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ASSET PURCHASE AGREEMENT
AMONG
EVOCARE, INC.
AND
EVOCARE HOME HEALTH CARE SERVICES, INC.
AS SELLERS,
XXXXXXX XXXXX
XXXXXXX X. XXXXXXXX
XXXXX XXXXXXXX
AS SHAREHOLDERS,
AND
AMERICAN HOMEPATIENT, INC.
AS BUYER
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TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE.....................................................................................1
1.1 Purchase and Sale...............................................................................1
1.2 Excluded Assets.................................................................................3
1.3 Assumed Contracts, Leases and Liabilities.......................................................3
1.4 Collection of Receivables.......................................................................4
1.5 Closing.........................................................................................4
ARTICLE II. PURCHASE PRICE.......................................................................................5
2.1 Purchase Price..................................................................................5
2.2 Interest on Purchase Price......................................................................5
2.3 Allocation of Purchase Price....................................................................5
2.4 Referrals.......................................................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS...........................................................6
3.1 Organization, Qualification and Authority.......................................................6
3.2 Absence of Default..............................................................................7
3.3 Financial Statements............................................................................7
3.4 Operations Since December 31, 1997 .............................................................8
3.5 Litigation......................................................................................9
3.6 Licenses........................................................................................9
3.7 Medicare, Medicaid and Other Third-Party Payors................................................10
3.8 Title to and Condition of Assets...............................................................11
3.9 Contracts......................................................................................12
3.10 Environmental Matters..........................................................................13
3.11 Miscellaneous Representations Relating to Real Estate..........................................14
3.12 Sellers' Employees.............................................................................15
3.13 Employee Benefit Plans.........................................................................16
3.14 Insurance......................................................................................18
3.15 Conflicts of Interest..........................................................................18
3.16 Compliance with Healthcare and Other Laws......................................................19
3.17 WARN Act.......................................................................................19
3.18 Tax Returns; Taxes.............................................................................19
3.19 No Omissions or Misstatements..................................................................20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................20
4.1 Organization, Qualification and Authority......................................................20
4.2 Absence of Default.............................................................................20
4.3 SEC Reports. ..................................................................................21
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ARTICLE V. COVENANTS OF PARTIES..................................................................................21
5.1 Preservation of Business and Assets............................................................21
5.2 Books and Records..............................................................................22
5.3 Preserve Accuracy of Representations and Warranties............................................23
5.4 Employees......................................................................................23
5.5 Broker's or Finder's Fee.......................................................................23
5.6 Indebtedness; Liens............................................................................23
5.7 Compliance with Laws and Regulatory Consents...................................................24
5.8 Maintain Insurance Coverage....................................................................24
5.9 Medicare and Medicaid Reporting................................................................24
5.10 Current Return Filing..........................................................................25
5.11 Financial Analysis.............................................................................25
5.12 Removal of Certain Conditions to Closing.......................................................25
5.13 Third Party Consent............................................................................25
5.14 Xxxx-Xxxxx-Xxxxxx Filing.......................................................................25
ARTICLE VI. SELLERS' AND SHAREHOLDERS' CONDITIONS TO CLOSE.......................................................26
6.1 Representations and Warranties True at Closing;
Compliance with Agreement......................................................................26
6.2 No Action/Proceeding...........................................................................26
6.3 Order Prohibiting Transaction..................................................................26
6.4 Exhibits.......................................................................................26
ARTICLE VII. BUYER'S CONDITIONS TO CLOSE.........................................................................27
7.1 Representations and Warranties True at Closing;
Compliance with Agreement......................................................................27
7.2 Regulatory Approvals...........................................................................27
7.3 No Action/Proceeding...........................................................................27
7.4 Inspection of Assets; U.C.C. Searches, etc.....................................................27
7.5 Order Prohibiting Transaction..................................................................27
7.6 Confidentiality and Non-Compete Agreements.....................................................28
7.7 Employment Agreements..........................................................................28
7.8 Approval of Board of Directors.................................................................28
7.9 Exhibits.......................................................................................28
ARTICLE VIII. OBLIGATIONS OF SELLERS AND SHAREHOLDERS
AT CLOSING...................................................................................28
8.1 Documents Relating to Title....................................................................28
8.2 Possession.....................................................................................29
8.3 Opinion of Counsel.............................................................................29
8.4 Corporate Good Standing and Corporate Resolutions..............................................29
8.5 Closing Certificate............................................................................29
8.6 Third Party Consents and Releases..............................................................29
8.7 Non-Foreign Tax Certificate; Power of Attorney.................................................29
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8.8 Insurance......................................................................................30
8.9 Confidentiality, Employment and Lease Agreements...............................................30
8.10 Closing Statement..............................................................................30
8.11 Additionally Requested Documents; Post-Closing Assistance......................................30
ARTICLE IX. OBLIGATIONS OF BUYER AT CLOSING......................................................................30
9.1 Purchase Price.................................................................................30
9.2 Assumption of Liabilities......................................................................30
9.3 Opinion of Buyer's Counsel.....................................................................30
9.4 Corporate Good Standing and Certified Board Resolutions........................................31
9.5 Closing Certificate............................................................................31
ARTICLE X. SURVIVAL OF PROVISIONS AND INDEMNIFICATION...........................................................31
10.1 Survival.......................................................................................31
10.2 Indemnification by Sellers and Shareholders....................................................31
10.3 Indemnification by Buyer.......................................................................32
10.4 Rules Regarding Indemnification................................................................32
ARTICLE XI. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS....................................................................34
11.1 Covenant Not to Compete........................................................................34
11.2 Enforceability.................................................................................35
ARTICLE XII. MISCELLANEOUS......................................................................................35
12.1 Assignment.....................................................................................35
12.2 Other Expenses.................................................................................35
12.3 Notices. ......................................................................................36
12.4 Confidentiality; Prohibition on Trading........................................................37
12.5 Partial Invalidity; Waiver.....................................................................37
12.6 Interpretation; Knowledge......................................................................37
12.7 Entire Agreement; Counterparts.................................................................37
12.8 Legal Fees and Costs...........................................................................38
12.9 Controlling Law................................................................................38
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into on February 27,
1998 by and among EVOCARE, INC., a Delaware corporation ("Evocare"), EVOCARE
HOME HEALTH SERVICES, INC., a Rhode Island corporation ("Home Health" and,
together with Evocare, collectively the "Sellers"), XXXXXXX XXXXX, a resident of
Massachusetts, and XXXXXXX X. XXXXXXXX, and XXXXX XXXXXXXX, residents of the
State of Rhode Island (collectively, "Shareholders"), and AMERICAN HOMEPATIENT,
INC., a Delaware corporation ("Buyer").
R E C I T A L S:
WHEREAS, Sellers own and operate a home health care business as more
particularly described on Exhibit A hereto, which Exhibit sets forth the type of
services and products provided by Sellers at each location (the "Business"); and
WHEREAS, Shareholders own all of the issued and outstanding securities
of Sellers; and
WHEREAS, except for the Excluded Assets (as such term is defined
herein), Sellers and Shareholders desire to sell and transfer the Assets (as
such term is defined herein) of the Business to Buyer, and Buyer desires to
purchase the same from Sellers, subject to the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE I. PURCHASE AND SALE
1.1 Purchase and Sale. Sellers agree to sell, transfer, assign, convey
and deliver to Buyer, and Buyer agrees to purchase from Sellers, all right,
title and interest in all assets (except the Excluded Assets) of Sellers of
every kind and type, tangible or intangible, real and personal, that are or have
been used to operate the Business, free and clear of all encumbrances,
mortgages, pledges, liens, security interests, obligations and liabilities other
than the Assumed Liabilities (as defined in paragraph 1.3), which assets will
include, without limitation, the following (collectively, the "Assets"):
(1) All right, title and interest in and to all of the real
property owned or leased by Sellers or Shareholders and used in connection with
the Business as listed in
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Exhibit 1.1(1) attached hereto and in and to all structures, improvements, fixed
assets and fixtures including fixed machinery and fixed equipment situated
thereon or forming a part thereof and all appurtenances, easements and
rights-of-way related thereto (collectively, the "Real Estate");
(2) All medical and other equipment, machinery, data
processing hardware and software, furniture, furnishings, appliances, vehicles
and other tangible personal property and all replacement parts therefor used in
connection with the Business including, without limitation, the items listed on
Exhibit 1.1(2) attached hereto (collectively, the "Equipment and Furnishings");
(3) All inventory of goods and supplies used or maintained in
connection with the Business (collectively, the "Inventory");
(4) All accounts and notes receivable (the "Receivables");
(5) All cash generated from operation of the Business on and
after the Effective Date, and all related bank accounts (as listed by name and
address of banking institution, account name and account and routing numbers on
Exhibit 1.1(5) attached hereto), money market accounts, other accounts,
certificates of deposit and other investments of Sellers (the "Cash and Cash
Equivalents");
(6) All patient, medical, personnel and other records related
to the Business (including both hard and microfiche copies), and all manuals,
books and records used in operating the Business, including, without limitation,
personnel policies and files and manuals, accounting records, and computer
software;
(7) To the full extent transferable, all federal, state and
local licenses, permits, registrations, certificates, consents, accreditations,
approvals and franchises necessary or advisable to operate and conduct the
Business (collectively, the "Licenses"), together with assignments thereof, if
required, and all waivers which Sellers currently have, if any, of any
requirements pertaining to the Licenses;
(8) All goodwill, and, to the extent assignable by Sellers,
all warranties (express or implied) and rights and claims related to the Assets
or the operation of the Business;
(9) Contract and leasehold rights and interests arising out of
or related to the Business and that are Assumed Liabilities; and
(10) All intangible or intellectual property owned, leased,
licensed or possessed by either Sellers or Shareholders and utilized in
connection with the Business,
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including without limitation, the names "Evocare, Inc.," "Evocare Home Health
Care Services, Inc." and derivatives thereof.
1.2 Excluded Assets. Sellers are not selling and Buyer is not
purchasing or assuming obligations with respect to the following (collectively,
the "Excluded Assets"): (a) Sellers' corporate and fiscal records and other
records that Sellers are required by law to retain in its possession; (b)
Sellers's cash and cash equivalents as of the day immediately prior to the
Effective Date (as defined herein); (c) those extraordinary notes receivable of
the Sellers existing as of the Effective Date set forth on Exhibit 1.2 attached
hereto; (d) all prepaid expenses and security deposits of the Sellers existing
as of the Effective Date set forth on Exhibit 1.2 attached hereto; and (e) any
tax refunds or insurance recoveries related to periods prior to the Effective
Date except to the extent any insurance recovery is related to an asset
reflected on the Interim Financial Statements.
1.3 Assumed Contracts, Leases and Liabilities.
(1) At Closing, Buyer will assume and agree to pay or perform,
as the case may be, only (a) Two Million Seven Hundred Fifty Thousand and No/100
Dollars ($2,750,000.00) of those obligations existing at February 1, 1998,
constituting working capital liabilities incurred in the ordinary course of
business which Buyer expressly elects to assume, as specifically set forth on
Exhibit 1.3(a) attached hereto, (b) those obligations constituting working
capital liabilities incurred in the ordinary course of business on and after the
Effective Date (as such term is defined in paragraph 1.5), including
indebtedness for borrowed money incurred to purchase Inventory in an amount not
to exceed that set forth on Exhibit 1.3(b) hereto, but excluding all other
long-term and interest bearing debt and other than obligations and costs
associated with the "Sellers Plans" described in paragraph 3.13, and (c) those
obligations arising on and after the Effective Date under those Contracts (as
such term is defined in paragraph 3.9) which Buyer expressly elects to assume
(collectively, the "Assumed Liabilities").
(2) Except for the Assumed Liabilities, it is expressly agreed
and understood by each of the parties to this Agreement that Buyer does not
assume, and will not be liable for, any debt, liability or obligation of Sellers
or Shareholders of any type or description whatsoever, whether related or
unrelated to the Assets, the Business or the transactions contemplated under
this Agreement and that Sellers and/or Shareholders will remain liable and
responsible for the payment or performance, as the case may be, of all debts,
liabilities, obligations, contracts, leases, notes payable, accounts payable,
commitments, agreements, suits, claims, indemnities, mortgages, taxes,
contingent liabilities and other obligations of Sellers and/or Shareholders
including, without limitation, any and all investment tax credit recapture,
depreciation recapture, recapture or prior period adjustments under Medicare,
Medicaid and Blue Cross, all impositions of income tax and other taxes; all
employee wages, salaries and benefits including, without limitation, COBRA and
WARN obligations, accrued vacation and sick pay not expressly assumed by
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Buyer pursuant to this paragraph, and other accrued employee benefits including
rights of Sellers' retirees to participate in Sellers' medical plans.
(3) Buyer will assume aggregate liabilities pursuant to clause
(a) of paragraph 1.3(1) of Two Million Seven Hundred Fifty Thousand and No/100
Dollars ($2,750,000.00) (the "Pre-Effective Date Assumed Liabilities Cap"). The
liabilities assumed pursuant to Clause (a) of Paragraph 1.3 (1) will consist
first of ordinary course working capital liabilities other than long term and
interest bearing debt and second of long term and interest bearing debt so that,
in the aggregate, such assumed liabilities do not exceed the Pre-Effective Date
Assumed Liabilities Cap. For purposes of calculating the amount of the Assumed
Liabilities, the present value of payments to be made on and after the Effective
Date with respect to any Assumed Liability that is a capitalized obligation
under generally accepted accounting principles will be considered part of the
amount of such Assumed Liabilities. In the event that Buyer elects to assume
Assumed Liabilities pursuant to paragraph 1.3(1)(a) in excess of the
Pre-Effective Date Assumed Liabilities Cap, then the cash portion of the
Purchase Price (as such term is defined herein) payable at Closing will be
reduced on a dollar-for-dollar basis to the full extent of such excess.
1.4 Collection of Receivables. At Closing, Sellers and Shareholders
will take all appropriate action necessary to vest in Buyer all right, title and
interest in the Receivables, and Buyer will proceed to collect the Receivables
following Closing. In the event that any Receivable cannot be transferred to
Buyer, then Sellers and Shareholders will collect the Receivable in compliance
with all applicable laws, as Buyer's agents for the limited purpose of such
collection, and will immediately deliver to Buyer the gross proceeds of such
collection. Sellers and Shareholders will also provide such additional
assistance in the collection process as Buyer may reasonably request. If, within
240 days following the Effective Date, Buyer has collected proceeds of
Receivables generated prior to the Effective Date in an aggregate amount less
than Three Million and No/100 Dollars ($3,000,000), (a) Sellers and, on a
several but not joint basis as more fully described in Article X, Shareholders
will pay to Buyer the amount of the shortfall (such amount shall be funded first
by offset against the Note (as defined herein)), and (b) Shareholders agree to
prepare, at Buyer's cost, revised historical financial statements reflecting the
impact of the less-than-anticipated collections. Buyer shall remit to Sellers
gross proceeds in excess of Three Million and No/100 Dollars ($3,000,000.00)
collected by Buyer with respect to Receivables created prior to the Effective
Date on a monthly basis for a period of two (2) years following the Effective
Date. Buyer agrees that during such two year period it will use commercially
reasonable efforts to collect such Receivables. If two (2) years following the
Effective Date both: (i) any such Receivables remain uncollected and (ii) either
$3,000,000.00 in proceeds of such Receivables have been collected by Buyer or
all Sellers and Shareholders have fully satisfied their obligations under
clauses (a) and (b) of this paragraph 1.4, then Buyer will assign back to
Sellers for no consideration all such uncollected Receivables related to periods
prior to the Effective Date.
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1.5 Closing. If all of the conditions to Closing set forth in Articles
VI and VII are satisfied, the parties will use good faith efforts to close the
contemplated transactions by March 31, 1998, at the offices of Xxxxxxx Xxxxxx
Xxxx Xxxxxxx & Manner, P.C., Nashville, Tennessee, or at such other time or
place as the parties may mutually agree (the "Closing"). Upon consummation,
Closing will be deemed to be effective, and the transfer of the Assets will be
deemed to have occurred, for accounting purposes as of 12:01 a.m. local time on
February 1, 1998 (the "Effective Date"). Accordingly, all income generated from
operation of the Business on and after the Effective Date will belong to Buyer,
and adjustments to reflect the distribution of income and liabilities with
respect to the Business as contemplated under this Agreement will be made in
accordance with the procedures outlined in Exhibit 1.5 attached hereto. If
Closing has not occurred by April 15, 1998, then any party not in default
hereunder may terminate this Agreement, with or without cause and without
further obligation, by so notifying the other party(ies) in writing.
ARTICLE II. PURCHASE PRICE
2.1 Purchase Price. The purchase price payable by Buyer to Sellers for
the Assets and in consideration for the agreements contained herein, including
the agreements contained in Article XI, will be Fourteen Million Seven Hundred
Fifty Thousand and No/100 Dollars ($14,750,000.00) (the "Purchase Price"). The
Purchase Price will be subject to adjustment as set forth in this Agreement and
will be payable at Closing in the following manner:
(1) Nine Million Five Hundred Thousand and No/100
Dollars($9,500,000.00), subject to the foregoing adjustments, in immediately
available funds by wire transfer at Closing;
(2) One Million and No/100 Dollars ($1,000,000.00) by a
purchase price note (the "Note"), the form of which is attached hereto as
Exhibit 2.1(2), subject to offset as provided in paragraph 1.3(1) to the extent
that less than Three Million Dollars of pre- Effective Date Receivable are
collected within the time period set forth in such paragraph, and subject to
offset to fund indemnification claims as provided in Article X; and
(3) Up to One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00) pursuant to an incentive based earn out, the terms of which are
contained in Exhibit 2.1(3) which is attached hereto.
(4) Assumption of the Assumed liabilities in the amount of Two
Million Seven Hundred Fifty Thousand and No/100 Dollars ($2,750,000).
2.2 Interest on Purchase Price. In addition to the Purchase Price
described in paragraph 2.1, Buyer will deliver to Sellers, in immediately
available funds by wire transfer
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at Closing, interest on that portion of the Purchase Price noted in paragraphs
2.1(1), and 2.1(2) at the rate of seven percent (7%) per annum for the Effective
Date until Closing.
2.3 Allocation of Purchase Price. The Purchase Price will be allocated
among the Assets in the manner set forth in Exhibit 2.3 attached hereto (the
"Allocation"). The parties to this Agreement expressly agree that the Allocation
will be used by them for tax, reimbursement and all other purposes. Each party
to this Agreement agrees that it will report the transaction completed under
this Agreement in accordance with the Allocation, including any report made
under Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that no such party will take a position inconsistent with the
Allocation except with the prior written consent of the other parties hereto.
2.4 Referrals. No part of the Purchase Price is a payment to the
Sellers or the Stockholders for the recommending or arranging for the referral
of business or the ordering of items or services offered by Buyer; nor are the
payments intended to induce referrals of business to Buyer. All parties hereto
acknowledge and agree that neither Sellers nor Stockholders have any obligation
(and there is no representation, implied or otherwise) to refer business to, or
otherwise utilize the services or facilities, of Buyer or any Affiliate of
Buyer.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereunder, each of the Sellers hereby
jointly and severally represents and warrants to Buyer, which representations
and warranties will be true and correct on the date hereof and as of the date of
Closing, as follows:
3.1 Organization, Qualification and Authority. Evocare and Home Health
are corporations duly organized and validly existing in the States of Delaware
and Rhode Island, respectively. Since the date of its organization and
incorporation, each Seller has consistently observed and operated within the
corporate formalities of the jurisdictions in which it is incorporated and/or
conducts its business, and has consistently observed and complied with the
general corporation law of such jurisdictions. Each Seller has full power and
authority to own, lease and operate its facilities and assets as presently
owned, leased and operated; to carry on its business as it is now being
conducted and is duly qualified to do business and is in good standing in each
of the jurisdictions where the Business is conducted. No person or entity owns
or holds, has any interest in, whether legal, equitable or beneficial, or has
the right to purchase, any capital stock or other security of Sellers other than
the Shareholders and those persons who hold the options described on Exhibit 3.1
hereto. Sellers own no capital stock, security, interest or other right, or any
option or warrant convertible into the same, of any corporation, partnership,
joint venture or other business enterprise. Sellers each have the full right,
power and authority to execute,
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deliver and carry out the terms of this Agreement and all documents and
agreements necessary to give effect to the provisions of this Agreement and to
consummate the transactions contemplated on the part of Sellers hereby.
Shareholders have the full right, power and authority to execute, deliver and
carry out the terms of this Agreement and all documents and agreements necessary
to give effect to the provisions of this Agreement, to consummate the
transactions contemplated on the part of Shareholders hereby, and to take all
actions necessary, in their capacity as the stockholders of Sellers, to permit
or approve the actions of Sellers taken in connection with this Agreement. The
execution, delivery and consummation of this Agreement, and all other agreements
and documents executed in connection herewith by Sellers, have been duly
authorized by all necessary action on the part of Sellers. Except for the third
party consents and waivers identified on Exhibit 3.1 hereto, no other action,
consent or approval on the part of Sellers, Shareholders or any other person or
entity is necessary to authorize due and valid execution, delivery and
consummation of this Agreement and all other agreements and documents executed
in connection herewith. This Agreement and all other agreements and documents
executed in connection herewith by Sellers and/or Shareholders, upon due
execution and delivery thereof, will constitute the valid and binding
obligations of each of Sellers and Shareholders, enforceable in accordance with
their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
3.2 Absence of Default. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by Sellers and/or Shareholders will not constitute a violation of, or
be in conflict with, will not, with or without the giving of notice or the
passage of time, or both, result in a breach of, constitute a default under,
create (or cause the acceleration of the maturity of) any debt, indenture,
obligation or liability affecting the Assets or the Business pursuant to, result
in the creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets, or otherwise adversely affect Buyer, Sellers
or Business under: (a) any term or provision of the Charter or Bylaws of
Sellers; (b) any contract, lease, purchase order, agreement, document,
instrument, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Sellers and/or Shareholders are a party or by which
Sellers and/or Shareholders or the Assets are bound; (c) any judgment, decree,
order, regulation or rule of any court or regulatory authority; or (d) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Sellers,
Shareholders and/or the Assets are subject.
3.3 Financial Statements.
(1) Attached hereto as Exhibit 3.3 are true and correct copies
of Sellers' combined, reviewed balance sheets as of December 31, 1997, and their
combined, reviewed income statements for the year then ending (the "Fiscal Year
Financial
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Statements"), and the combined interim unaudited balance sheets and income
statements of Sellers for the one (1) month period ended January 31, 1998 (the
"Interim Financial Statements" which, with the Fiscal Year Financial Statements,
will be referred to as the "Financial Statements"). The Financial Statements are
based on the books and records of Sellers and present fairly, in compliance with
generally accepted accounting principles, the financial position of Sellers as
of, and the results of its operations for, the periods specified, except for the
absence of footnotes otherwise required under generally accepted accounting
principles ("GAAP") and, in the case of the Interim Financial Statements, normal
year-end adjustments. Except as set forth in the Interim Financial Statements,
Sellers have, and as of Closing will have, no contingent liabilities or
obligations which are required to be disclosed therein in accordance with GAAP.
(2) The books and records of Sellers are in such order and
completeness so that, except as set forth on Exhibit 3.3(2) hereto, an
unqualified audit may be performed for any period prior to Closing not already
audited. Sellers and Shareholders will fully and readily cooperate with Buyer,
at Buyer's cost, in Buyer's attempt to perform an audit of the Sellers for any
period prior to Closing not already audited.
3.4 Operations Since December 31, 1997 . Except as set forth on Exhibit
3.4 hereto, since December 31, 1997, there has been no:
(1) material change in the condition, financial or otherwise,
which has had a material and adverse effect on the Business or in the results of
the operations of Sellers;
(2) loss, damage or destruction of or to any of the Assets,
whether or not covered by insurance;
(3) sale, lease, transfer or other disposition by Sellers of,
or mortgages or pledges of or the imposition of any lien, charge or encumbrance
on, any portion of the Assets, except inventory and equipment held for rent in
the ordinary course of business;
(4) increase in the compensation payable by Sellers to any
Shareholders, employees, directors, independent contractors or agents, or any
increase in, or institution of, any bonus, insurance, pension, profit-sharing or
other employee benefit plan or arrangements made to, for or with the employees,
directors, Shareholders or independent contractors of the Sellers;
(5) cumulative net operating loss incurred in the operation of
the Business, adjustment or write-off of Receivables or reduction in reserves
for Receivables, in each case outside of the ordinary course of business, or
change in the accounting methods or practices employed by Sellers or change in
depreciation or amortization policies;
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(6) issuance or sale by Sellers or Shareholders, or contract
or other commitment entered into by Sellers or Shareholders, for the issuance or
sale of any shares of capital stock or securities convertible into or
exchangeable for capital stock of Sellers, except upon exercise of outstanding
options;
(7) payment by Sellers of any dividend, distribution or
extraordinary or unusual disbursement or expenditure or intercompany payable;
(8) merger, consolidation or similar transaction involving the
Sellers;
(9) strike, work stoppage or other labor dispute adversely
affecting the Business; or
(10) termination, waiver or cancellation of any material
rights or claims of Sellers, under contract or otherwise.
Further, since the Effective Date, neither Shareholders nor any of
their family members or affiliates have received any compensation, benefits or
distributions from Sellers, whether as salary, bonus, fees, dividends or any
other form of compensation, which, in the case of Xxxxxxx and Xxxxx Xxxxxxxx, is
greater than the amount of compensation and benefits contemplated for each
pursuant to the agreements referenced in paragraph 7.7 except such amounts as
have been repaid and adjusted for at Closing, and except for distributions to
fund tax obligations as Shareholders of S corporations shown on Exhibit 3.4 that
will be repaid and adjusted for at Closing.
3.5 Litigation. Except as disclosed in Exhibit 3.5 attached hereto, no
person or party (including, without limitation, any governmental agency) has
asserted, or to the best knowledge of Sellers or Shareholders has threatened to
assert, any claim for any action or proceeding, against Sellers (or any officer,
director, employee, agent or shareholders of Sellers in their capacity as such)
arising out of any statute, ordinance or regulation relating to wages,
collective bargaining, discrimination in employment or employment practices or
occupational safety and health standards (including, without limitation, the
Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, as amended,
the Occupational Safety and Health Act, the Age Discrimination in Employment Act
of 1967, the Americans with Disabilities Act or the Family and Medical Leave Act
of 1993). Neither of the Sellers nor any Shareholder have received notice of any
violation of any law, rule, regulation, ordinance or order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, legislation
and regulations applicable to the Medicare and Medicaid programs, environmental
protection, civil rights, public health and safety and occupational health).
Except as set forth in Exhibit 3.5, there are no lawsuits, proceedings, actions,
arbitrations, governmental investigations, claims, inquiries or proceedings
pending or, to the best knowledge of Sellers and Shareholders, threatened
involving Sellers, any
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Shareholder in his or her capacity as such, any of the Assets or the Business.
The claims disclosed in Exhibit 3.5 will not result in any liability to or
obligation of Buyer, and will not cause or lead to any lien or encumbrance being
placed, created or filed against or upon any of the Assets.
3.6 Licenses.
(1) Sellers have all Licenses necessary to occupy, operate and
conduct the Business, and no waivers or exemptions exist relating thereto. There
is no default on the part of either of the Sellers or any other party under any
of the Licenses, and there exist no grounds for revocation, suspension or
limitation of any of the Licenses. Copies of each of the Licenses are attached
to and listed on Exhibit 3.6(1) attached hereto. The most recent licensure
surveys, deficiency reports and plans of correction related to each of these
items has also been included in Exhibit 3.6(1). Sellers are, and at the time of
Closing will be, licensed by the regulatory bodies listed on Exhibit 3.6(1). No
notices have been received by Sellers or Shareholders with respect to any
threatened, pending, or possible revocation, termination, suspension or
limitation of the Licenses.
(2) Sellers have all certificates of need, certificates of
exemption or non- review letters (collectively referred to as "CON's") necessary
to operate the Business as it has been historically and currently conducted.
Copies of all implemented and unimplemented CON's issued to Sellers in the past
five (5) years have been previously provided to Buyer. Sellers are in compliance
with the terms of all current CON's.
(3) Each employee of Sellers has all Licenses required for
each such employee to perform such employees' designated functions and duties
for Sellers in connection with conducting the Business, and no waivers or
exemptions exist relating thereto. There is no default under, nor does there
exist any grounds for revocation, suspension or limitation of, any such
Licenses.
(4) Sellers' infusion services businesses are accredited by
the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO") to
operate and conduct the Business. Included in Exhibit 3.6(4) attached hereto are
the certificates of accreditation issued by the JCAHO, and copies of the most
recent JCAHO accreditation survey report, including a list of deficiencies, if
any.
3.7 Medicare, Medicaid and Other Third-Party Payors.
(1) Sellers participate in the Medicare and Medicaid Programs
(the "Programs"). A list of and copies of its existing Medicare and Medicaid
contracts or, if such contracts do not exist, other documentation evidencing
such participation (collectively, the "Program Agreements") are included in
Exhibit 3.9 attached hereto. Sellers are, and will
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be at the time of Closing, in full compliance with all of the terms, conditions
and provisions of the Program Agreements.
(2) No notice of any offsets against future reimbursements
under or pursuant to the Programs has been received by either Sellers or
Shareholders, nor to their knowledge is there any basis therefor. There are no
pending appeals, adjustments, challenges, audits, litigation, notices of intent
to recoup past or present reimbursements with respect to the Programs. Sellers
have not been subject to or threatened with loss of waiver of liability for
utilization review denials with respect to the Programs during the past twelve
(12) months, nor have either Sellers or Shareholders received notice of any
pending, threatened or possible decertification or other loss of participation
in, any of the Programs.
(3) Sellers currently have contractual arrangements with Blue
Cross and other third party payors. A list of and copies of its existing Blue
Cross contracts and other third party payor contract(s) are included in Exhibit
3.9. Sellers are, and will be at the time of Closing, in full compliance with
all of the material terms, conditions and provisions of such contracts.
(4) All liabilities and contractual adjustments of Sellers
under any third party payor or reimbursement programs have been properly
reflected and adequately reserved for in the Financial Statements. If, following
Closing, Buyer suffers any offsets against any reimbursement under any
third-party payor or reimbursement programs due to Buyer relating to the periods
on or prior to Closing, relating to amounts owing under any such programs by
Sellers, then Sellers will immediately pay to Buyer the amounts so offset, with
interest at a rate equal to six percent (6%) per annum; provided, however that
Buyer will bear the risk of offset as to operations from the Effective Date
through Closing so long as such offsets are not caused by the willful acts or
omissions, or gross negligence, of Shareholders, Sellers and/or its employees,
representatives or agents. The interest will accrue from the date of offset by
the third party until the date paid by Sellers to Buyer.
3.8 Title to and Condition of Assets.
(1) One of the Sellers is the sole legal and beneficial owner
of, or has the exclusive, unrestricted right and authority to use and transfer
to Buyer, the personal property included in the Assets, free and clear of all
mortgages, security interests, liens, leases, covenants, assessments, easements,
options, rights of refusal, restrictions, reservations, defects in the title,
encroachments, and other encumbrances, except the Assumed Liabilities, and
except for liens which will be discharged at Closing. The Assets are all the
assets set forth on the Interim Financial Statements or used in the operation of
the Business.
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(2) The descriptions of the Real Estate contained in Exhibit
1.1(1) are accurate and include all real property leased or owned by Sellers or
Shareholders and used in connection with the Business or set forth on the
Interim Financial Statements. Neither of the Sellers owns any real property.
Sellers are in lawful possession of all of the Real Estate that is leased rather
than owned, in each case free and clear of all mortgages, liens and other
encumbrances or restrictions that are related to or impair the Assets or the
Business. Additionally, Sellers have the right and authority to transfer and
convey the leased Real Estate to Buyer as contemplated by the terms of this
Agreement, and such transfer and conveyance, once effected as contemplated
hereunder, will vest in the Buyer the lawful right to possess and use the leased
Real Estate, superior in right to all others.
(3) The Equipment and Furnishings are all of the "Equipment"
reflected on the Interim Financial Statements, other than those items sold and
replaced in the ordinary course of business. The Assets, together with the
Excluded Assets, comprise all assets owned by Sellers and all assets used in
connection with the Business. All components of all of the Equipment and
Furnishings (a) operate in accordance with their respective specifications, (b)
perform the functions they are supposed to perform, (c) are free of structural,
installation, engineering, or mechanical defects or problems, and (d) are
otherwise in good working order, normal wear and tear excepted. Neither of the
Sellers has received no written recommendation from any insurer to repair or
replace any of the Assets with which Sellers has not complied.
(4) The Inventory is, and on Closing will be, of a quality and
quantity presently used by Sellers in the ordinary course of business determined
and valued consistent with Sellers' past practice. The Inventory is, and at
Closing will be, properly valued at the lower of cost or market value on a
first-in/first-out basis in accordance with generally accepted accounting
principles consistently applied. Seller has in place adequate controls to track
all Inventory and, along with Shareholders pursuant to the terms of Article X,
will indemnify Buyer for any missing infusion pumps or other Inventory which, in
the aggregate, would cost Ten Thousand Dollars ($10,000.00) or more to replace.
Since the date of the Interim Financial Statements, neither of the Sellers has
decreased or substituted its items of Inventory other than in the ordinary
course of business.
(5) All vehicles used in the Business, whether owned or
leased, are listed in Exhibit 1.1(2) attached hereto, are properly licensed, and
are registered in accordance with applicable law.
(6) All trademarks, service marks, trade names, patents,
inventions, processes, copyrights and applications therefor, whether registered
or at common law (collectively, the "Intellectual Property"), owned by Sellers
are listed and described in Exhibit 3.8 attached hereto. No proceedings have
been instituted or are pending or, to the best knowledge of Sellers and
Shareholders, threatened which challenge the validity of the ownership by
Sellers of any such Intellectual Property. Neither of the Sellers has licensed
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anyone to use any such Intellectual Property, and neither Sellers nor
Shareholders have any knowledge of the use or the infringement of any of such
Intellectual Property by any other person. Each of the Sellers owns or possesses
adequate and enforceable licenses or other rights to use all Intellectual
Property now used in the conduct of its Business.
3.9 Contracts.
(1) Exhibit 3.9 attached hereto sets forth a complete and
accurate list of all contracts, including the Program Agreements, agreements,
purchase orders, leases, subleases, options and commitments, oral or written,
and all assignments, amendments, schedules, exhibits and appendices thereof,
affecting or relating to the Business or any Asset or any interest therein, to
which either Sellers and/or Shareholders are a party or by which Sellers, the
Assets or the Business is bound or affected (collectively, the "Contracts").
Accurate and complete copies of all written Contracts and written summaries of
key terms of all oral Contracts have been previously delivered to Buyer. Except
for the Assumed Liabilities, all Contracts and all other obligations and
liabilities relating to the Assets and the Business will be retained by Sellers.
(2) None of the Contracts has been modified, amended, assigned
or transferred and each is in full force and effect and is valid, binding and
enforceable in accordance with its respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity. No event or
condition has happened or presently exists which constitutes a default or breach
or, after notice or lapse of time or both, would constitute a default or breach
by any party under any of the Contracts. There are no counterclaims or offsets
under any of the Contracts.
(3) There does not exist any security interest, lien,
encumbrance or claim of others created or suffered to exist on any interest
created under any of the Contracts, except for those that result from or relate
to leased Assets. No purchase commitment by Sellers is in excess of Sellers'
ordinary business requirements.
(4) Following receipt of the consents and waivers identified
on Exhibit 3.9, assignment to Buyer of those Contracts constituting part of the
Assumed Liabilities will not default, alter or terminate any such Contracts, and
such assignment will confer and convey all of Sellers' rights thereunder to
Buyer.
3.10 Environmental Matters.
(1) Hazardous Substances. As used in this paragraph 3.10, the
term "Hazardous Substances" means any hazardous or toxic substances, materials
or wastes, including but not limited to those substances, materials, and wastes
defined in Section 101 of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980,
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as amended ("CERCLA"), listed in the United States Department of Transportation
Table (49 CFR 172.101) or by the Environmental Protection Agency as hazardous
substances pursuant to 40 CFR Part 302, or which are regulated under any other
Environmental Law (as such term is defined below), and any of the following:
hydrocarbons, petroleum and petroleum products, asbestos, polychlorinated
biphenyls, formaldehyde, radioactive substances (other than naturally occurring
materials in place), flammable and explosives.
(2) Compliance with Laws and Regulations. All operations or
activities on, and any use or occupancy of, the Real Estate by Sellers, any
Affiliates of Sellers (wherein the term "Affiliates" will mean any person or
entity controlling, controlled by or under common control at any time with
Sellers, and the term "control" will mean the power, directly or indirectly, to
direct the management or policies of such person or entity), and any agent,
contractor or employee of any agent or contractor of Sellers or its Affiliates
("Agents"), or any tenant or subtenant of Sellers is and has been in compliance
with any and all laws, licenses, permits, regulations, orders, codes, judicial
decisions, decrees and other applicable requirements of governmental authorities
with respect to Hazardous Substances, pollution or protection of human health
and safety (collectively, "Environmental Law"), including but not limited to the
release, emission, discharge, storage and removal of Hazardous Substances.
Sellers, Affiliates and Agents have kept the Real Estate free of any lien
imposed pursuant to Environmental Law. Except for uses and storage or presence
of Hazardous Substances reasonably necessary or incidental to the customary
operation of a business similar to the Business, as appropriate which, if
required, was duly licensed or authorized by appropriate governmental
authorities or otherwise permitted by and complies with Environmental Law:
(a) Neither Sellers nor their Affiliates or Agents
have allowed the use, generation, treatment, handling, manufacture, voluntary
transmission or storage of any Hazardous Substances on the Real Estate (except
in compliance with applicable law) nor, to the best knowledge of Sellers or
Shareholders, has the Real Estate ever been used for any of the foregoing.
(b) Neither of the Sellers nor their Affiliates or
Agents have installed on the Real Estate friable asbestos or any substance
containing asbestos in condition or amount deemed hazardous by Environmental
Law.
(c) Neither of the Sellers has at any time engaged in
or permitted any dumping, discharge, disposal, spillage or leakage (whether
legal or illegal, accidental or intentional) of such Hazardous Substances on the
Real Estate that would subject the Real Estate or Buyer to clean-up obligations
imposed by environmental governmental authorities. Neither of the Sellers has
assumed any liability of a third party for clean up under, or noncompliance
with, Environmental Law.
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(d) Neither of the Sellers (i) has either received or
been issued a notice, demand, request for information, citation, summons or
complaint regarding an alleged failure to comply with Environmental Law, or (ii)
is subject to any existing, pending, or, to the best knowledge of the Sellers
and Shareholders, threatened investigation or inquiry by any governmental
authority for noncompliance with, or any remedial obligations under
Environmental Law.
(e) Neither of the Sellers nor their Affiliates or
Agents have transported or arranged for the transportation of any Hazardous
Substances to any location which is listed or, to the best knowledge of Sellers
and Shareholders, proposed for listing under Environmental Law or is the subject
of any enforcement action, investigation or other inquiry under Environmental
Law.
(3) Other Environmental Matters. To the best knowledge of
Sellers and Shareholders, there are no underground storage tanks on any portion
of the Real Estate, the Real Estate is free of dangerous levels of
naturally-emitted radon, and no portion of the Real Estate has ever been used as
a landfill. Sellers have furnished to Buyer a copy of any environmental audit or
report on the Real Estate which Sellers or their Affiliates obtained or was
furnished. All utilities serving the Real Estate are adequate to operate the
Real Estate in the manner it is currently operated.
3.11 Sellers' Employees.
(1) Exhibit 3.11 attached hereto sets forth: (a) a complete
list of all of each Seller's employees, (b) their respective rates of pay, (c)
the employment dates and job titles of each such person, and (d) categorization
of each such person as a full-time or part-time employee of Sellers. For
purposes of this paragraph, "part-time employee" means an employee who is
employed for an average of fewer than twenty (20) hours per week or who has been
employed for fewer than six of the twelve (12) months preceding the date on
which notice is required pursuant to the "Worker Adjustment and Retraining
Notification Act" ("WARN"), 29 U.S.C. ss.2102 et seq. Except as provided in
Exhibit 3.9, Sellers have no employment agreements with its employees and all
such employees are employed on an at "at will" basis. Exhibit 3.11 also (a)
lists, and has attached copies of, all employee fringe benefits and personnel
policies, and (b) lists all ex-employees of Sellers utilizing or eligible to
utilize COBRA (health insurance). Sellers will terminate all of their employees
at Closing, and Sellers and Shareholders agree, pursuant to the terms of Article
X, to indemnify and hold Buyer harmless from and against any and all claims of
Sellers' employees relating to their employment by Sellers through Closing and
such termination, whenever made. Other than the Assumed Liabilities, the parties
to this Agreement expressly agree that Sellers will retain responsibility for
and fully and timely pay all salaries and wages, related payroll taxes and all
sick leave, holiday, vacation benefits, retirement and other fringe benefits
that have accrued to its employees through the date of Closing, including
related payroll taxes.
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(2) Neither of the Sellers is a party to any labor contract,
collective bargaining agreement, contract, letter of understanding, or any other
arrangement, formal or informal, with any labor union or organization which
obligates Sellers to compensate employees at prevailing rates or union scale,
nor are any of its employees represented by any labor union or organization.
There is no pending or, to the best knowledge of Sellers and Shareholders,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Sellers and any
present or former employee(s) of Sellers. There is no pending or, to the best
knowledge of Sellers and Shareholders, threatened suit, action, investigation or
claim between Sellers and any present or former employee(s) of Sellers. There
has not been any labor union organizing activity at any location of either of
the Sellers, or elsewhere, with respect to the Sellers' employees.
3.12 Employee Benefit Plans.
(1) Except as described on Exhibit 3.12, Sellers do not
maintain any bonus, deferred compensation, pension, retirement, stock option,
stock appreciation, restricted stock, profit sharing, severance, medical or life
insurance, employee stock ownership or stock purchase plans or other "employee
pension benefit plan", as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or other "employee welfare
benefit plan", as defined in Section 3(1) of ERISA (collectively the "Sellers
Plans"). All of the Sellers Plans described in Exhibit 3.12 have been operated
in all respects in compliance with all applicable laws, including without
limitation, the applicable provisions of ERISA and the Internal Revenue Code of
1986 ("Code"), and regulations thereunder (collectively the "Employee Benefit
Laws"). Copies of all Sellers Plans have previously been provided to Buyer.
(2) With respect to any Sellers Plan which is intended to
qualify under Section 401(a) of the Code (collectively, the "Sellers Pension
Plans"), a favorable determination letter as to the qualification of the plan
under Section 401(a) of the Code has been issued and the related trust has been
determined to be exempt from taxation under Section 501(a) of the Code and no
amendment made (or the failure to make such amendment) to any Sellers Pension
Plan subsequent to the date of such determination letter has adversely affected
the qualified status of any such Sellers Pension Plan.
(3) Each of the Sellers has performed all obligations required
to be performed by it under, and is not in default or in violation of, the terms
of any of the Sellers Plans in any respect. No "disqualified person" (as defined
in Section 4975 of the Code) or "party in interest" (as defined in Section 3(14)
of ERISA) has engaged in any "prohibited transaction" (as such term is defined
in Section 4975 of the Code or Section 406 of ERISA), or breach of fiduciary
duties (as described in Section 404 of ERISA) and no "reportable event" within
the meaning of Section 4043 of ERISA has occurred with respect to any Sellers
Plan. Sellers have not incurred and does not reasonably expect to incur, any
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liability to the Pension Benefit Guaranty Corporation (except for required
premium payments, which payments have been made when due). No "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA and Section
412 of the Code (whether or not waived), exist with respect to any of the
Sellers Plans. No "unfunded current liability" as determined under Section
412(1) of the Code exists with respect to any Sellers Plan subject to the
minimum funding requirements of Code Section 412, and, if applicable, Title IV
of ERISA. Sellers have no liability for any delinquent contributions within the
meaning of Section 515 of ERISA (including, without limitation, related
attorneys' fees, costs, liquidated damages and interest) or for any arrearages
of wages.
(4) Sellers are not required to contribute to, and during the
five-year period ending on the date of Closing will not have been required to
contribute to, any "multi-employer plan" as such term is defined in Section
4001(a)(3) of ERISA covering Sellers' employees and Sellers will not be subject
to any withdrawal liability (whether partial or complete) within the
contemplation of Section 4001 et seq. of ERISA as a result of the Transactions.
Sellers have never contributed to, withdrawn from, or had any employee covered
by a multi-employer plan.
(5) Neither of the Sellers has any unpaid obligations and
liabilities to provide benefits or contributions with respect to any Sellers
Plan (including, without limitation, liabilities and obligations currently due
and those not yet due that are attributable to the current plan year or
otherwise will become due at a later date for benefits previously earned). With
respect to each Sellers Plan subject to Title IV of ERISA, as of the date of
Closing, the assets of each such Plan are at least equal in value to the greater
of (1) the present value of the accrued benefits (determined as of the date of
Closing) of the participants in such Plans, based on actuarial methods, tables
and assumptions satisfactory to Buyer which present value is not less than the
projected benefit obligation for such Plan under FASB 87, or (2) such amount as
may be determined pursuant to Sections 411 and 417 of the Code (or such other
provision of the Code or ERISA as may be applicable) as necessary to fund
required benefits upon termination of such Sellers Plan.
(6) Each of the Sellers has made all contributions and other
payments required by and due under the terms of each Sellers Plan.
(7) No asset of either of the Sellers is subject to any lien
under Code Section 401(a)(29), ERISA Section 302(f) or Code Section 412(n),
ERISA Section 4068 or arising out of any action filed under ERISA Section
4301(b).
(8) Neither of the Sellers nor any affiliated company that is,
or was at any time after September 2, 1974, together with Sellers, treated as a
"single employer" under Section 414(b), 414(c), 414(m), or 414(o) of the Code,
has incurred any liability which
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could subject any of the parties to this Agreement to any liability under
Section 4062, 4063, or 4064 of ERISA.
(9) There are no negotiations, demands or proposals which are
pending which affect matters now covered, or that would be covered, by the types
of plans or agreements listed in Exhibit 3.12. There has been no failure to
comply with any applicable reporting and disclosure requirements under Title I
or Title IV of ERISA that could subject Sellers to any civil or criminal
sanction. There are no actions, suits or claims (other than routine claims for
benefits) pending or threatened against Sellers or the Sellers Plans, and no
facts are known to exist which could reasonably be expected to give rise to any
actions, suits or claims (other than routine claims for benefits) pending or
threatened against Sellers or the Sellers Plans, and no facts are known to exist
which could reasonably be expected to give rise to any actions, suits or claims
(other than routine claims for benefits) against Sellers or against the Sellers
Plans.
(10) Sellers have each complied in all respects with the
requirements of the Consolidated Omnibus Budget Reconciliation Act as it relates
to employee benefits provided to Sellers' employees.
(11) Prior to the Closing, Sellers have each taken the
necessary official actions to terminate the Sellers Plans. Sellers will handle
the termination of the Sellers Plans, including (1) adoption of the necessary
amendments to the Sellers Plans to bring each into full compliance with the
current laws, (2) request for a favorable determination letter from the Internal
Revenue Service on the termination of each such plan, (3) preparation and
distribution of benefit distribution forms to participants and (4) preparation
of remaining forms to be filed with the government agencies. If one of the
Sellers' Plans includes the features described in Section 401(k) of the Code,
then such actions to terminate the Plan prior to the date of Closing will be
handled in such a manner so that distributions may be made to the participants
in such Plan as provided in Section 401(k)(2)(B)(i)(II) of the Code and the
restrictions under Section 401(k)(10)(A)(i) of the Code and 1.401(k)-1(d)(3) of
the Treasury Regulations on distributions do not apply upon Plan termination
because of the maintaining of a defined contribution plan maintained by the
Buyer. All costs associated with the termination of the Sellers Plans and any
other liabilities related thereto shall remain with and be assumed by the
Sellers.
3.13 Insurance. Each of the Sellers has in effect and has since its
inception continuously maintained insurance coverage for its operations,
personnel and assets, and for the Assets and the Business. A complete and
accurate list of all current insurance policies is included in Exhibit 3.9.
Exhibit 3.13 attached hereto sets forth a summary of the Sellers' current
insurance coverage (listing type, carrier and limits), includes a list of any
pending insurance claims relating to either of the Sellers and the Business, and
includes a recent three-year claims history relating to Sellers and the Business
as prepared by the applicable insurance carrier(s). Sellers and Shareholders
agree, pursuant to the terms of
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Article X, to indemnify and hold harmless Buyer from and against any damages or
costs (including attorney fees) arising out of such insurance claims to the
extent not covered by insurance proceeds. Sellers are not in default or breach
with respect to any provision contained in any such insurance policies, nor has
either of the Sellers failed to give any notice or to present any claim
thereunder in due and timely fashion.
3.14 Conflicts of Interest. Except as described in detail on Exhibit
3.14 hereto, none of the following is either a supplier of goods or services to
Sellers, or directly or indirectly controls or is a director, officer, employee
or agent of any corporation, firm, association, partnership or other business
entity that is a supplier of goods or services to Sellers: (a) any Shareholder,
(b) any director or officer of Sellers, or (c) any entity under common control
with Sellers or controlled by or related to Shareholders.
3.15 Compliance with Healthcare and Other Laws. Neither of the Sellers
has made any kickback, bribe or payment to any person or entity, directly or
indirectly, for referring, recommending or arranging business or patients with,
to or for Sellers which action could have a material adverse effect on the
Business. Neither WARN nor any similar state law applies to such transactions,
and such transactions comply with applicable state antitrust and similar laws.
None of the Contracts and no activity of Sellers violates (a) Section 1877 of
the Social Security Act or any similar provision of applicable state law in any
material respect or (b) provisions of applicable state law relating to the
corporate practice of medicine in any material respect. The Sellers are in
compliance (without obtaining waivers, variances or extensions) with, all
federal, state and local laws, rules and regulations which relate to the
operations of the Business, except where the failure to be in compliance could
not have a material adverse effect on the Business. All Certificates of Medical
Necessity filed by Sellers have been properly completed, executed and filed in
compliance with all applicable laws, rules and regulations. All healthcare, tax
and other returns, reports, plans and filings of any nature required to be or
otherwise filed by Sellers with any governmental authorities or third party
payors have been properly completed, except where the failure to be so completed
or filed could not have a material adverse effect on the Business, and timely
filed in compliance with all applicable requirements. Each return, report, plan
and filing contains no materially untrue or misleading statements and does not
omit anything which would cause it to be misleading or inaccurate in any
material respect. Sellers will retain and be responsible for any liability
incurred in connection with any such return, report, plan and filing.
3.16 WARN Act. Since ninety (90) days prior to the Effective Date,
Sellers have not temporarily or permanently closed or shut down any single site
of employment or any facility or any operating unit, department or service
within a single site of employment, as such terms are used in WARN.
3.17 Tax Returns; Taxes. Sellers have filed all federal, state and
local tax returns and tax reports required by such authorities to be filed.
Sellers have paid all taxes,
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assessments, governmental charges, penalties, interest and fines due or claimed
to be due (including, without limitation, taxes on properties, income,
franchises, licenses, sales and payrolls) by any governmental authority.
Additionally, the reserves for taxes reflected in the Financial Statements are
adequate to cover all tax liabilities accrued as of the respective dates
thereof. There is no pending tax examination or audit of, nor any action, suit,
investigation or claim asserted or, to the best knowledge of Sellers and
Shareholders, threatened against Sellers by any governmental authority; and
Sellers have not been granted any extension of the limitation period applicable
to any tax claims.
3.18 No Omissions or Misstatements. The information included in this
Agreement and the Exhibits hereto does not contain any untrue statement of a
material fact and does not omit to state any material fact necessary in order to
make any of the statements herein or therein not misleading in light of the
circumstances in which they were made.
3.19 Sole Representations. The representations and warranties contained
herein constitute the sole representations and warranties which are being
extended by the Sellers with respect to the transaction contemplated herein.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers and Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereunder, Buyer
hereby represents and warrants to Sellers and Shareholders, which
representations and warranties will be true and correct on the date hereof and
on the date of Closing, as follows:
4.1 Organization, Qualification and Authority. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer has the full corporate power and corporate authority to
own, lease and operate its properties and assets as presently owned, leased and
operated and to carry on its business as it is now being conducted. Buyer has
the full right, power and authority to execute, deliver and carry out the terms
of this Agreement and all documents and agreements necessary to give effect to
the provisions of this Agreement and to consummate the transactions contemplated
on the part of Buyer hereby. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by Buyer has been duly authorized by all necessary corporate action on the part
of Buyer. No other action on the part of Buyer or any other person or entity is
necessary to authorize the execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection
herewith. This Agreement, and all other agreements and documents executed in
connection herewith by Buyer, upon due execution and delivery thereof, will
constitute the valid binding obligations of Buyer, enforceable in accordance
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
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4.2 Absence of Default. The execution, delivery and consummation of
this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
with or without the giving of notice or the passage of time, or both, result in
a breach of, constitute a default under, or create (or cause the acceleration of
the maturity of) any debt, indenture, obligation or liability or result in the
creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Assets (except in the ordinary course pursuant to
the existing credit agreement of Buyer) under: (a) any term or provision of the
Certificate of Incorporation or Bylaws of Buyer; (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval or
other commitment to which Buyer is a party or by which Buyer is bound; (c) any
judgment, decree, order, regulation or rule of any court or regulatory
authority, or (d) any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Buyer is subject.
4.3 SEC Reports. Prior to Closing, Buyer will furnish to Shareholders
true and complete copies of its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, its Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997 and its proxy materials for the most recently
held annual meeting of shareholders (collectively, the "SEC Reports") as such
reports were filed with the Securities and Exchange Commission. The SEC Reports,
at the time they were filed, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Since September 30, 1997, there has been
no material adverse change in the operation of the business of the Buyer, taken
as a whole, which would necessitate any filings with the Securities and Exchange
Commission modifying the SEC Reports, other than in the ordinary course of
business.
ARTICLE V. COVENANTS OF PARTIES
5.1 Preservation of Business and Assets. Except as set forth on Exhibit
5.1 hereto, from the Effective Date until Closing, each of the Sellers and the
Shareholders will use their reasonable efforts and will do or cause to be done
all such acts and things as may be necessary to preserve, protect and maintain
intact the operation of the Business and Assets as a going concern consistent
with prior practice and not other than in the ordinary course of business, and
to preserve, protect and maintain for Buyer the goodwill of the suppliers,
employees, clientele, patients and others having business relations with Sellers
or the Business. Until termination of this Agreement, Sellers and Shareholders
agree that they will not sell, transfer or pledge, or negotiate the sale,
transfer or pledge of, either any of the Assets or any stock or other security
of Sellers, nor merge or consolidate with any other entity; neither of the
Sellers nor the Shareholders will solicit any inquiries,
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proposals or offers relating to any such transactions. From the Effective Date
until Closing, Sellers will pay no dividend (other than those needed to fund tax
obligations as shareholders of S Corporations as shown on Exhibit 3.4 and that
will be repaid and adjusted for at Closing), and will make no distribution or
extraordinary payment to the Shareholders or any third party or pay any
intercompany payable and, other than in the ordinary course of business, Sellers
will not sell, discard or dispose of any of the Assets, except in the ordinary
course of business consistent with past practices. None of the Contracts will be
amended between the date hereof and Closing without the prior written consent of
Buyer, and Sellers will not enter into any new material contract or commitment
or any other transaction with respect to the Business or the Assets without the
prior written consent of Buyer. From the Effective Date until Closing, Sellers
and any party in possession of all or any part of the Assets will maintain and
keep the Assets in a sanitary, well-maintained condition and in good order and
repair. Buyer, Sellers and Shareholders will use their reasonable efforts to
facilitate the consummation of the transactions contemplated under this
Agreement.
5.2 Books and Records.
(1) From the date hereof until Closing, each of the Sellers
will maintain its books of account in the usual, regular and ordinary manner on
a basis consistent with prior years and will make no change in its accounting
methods or practices.
(2) Until Closing, Sellers will give to Buyer full access, by
appointment at mutually agreed times, to all of Sellers' offices, properties,
books, contracts, commitments, records and affairs relating to the Assets or the
Business so that Buyer may inspect and audit them and will furnish to Buyer a
copy of all documents and information concerning the properties and affairs of
the Sellers, the Business or the Assets as Buyer may request. If any such books,
records and materials are in the custody of third parties, Sellers will direct
such third parties to promptly provide them to Buyer.
(3) Following Closing, Buyer will permit Sellers, during
normal business hours, to have reasonable access to, and examine and make copies
of, all books and records of the Business which relate to transactions or events
occurring prior to Closing. All out-of-pocket costs associated with the delivery
of the requested documents will be paid by Sellers.
(4) Following Closing, Sellers will permit Buyer to have
access to, and examine and make copies of, all books and records of Sellers and
its Affiliates relating to the Business or Assets, which books and records are
retained by Sellers and which relate to transactions or events occurring prior
to Closing. For a period of seven (7) years after Closing, Sellers agree that,
prior to the destruction or disposition of any such books or records, Sellers
will provide not less than forty-five (45) days', nor more than ninety (90)
days', prior written notice to Buyer of such proposed destruction or disposal.
If Buyer
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desires to obtain any such documents or records, it may do so by notifying
Sellers in writing at any time prior to the date scheduled for such destruction
or disposal. In such event, Sellers will not destroy such documents or records
and the parties will then promptly arrange for the delivery of such documents or
records to Buyer, its successors or assigns. All out-of-pocket costs associated
with the delivery of the requested documents or records will be paid by Buyer.
(5) Sellers will cause its accounting firm and prior
accounting firm to consent to the inclusion of the Financial Statements in any
registration statements, private placement memoranda and periodic reports, if
any, necessary or appropriate to enable Buyer or its Affiliates to comply with
any applicable registration or reporting requirements of federal or state
securities laws. After Closing, Sellers and Shareholders will make the books and
records of Sellers available to the Buyer and will otherwise cooperate with
Buyer in order to permit Buyer, at its expense, to conduct an audit of the
Sellers' financial statements for any period prior to Closing not already
audited. Sellers agree to cooperate, with Buyer in Buyer's preparation of
financial statements relating to such periods and Buyer's filing in a timely
manner registration statements, private placement memoranda and periodic
reports, if any, pursuant to any applicable federal or state securities law.
5.3 Preserve Accuracy of Representations and Warranties. Each of the
Sellers and the Shareholders will refrain from taking any action which would
render any representation and warranty contained in Article III untrue,
inaccurate or misleading as of Closing. Sellers and each Shareholder will
promptly notify Buyer of any lawsuit, claim, audit, investigations,
administrative action or other proceeding asserted or commenced against Sellers
or its directors, officers, or Shareholders, that may involve or relate in any
way to Sellers, the Assets, Shareholders or the operation of the Business.
Sellers and Shareholders will promptly notify Buyer of any facts or
circumstances that come to either's attention and that cause, or through the
passage of time may cause, any of Sellers' and Shareholders' representations and
warranties to be untrue or misleading at any time from the date hereof through
Closing.
5.4 Employees. Sellers will use their reasonable efforts to retain
their employees in their current positions up to Closing. At Closing Sellers
will terminate those employees listed on Exhibit 3.12, and Buyer (or one of its
Affiliates) will offer employment to such employees on terms and conditions
substantially equivalent to those in place at Closing except as otherwise
provided in paragraph 7.7. Sellers, Shareholders and Buyer acknowledge and agree
that such employees will remain on Sellers' payroll system during transition of
the Business to the control of Buyer until integration of payroll is possible.
During this interim period Sellers will timely pay all taxes related to the
payroll of such employees and file and maintain all reports and documentation
related to such payroll, including employee 941 and W-2 forms. Buyer agrees to
use its best efforts to assume, either directly or through an Affiliate, such
payroll responsibilities as promptly as possible and, during the transition
period, will promptly reimburse Sellers for documented, out-of-
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pocket costs directly associated with maintaining such payroll, including but
not limited to payment of payroll taxes. Sellers need not continue their
worker's compensation coverage following Closing with regard to individuals who
become employees of Buyer. Buyer will obtain worker's compensation for such
employees beginning as of Closing.
5.5 Broker's or Finder's Fee. Neither Buyer, Sellers nor any
Shareholder has employed or is liable for the payment of any fee to any finder,
broker or similar person in connection with the transactions contemplated under
this Agreement, other than Ultimate Resource, Inc., whose fees and expenses
shall be borne by the Shareholders.
5.6 Indebtedness; Liens. Other than in the ordinary course of business
from the Effective Date through Closing, Sellers will not create, incur, assume,
guarantee or otherwise become liable or obligated with respect to any
indebtedness for borrowed money, nor make any loan or advance to, or any
investment in, any person or entity, nor create any lien, security interest,
mortgage, right or other encumbrance in any of the Assets, without Buyer's prior
written approval. At Closing the Assets will be free and clear of all mortgages,
security interests, liens, leases, covenants, assessments, easements, options,
rights of first refusal, restrictions, reservations, defects in title,
encroachments or other encumbrances, except as set forth in those Contracts
which Buyer expressly elects to assume, and Sellers will deliver to Buyer by
Closing such pay-off letters, releases, U.C.C. termination statements and other
documents as Buyer may request to evidence the same.
5.7 Compliance with Laws and Regulatory Consents. From the date hereof
through Closing, (a) Sellers will comply with all applicable laws and
regulations; (b) Sellers will keep, hold and maintain all Licenses necessary or
advisable for the Business and operation of the Assets; (c) Sellers and
Shareholders will use their reasonable efforts and will cooperate fully with
Buyer to obtain all consents, approvals, exemptions and authorizations of third
parties, whether governmental or private, necessary to consummate the
transactions contemplated under this Agreement; and (d) Sellers and Shareholders
will make and cause to be made all filings and give and cause to be given all
notices which may be necessary or desirable under all applicable laws and under
applicable contracts, agreements and commitments in order to consummate the
transactions contemplated under this Agreement. The parties waive compliance
with any applicable bulk sales statute.
5.8 Maintain Insurance Coverage. From the date hereof through Closing,
Sellers will maintain and cause to be maintained in full force and effect the
existing insurance on the Assets and the operations of the Business and will
provide, upon request by Buyer, evidence satisfactory to Buyer that such
insurance continues to be in effect, that all premiums due have been paid, and
that Buyer has been named additional named insured since the Effective Date. If
Sellers' existing product and professional liability insurance is on an
"occurrence" basis, Sellers will maintain such insurance through "discontinued
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operations" coverage for at least one year after Closing. If Sellers' existing
product and professional liability insurance is on a "claims made" basis,
Sellers will maintain such insurance through both "discontinued operations"
coverage for at least one year after Closing and "tail" coverage for at least
five (5) years after Closing.
5.9 Medicare and Medicaid Reporting. Through Closing, Sellers will
timely file or cause to be filed all reports and claims of every kind, nature or
description, required by law or by written or oral contract to be filed with
respect to the purchase of services by third party payors, including, but not
limited to, Medicare, Medicaid and Blue Cross. Sellers have paid or will pay all
liabilities for contracted adjustments, discounts, refunds and other offsets in
connection with the filing of such reports and claims up to the Effective Date;
provided, however, that if any adverse adjustments or offsets regarding
operations on or after Effective Date are the result of the wilful acts or
omissions, or gross negligence, of Sellers, Shareholders or Sellers' employees,
representatives or agents, Sellers and Shareholders will also be responsible for
such adjustments and offsets as contemplated under paragraph 3.7. Sellers will
be entitled to receive any refund or other benefit which may result from the
filing of said reports and claims for operations up to the Effective Date, and
Buyer will likewise be so entitled beginning on the Effective Date.
5.10 Current Return Filing. Sellers will be responsible for (a) the
preparation and filing of the federal, state and local income tax and gross
receipts and use tax returns for all the tax periods of Sellers ending on or
before Closing, and (b) the payment of all such taxes when due. Buyer will
reimburse Sellers for all income taxes (but no penalties or assessments)
properly paid by Sellers which relate to operations of the Business from the
Effective Date through Closing.
5.11 Financial Analysis. Buyer covenants to provide Sellers and
Shareholders all information which Sellers and Shareholders feel relevant to
their decision to accept the form of Purchase Price stipulated in paragraph 2.1,
exclusive of confidential and/or proprietary information which Buyer in good
faith determines is not relevant to the Sellers and Shareholders' determination.
Sellers and Shareholders represent that they possess, with their financial
advisors (if any), the financial and business experience to make an informed
decision regarding the form of the Purchase Price and the financial means to
bear the economic risk of the same. The representations, warranties and
covenants contained in this Agreement are not to be deemed acknowledgments by
any party that any portion of the Purchase Price constitutes a "security" as
defined in either the Security Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended.
5.12 Removal of Certain Conditions to Closing. In furtherance of the
parties' agreement and obligation to use their respective best efforts to
facilitate consummation of the contemplated transactions, the parties hereby
expressly agree to use their best efforts to satisfy fully certain conditions to
Closing stipulated on Articles VI and VII of this Agreement as follows: the
conditions itemized in paragraphs 6.4, 7.4, 7.6, 7.7, 7.8 and 7.9
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will be fully satisfied by March 11, 1998. If any condition is not fully and
timely satisfied, the non-breaching party or parties shall have the right, upon
written notice to the other parties hereto, to terminate this Agreement without
further liability or obligation by any party. Failure to provide requested due
diligence items, including but not limited to UCC and other lien searches, by
March 9, 1998 will be deemed a breach of this paragraph 5.12. Upon completion of
all conditions stipulated in paragraphs 6.4, 7.4, 7.6, 7.7, 7.8 and 7.9, the
parties will execute and deliver a binding letter agreement confirming the same.
5.13 Third Party Consent. Buyer acknowledges the difficulties
associated with Sellers and Shareholders obtaining all third party consents
pertaining to assignment of Contracts as required under paragraph 8.6, and
Sellers and Shareholders acknowledge that Buyer cannot properly assess this
matter prior to completing its due diligence. Accordingly, the parties agree to
use their best efforts to enter into a binding letter agreement by March 11,
1998 modifying paragraph 8.6 with the expectation that certain third party
consents otherwise required by Closing will instead be delivered subsequent to
Closing. If the parties fail to agree upon such letter by such date, either
Buyer or Seller may terminate this Agreement with no further liability
hereunder.
5.14 Xxxx-Xxxxx-Xxxxxx Filing. Shareholders and Sellers will (with the
assistance of the Buyer if and when required) timely and promptly make, and
Buyer will or, if Buyer is not the "ultimate parent" it will cause its "ultimate
parent" (with the assistance of Shareholders and Sellers if and when required),
to timely and promptly make, all filings which are required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the "Antitrust
Improvements Act"). The parties will use their best efforts to obtain the
approval of the United States Federal Trade Commission or the Antitrust Division
of the United States Department of Justice, as the case may be, to the purchase
of the Assets by Buyer or the lapse prior to Closing of the waiting period under
the Antitrust Improvements Act without the commencement of litigation, or threat
thereof, by the appropriate governmental enforcement agency to restrain the
transactions contemplated under this Agreement.
ARTICLE VI. SELLERS' AND SHAREHOLDERS' CONDITIONS TO CLOSE
The obligations of Sellers and Shareholders under this Agreement are
subject to the satisfaction on or prior to Closing, of the following conditions
(which may be waived in writing by Sellers in whole or in part):
6.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits and attachments hereto) or in any certificate
or document delivered to Sellers and/or Shareholders pursuant hereto, will be
deemed to have been made again at Closing and will then be true in all material
respects; and Buyer will have performed and
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complied with all covenants, agreements and conditions required under this
Agreement to be in all material respects performed or complied with by it prior
to or at Closing.
6.2 No Action/Proceeding. No action or proceeding before a court or any
other governmental agencies or body will have been instituted or threatened to
restrain or prohibit the transactions here under contemplated, and no
governmental agency or body or other entity will have taken any other action or
made any request of Sellers or Buyer as a result of which Sellers reasonably and
in good xxxxx xxxxx that to proceed with the transactions hereunder may
constitute a violation of law. The waiting periods specified under the Antitrust
Improvements Act with respect to the transactions contemplated under this
Agreement will have lapsed or been terminated.
6.3 Order Prohibiting Transaction. No order will have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court will have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There will have been no statute, rule or regulations enacted or
promulgated after the date of this Agreement that would reasonably, directly or
indirectly, result in any of the consequences referred to in this paragraph.
6.4 Exhibits. The Exhibits to this Agreement will be completed to the
mutual satisfaction of the parties.
ARTICLE VII. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Buyer in whole or in part):
7.1 Representations and Warranties True at Closing; Compliance with
Agreement. The representations and warranties of Sellers and Shareholders
contained in this Agreement (including the Exhibits and attachments hereto) or
in any certificate or document delivered to Buyer in connection herewith, will
be deemed to have been made again at Closing and will then be true in all
material respects, and Sellers and Shareholders will have performed and complied
in all material respects with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by them prior to or at
Closing.
7.2 Regulatory Approvals. Buyer will have obtained (a) a temporary
power of attorney with respect to the Controlled Substances Act or the
Controlled Substances Import and Export Act in the form attached hereto as
Exhibit 7.2, (b) certification for participation in the Medicaid Programs of the
states where the Business is conducted, (c) certification
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from the appropriate agency of the federal government for participation in the
federal Medicare Program, and (d) all other consents, licenses, permits,
approvals, provider contracts, determinations or certificates of need necessary
or reasonably advisable in the judgment of Buyer to acquire and operate the
Assets and Business as contemplated hereunder.
7.3 No Action/Proceeding. No action or proceeding before a court or any
other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transaction hereunder contemplated, and no governmental
agency or body or other entity will have taken any other action or made any
request of Sellers or Buyer as a result of which Buyer reasonably and in good
xxxxx xxxxx that to proceed with the transactions hereunder may constitute a
violation of law. The waiting periods specified under the Antitrust Improvements
Act with respect to the transactions contemplated by this Agreement will have
lapsed or been terminated.
7.4 Inspection of Assets; U.C.C. Searches, etc. Buyer and its
representatives will have had and continue to have reasonable rights of
inspection of the Assets in connection with Buyer's due diligence review, and
the results of Buyer's inspection and due diligence review will be acceptable to
it. Sellers will have delivered to Buyer, at Sellers' expense, all U.C.C.
financing statements and title searches, local and central, including fixtures,
and federal and state pending litigation, tax lien and judgment searches, with
respect to Sellers, the Assets and the Business including all "DBA's," trade
names and fictitious names of Sellers, dated no more than ten (10) days prior to
Closing, with results satisfactory to Buyer in its sole discretion.
7.5 Order Prohibiting Transaction. No order will have been entered in
any action or proceeding before any court or governmental agency, and no
preliminary or permanent injunction by any court will have been issued which
would have the effect of (a) making the transactions contemplated under this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Buyer effectively to
acquire and hold Assets, to operate the Business or, in any case, to exercise
rights of ownership pursuant thereto. There will have been no statute, rule or
regulations enacted or promulgated after the date of this Agreement that would
reasonably result, directly or indirectly, in any of the consequences referred
to in this paragraph.
7.6 Confidentiality and Non-Compete Agreements. Each of Xxxxxxx Xxxxx,
the key employees, officers and directors of each of the Sellers will execute
and deliver to Buyer a Confidentiality and Non-Compete Agreement in form
attached hereto as Exhibit 7.6.
7.7 Employment Agreements. An affiliate of Buyer will have entered into
an employment agreement (containing non-compete and confidentiality covenants)
with each
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of Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxxxx. Such employment agreements will be in
the form attached hereto as Exhibit 7.7.
7.8 Approval of Board of Directors. This Agreement and consummation of
the transactions contemplated hereunder will have been approved by the Board of
Directors of Buyer.
7.9 Exhibits. The Exhibits to this Agreement will be completed to the
mutual satisfaction of the parties.
ARTICLE VIII. OBLIGATIONS OF SELLERS AND SHAREHOLDERS AT CLOSING
At Closing, Sellers and Shareholders will deliver or cause to be
delivered to Buyer the following in form and substance satisfactory to Buyer:
8.1 Documents Relating to Title. Sellers will execute, acknowledge,
deliver and cause to be executed, acknowledged and delivered to Buyer:
(1) Unless otherwise agreed by Buyer, an Assignment and
Assumption of Lease Agreement for each location of the leased Real Estate, with
all recording, stamp tax or other transfer fees paid by Sellers, and conveying
to Buyer the legal right to possess and use the leased Real Estate free and
clear of all liens, mortgages, superior rights of possession or use, except for
those expressly acceptable to Buyer.
(2) A Xxxx of Sale warranting and conveying to Buyer good,
valid and marketable title to all Assets, free and clear of all liens,
mortgages, pledges, encumbrances, security interests, covenants, easements,
rights of way, equities, options, rights of first refusal restrictions, special
tax or governmental assessments, defects in title, encroachments and other
burdens, except for the Assumed Liabilities.
(3) Certificates of title to all vehicles that constitute
Assets endorsed by Sellers and evidencing current odometer readings, together
with completed originals of any forms required by applicable state authorities
to transfer the titles and register each vehicle, free and clear of all liens
except for the Assumed Liabilities, and a written statement of the book value of
each vehicle.
(4) An effective and enforceable assignment and Assumption
Agreement for those Contracts Buyer has agreed to assume.
8.2 Possession. Sellers will deliver to Buyer full possession and
control of the Business and Assets, including but not limited to the Cash and
Cash Equivalents.
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8.3 Opinion of Counsel. Sellers and Shareholders will deliver to Buyer
a favorable opinion of counsel, dated as of Closing, in the form attached hereto
as Exhibit 8.3.
8.4 Corporate Good Standing and Corporate Resolutions. Sellers and
Shareholders will deliver to Buyer certificates of good standing from the
Secretary of State of its state of organization and from each jurisdiction in
which Sellers are qualified to do business, certified copies of the Bylaws and
Charter of Sellers, and a certified copy of the resolutions of the Board of
Directors and Shareholders of Sellers authorizing the execution, delivery and
consummation of this Agreement and the execution, delivery and consummation of
all other agreements and documents executed in connection herewith by them,
including all deeds, bills of sale and other instruments required hereunder,
sufficient in form and content to meet the requirements of the law of the State
of Sellers' incorporation relevant to such transactions and certified by
officers of Sellers to be validly adopted and in full force and effect and
unamended as of Closing.
8.5 Closing Certificate. Sellers will deliver to Buyer a certificate of
an officer of each of the Sellers, dated as of Closing, certifying that (a) each
covenant and obligation of Sellers has been complied with and (b) each
representation and warranty of Sellers is true and correct at Closing in all
material respects as if made on and as of Closing provided that the provisions
of Article X shall apply to any breach of such representations and warranties
whether material or immaterial.
8.6 Third Party Consents and Releases. Sellers will deliver to Buyer by
Closing, all consents, estoppels, approvals, releases, pay-off letters, filings
and authorizations of third parties that Buyer believes are necessary or
advisable for the legal and proper execution, delivery and consummation of this
Agreement, and the transactions contemplated hereunder, including but not
limited to, those consents necessary for the assignment of Contracts pursuant to
paragraph 8.1(4), for release of any and all mortgages, security interests,
liens, pledges, restrictions or other encumbrances on or applicable to the
Assets, and any U.C.C. termination statements regarding the Assets.
8.7 Non-Foreign Tax Certificate; Power of Attorney. Sellers will
deliver to Buyer a certificate of non-foreign status signed by the appropriate
party and sufficient in form and substance to relieve Buyer of all withholding
obligations under Section 1445 of the Code. Sellers will also deliver to Buyer
the power of attorney described in paragraph 7.2.
8.8 Insurance. Sellers will deliver evidence of insurance coverage as
required by paragraph 5.8.
8.9 Confidentiality, Employment and Lease Agreements. Sellers and
Shareholders will deliver to Buyer each of the agreements described in
paragraphs 7.6, and 7.7.
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8.10 Closing Statement. Sellers will, along with Buyer, execute a
Closing Statement setting forth the Purchase Price and various adjustments
thereto.
8.11 Additionally Requested Documents; Post-Closing Assistance. At the
reasonable request of Buyer at Closing and at any time or from time to time
thereafter, Sellers and Shareholders, as Buyer may reasonably request, will (a)
cooperate with Buyer to put Buyer in actual possession and operating control of
the Assets and Business, (b) execute and deliver such further instruments of
sale, conveyance, transfer and assignment effectively to sell, convey, transfer
and assign the Assets and Business to Buyer, (c) execute and deliver such
further instruments and to take such other actions as Buyer may reasonably
request to release Buyer from all obligation and liability with regard to any
obligation or liability retained by Sellers and/or Shareholders, and (d) execute
and deliver such further instruments and to cooperate with Buyer to enable Buyer
to obtain all necessary health care or regulatory certifications, approvals,
consents and licenses, accreditations or permits.
ARTICLE IX. OBLIGATIONS OF BUYER AT CLOSING
At closing, Buyer will deliver or cause to be delivered to Sellers the
following in a form and substance reasonably satisfactory to Sellers and
Shareholders:
9.1 Purchase Price. Buyer will make available to the Sellers the
Purchase Price upon the terms specified in this Agreement.
9.2 Assumption of Liabilities. Buyer will covenant to fully perform and
comply with all of the Assumed Liabilities, subject to the provisions of this
Agreement.
9.3 Opinion of Buyer's Counsel. Buyer will deliver to Sellers a
favorable opinion of counsel for Buyer, dated as of Closing and pursuant to the
Legal Opinion Accord of the ABA Section of Business Law (1991), in form and
substance reasonably satisfactory to Sellers and their counsel to the effect
that:
(1) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and corporate authority to own, operate and lease its
properties and assets and to carry on its business as now conducted.
(2) Buyer has the corporate power and corporate authority to
execute, deliver and carry out the terms of this Agreement and all documents and
agreements delivered by Buyer at Closing and to consummate the transactions
contemplated on the part of Buyer hereby and thereby; Buyer has taken all action
required by law, and its Certificate of Incorporation and Bylaws, to authorize
such execution, delivery and
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consummation of this Agreement, and this Agreement, and all other agreements
delivered by Buyer at Closing constitute the valid and binding obligations of
Buyer enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
9.4 Corporate Good Standing and Certified Board Resolutions. Buyer will
deliver to Sellers a certificate of good standing from the Secretary of State of
Delaware, together with a certified copy of the resolutions of the Board of
Directors of Buyer approving this Agreement and the consummation of the
transactions contemplated hereunder.
9.5 Closing Certificate. Buyer will deliver to Sellers a certificate of
an officer of the Buyer, dated as of Closing, certifying that (a) each covenant
and obligation of Buyer has been complied with by Buyer, and (b) each
representation and warranty of Buyer is true and correct on Closing as if made
on and as of Closing.
ARTICLE X. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
10.1 Survival. The covenants, obligations, representations and
warranties of Buyer, Sellers and Shareholders contained in this Agreement, or in
any certificate or document delivered pursuant to this Agreement, will be deemed
to be material and to have been relied upon by the parties hereto
notwithstanding any investigation prior to Closing, will not be merged into any
documents delivered in connection with Closing, and will survive the date of
Closing for a period of eighteen (18) months; provided, however, that the
representations, warranties and covenants set forth in paragraphs 3.7, 3.10,
3.16 (as such paragraph pertains to health care matters), 3.18, 5.9 and 5.10
will each survive for the applicable statute of limitations (the "Unrestricted
Items").
10.2 Indemnification by Sellers and Shareholders. Subject to the
provisions of paragraph 10.4, Sellers and Shareholders will promptly indemnify,
defend, and hold harmless Buyer and the directors, officers, stockholders,
employees and agents of Buyer and the Assets against any and all losses, costs,
and expenses (including reasonable cost of investigation, court costs and legal
fees actually incurred) and other damages resulting from (i) any breach by
either Sellers or Shareholders of any of the covenants, obligations,
representations or warranties or breach or untruth of any representation,
warranty, fact or conclusion contained in this Agreement or any certificate or
document of Sellers and/or Shareholders delivered pursuant to this Agreement,
(ii) any liability of Sellers not expressly assumed by Buyer pursuant to
paragraph 1.3, and (iii) any claim (whether or not disclosed herein) that is
brought or asserted by any third party(ies) against Buyer arising out of the
ownership, licensing, operation or conduct of the Business or Assets or the
conduct of any of Sellers' employees, agents or independent contractors relating
to all periods of time prior to Effective Date. Any indemnification payment made
pursuant to this Article will
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include interest at a rate of six percent (6%) per annum (the "Rate") payable
for the period measured from the date that the claim for indemnification for the
loss, cost, expense or damage was asserted until the date of payment. Any claim
for indemnification pursuant to this paragraph 10.2 shall first be made against
the Note. The liability created under this paragraph 10.2 shall be joint and
several between the Sellers and the liability created by this paragraph 10.2 and
the obligations of Shareholders pursuant to paragraph 1.4 and shall be borne by
the Shareholders in the following proportions: forty percent (40%) by Xxxxxxx
Xxxxx and sixty percent (60%) jointly and severally by Xxxxxxx X. Xxxxxxxx and
Xxxxx Xxxxxxxx.
10.3 Indemnification by Buyer. Subject to the provisions of paragraph
10.4, Buyer will promptly indemnify, defend, and hold Sellers harmless against
any and all losses, costs, and expenses (including reasonable cost of
investigation, court costs and legal fees actually incurred) and other damages
resulting from (i) any breach by Buyer of any of its covenants, obligations,
representations or warranties or breach or untruth of any representation,
warranty, fact or conclusion contained in this Agreement or any certificate or
document of Buyer delivered pursuant to this Agreement, (ii) any claim which is
brought or asserted by any third party(ies) against Sellers for failure to pay
or perform any of the Assumed Liabilities; and (iii) subject to the other
provisions of this Agreement, any claim that is brought or asserted by any third
party(ies) against Sellers arising out of the ownership, licensing, operation or
conduct of the Business or Assets or the conduct of any of Buyer's employees,
agents or independent contractors, relating to all periods of time subsequent to
the Effective Date. Any indemnification payment pursuant to the foregoing will
include interest at the Rate from the date that the claim for indemnification
for the loss, cost, expense or damage was asserted until the date of payment.
10.4 Rules Regarding Indemnification. The obligations and liabilities
of each party which may be subject to indemnification liability hereunder (the
"indemnifying party") to the other party (the "indemnified party") will be
subject to the following terms and conditions:
(1) Claims by Non-parties. The indemnified party will give
written notice to the indemnifying party, within such time as not to prejudice
unduly the indemnifying party's ability to defend against the underlying claim,
of any written claim by a third party which is likely to give rise to a claim by
the indemnified party against the indemnifying party based on the indemnity
agreements contained in this Article, stating the nature of said claim and the
amount thereof, to the extent known. The indemnified party will give notice to
the indemnifying party that pursuant to the indemnity, the indemnified party is
asserting against the indemnifying party a claim with respect to a potential
loss from the third party claim, and such notice will constitute the assertion
of a claim for indemnity by the indemnified party. If, within twenty (20) days
after receiving such notice, the indemnifying party advises the indemnified
party that it will provide indemnification and assume the defense at its
expense, then so long as such defense is being conducted, the indemnified party
will not settle or admit liability with respect to the claim and will afford to
the
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indemnifying party and defending counsel reasonable assistance in defending
against the claim. If the indemnifying party assumes the defense, counsel will
be selected by such party and if the indemnified party then retains its own
counsel, it will do so at its own expense. If the indemnified party does not
receive a written objection to the notice from the indemnifying party within
twenty (20) days after the indemnifying party's receipt of such notice, the
claim for indemnity will be conclusively presumed to have been assented to and
approved, and in such case the indemnified party may control the defense of the
matter or case and, at its sole discretion, settle or admit liability. If within
the aforesaid twenty (20) day period the indemnified party will have received
written objection to a claim (which written objection will briefly describe the
basis of the objection to the claim or the amount thereof, all in good faith),
then for a period of sixty (60) days after receipt of such objection the parties
will attempt to settle the dispute as between the indemnified and indemnifying
parties. If they are unable to settle the dispute, the unresolved issue or
issues will be settled by arbitration in Wilmington, Delaware in accordance with
the rules and procedures of the American Arbitration Association.
(2) Claims by a Party. The determination of a claim asserted
by a party hereunder (other than as set forth in subparagraph (1) above)
pursuant to this Article will be made as follows: The indemnified party will
give written notice to the indemnifying party, within such time as not to
prejudice unduly the indemnifying party's ability to defend against the
underlying claim, of any claim by the indemnified party which has not been made
pursuant to subsection (1) above, stating the nature of such claim and the
amount thereof, to the extent known. The claim will be deemed to have resulted
in a determination in favor of the indemnified party and to have resulted in a
liability of the indemnifying party in an amount equal to the amount of such
claim estimated pursuant to this paragraph if within thirty (30) days after the
indemnifying party's receipt of the claim the indemnified party will not have
received written objection to the claim. In such event, the claim will be
conclusively presumed to have been assented to and approved. If within the
aforesaid thirty (30) day period the indemnified party will have received
written objection to a claim (which written objection will briefly describe the
basis of the objection to the claim or the amount thereof, all in good faith),
then for a period of sixty (60) days after receipt of such objection the parties
will attempt to settle the disputed claim as between the indemnified and
indemnifying parties. If they are unable to settle the disputed claim, the
unresolved issue or issues will be settled by arbitration in Wilmington,
Delaware in accordance with the rules and procedures of the American Arbitration
Association. Notwithstanding the provisions of this clause (2), the enforcement
provisions set forth in paragraph 11.2 will be available in the event of a
breach of paragraph 11.1.
(3) Claims by a Straddle Patient. Any claim by a patient
relating to professional negligence or similar matters involving a patient
served both prior to the Effective Date and subsequent to the Effective Date
will be the responsibility of either Buyer, on the one hand, or Sellers and
Shareholders, jointly and severally, on the other hand, in accordance with the
following guidelines: (i) if it is a claim in which the incident
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giving rise to liability clearly arose prior to the Effective Date, Sellers and
Shareholders will respond to the loss and defense expenses; (ii) if it is a
claim in which the incident giving rise to liability clearly arose on or after
the Effective Date, Buyer will respond to the loss and defense expenses; and
(iii) in the event that the incident giving rise to liability as to time is not
clear, Sellers, Shareholders and Buyer will jointly defend the case and each
will fully cooperate with the other in such defense. Once the case is closed, if
Buyer and Sellers and Shareholders cannot agree to the allocation of both
indemnity and expenses, then the matter will be submitted to binding arbitration
in Wilmington, Delaware in accordance with the rules and procedures of the
American Arbitration Association.
(4) Limitations. The obligations of Seller and Shareholders, on the one
hand, or the Buyer, on the other hand, under this Article X will not begin until
the indemnified party incurs one or more claims that equal, in the aggregate,
One Hundred Forty Seven Thousand Five Hundred and No/100 Dollars ($147,500.00)
(the "Basket"); provided, however, that such Basket will not apply to
obligations under paragraph 1.4 regarding the collection of Receivables, any
working capital liabilities which are the responsibility of either Seller,
Shareholders or Buyer, as the case may be, or the Unrestricted Items. Once the
Basket is reached, the obligations of indemnifying party under this Agreement
will apply only to all claims of an indemnified party in excess of the Basket.
The parties acknowledge and agree that the materiality and knowledge caveats set
forth elsewhere in this Agreement will provide no limitation on obligations of
an indemnifying party in excess of or in addition to the Basket. Further, the
indemnification obligations of the Seller and Shareholders, one the one hand,
and the Buyer, on the other hand, will not exceed, in the aggregate, Six Million
and No/100 Dollars ($6,000,000.00) (the "Cap"); provided, however, that
obligations arising with respect to the Unrestricted Items will not be subject
to the Cap or considered when calculating the Cap. Any claim for indemnification
shall be net of insurance recoveries and tax benefits.
ARTICLE XI. [OMITTED]
ARTICLE XII. MISCELLANEOUS
12.1 Assignment. Following Closing, Buyer may freely assign any or all
of its rights or delegate any or all of its obligations under this Agreement
without the express written consent of Sellers or Shareholders. Neither Sellers
nor Shareholders may assign any rights or delegate any obligations under this
Agreement without the prior written consent of Buyer, and any prohibited
assignment or delegation will be null and void. Subject to the foregoing, this
Agreement will be binding upon and will inure to the exclusive benefit of the
parties hereto and their respective heirs, legal representatives, successors and
assigns. This Agreement is not intended to, nor will it, create any rights in
any other party.
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12.2 Other Expenses. Except as otherwise provided in this Agreement,
Sellers and Shareholders will pay all of their expenses in connection with the
negotiation, execution, and implementation of the transactions contemplated
under this Agreement, and Buyer will pay all of its expenses in connection with
the negotiation, execution, and implementation of the transactions contemplated
under this Agreement. All state and local sales and use taxes, recording fees
and transfer fees and taxes incurred in connection with the transactions
contemplated under this Agreement will be borne and timely paid as set forth on
Exhibit 12.2 hereto. All ad valorem taxes incurred and related to the Real
Estate will be shared by Sellers and Buyer and will be prorated as of the
Effective Date. The Purchase Price will be reduced, on a dollar-per-dollar
basis, to the extent and in an amount equal to any taxes that are accrued but
unpaid by Sellers as of the date of Closing.
12.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given: (a) if delivered personally
or sent by facsimile, on the date received, (b) if delivered by overnight
courier, on the day after mailing so long as the sending party retains a receipt
thereof, and (c) if mailed, five (5) days after mailing with postage prepaid.
Any such notice will be sent as follows:
To Sellers and Shareholders:
Xxxxxxx and Xxxxx Xxxxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
or
Xxxxxxx Xxxxx
00 Xxxx Xxxx
Xxxxxxx, XX 00000
with a courtesy copy to:
Xxxxx Xxxxxx
Xxxxxxxx Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
To the Buyer:
American HomePatient, Inc.
0000 Xxxxxxxx Xxx
Xxxxx 000
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Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
with a courtesy copy to:
Xxxxxx X. Xxxxxxxx
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
12.4 Confidentiality; Prohibition on Trading. Sellers, Shareholders and
their Affiliates agree to maintain the confidentiality of the existence of this
Agreement and the transactions contemplated hereunder, unless disclosure is
required by law. Sellers, Shareholders and their Affiliates agree not to trade
in the securities of Buyer or its Affiliates based upon any nonpublic
information.
12.5 Partial Invalidity; Waiver. The invalidity or unenforceability of
any particular provision of this Agreement will not affect the other provisions
hereof, and this Agreement will be construed in all respects as if such invalid
or unenforceable provisions were omitted. Further, there will be automatically
substituted for such invalid or unenforceable provision a provision as similar
as possible which is valid and enforceable. Neither the failure nor any delay on
the part of any party hereto in exercising any rights, power or remedy hereunder
will operate as a waiver thereof, or of any other right, power or remedy; nor
will any single or partial exercise of any right, power or remedy preclude any
further or other exercise thereof, or the exercise of any other right, power or
remedy. No waiver of any of the provisions of this Agreement will be valid
unless it is in writing and signed by the party against which it is sought to be
enforced.
12.6 Interpretation; Knowledge. All pronouns and any variation thereof
will be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or entity, or the context, may require. Further,
it is acknowledged by the parties that this Agreement has undergone several
drafts with the negotiated suggestions of both; and, therefore, no presumptions
will arise favoring either party by virtue of the authorship of any of its
provisions or the changes made through revisions. Any table of contents and
paragraph headings in this Agreement are for convenience of reference only and
will not be considered or referred to in resolving questions of interpretation.
Whenever in this Agreement the term "to the best knowledge of Sellers or
Shareholders" or the like is used, Sellers and Shareholders will each be deemed
to have the knowledge of Shareholders, and Sellers' officers, directors and key
employees; and Sellers and Shareholders will each be under a duty of due
inquiry.
12.7 Entire Agreement; Counterparts. This Agreement, including the
Exhibits and attachments hereto, constitutes the entire agreement between the
parties hereto with
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regard to the matters contained herein and it is understood and agreed that all
previous undertakings, negotiations and agreements between the parties are
merged herein. This Agreement may not be modified orally, but only by an
agreement in writing signed by Buyer, Sellers and Shareholders. This Agreement
may be executed simultaneously in two or more counterparts each of which will be
deemed an original and all of which together will constitute but one and the
same instrument.
12.8 Legal Fees and Costs. In the event any party incurs legal expenses
to enforce or interpret any provision of this Agreement, the prevailing party
will be entitled to recover such legal expenses, including, without limitation,
attorney's fees, costs and disbursements, in addition to any other relief to
which such party will be entitled.
12.9 Controlling Law. This Agreement will be construed, interpreted and
enforced in accordance with the substantive laws of the State of Tennessee,
without giving effect to its conflict of laws provisions.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SELLERS":
EVOCARE, INC.
By:
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Title:
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EVOCARE HOME HEALTH CARE
SERVICES, INC.
By:
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Title:
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"SHAREHOLDERS":
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XXXXXXX XXXXX
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XXXXXXX X. XXXXXXXX
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XXXXX XXXXXXXX
"BUYER":
AMERICAN HOMEPATIENT, INC.
By:
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Title:
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