder has the full corporate power
and authority to enter into this Agreement and each of the Related Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by Seller and Shareholder of
this Agreement and each of the Related Agreements has been duly authorized by
all requisite corporate action, and all required approvals of the directors and
shareholders of Seller or Shareholder, as the case may be, in connection
therewith have been received. Each of this Agreement and the Related Agreements
constitutes the valid and binding obligation of Seller or Shareholder,
respectively, and is enforceable against Seller or Shareholder in accordance
with its respective terms.
(b) Neither Seller nor Shareholder is a party to, subject to or
bound by any note, bond, mortgage, indenture, deed of trust, agreement, lien,
contract or other instrument or obligation or any statute, law, rule,
regulation, judgment, order, writ, injunction, or decree of any court,
administrative or regulatory body, governmental agency, arbitrator, mediator or
similar body, franchise or license, which would (i) conflict with or be breached
or violated or the obligations thereunder accelerated or increased (whether or
not with notice or lapse of time or both) by the execution, delivery or
performance by it of this Agreement or any of the Related Agreements, or (ii)
prevent the carrying out of the transactions contemplated hereby or by any of
the Related Agreements. The execution, delivery and performance of this
Agreement by Seller and the Shareholder will not conflict with, breach or
violate the articles of incorporation or bylaws of Seller or the Shareholder.
Except as set forth on Schedule 2.2, no waiver or consent of any third person or
governmental authority is required for the execution of this Agreement or any of
the Related Agreements by Seller or Shareholder or the consummation of the
transactions contemplated hereby or thereby. The execution of this Agreement and
each of the Related Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in the creation of any lien,
claim, encumbrance, security interest, charge, pledge, or other restriction or
adverse claim of whatever nature (collectively, "Liens") against the Assets.
2.3 Financial Statements.
Attached hereto as Schedule 2.3 are true, complete and correct copies
of (i) the unaudited balance sheet (the "Balance Sheet") of the Business as of
September 30, 2004 (the "Balance Sheet Date") and the related statements of
income and cash flows (or the equivalent) for the period then ended and (ii) the
unaudited balance sheets of the Business as of December 31, 2003 and the related
statement of income and cash flows (or the equivalent) for the fiscal year then
ended ((i) and (ii) together, the "Financial Statements"). Each of the Financial
Statements (including in all cases the notes thereto, if any) has been based
upon the information contained in Seller's books and records (which books and
records are correct and complete), is accurate and complete and presents fairly
the financial condition, results of operations and changes in cash flows of the
Business as of the times and for the periods referred to therein, and such
Financial Statements (including all reserves included therein) have been
prepared in accordance with generally accepted accounting principles ("GAAP"),
consistently applied, except for the absence of footnotes and subject to
customary year end adjustment.
2.4 Events Subsequent to September 30, 2004
Since the Balance Sheet Date, except as set forth on Schedule 2.4,
there has been no:
(a) damage, destruction or loss, whether covered by insurance or
not, affecting the Assets;
(b) transaction entered into or carried out by Seller or
Shareholder with respect to the Business other than in the ordinary course of
the business;
(c) grant of any Lien with respect to the Assets;
(d) transfer of any assets of the Business which might have
become Assets other than arm's-length sales, leases, or dispositions in the
ordinary course of the business; and
(e) modification of any contract included in the Customer
Agreements or Unfulfilled Orders or any term thereof.
2.5 Necessary Property and Transfer of Assets.
Except as set forth on Schedule 2.5, the Assets and the Assumed
Liabilities constitute all property and property rights now used or necessary
for the conduct of the Business in the manner and to the extent presently
conducted or planned by the Seller. There exists no condition, restriction or
reservation affecting the title to or utility of the Assets or the Assumed
Liabilities which would prevent Buyer from utilizing the Assets, or any part
thereof, to the same extent that Seller might continue to do so if the sale and
transfer contemplated hereby did not take place. Upon the execution of this
Agreement and delivery of Related Agreements, good and marketable title to the
Assets and the rights under the Assumed Liabilities shall be vested in Buyer
free and clear of all Liens.
2.6 No Breach of Law or Governing Document; Licenses and Permits.
Seller has complied with and Seller is not in default under or in
violation of any applicable statute, law, ordinance, decree, order, rule, or
regulation of any Government (as defined below) ("Law") with respect to its
operations of the Business or the Assets, or the provisions of any license with
respect to the Business or the Assets, or in default under or in violation of
any provision of its respective constituent documents. Seller holds all licenses
or permits required to conduct the Business as presently conducted and to
operate the Assets, and each such license or permit is valid, in full force and
effect, and listed on Schedule 2.6. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby do or will constitute
or result in a default under or violation of any such permit or license.
2.7 Contracts and Commitments.
Attached hereto as Schedules 1.1(a), 1.1(b) or attached to Exhibit A
and Exhibit B are true, correct and complete copies of each Customer Agreement
and Unfulfilled Order included in the Assets or Unfulfilled Orders
(collectively, the "Contracts"). Each Contract is a valid and binding obligation
of Seller and the other parties thereto in accordance with its terms and
conditions. Neither the Seller, nor, to Seller's knowledge, any other party to a
Contract is in material default under or in violation of any Contract, and there
are no material disputes with regard to any Contract. No event has occurred
which, with the passage of time or the giving of notice, or both, would
constitute, and none of the execution of this Agreement, the Related Agreements
or the consummation of the transactions contemplated hereby do or will
constitute or result in, a default under or a violation of any Contract by
Seller, nor to Seller's knowledge, by any other party to any Contract, or would
cause the acceleration of any obligation or the creation of a Lien upon any
Asset. None of the Contracts has been modified, supplemented, addended or
amended in any respect, except as reflected in the copy of such Contract
attached hereto, and such Contract represents the sole contract, agreement or
obligation of Seller or Shareholder with respect to such party. Each Contract
will be duly assigned to Buyer on the execution hereof and upon such assignment,
Buyer will acquire all right, title and interest of the Seller in and to such
Contract and will be substituted for Seller under the terms of such Contract.
Except as set forth in Schedule 2.7, no consent or waiver is required for
assignment of Customer Contracts.
2.8 Undisclosed Liabilities.
In connection with the Business, other than as incurred in the
ordinary course of business consistent with past practice, Seller does not have
any liabilities or obligations whether accrued, absolute, contingent,
unliquidated or otherwise and to Seller's knowledge, there is no basis for any
such liability or obligation or any claim in respect thereof. All liabilities
and obligations other than the Assumed Liabilities, shall remain the Seller's
liabilities and obligations from and after the execution of this Agreement and
the consummation of the transactions contemplated hereby.
2.9 Taxes.
(a) All tax returns ("Returns") required to be filed by Seller on
or prior to the execution hereof with respect to Taxes (as defined below) have
been or will be timely filed and all such Returns are correct and complete.
(b) All amounts shown on each of such Returns have been paid or
will be paid when due.
(c) Seller is not aware of any grounds for the assertion or
assessment of any Taxes against Seller, the Assets or the Business other than
those reflected or reserved against on the Balance Sheet.
(d) Neither the Assets nor the Business are and neither will be
encumbered by any Liens arising out of any unpaid Taxes and Seller is not aware
of any grounds for the assertion or assessment of any Liens against the Assets
or the Business in respect of any Taxes.
(e) The transactions contemplated by this Agreement will not give
rise to (i) the creation of any Liens against the Assets or the Business in
respect of any Taxes or (ii) the assertion of any additional Taxes against the
Assets or the Business.
(f) There is no action or proceeding or unresolved claim for
assessment or collection, pending or threatened, by, or present or expected
dispute with, any Government (as hereinafter defined) authority for assessment
or collection from Seller of any Taxes of any nature affecting the Assets or the
Business.
(g) There is no extension or waiver of the period for assertion
of any Taxes against the Seller affecting the Assets or the Business.
(h) Seller and Shareholder have complied with all Laws relating
to the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Section 1441 and 1442 of the Code, or
similar provision under foreign laws), and have timely and properly withheld
from employee wages and paid over to the proper Government all amounts required
to withhold and be paid over under applicable Law.
(i) As used in this Agreement, "Taxes" means all taxes, charges,
fees, levies, or other like assessments, including without limitation income,
gross receipts, ad valorem, value added, premium, excise, real property,
personal property, windfall profit, sales, use, transfer, license, withholding,
employment, payroll, and franchise taxes imposed by: the United States or any
foreign nation or bilateral or multilateral governmental authority, or any state
or local governmental unit or subdivision thereof, or any branch, agency, or
judicial body thereof ("Government"); and shall include any interest, fines,
penalties, assessments, or additions to tax resulting from, attributable to, or
incurred in connection with any such Taxes or any contest or dispute thereof.
2.10 Litigation and Arbitration.
(a) Except as set forth on Schedule 2.10, there is no suit,
claim, action or proceeding against Seller or relating to the Business now
pending or, to the best knowledge of Seller, threatened before any court, grand
jury, administrative or regulatory body, Government agency, arbitration or
mediation panel or similar body to which Seller is a party or which may result
in any judgment, order, decree, liability, award or other determination which
will or may reasonably be expected to have an adverse effect upon any of the
Seller, the Assets, the Assumed Liabilities or the Business. No such judgment,
order, decree or award has been entered or is pending against Seller nor to
Seller's knowledge has any liability been incurred which has, or may reasonably
be expected to have, such effect.
2.11 Affiliate Transactions.
Except as set forth on Schedule 2.11, no director, officer, employee
or affiliate of Seller or Shareholder or any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
individual or entity owns any beneficial interest, is a party to any agreement,
contract, commitment or other form of transaction or arrangement with either
Seller or Shareholder in connection with the Business or has any interest in any
property used by or in connection with the Business.
2.12 Brokers, Finders.
Seller has not retained any broker, finder or agent or agreed to pay
any brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this Agreement.
2.13 Full Disclosure.
No representation or warranty of Seller or Shareholder herein and no
statement, information or certificate furnished or to be furnished by Seller
pursuant hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
herein or therein misleading.
ARTICLE III
COVENANTS OF SELLER
Seller covenants and agrees that from and after the date of this
Agreement:
3.1 Tax Matters.
(a) Seller shall pay all applicable tax determinations that are
based on transactions relating to the Business dated before the date of this
Agreement.
(b) Seller agrees to furnish or cause to be furnished, upon
request, as promptly as practicable, such information and assistance (including
access to books and records)
relating to the Assets as is reasonably necessary for the preparation of any
return for Taxes, claims for refund or audit or prosecution or defense of any
claim, suit or proceeding relating to any proposed adjustment of Taxes paid.
(c) Seller shall provide or obtain from any taxing authority any
certificate or other document necessary to mitigate, reduce or eliminate any
Taxes (including additions thereto or interest and penalties thereon) that
otherwise would be imposed with respect to the transactions contemplated in this
Agreement.
3.2 Referral of Callers. Seller hereby covenants and agrees that for
all callers seeking to purchase from Seller medical supplies (other than those
medical supplies permitted to be sold pursuant to the Retained Business), Seller
shall refer the caller to Buyer and, for a period of sixty (60) days following
the execution hereof, Seller, at Buyer's expense, will maintain its current
telephone number(s) for the Business, will cause such purchase order to be
processed in such manner as Buyer may request. Seller shall also cooperate with
Buyer in forwarding such telephone numbers (other than the 800 number of Seller)
to Buyer as Buyer may reasonably request but no sooner than one hundred twenty
(120) days from the date hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
In order to induce Seller to sell the Assets, Buyer makes the
following representations and warranties, each of which representations and
warranties is true and correct on the date hereof and will be true and correct
on the date of consummation of the transactions contemplated hereby.
4.1 Corporate Authority. With respect to Buyer and its business, Buyer
represents and warrants, in particular, that:
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota.
(b) Buyer has all necessary power and authority to enter into
this Agreement and each of the Related Agreements to which it is a party, to
execute and deliver the documents and instruments required of Buyer herein, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder.
(c) Buyer is duly authorized to execute, deliver and perform this
Agreement and all documents and instruments and transactions contemplated hereby
or incidental hereto. The execution, delivery and performance by Buyer of this
Agreement and each of the Related Agreements has been duly authorized by all
requisite corporate action, and all required approvals of the directors and
shareholders of Buyer, as the case may be, in connection therewith have been
received. Each of this Agreement and the Related Agreements constitutes the
valid and binding obligation of Buyer and is enforceable against Buyer in
accordance with its respective terms.
4.2 Commissions. Buyer has dealt with no broker, finder or any other
person, in connection with the purchase of or the negotiation of the purchase of
the Assets that might give rise to any claim for commission against Seller or
any lien against the Assets.
ARTICLE V
COVENANT NOT TO COMPETE
In consideration of the consummation of the transactions contemplated
hereby:
Seller and Shareholder agree that they shall not:
(a) directly or indirectly through any affiliate or other entity, as a
principal, employee, partner, agent or otherwise, compete, assist in or provide
financial resources to any activity which competes with the Business as
presently conducted by Seller or as presently conducted by Buyer other than the
Retained Business, for a period of five (5) consecutive years from the date of
this Agreement (the "Restrictive Period") anywhere in the United States;
provided, however, that the running of such time period shall be tolled during
any period of time during which Seller or Shareholder violates this Article V;
(ii) use or disclose to anyone except authorized personnel of Buyer,
whether or not for its benefit or otherwise, any confidential matters concerning
the Business as conducted by Buyer (or conducted by Seller prior to the date of
this Agreement), including, without limitation, secrets, customer lists and
credit records, employee data, sales representatives and their territories,
mailing lists, consultancy arrangements, pricing policies, operational methods,
marketing plans or strategies, product development and techniques or plans,
research and development programs and plans, business acquisition plans, new
personnel acquisition plans, designs and design projects and any other research
or business information concerning the Business which either Seller or Buyer
currently deems to be confidential (whether or not a trade secret under
applicable law), except to the extent such information or material becomes
publicly known through no fault of either Seller or Shareholder (or their
respective directors, officers, managers, members, agents or employees); and
(iii) directly or indirectly during the Restrictive Period solicit,
encourage to leave employment, or hire any employee of the Buyer or any person,
who at the time of hire by Seller or any affiliate of Seller had been an
employee of the Buyer within the previous 12 months and who had been involved in
Buyer's medical surgical supply business or induce or attempt to induce, or
assist anyone else to induce or attempt to induce, any Customer to reduce or
discontinue its business with Buyer or disclose to anyone else the name and/or
requirements of any such Customer; provided however, nothing in this subsection
shall prohibit Seller or its affiliates from hiring any such individuals who
respond to general solicitations for employment not specifically directed at
them.
(b) Notwithstanding the foregoing of this Article V, Seller and
Shareholder may participate in the Retained Business.
(c) Seller and Shareholder acknowledge that the foregoing restrictions
are reasonable and agree that in the event of any breach thereof the harm to
Buyer will be irreparable and without adequate remedy at law, and therefore that
injunctive relief with respect thereto will be appropriate. In the event that a
court of competent jurisdiction determines, in an action brought by or on behalf
of Buyer, that any of the foregoing provisions are unenforceable as stated, the
parties intend that such restrictions be modified to permit the maximum
enforceable restriction on Seller's and Shareholder's competition with the
Business.
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations and Warranties.
All representations and warranties of the parties made in this
Agreement, the Related Agreements or in any Exhibit, statement, Schedule,
certificate, instrument or any document delivered pursuant hereto shall survive
for two years following the consummation of the transactions contemplated
hereby. All representations and warranties hereunder shall be deemed to be
material and relied upon by the parties with or to whom the same were made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties.
6.2 Indemnification of Buyer.
Each of Seller and Shareholder shall jointly and severally hold Buyer,
and its respective affiliates and the shareholders, directors, officers,
partners, successors, assigns, and agents of each of them (the "Buyer
Indemnified Persons"), harmless and indemnify Buyer from and against any and all
claims, losses, damages, liabilities, penalties, fines, expenses or costs
("Losses"), plus reasonable attorneys' fees and expenses incurred in connection
with Losses and/or enforcement of this Agreement (in all, "Indemnified Losses"),
incurred by any Buyer Indemnified Person resulting from or arising out of:
(a) any breach or violation of Seller's or Shareholder's
representations, warranties, covenants, or agreements contained in this
Agreement or in any documents delivered pursuant hereto;
(b) the assertion against any Buyer Indemnified Person of any
liability or obligation of Seller, Shareholder or any of their affiliates other
than the Assumed Liabilities;
(c) the assertion of any claim relating to the liability of
Seller, Shareholder or any of its affiliates for their own Taxes or their
liability, if any, for Taxes of others (for example, by reason of transferee
liability or application of Treas. Reg. Section 1.1502-6);
(d) the assertion of any claim for Taxes claimed or assessed
against Buyer or the Assets for any taxable period ending on or before the
consummation of the transactions contemplated hereby and the execution hereof,
including any Losses sustained in a tax period of Buyer ending after the
consummation of the transactions contemplated hereby
arising out of the settlement or other resolution of a proposed tax adjustment
which relates to a tax period ending on or before the consummation of the
transactions contemplated hereby;
(e) the assertion of any claim for personal injury, death,
property or economic damage, or other product or strict liability claim arising
from the sale or other distribution of any product by Seller, or the provision
of any service by Seller, prior to the consummation of the transactions
contemplated hereby; or
(f) the assertion of any claim, liability or obligation arising
out of circumstances or occurrences or operations of Seller or the Business
prior to the consummation of the transactions contemplated hereby.
6.3 Indemnification of Seller and Shareholder.
Buyer shall hold Seller and Shareholder and their respective
affiliates and the shareholders, directors, officers, partners, successors,
assigns, and agents of each of them (the "Seller Indemnified Persons") harmless
and indemnify each of them from and against any and all Indemnified Losses
incurred or to be incurred by any Seller Indemnified Person resulting from or
arising out of:
(a) any breach or violation of Buyer's representations,
warranties, covenants and agreements contained in this Agreement; or
(c) the use of the Assets in the business and operations of Buyer
after the execution hereof, except in each case to the extent Buyer is entitled
to be indemnified pursuant to Section 6.2 hereof with respect to the facts and
circumstances giving rise to such Seller Indemnified Person's claim.
6.4 Notice of Claim.
In the event that a party seeks indemnification hereunder such party
(the "Indemnified Party") shall give written notice to the indemnifying party
(the "Indemnifying Party") specifying the facts constituting the basis for such
claim and the amount, to the extent known, of the claim asserted. Subject to the
terms hereof, the Indemnifying Party shall pay the amount of any valid claim not
more than ten calendar days after the Indemnified Party provides notice to the
Indemnifying Party of such amount. If the Indemnifying Party disputes the
validity or amount of any such claim, the Indemnifying Party shall so notify the
Indemnified Party in writing within ten calendar days after the Indemnified
Party provides notice to the Indemnifying Party of such claim, specifying in
reasonable detail the points of disagreement. Upon receipt of such notice of
dispute, the Indemnified Party shall promptly consult with the Indemnifying
Party with respect to such points of disagreement in an effort to resolve the
dispute. If any such dispute cannot be resolved by the Indemnified Party and
Indemnifying Party within 30 calendar days after the Indemnified Party receives
the notice of dispute, then either of such parties can xxx the other party in a
court of competent jurisdiction.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Binding Agreement. This Agreement shall be binding on and shall
inure to the benefit of the parties named herein and to their respective heirs,
administrators, executors, personal representatives, successors and assigns.
7.2 Assignment. Neither party may assign its rights, obligations or
interests hereunder without the prior written consent of the other party.
7.3 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered personally or sent by registered or certified
mail, postage pre-paid, and addressed as set forth below:
(a) If to Seller:
McKesson Medical-Surgical Minnesota Supply Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: President
With a copy to:
McKesson Medical-Surgical Minnesota Supply Inc.
0000 00xx Xxxxxx Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxx 00000
Attn: Legal Department
(b) If to Buyer:
Advocat Distribution Services, Inc.
000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. Council
With a copy to:
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Any party may change the address to which notices are to be addressed
by giving the other parties notice in the manner herein set forth.
7.4 Nature of Representations, Warranties, Covenants and Agreements.
Each and every representation and warranty and covenant and agreement made by
the parties and contained in this Agreement or in any instrument, certificate or
other document delivered pursuant to this Agreement and shall be binding upon
and inure to the benefit of the parties hereto and their respective personal
representatives, successors and assigns.
7.5 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of Minnesota.
7.6 Entire Agreement. This Agreement, together with all the Exhibits
and Schedules attached hereto and incorporated by reference herein, constitutes
the entire undertaking between the parties hereto, and supersedes any and all
prior agreements, arrangements and understandings between the parties.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
7.8 Captions. The captions of this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
7.9 Severability. Should any one or more of the provisions of this
Agreement be determined to be invalid, unlawful or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
7.10 Bulk Sales. Seller agrees to indemnify, defend and hold harmless
Buyer from any and all loss, cost or expenses resulting from the assertion of
claims made against the Assets sold hereunder or against Buyer by creditors of
Seller under any bulk sales law with respect to liabilities and obligations of
Seller not assumed by Buyer hereunder, such indemnity to be in accordance with
the provisions of Article VI.
7.11 Confidentiality.
No party to this Agreement shall make any announcement or other
disclosure of the terms hereof or the transactions contemplated hereby (except
disclosure to their respective professional advisors) without the mutual written
consent of Seller, Shareholder and the Buyer, except as required by Law.
7.12 Further Assurances.
From time to time after the date hereof, the Parties shall, at their
own expense, execute and deliver, or cause to be executed and delivered, all
such other instruments, including instruments of conveyance, assignment and
transfer and to make all filings with and to obtain all consents, approvals or
authorizations of any Governmental or regulatory authority or any other person
under any permit and take all such other actions as such Party may reasonably be
requested to take by another Party to this Agreement, consistent with the terms
of this
Agreement, in order to effectuate better the provisions and purposes of this
Agreement and the transactions contemplated by this Agreement.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MCKESSON MEDICAL SURGICAL MINNESOTA
SUPPLY INC. a Minnesota corporation
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
ADVOCAT DISTRIBUTION SERVICES, INC.,
a Tennessee corporation
By: /s/ Xxxxxxx X. Council III
------------------------------------
DIVERSICARE MANAGEMENT SERVICES, INC.,
a Tennessee corporation
By: /s/ Xxxxxxx X. Council III
------------------------------------
