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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
XXXX-CARE SYSTEMS, INC.
"XXXX-CARE"
SCRIPTS & THINGS, INC.
"SCRIPTS"
XXXXXXX XXXXXX AND XXXXXXX XXXXXXXXX
COLLECTIVELY, THE "SHAREHOLDERS,"
AND
CAPSTONE PHARMACY SERVICES, INC.
THE "PARENT"
XXXX MERGECO, INC. "GMI" AND SCRIPTS MERGECO, INC. "SMI"
COLLECTIVELY THE "CAPSTONE SUBS"
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
effective September 30, 1995, by and among XXXX-CARE SYSTEMS, INC., a New York
corporation ("Xxxx-Care"), SCRIPTS & THINGS, INC., a New York corporation
("Scripts"), XXXXXXX XXXXXX and XXXXXXX XXXXXXXXX (collectively the
"Shareholders"), CAPSTONE PHARMACY SERVICES, INC., a Delaware corporation
("Parent") and XXXX MERGECO, INC., a New York corporation ("GMI") and SCRIPTS
MERGECO, INC. , a New York corporation("SMI" and together with GMI, the
"Capstone Subs").
R E C I T A L S:
WHEREAS, Shareholders own and operate XXXX-CARE AND SCRIPTS, which
operate pharmacy businesses in the New York City area, all as more particularly
described on Exhibit A hereto, which Exhibit sets forth the type of services
and products provided by Xxxx-Care and Scripts at each location (collectively,
the "Business"); and
WHEREAS, Shareholders own all of the issued and outstanding capital
stock of Xxxx-Care and Scripts (the "Stock"); and
WHEREAS, the Shareholders and the respective Boards of Directors of
Xxxx-Care, Scripts, Parent and Capstone Subs consider the acquisition by Parent
of Xxxx-Care and Scripts through a merger in accordance with this Agreement to
be in the respective best interests of the parties. To that end, each
Shareholder and Board of Directors has approved this Agreement and the forms of
Certificate of Merger attached hereto as Exhibit B and Exhibit C (the
"Certificate of Merger"). The parties adopt this Agreement, together with the
forms of Certificate of Merger, as a "plan of reorganization" within the
meaning of Section 368 of the Internal Revenue Code of 1984, as amended (the
"Code").
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained in this Agreement, and 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. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3
hereof) and subject to and upon the terms and conditions of this Agreement,
Xxxx-Care shall be merged with and into GMI and Scripts shall be merged with
and into SMI (the "Merger") in
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accordance with provisions of the New York Business Corporation Law ("NYBCL").
Following the Merger, GMI and SMI shall continue as the surviving corporations
under the names "Xxxx-Care Systems, Inc." and "Scripts & Things, Inc.",
respectively (collectively the "Surviving Corporations"), and the separate
corporate existence of Xxxx-Care and Scripts will cease.
1.2 Effects of the Merger. At the Effective Time (as defined in
Section 1.3 hereof), the Surviving Corporations shall, without any other
action, possess all the rights, privileges, powers and franchises of a public
as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of Xxxx-Care and GMI and Scripts and SMI as the
case may be (Xxxx-Care and GMI on the one hand and Scripts and SMI on the other
are sometimes hereinafter referred to as the "Constituent Corporations" for the
respective Surviving Corporation); and all rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to any of the Constituent Corporations on
whatever account, and shall be vested in their respective Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
their respective Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise, in
the Constituent Corporations, shall not revert or be in any way impaired by
reason of the Merger; but all rights of creditors and all liens upon any
property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of each of the Constituent
Corporations shall thenceforth attach to their respective Surviving
Corporation, and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it.
1.3 Effective Time and Transaction Effective Date. The Merger
shall become effective at the time of the filing of the Certificate of Merger
with the office of the Secretary of State of the State of New York in
accordance with the applicable provisions of the NYBCL, which Certificate of
Merger shall be so filed as soon as practicable after the Closing (as defined
in Section 8.1). The date and time when the Merger shall become effective for
the purposes of New York law are herein referred to as the "Effective Time".
Upon consummation, the Closing shall be deemed to be effective for accounting
purposes as of 12:01 a.m. local time on September 30, 1995 (the "Transaction
Effective Date"), which date is the effective date of the interim management
agreement entered into among Parent, Xxxx-Care and Scripts (the "Interim
Management Agreement").
1.4 Certificate of Incorporation. The Articles of Incorporation
of each of the Capstone Subs in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of each of the Surviving
Corporations, as applicable, until amended in accordance with the provisions of
the applicable corporate law, except that at the Effective
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Time the Certificate of Incorporation of each may be amended and restated as
may be provided for in the forms of the Certificate of Merger.
1.5 Bylaws. The Bylaws of each of the Capstone Subs in effect
immediately prior to the Effective Time shall be the Bylaws of each of the
Surviving Corporations, as applicable, until amended in accordance with the
provisions of the applicable corporate law, the Certificate of Incorporation of
such Surviving Corporation and such Bylaws.
1.6 Directors. The directors of each of the Capstone Subs
immediately prior to the Effective Time shall, after the Effective Time, be the
directors of each of the Surviving Corporations, as applicable, without change,
until their successors have been duly elected and qualified in accordance with
the Certificate of Incorporation and Bylaws of such Surviving Corporation.
1.7 Officers. The officers of each of the Capstone Subs
immediately prior to the Effective Time shall, after the Effective Time, be the
officers of each of the Surviving Corporations, as applicable, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of such
Surviving Corporation or until his or her successor has been duly elected and
qualified in accordance with the Certificate of Incorporation and Bylaws of
such Surviving Corporation.
ARTICLE II. STATUS AND CONVERSION OF SECURITIES
2.1 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Capstone Subs,
Xxxx-Care, Scripts or the Shareholders:
(1) Each share of common stock, par value $.01 per share,
of SMI and GMI issued and outstanding immediately prior to the Effective Time
shall continue without change and shall represent validly issued, fully paid
and nonassessable shares of common stock of the applicable Surviving
Corporation.
(2) Each share of Xxxx-Care and Scripts Common Stock held
by Xxxx-Care or Scripts (as the case may be) as a treasury share shall be
canceled and no payment shall be made with respect thereto.
(3) Each outstanding share of Xxxx-Care and Scripts
Common Stock issued and outstanding immediately prior to the Effective Time,
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be canceled and extinguished and converted into the
right to receive an aliquot portion of the Merger Consideration (as defined
below) as described below.
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2.2 The Merger Consideration. The Merger Consideration shall be
as follows:
(1) Five Million six hundred and seventy thousand dollars
($5,670,000.00) which represents consideration for the beds, currently
serviced by Xxxx-Care under contract as of September 30, 1995 and listed on
Exhibit 2.2(1) hereto; plus
(2) Seven Hundred Thousand Dollars ($700,000) which
represents $350.00 times 2,000 additional facility beds, which it is
anticipated that the Surviving Corporations shall obtain the right to service
under binding written contracts executed and delivered as a result of
Shareholders' efforts by May 31, 1996 (which bed remains as a client of the
Surviving Corporations for a 12 month period from the date acquired); provided,
however, that the Merger Consideration Adjustments set forth in Section 2.4
hereof shall constitute the sole consequences of any failure to obtain or
retain such beds; plus
(3) One Million Five Hundred Thousand Dollars
($1,500,000.00) which represents $150.00 times 10,000 additional facility beds,
which it is anticipated that the Surviving Corporations shall obtain the right
to service under binding written contracts executed and delivered as a result
of Shareholders' efforts by September 30, 1998 (which bed remains as a client
of the Surviving Corporations for a 12 month period from the date acquired);
provided, however, that the Merger Consideration Adjustments set forth in
Section 2.4 hereof shall constitute the sole consequences of any failure to
obtain or retain such beds.
For purposes of determining whether beds under Sections 2.2(2), and
2.2(3) are to be counted as obtained "as a result of Shareholders' efforts",
the parties agree that beds obtained as a result of the efforts of employees of
the Surviving Corporations who are under the direct control of Shareholders
shall be deemed to be beds obtained "as a result of Shareholders' efforts". In
the event that it is not clear that beds are obtained as a result of the
efforts of employees under Shareholders' direct control, the written statement
of the customer that the Shareholders were the procuring cause shall be deemed
to satisfy the requirement.
The Merger Consideration shall be payable $100,000 in cash,
$1,220,000 in promissory note(s) and $6,550,000 in shares of common stock of
Parent, par value $.01 per share; provided that cash may be paid in lieu of
fractional shares. The number of shares to be issued shall be calculated by
dividing the Purchase Price to be paid in stock by the Share Value (as defined
in Section 2.3). The cash and shares of stock so determined shall be allocated
between Xxxx-Care and Scripts as set forth in Exhibit 2.2(3) and shall be
distributed, as allocated, on a pro-rata basis among the outstanding shares of
Xxxx-Care and Scripts, respectively, as described in Section 5.2. Of the cash
portion of the Merger Consideration, $1,220,000 shall be payable by Parent's
unsecured note(s)
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("Merger Consideration Note(s)") due January 2, 1996, bearing interest at 10%
per annum until paid. The Merger Consideration Note(s) shall be subject to
offset in the amount of $293,513, which amount represents the obligations of
Shareholders to the Surviving Corporations, and which amount shall be deemed to
be repaid by such offset.
2.3 Share Value. "Share Value" is defined as $6.50 per share of
common stock of Parent.
2.4 Merger Consideration Adjustments. As of Closing, the Merger
Consideration shall be calculated assuming that all 12,000 additional facility
beds referenced in Section 2.2(2) and Section 2.2(3) will be obtained within
the specified periods. The Merger Consideration shall be subject to post
closing adjustment as follows:
(1) The Shareholders shall repay any consideration paid
pursuant to Sections 2.2(2) and 2.2(3) for an additional bed to the extent the
Surviving Corporations do not obtain an executed contract to service the beds
as a result of Shareholders' efforts (as defined in Section 2.2) within the
respective time periods stated above. The repayment obligation shall be
satisfied as set forth in Section 2.5(2) upon the respective dates set forth in
Section 2.2 (2) and (3) above.
(2) The Shareholders shall repay any consideration paid
pursuant to Sections 2.2(2) and 2.2(3) for any additional bed not retained for
a full 12 months from the date acquired. Shareholders shall not be required to
repay any such consideration for beds which are not retained for 12 months in
the event that such beds are not retained solely as a result of the lack of
proper service being provided by employees of Parent or the Surviving
Corporations other than Shareholders or persons under the Shareholders'
control, and provided Shareholders notify Parent of such failure in writing
prior to termination and Parent is afforded a reasonable opportunity to cure
such lack of service. The repayment obligation shall be satisfied as set forth
in Section 2.5(2) upon loss of any such aforesaid bed. As to beds not serviced
by operations managed by the Shareholders, the preceding proviso applies for
any failure only if Shareholders had knowledge thereof.
(3) The Merger Consideration shall be adjusted upon
receipt of the Post Closing Financial Statements (as defined in Section 5.4)
and from time to time in accordance with Article 14 hereof to the extent that
Shareholders have liability thereunder. Such adjustment shall be immediately
satisfied as set forth in Section 2.5(2).
2.5 Escrow Agreement.
(1) The Shareholders shall place in escrow at Closing
under the terms of an escrow agreement in the form of Exhibit 2.5 hereto (the
"Escrow Agreement"), all 338,462 shares of Parent Common Stock to be received
by them pursuant to section 2.2
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(2) and 2.2 (3) to be used to satisfy in whole or in part any Merger
Consideration reduction as provided in Section 2.4, and to fund in whole or in
part any indemnification obligations to Parent as provided in Section 14. The
escrow shall terminate, and such shares shall be destributed to Shareholders,
as to 107,692 shares, provided such shares are not subject to a claim, on May
31, 1997 (such shares representing a potential adjustment under Section 2.2(2))
and 230,770 shares, provided such shares are not subject to a claim, on
September 30, 1999 (such shares representing a potential adjustment under
Section 2.2(3)). There shall be no adjustment as a result of the loss of any
of the Konig beds thereafter.
(2) The obligations of Shareholders to adjust the Merger
Consideration and any indemnity obligations shall not be limited to and shall
survive the termination of the escrow for the term and to the extent set forth
elsewhere in this Agreement. Such reduction and indemnity claims shall first
be satisfied out of shares in escrow. Shares of Parent Common Stock used to
fund a Merger Consideration adjustment or indemnity obligation on the part of
the Shareholders shall be valued at the Share Value and shall be delivered free
and clear of any lien or encumbrance. In the event that the escrow fund is
insufficient to satisfy any Merger Consideration adjustment or indemnity,
Shareholders shall promptly satisfy such obligation by delivery (free and clear
of any lien or encumbrance) to Parent upon demand sufficient shares of Parent
Common Stock (up to the number of non-escrowed shares received hereunder and
still held by Shareholders at the time such claim is made) valued at the Share
Value. In the event that delivery of such shares is insufficient, then the
remaining obligation shall be satisfied in cash.
2.6 Taking of Necessary Action; Further Action. Parent, Capstone
Subs, Xxxx-Care and Scripts and Shareholders, respectively, shall each use
their best efforts to take all such action as may be necessary or appropriate
in order to effectuate the Merger under the NYBCL as promptly as possible. If
at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporations with full right, title and possession to all assets, property,
rights, privileges, powers, franchises of their Constituent Corporations, the
officers of such corporations are fully authorized in the name of their
corporation or otherwise to take, and shall take, all such lawful and necessary
action.
ARTICLE III. OPTION TO SELL SHARES
3.1 Shareholders' Option to Have Parent Repurchase Shares. For
the period of time from Closing until September 30, 1996, the Shareholders
shall have an option to have Parent repurchase (the "Repurchase Option") at
$6.50 per share in cash an aggregate of not more than 250,000 shares of the
common stock delivered as Merger Consideration (Xxxxxxx Xxxxxx to have a
Repurchase Option to sell up to 208,333 shares and Xxxxxxx Xxxxxxxxx to have a
Repurchase Option to sell up to 41,667 shares). Parent shall
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repurchase such shares from a Shareholder upon 30 days written notice by such
Shareholder to Parent of a Repurchase Option exercise. Upon receipt of notice
hereunder Parent shall have thirty (30) days to consummate the repurchase of
shares pursuant to this Section. The parties hereby agree that the Repurchase
Option shall apply only to shares originally delivered free of escrow. This
Repurchase Option shall terminate for notices given after September 30, 1996
or if earlier, upon the date a registration statement under the Securities Act
of 1933 becomes effective covering at least 250,000 shares of non escrowed
Common Stock received by Shareholders.
ARTICLE IV. RECEIVABLES
4.1 Collection of Receivables. After Closing, the Surviving
Corporations will proceed to collect the Receivables as defined in Section
5.11(3)(d). Shareholders shall provide such assistance in the collection
process as the Surviving Corporation or Parent may reasonably request. For
purposes of calculating Shareholders' Equity at September 30, 1995 in the Post
Closing Financial Statements, as defined below, any Receivables net of
allowance for doubtful accounts set forth on the Interim Financial Statements,
as defined below, not collected as of March 31, 1996 shall be deemed to have
been uncollectable as of September 30, 1995 and therefore not included in
calculating Shareholders' equity as of such date. Parent will refund to the
Shareholders any amounts received by Parent or Surviving Corporations after
March 31, 1996 on receivables for which Shareholders have made a payment to
Parent under Article 14.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
As a material inducement to Parent and the Capstone Subs to enter into
this Agreement and to consummate the transactions contemplated herein,
Shareholders hereby represent and warrant to Parent and the Capstone Subs,
which representations and warranties shall be true and correct on the
Transaction Effective Date and on the date of Closing, as follows:
5.1 Organization, Qualification and Authority. Each of Xxxx-Care
and Scripts is a corporation duly organized, validly existing and in good
standing in the State of New York. Since the date of its organization and
incorporation, Xxxx-Care and Scripts have 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 jurisdiction. Xxxx-Care and
Scripts have full power and authority to own, lease and operate their
facilities and assets as presently owned, leased and operated; to carry on
their businesses as they are now being conducted; and are duly qualified to do
business and are in good standing in each of the jurisdictions where the
Business is conducted. Except for Shareholders, no other person
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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 Xxxx-Care or Scripts. Except as set forth on Exhibit 5.1, Xxxx-Care and
Scripts 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, the status of each of which is summarized
in Exhibit 5.1. Neither Xxxx-Care, Scripts nor any Shareholder is or has been
an affiliate of "Xxxx-Care Pharmaceuticals". Each such business enterprise is
duly organized, validly existing, and in good standing in the state of its
incorporation or formation and is in good standing and duly qualified to do
business in any jurisdiction where its business is conducted.
Xxxx-Care, Scripts and 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 each such
party hereby, and to take all actions necessary, in their respective
capacities, to permit or approve the actions of Xxxx-Care, Scripts and
Shareholders 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 Xxxx-Care, Scripts and Shareholders, have
been duly authorized by all necessary action on the part of such parties. This
Agreement and all other agreements and documents executed in connection
herewith by Xxxx-Care, Scripts and/or Shareholders, upon due execution and
delivery thereof, shall constitute the valid and binding obligations of
Xxxx-Care, Scripts and/or Shareholders, as the case may be, 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.
5.2 Capitalization and Stock Ownership. Except for Shareholders,
no other 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 Xxxx-Care or Scripts. The capital stock of Xxxx-Care and
Scripts consists of 200 shares of common stock of Xxxx-Care, no par value per
share, and 200 shares of common stock of Scripts, no par value per share
(collectively, the "Stock") of which 100 and 40 shares are issued and
outstanding for Xxxx-Care and Scripts, respectively, all of which is duly
authorized, validly issued, fully paid and nonassessable, and is owned free and
clear of any liens, charges, encumbrances, security interests, pledges or any
other restrictions whatsoever. Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxxxx own
five-sixths (5/6) and one-sixth (1/6), respectively, of the issued and
outstanding common stock of Xxxx-Care and Scripts. At Closing, Xxxx-Care and
Scripts shall have no outstanding subscriptions, options, warrants, calls,
contracts, convertible securities or other instruments, agreements or
arrangements of any nature whatsoever under which Xxxx-Care and/or Scripts are
or may be obligated or compelled to issue any capital stock, security or
interest of any kind, or to transfer or modify any right
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with respect to any capital stock, security or other interest, and no one has
any pre-emptive rights, right of first refusal or similar rights with respect
to the Stock or any equity interest in Xxxx-Care or Scripts. Neither
Xxxx-Care, Scripts nor any Shareholder is a party to any, and there exist no,
voting trusts, stockholder agreements, pledge agreements or other agreements
relating to or restricting the transferability of any shares of the Stock or
equity interests of Xxxx-Care or Scripts. The Stock has been issued in
accordance with all applicable federal and state securities laws.
5.3 Absence of Default. The execution, delivery and consummation
of this Agreement, and all other agreements and documents executed in
connection herewith by Xxxx-Care, Scripts and 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, or create (or cause the acceleration of the maturity of) any
debt, indenture, obligation or liability affecting Xxxx-Care or Scripts or the
Business or rights in any of the Stock, result in the creation or imposition
of any security interest, lien, charge or other encumbrance upon any of the
Stock, or otherwise adversely affect Parent, Xxxx-Care, Scripts or the Business
under: (a) any term or provision of the Charter or Bylaws of Xxxx-Care or
Scripts; (b) any contract, lease, purchase order, agreement, document,
instrument, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Xxxx-Care, Scripts or any Shareholder is a party
or by which Xxxx-Care, Scripts, any Shareholder, any of the Stock, the Business
or any of 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 Xxxx-Care, Scripts, any
Shareholder, any of the Stock, the Business or any of the Assets are subject.
5.4 Financial Statements.
(1) Attached hereto as Exhibit 5.4 are true and correct
copies of Xxxx-Care's and Script's combined audited balance sheets as of
December 31, 1994 and their audited income statements for the year then ending
(the "Fiscal Year Financial Statements"), and the interim unaudited balance
sheets and income statements of Xxxx-Care and Scripts for the nine (9) month
period ended September 30, 1995 (the "Interim Financial Statements" which with
the Fiscal Year Financial Statements shall be the "Financial Statements"). The
Financial Statements are based on the books and records of Xxxx-Care and
Scripts and present fairly, in compliance with generally accepted accounting
principles, the financial position of Xxxx-Care and Scripts as of, and the
results of their operations for, the periods specified. By April 15, 1996, the
shareholders will cause an audit of Xxxx-Care and Scripts to be made as of the
nine month period ended September 30, 1995 (the "Post Closing Financial
Statements") and the results of such audit shall not reflect any material
adverse change in the financial position or results of operations of Xxxx-Care
and Scripts at September 30, 1995 from that reflected on the
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Financial Statements. In addition, the Post Closing Financial Statements shall
reflect reserves for accounts receivable and inventory that are consistent with
GAAP and Xxxx and Scripts' prior financials. The Financial Statements will be
stated with all disclaimers required for inclusion of such Financial Statements
in Parent's securities filings.
(2) The books and records of Xxxx-Care and Scripts on a
consolidated basis are in such order and completeness so that an unqualified
audit may be performed for the two full fiscal years prior to Closing.
Shareholders shall fully and readily cooperate with Parent in Parent's attempt
to perform an audit of Xxxx-Care and Scripts for any period prior to Closing
not already audited.
5.5 Operations Since September 30, 1995. Since September 30,
1995, there has been no:
(a) except as set forth on Exhibit 5.5(a), material
change in the condition, financial or otherwise, which has, or could reasonably
be expected to have, an adverse effect on any of the Assets or the Business, or
in the results of the operations of Xxxx-Care or Scripts;
(b) loss, damage or destruction of or to any material
portion of the Assets, whether or not covered by insurance;
(c) sale, lease, transfer or other disposition by
Xxxx-Care or Scripts of, or mortgages or pledges of or the imposition of any
lien, charge or encumbrance on, any portion of the Assets, other than those
made in the ordinary course of business;
(d) except as set forth on Exhibit 5.5(d) increase in the
compensation payable by Xxxx-Care or Scripts to any of its shareholders,
employees, directors, independent contractors or agents, or 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,
independent contractors or agents of Xxxx-Care or Scripts;
(e) cumulative net operating loss incurred in the
operation of the Business;
(f) adjustment or write-off of Receivables or reduction
in reserves for Receivables outside of the ordinary course of business;
(g) change in the accounting methods or practices
employed by Xxxx-Care or Scripts or change in adopted depreciation or
amortization policies;
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(h) issuance or sale by Xxxx-Care or Scripts, or contract
or other commitment entered into by Xxxx-Care, Scripts or Shareholders for the
issuance or sale, of any shares of capital stock or securities convertible into
or exchangeable for capital stock of Xxxx-Care or Scripts;
(i) except as set forth on Exhibit 5.5(i), payment by
Xxxx-Care or Scripts of any dividend, distribution or extraordinary or unusual
disbursement or expenditure or intercompany payable;
(j) sale, transfer, pledge, mortgage or other disposition
of any of the Stock or the Assets (except inventory and equipment held for rent
in the ordinary course of business and consistent with Xxxx-Care's and Scripts'
past practices); merger, consolidation or similar transaction; or solicitation
therefor;
(k) security interest, guarantee or other encumbrance,
or, other than in the ordinary course of business, obligation or liability, in
each case whether absolute, accrued, contingent or otherwise, or whether due or
to become due, incurred or paid by Xxxx-Care or Scripts to any person or
entity; or the making by Xxxx-Care or Scripts of any loan or advance to, or an
investment in, any person or entity;
(l) federal, state or local statute, rule, regulation,
order or case adopted, promulgated or decided which, to the best knowledge of
Xxxx-Care, Scripts and Shareholders, materially adversely affects Xxxx-Care,
Scripts, any of the Stock, the Business or any of the Assets;
(m) strike, work stoppage or other labor dispute
adversely affecting the Business; or
(n) termination, waiver or cancellation of any rights or
claims of Xxxx-Care or Scripts under contract or otherwise.
Further, since September 30, 1995, the Shareholders have not received
any compensation, benefits or distributions from Xxxx-Care or Scripts, whether
as salary, bonus, fees, dividends or any other form of compensation, which is
greater than the amount of compensation and benefits previously paid.
5.6 Absence of Certain Liabilities. Except as set forth on
Exhibit 5.6, Xxxx-Care or Scripts have, and as of the Transaction Effective
Date and Effective Date will have, no contingent liabilities or obligations,
except for those incurred in the ordinary course of business not in excess of
$50,000 in the aggregate.
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5.7 Employment Discrimination. Except as disclosed in Exhibit 5.7
attached hereto, no person or party (including, without limitation, any
governmental agency) has asserted, or to the best knowledge of Xxxx-Care,
Scripts and Shareholders, has threatened to assert, any claim for any action
or proceeding of any type, against Xxxx-Care or Scripts (or any officer,
director, employee, agent or Shareholder of Xxxx-Care or Scripts) 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, Family and Medical
Leave Act, or any workers compensation statutes. The claims disclosed in
Exhibit 5.7 will not result in any liability to or obligation of Parent,
directly or through the Surviving Corporations, and will not cause or lead to
any lien or encumbrance being placed, created or filed against or upon any of
the Stock or Assets.
5.8 Licenses and Permits.
(1) Xxxx-Care and Scripts have all local, state and
federal licenses, permits, registrations, certificates, contracts, consents,
accreditations and approvals (collectively, the "Licenses and Permits")
necessary for Xxxx-Care and Scripts to occupy, operate and conduct the
Business, including, but not limited to, state pharmacy permits and controlled
substance registrations, and federal drug enforcement agency registrations.
There is no default on the part of Xxxx-Care or Scripts, and to the knowledge
of Xxxx-Care, Scripts and Shareholders there is no default on the part of any
other party under any of such licenses and there does not exist any waivers or
exemptions relating thereto. There is no default on the part of Xxxx-Care or
Scripts or any other party under any of the Licenses and Permits. There exists
no grounds for revocation, suspension or limitation of any of the Licenses or
Permits. Copies of each of the Licenses and Permits are attached to and listed
on Exhibit 5.8(1) attached hereto. The most recent licensure surveys and
deficiency reports related to each of these items has also been included in
Exhibit 5.8(1). Xxxx-Care and Scripts are and at the time of Closing will be,
licensed by the regulatory bodies listed on Exhibit 5.8(1). No notices have
been received by Xxxx-Care, Scripts or Shareholders with respect to any
threatened, pending, or possible revocation, termination, suspension or
limitation of the Licenses and Permits.
(2) Xxxx-Care and Scripts are not required to have any
certificates of need or similar authorizations in order to operate the
Business.
(3) Each employee of Xxxx-Care and Scripts has all
Licenses and Permits required for each such employee to perform such employee's
designated functions and duties for Xxxx-Care and Scripts in connection with
conducting the Business, and there exists no waivers or exemptions relating
thereto. There is no default under, nor does there
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exist any grounds for revocation, suspension or limitation of, any such
Licenses and Permits.
5.9 Medicare, Medicaid and Other Third-Party Payors.
(1) Neither Xxxx-Care nor Scripts is or has previously
been a participant in the Medicare program. Xxxx-Care and Scripts participate
in the Medicaid Program (the "Program"). A list of and copies of their
existing contracts and other documentation evidencing such participation
(collectively, the "Program Agreements") are included in Exhibit 5.12 attached
hereto. Xxxx-Care and Scripts are, and will be at the time of Closing, in full
compliance with all of the terms, conditions and provisions of the Program
Agreements.
(2) Exhibit 5.9(2) attached hereto contains a copy of
Xxxx-Care's and Scripts' most recent Statement of Deficiencies and Plan of
Correction, if any.
(3) No notice of any offsets against future
reimbursements under or pursuant to the Program has been received by Xxxx-Care,
Scripts or Shareholders, nor 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 Program. Neither
Xxxx-Care nor Scripts has not been subject to or threatened with loss of waiver
of liability for utilization review denials with respect to the Program during
the past twelve (12) months, nor has Xxxx-Care, Scripts or Shareholders
received notice of any pending, threatened or possible decertification or other
loss of participation in, the Program.
(4) Xxxx-Care and Scripts currently have contractual
arrangements with Blue Cross and other third party Payors. A list of and
copies of their existing Blue Cross contract(s) and other third party payor
contract(s) are included in Exhibit 5.12 attached hereto. Xxxx-Care and Scripts
are, and will be at the time of Closing, in full compliance with all of the
material terms, conditions and provisions of such contracts.
(5) All liabilities for contractual adjustments
discounts, refunds and other offsets of Xxxx-Care and Scripts under any third
party payor or reimbursement programs have been properly reflected and
adequately accrued or reserved for in the Financial Statements, and there is no
basis for any offsets against any reimbursement under any third-party payor or
reimbursement programs due to Parent or either of the Surviving Corporations
relating to the periods on or prior to the Effective Time.
5.10 Compliance with Zoning, Land Use and Other Laws; Easements.
None of the Real Estate is in violation of any zoning, public health, building
code or other similar laws applicable thereto or to the ownership, occupancy
and/or operation thereof, nor does
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there exist any waivers or exemptions relating to the Real Estate with respect
to any non-conforming use or other zoning or building codes matters. Xxxx-Care
and Scripts have all easements and rights necessary to continue operation of
the Business, copies of which are set forth in Exhibit 5.10 attached hereto.
5.11 Assets.
(1) Xxxx-Care and Scripts are the sole legal and
beneficial owners of 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 as set
forth in the Leases and Contracts. The Assets are all the assets set forth on
the Interim Financial Statements or used in the operation of the Business, with
such changes as may occur in the ordinary course of business.
(2) The descriptions of the Real Estate contained in
Exhibit 5.11(3)(a) are accurate and sufficient for their intended purposes,
and such descriptions include all real property leased or owned by Xxxx-Care
and Scripts and used in connection with the Business or set forth on the
Interim Financial Statements. Xxxx-Care and Scripts are sole and exclusive
record, legal and equitable owners of all right, title and interest in and has
good, marketable and insurable title in fee simple to, and are in possession
of, all of the Real Estate including the buildings, structures and improvements
situated thereon and all appurtenances thereto, in each case free and clear of
all mortgages, liens, leases, assessments, easements, covenants, options,
rights of refusal, restrictions, reservations, defects in title, encroachments
and other encumbrances, whether or not the same render the title to such Real
Estate uninsurable or unmarketable. Xxxx-Care and Scripts are in lawful
possession of all of the Real Estate that is leased rather than owned,
including, without limitation, the buildings, structures and improvements
situated thereon and appurtenances thereto, 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, the merger as contemplated
by the terms of this Agreement once effected as contemplated hereunder, will
vest in the Parent, either directly or indirectly through one of the Surviving
Corporations, the lawful right to possess and use the leased Real Estate,
superior in right to all others.
(3) At the Transaction Effective Date and at the
Effective Time, Xxxx-Care and Scripts shall own or lease, as specified, all
assets, tangible and intangible, real and personal, that are necessary or
reasonably desirable to operate the Business (collectively, the "Assets"), free
and clear of all encumbrances, mortgages, pledges, liens, security interests,
obligations and liabilities other than the Continuing Liabilities (as defined
in below), which Assets shall include, without limitation, the following:
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(a) All right, title and interest in and to all
of the land and real estate leased by Xxxx-Care or Scripts and used in
connection with the Business as listed in Exhibit 5.11(3)(a) 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");
(b) All tangible personal property, medical and
other equipment, machinery, data processing hardware and software, furniture,
furnishings, appliances, vehicles and other tangible personal property of every
description and kind and all replacement parts therefor used in connection with
the Business including, without limitation, the items listed on Exhibit
5.11(3)(b) attached hereto (collectively, the "Equipment and Furnishings");
(c) All inventory of goods and supplies used or
maintained in connection with the Business reflected on the Financial
Statements (collectively, the "Inventory");
(d) All accounts and notes receivables listed on
Exhibit 5.11(3)(d) (the "Receivables");
(e) All cash, bank accounts (as listed by name
and address of banking institution, account name and account and routing
numbers on Exhibit 5.11(3)(e) attached hereto), money market accounts, other
accounts, certificates of deposit and other investments of Xxxx-Care and
Scripts (the "Cash and Cash Equivalents");
(f) All patient, medical, personnel, corporate
and other records related to the Business (including hard, microfilm and
computer database copies), and all manuals, books and records used in operating
the Business, including, without limitation, personnel policies and files and
manuals, accounting records, computer software and customer records;
(g) To the full extent transferable, all
licenses, permits, registrations, certificates, consents, accreditations,
approvals and franchises necessary to operate and conduct the Business,
together with assignments thereof, if required, and all waivers which Xxxx-Care
and Scripts currently have, if any, of any requirements pertaining to such
licenses, permits, registrations, certificates, consents, accreditations,
approvals and franchises;
(h) All goodwill, and, to the extent assignable
by Xxxx-Care and Scripts, all warranties (express or implied) and rights and
claims related to the Assets or the operation of the Business;
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(i) All prepaid expenses reflected on the
Financial Statements;
(j) All contract and leasehold rights and
interests pursuant to contracts for purchase or lease of personal property,
construction contracts, contracts for purchase, sale or lease of equipment,
goods or services currently furnished or to be furnished in connection with the
Business and that are approved by Parent (as such term is defined herein);
(k) All intangible or intellectual property
owned, leased, licensed or possessed by Xxxx-Care, Scripts or the Shareholders
and utilized in connection with the Business to the extent Xxxx-Care, Scripts
or any Shareholder has rights in or to such intellectual property including all
right, title and use in and to the names "Xxxx-Care" and "Scripts & Things";
and
(l) All equity interests in Xxxx-Care and Scripts
and all corporate, fiscal and other records pertaining to Xxxx-Care, Scripts or
the Business and all of Xxxx-Care's and Scripts' right, title and interest in
any partnerships, joint ventures or similar arrangements.
(4) At Closing, the Surviving Corporations will retain
only (a) those obligations specifically set forth on Exhibit 5.11(4) attached
hereto, and (b) those obligations arising on and after the Transaction
Effective Date under those Leases and Contracts (as defined in paragraph 5.12)
specifically set forth on Exhibit 5.11(4)(collectively, the "Continuing
Liabilities").
(5) reserved.
(6) reserved.
(7) The Receivables, net of allowance for doubtful
accounts as set forth on the Interim Fiancial Statements, will be collected in
accordance with Section 4.1 within 180 days following the Transaction Effective
Date.
5.12 Leases and Contracts.
(1) Exhibit 5.12 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, Stock or any Asset or any
interest therein, to which Xxxx-Care, Scripts or Shareholders are a party or by
which Xxxx-Care, Scripts, the Assets or the Business is bound or affected,
including, without limitation, wholesaler contracts, service contracts,
management agreements,
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equipment leases and building leases pertaining to any part of the Real Estate
(collectively, the "Leases and Contracts"). Attached to Exhibit 5.12 are
accurate and complete copies of all written Leases and Contracts and written
summaries of key terms of all oral Leases and Contracts.
(2) None of the Leases and 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.
(3) To the knowledge of Shareholders, no event or
condition has happened, except as disclosed to Parent prior to Closing orally
or in writing, 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 Leases and Contracts. There are no counterclaims or
offsets under any of the Leases and Contracts.
(4) 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 Leases and Contracts (except for those that result
from or relate to leased Assets).
(5) To the knowledge of Shareholders, no purchase
commitment by Xxxx-Care or Scripts is in excess of Xxxx-Care's or Scripts'
ordinary business requirements.
(6) The Merger will not default, alter or terminate any
of the Leases and Contracts, and Parent, directly or through one of the
Surviving Corporations, will be entitled to all rights thereunder.
5.13 Environmental Matters.
(1) Hazardous Substances. As used in this Paragraph, 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 Paragraph 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 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 herein), and any of the following: hydrocarbons, petroleum and
petroleum products, asbestos, polychlorinated biphenyls,
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formaldehyde, radioactive substances (other than naturally occurring materials
in place), flammables and explosives.
(2) Compliance with Laws and Regulations. To the
knowledge of Shareholders, all operations or activities by Xxxx-Care and
Scripts upon, or any use of occupancy of the Real Estate, or any portion
thereof, by Xxxx-Care and Scripts, any Affiliates of Xxxx-Care and Scripts
(wherein the term "Affiliates" shall mean any person or entity controlling,
controlled by or under common control with Xxxx-Care and Scripts, and the term
"control" shall 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 Xxxx-Care and Scripts or their Affiliates
("Agents"), or any tenant or subtenant of Xxxx-Care and Scripts of any part of
the Real Estate is and has been in compliance with any and all laws,
regulations, orders, codes, judicial decisions, decrees, licenses, permits and
other applicable requirements of governmental authorities with respect to
Hazardous Substances, pollution or protection of human health and safety
(collectively, "Environmental Laws"), including but not limited to the release,
emission, discharge, storage and removal of Hazardous Substances. Xxxx-Care,
Scripts, Affiliates and Agents have kept the Real Estate free of any lien
imposed pursuant to Environmental Laws. 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 Environmental Law, and which complies
with Environmental Law:
(a) Neither Xxxx-Care, Scripts, their Affiliates
nor, to the best knowledge of Xxxx-Care, Scripts and Shareholders, their Agents
have allowed the use, generation, treatment, handling, manufacture, voluntary
transmission or storage of any Hazardous Substances over, in or upon the Real
Estate, nor, to the best knowledge of Xxxx-Care, Scripts and Shareholders, has
the Real Estate ever been used for any of the foregoing.
(b) Neither Xxxx-Care, Scripts, their Affiliates
nor, to the best knowledge of Xxxx-Care, Scripts and Shareholders, their Agents
have installed or permitted to be installed, in or on the Real Estate friable
asbestos or any substance containing asbestos in condition or amount deemed
hazardous by Environmental Law.
(c) Xxxx-Care and Scripts have not 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, at, on, in or about the Real Estate, or any portion thereof that
would subject the Real Estate or Parent to clean-up obligations imposed by
governmental authorities.
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(d) Neither Xxxx-Care or Scripts nor to
Xxxx-Care's, Scripts and Shareholders' knowledge has any of the Real Estate, or
any part thereof, or any present owner or operator of the Real Estate (i)
either received or been issued a notice, demand, request for information,
citations, 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 Xxxx-Care, Scripts or Shareholders, threatened investigation
or inquiry by any governmental authority for noncompliance with, or any
remedial obligations under Environmental Law, and there are no circumstances
known to Xxxx-Care, Scripts or Shareholders which could serve as a basis
therefor. Neither Xxxx-Care nor Scripts has assumed any liability of a third
party for clean-up under or noncompliance with Environmental Law.
(e) Neither Xxxx-Care, Scripts, their Affiliates
nor, to the best knowledge of Xxxx-Care, Scripts or Shareholders, their Agents
have transported or arranged for the transportation of any Hazardous Substances
to any location which is listed or, to the best knowledge of Xxxx-Care, Scripts
and Shareholders, proposed for listing under Environmental Law or is the
subject of any enforcement action, investigation or other inquiry under
Environmental Law.
Xxxx-Care, Scripts and Shareholders shall promptly notify Parent in
writing of any order of which either is aware, receipt of any notice of
violation or noncompliance with any Environmental Law, any threatened or
pending action of which it is aware by any claims made by any third party of
which Xxxx-Care, Scripts or any Shareholder is aware relating to Hazardous
Substances on, emanations on or from, releases on or from, any of the Real
Estate which relate to the period prior to Closing; and shall promptly furnish
Parent with copies of any written correspondence, notices or legal pleadings
and written summaries of any oral communications or notices in connection
therewith. If, and only if, required by law or where the failure to do so
would impose liabilities on Parent either of the Surviving Corporations, the
Business or the Assets, Parent shall have the right, but shall not be
obligated, to notify any governmental authority of any state of facts which may
come to its attention with respect to Hazardous Substances on, released from or
emanating from any part of the Real Estate. Parent shall give Xxxx-Care and
Scripts prior or simultaneous notice of such notification.
(3) Other Environmental Matters. To the best knowledge
of Xxxx-Care, Scripts and Shareholders, there are no underground storage tanks
on any portion of the Real Estate, and the Real Estate is free of dangerous
levels of naturally-emitted radon. To the best knowledge of Xxxx-Care, Scripts
and Shareholders, no portion of the Real Estate has ever been used as a
landfill. Xxxx-Care and Scripts have furnished to Parent a copy of any
environmental audit, study, report or other analysis on the Real Estate, which
Xxxx-Care, Scripts or their Affiliates obtained or were furnished.
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5.14 Miscellaneous Representations Relating to Real Estate.
(1) To the best knowledge of Xxxx-Care, Scripts and
Shareholders, no part of the Real Estate is currently subject to condemnation
proceedings and no condemnation or taking is threatened or contemplated. There
are no public improvements which may result in special assessments against or
otherwise affect the Real Estate. There are no facts known to either
Xxxx-Care, Scripts or Shareholders that would adversely affect the possession,
use or occupancy of the Real Estate.
(2) Attached as Exhibit 5.14 are complete copies of all
appraisals, mechanical and structural studies or reports or assessments,
engineering plans, architectural drawings, soil studies, surveys and other
documents which have been prepared by or at the direction of Xxxx-Care, Scripts
or Shareholders within the last five (5) years relating to any of the Assets.
(3) All utilities serving the Real Estate are adequate to
operate the Real Estate in the manner it is currently operated and all utility
lines, pipes, hook-ups and wires serving the Real Estate are located within
recorded easements for the benefit of the Real Estate. There are no
encroachments upon the Real Estate and no encroachment of any improvements to
the Real Estate onto adjacent property. None of the improvements to the Real
Estate violate set-back, building or side lines, nor do they encroach on any
easements located on the Real Estate.
(4) All potable and industrial water and all gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving the Real Estate and the
facilities of the Business are installed and operating and are sufficient to
enable the Real Estate and the facilities of the Business to continue to be
used and operated in the manner currently being used and operated, and any
so-called hook-up fees or other associated charges accrued to date have been
fully paid. Xxxx-Care and Scripts have received no written recommendation from
any insurer to repair or replace any of the Assets with which they have not
complied.
5.15 Litigation. Neither Xxxx-Care, Scripts nor Shareholders 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 Medicaid
program, environmental protection, civil rights, public health and safety and
occupational health). Except as set forth in Exhibit 5.15 attached hereto (for
which Shareholders shall jointly and severally indemnify and hold harmless
Parent and the Surviving Corporations), there are no lawsuits, proceedings,
actions, arbitrations, governmental investigations or hearings, claims,
inquiries or proceedings pending or to the knowledge of Shareholders,
threatened (explicitly or implicitly in the form of a demand
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letter) involving Xxxx-Care, Scripts, Shareholders, any of the Stock, any of
the Assets or the Business.
5.16 Employees. Exhibit 5.16 attached hereto sets forth: (a) a
complete list of all of Xxxx-Care's and Scripts' employees, and rates of pay,
(b) true and correct copies of any and all fringe benefits and personnel
policies, (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
Xxxx-Care and Scripts. For purposes of this paragraph, "part-time employee"
means an employee who is employed for an average of fewer than twenty hours per
week to who has been employed for fewer than six (6) 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. Section 2102 et
seq. Except as provided in Exhibit 5.12, Xxxx-Care and Scripts have no
employment agreements with its employees and all such employees are employed on
an "at will" basis. Exhibit 5.16 lists all ex-employees of Xxxx-Care and
Scripts utilizing or eligible to utilize COBRA (health insurance). Xxxx-Care
and Scripts have adequately accrued all salaries and wages, related payroll
taxes and all sick leave, holiday, vacation benefits, retirement and other
fringe benefits that have accrued to Xxxx-Care's and Scripts' employees through
the Transaction Effective Date and Closing Date, including related payroll
taxes.
5.17 Labor Relations. Xxxx-Care and Scripts are not parties 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 Xxxx-Care or Scripts to compensate
Xxxx-Care's or Scripts' 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 Xxxx-Care, Scripts and Shareholders,
threatened labor dispute or information suggesting a possible union drive or
work stoppage, unfair labor practice complaint, strike, administrative or court
proceeding or order between Xxxx-Care, Scripts and any present or former
employee(s) of Xxxx-Care and Scripts. There is no pending or threatened
(explicitly or implicitly in the form of demand letter) suit, action,
investigation or claim between Xxxx-Care and Scripts and any present or former
employee(s) of Xxxx-Care or Scripts. There has not been any labor union
organizing activity at any location of Xxxx-Care or Scripts, or elsewhere, with
respect to Xxxx-Care or Scripts employees within the last three years.
5.18 Insurance. Xxxx-Care and Scripts have in effect and have
continuously maintained insurance coverage for all of their operations,
personnel and assets, and for the Assets and the Business. A complete and
accurate list of all such insurance policies is set forth in Exhibit 5.18
attached hereto, which policies have previously been provided to Parent.
Exhibit 5.18 also sets forth a summary of Xxxx-Care's and Scripts' current
insurance coverage (listing type, carrier and limits), and includes a list of
any pending insurance claims relating to Xxxx-Care and Scripts. Xxxx-Care
and Scripts are not in
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default or breach with respect to any provision contained in any such insurance
policies, nor has Xxxx-Care or Scripts failed to give any notice or to present
any claim thereunder in due and timely fashion.
5.19 Broker's or Finder's Fee. Neither Xxxx-Care, Scripts nor
Shareholders have employed, or are liable for the payment of any fee to, any
finder, broker, consultant or similar person in connection with the
transactions contemplated by this Agreement, except for a $250,000 brokerage
fee which shall be paid by Parent and except for fees to be paid by
Shareholders.
5.20 Conflicts of Interest. None of the following is either a
supplier of goods or services to Xxxx-Care or Scripts, 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 Xxxx-Care or Scripts: (a) Shareholders, (b)
any director or officer of Xxxx-Care or Scripts, or (c) any entity under common
control with Xxxx-Care or Scripts or controlled by or related to
Shareholders.
5.21 Intellectual Property. 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 Xxxx-Care, Scripts or the Shareholders and utilized or
utilizable in connection with the Business are listed and described in Exhibit
5.21 attached hereto. No proceedings have been instituted or are pending or,
to the best knowledge of Xxxx-Care, Scripts and Shareholders, threatened which
challenge the validity of the ownership by Xxxx-Care or Scripts of any such
Intellectual Property. Neither Xxxx-Care, Scripts nor Shareholders have
licensed anyone to use any such Intellectual Property, and neither Xxxx-Care,
Scripts nor Shareholders have any knowledge of the use or the infringement of
any of such Intellectual Property by any other person. Xxxx-Care, Scripts and
Shareholders own or possess adequate and enforceable licenses or other rights
to use all Intellectual Property now used in the conduct of its Business.
5.22 Inventories. The Inventory is of a quality and quantity used
by Xxxx-Care and Scripts in the ordinary course of business determined and
valued consistent with Xxxx-Care's and Scripts' past practices.
5.23 Motor Vehicles. All motor vehicles used in the Business,
whether owned or leased, are listed in Exhibit 5.23 attached hereto. All such
vehicles are properly licensed and registered in accordance with applicable
law.
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5.24 Employee Benefit Plans.
(1) Welfare Benefit Plans. Exhibit 5.24(1) attached
hereto contains a true, accurate and complete list of each "employee welfare
benefit plan" (as defined in Paragraph 3(1) of the Employee Retirement Income
Security Act of 1974 as amended ("ERISA")) maintained by Xxxx-Care or Scripts
or to which Xxxx-Care or Scripts contributes or are required to contribute
(such employee welfare benefit plans being hereinafter collectively referred to
as the "Welfare Benefit Plans"). Copies of all Welfare Benefit Plans have
previously been provided to Parent.
(2) Pension Benefit Plans. Exhibit 5.24(2) attached
hereto contains a true and complete list of each "employee pension benefit
plan" (as defined in Paragraph 3(2) of ERISA) maintained by Xxxx-Care or
Scripts, to which Xxxx-Care or Scripts contributes or is required to
contribute, or which covered employees of Xxxx-Care or Scripts during the
period of their employment with any predecessor of Xxxx-Care or Scripts,
including any multi-employer pension plan as defined under Internal Revenue
Code of 1986, Paragraph 414(f) (such employee pension benefit plans being
hereinafter collectively referred to as the "Pension Benefit Plans"). Copies
of all Pension Benefit Plans have previously been provided to Parent.
(3) Liabilities. Unfunded liabilities under any Welfare
Benefit Plan or Pension Benefit Plan are described on Exhibit 5.24(3) attached
hereto, including information on other entities that should be considered in
connection with calculation of unfunded liability exposure. Neither Parent nor
the Surviving Corporation shall be liable or responsible for any debt,
obligation, responsibility or liability under any such plans.
(4) Termination of Participation. Upon Closing,
Xxxx-Care and Scripts shall cease to be a participating employer under all
Pension Benefit Plans and Welfare Benefit Plans, and Parent and the Surviving
Corporations shall in no way be liable for any obligations thereunder.
5.25 Compliance with Healthcare and Other Laws.
(1) Neither Xxxx-Care, Scripts nor Shareholders have
made any kickback, bribe or payment ("Improper Payment") to any person or
entity, directly or indirectly, for referring, recommending or arranging
business or patients with, to or for Xxxx-Care or Scripts except where such
Improper Payment would not have a material adverse effect on the Surviving
Corporations, Buyer, Xxxx-Care, Scripts, the Business or the Assets following
Closing;
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(2) None of the Leases and Contracts and no activity of
Xxxx-Care, Scripts or Shareholders violates Paragraph 1877 of the Social
Security Act or any similar provision of applicable state law; and
(3) None of the Leases and Contracts and no activity of
Xxxx-Care, Scripts or Shareholders violates provisions of applicable state law
relating to the corporate practice of medicine.
Xxxx-Care and Scripts 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 would not have a material adverse effect on the
Business. No bulk sales or similar statute applies to the transactions
contemplated under this Agreement. All healthcare, tax and other returns,
reports, plans and filings of any nature required to be filed by Xxxx-Care,
Scripts or Shareholders with any federal, state or local governmental
authorities and any 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 could cause it
to be misleading or inaccurate in any material respect.
5.26 Condition of Assets. 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
comprise all of the following: all assets owned by Xxxx-Care and Scripts and
all assets used in connection with the Business and any related businesses.
All components of all of the Equipment and Furnishings are generally in good
working order. Xxxx-Care and Scripts have received no written recommendation
from any insurer to repair or replace any of the Assets with which Xxxx-Care
and Scripts have not complied. Except as required in the ordinary and usual
course of the Business, no assets have been removed, distributed, assigned or
paid by or from Xxxx-Care, Scripts or Shareholders.
5.27 WARN Act. Within the period ninety (90) days prior to
Effective Date, neither Xxxx-Care nor Scripts have 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.
5.28 Tax Returns; Taxes. Xxxx-Care, Scripts and Shareholders have
filed all federal, state and local tax returns and tax reports required by such
authorities to be filed as of the time of the Transaction Effective Date and
the Closing relating to Xxxx-Care, Scripts, the Assets and the Business.
Xxxx-Care, Scripts and Shareholders have paid all taxes, assessments,
governmental charges, penalties, interest and fines due or claimed
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to be due as of such dates (including, without limitation, taxes on properties,
income, franchises, licenses, sales and payrolls) by any federal, state or
local authority relating to Xxxx-Care, Scripts, the Assets and the Business.
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 Xxxx-Care,
Scripts and Shareholders, threatened against Xxxx-Care, Scripts or Shareholders
relating to Xxxx-Care or Scripts by any federal, state or local authority; and
neither Xxxx-Care, Scripts nor Shareholders, have been granted any extension
of the limitation period relating to Xxxx-Care or Scripts applicable to any
tax claims.
5.29 Service of Beds. Xxxx-Care and Scripts currently service
under written contracts (with the exception of "adult homes") all of the beds
set forth on Exhibit 2.2(1) and, as of Closing, serviced 3,000 beds under a
contract with the Konig nursing home chain.
5.30 No Omissions or Misstatements. None of the representations,
warranties, covenants or other information in this Agreement and Exhibits
hereto, contains any untrue statement of a material fact or is misleading in
any material respect or omits 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.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PARENT
As an inducement to Shareholders to enter into this Agreement and to
consummate the transactions contemplated herein, Parent hereby represents and
warrants to Shareholders, which representations and warranties shall be true
and correct on the date of Closing, as follows:
6.1 Organization, Qualification and Authority. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Parent has the full corporate power and
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. Parent 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 Parent hereby. The execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection herewith by Parent has been duly authorized by
all necessary corporate action on the part of Parent. No other action on the
part of Parent 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
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other agreements and documents executed in connection herewith by Parent, upon
due execution and delivery thereof, shall constitute the valid binding
obligations of Parent, 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.
6.2 Absence of Default. The execution, delivery and consummation
of this Agreement and all other agreements and documents executed in connection
herewith by Parent 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 under: (a) any term or provision of the
Certificate of Incorporation or Bylaws of Parent; (b) any contract, lease,
agreement, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Parent is a party or by which Parent 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 Parent is subject. At Closing any approval or consent of any
governmental or regulatory authority having jurisdiction over Parent and
required to be obtained to enable Parent to complete the transactions
contemplated hereby shall have been obtained by Parent.
6.3 Broker's or Finder's Fee. Except for fees for which Parent is
soley liabile, Parent has not employed and is not liable for the payment of any
fee to any finder, broker, government official, consultant or similar person in
connection with the transactions contemplated by this Agreement.
6.4 Parent Reports. Parent has delivered to the Shareholders
those filings with the Securities and Exchange Commission (collectively, the
"Parent Reports") listed on Exhibit 6.4 hereto. The Parent Reports were
complete, accurate and correct, in all material respects, when filed. The
Parent Reports, when filed, did not contain any untrue Statement of material
fact or omit to state any material fact necessary in order to make any of the
statements therein not misleading in light of the circumstances in which they
were made.
ARTICLE VII. COVENANTS OF PARTIES
7.1 Preservation of Business and Assets. From the date hereof
until the Closing, Xxxx-Care, Scripts and Shareholders shall use their best
efforts and shall 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
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with prior practice and not other than in the ordinary course of business, to
preserve, protect and maintain for Parent and Capstone Subs the good will of
the suppliers, employees, clientele, patients and others having business
relations with Xxxx-Care, Scripts or the Business. Each of Xxxx-Care, Scripts
and Shareholders shall use their reasonable best efforts to obtain all
documents called for by this Agreement. Parent, Capstone Subs, Xxxx-Care,
Scripts and Shareholders shall use their best efforts to facilitate the
consummation of the transactions contemplated by this Agreement, including the
obtaining of all required regulatory consents, approvals, certifications for
participation, provider contracts, licenses or certificates of need. Other
than in the ordinary course of business, neither Xxxx-Care nor Scripts will
sell, discard or dispose of any of the Assets. Until termination of this
Agreement in accordance with its terms, Xxxx-Care, Scripts and Shareholders
will not sell or transfer, or negotiate the sale or transfer of, either the
Stock or, except in the ordinary course of business or as otherwise
contemplated herein, any material portion of the Assets. Xxxx-Care and Scripts
shall pay no dividend, and shall make no distribution or extraordinary payment
to Shareholders or any third party or pay any intercompany payable other than
in accordance with the terms of this Agreement. None of the Leases and
Contracts shall be amended in any material respect between the date hereof and
Closing without the prior written consent of Parent. From and after the date
hereof until Closing, Xxxx-Care and Scripts will not perform any material
grading or excavation, construction or removal of any improvement, or make any
material other change or improvement upon or about the Real Estate, except as
may be required to preserve and protect the value of such Real Estate. From
and after the date of this Agreement until Closing, Xxxx-Care, Scripts 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.
7.2 Absence of Material Change. From the date hereof until
Closing, neither Xxxx-Care, Scripts nor Shareholders shall make any change in
the Business or in the utilization of the Assets and shall not enter jointly
or separately into any other material contract or commitment or any other
transaction with respect to the Business or the Assets without the prior
written consent of Parent.
7.3 Access to Books and Records.
(a) From the date hereof until the Closing, during
normal business hours Xxxx-Care, Scripts and Shareholders shall give to Parent
and to Parent's counsel, accountants and other representatives, full access to
all of Xxxx-Care's and Scripts' offices, properties, books, contracts,
commitments, records and affairs relating to the Stock, Assets or the Business
so that Parent may inspect and audit them and shall furnish to Parent a copy of
all documents and information concerning the properties and affairs of
Xxxx-Care, Scripts, the Business, Stock or the Assets as Parent may reasonably
request. If any such books, records and materials are in the custody of third
parties, Xxxx-Care, Scripts and
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Shareholders shall direct such third parties to promptly provide them to
Parent. Copies of documents furnished to Parent by Xxxx-Care, Scripts and
Shareholders will be returned by Parent if the transaction is not consummated.
Xxxx-Care, Scripts and Shareholders shall provide Parent promptly with interim
financial statements of Xxxx-Care and Scripts and any other management reports,
as and when they are available.
(b) Following the Closing, Parent shall permit
Shareholders' representatives (including, without limitation, its counsel and
auditors), 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 the Closing. All out-of-pocket
costs associated with the delivery of the requested documents shall be paid by
Shareholders.
(c) Following the Closing, Shareholders shall permit
Parent and its representatives (including, without limitation, its counsel and
auditors), to have access to, and examine and make copies of, any books and
records relating to the Business, Stock or Assets which are retained by
Shareholders and which relate to transactions or events occurring prior to the
Closing. For a period of five years after the Closing, Shareholders agree
that, prior to the destruction or disposition of any such books or records,
Shareholders shall provide not less than forty-five (45) days', nor more than
ninety (90) days', prior written notice to Parent of such proposed destruction
or disposal. If Parent desires to obtain any such documents or records, it may
do so by notifying Shareholders in writing at any time prior to the date
scheduled for such destruction or disposal. In such event, Shareholders shall
not destroy such documents or records and the parties shall then promptly
arrange for the delivery of such documents or records to Parent, its successors
or assigns. All out-of-pocket costs associated with the delivery of the
requested documents or records shall be paid by Parent.
(d) Shareholders shall use their reasonable best efforts
to cause Xxxx-Care's and Scripts' 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 in order to
enable Parent or its affiliates to comply with any applicable registration or
reporting requirements of federal or state securities laws.
(e) After Closing, Shareholders shall make the books and
records of Xxxx-Care and Scripts available to Parent (and, without limitation,
to Parent's auditors and other agents) and shall otherwise cooperate with
Parent in order to permit Parent to conduct an audit of Xxxx-Care's and
Scripts' financial statements for any period prior to Closing not already
audited. Shareholders agrees to cooperate with Parent in Parent's preparation
of financial statements relating to such periods and Parent's filing in a
timely manner of registration statements, private placement memoranda and
periodic reports, if any, pursuant to any applicable federal or state
securities law.
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(f) After Closing, Parent shall afford Shareholders the
right to participate in the preparation of filings with respect to tax returns
relating to the period through Closing.
7.4 [RESERVED]
7.5 Current Return Filing. Shareholders shall be responsible for
the preparation and filing of the federal, state and local income tax and gross
receipts and use tax returns which were due on or before the Transaction
Effective Date. Xxxx-Care and Scripts shall, with Shareholders' assistance
with respect to Business operations occurring prior to Transaction Effective
Date, be responsible for the preparation and filing of all such returns which
were due subsequent thereto. Shareholders shall pay all taxes, including any
penalties or assessments thereon, for any period prior to the Transaction
Effective Date.
7.6 Preserve Accuracy of Representations and Warranties.
Shareholders, Xxxx-Care and Scripts shall use their best efforts to refrain
from taking any action which would render any representation and warranty
contained in Article V hereof untrue, inaccurate or misleading as of Closing.
Shareholders, Xxxx-Care and Scripts will promptly notify Parent and Capstone
Subs of any lawsuit, claim, administrative action or other proceeding asserted
or commenced against Xxxx-Care, Scripts or their directors, officers, or
Shareholders, that may involve or relate in any way to Xxxx-Care, Scripts, any
of the Assets, any of the Stock, Shareholders or the operation of the Business.
Shareholders, Xxxx-Care and Scripts shall promptly notify Parent of any facts
or circumstances that come to either's attention and that cause, or through the
passage of time may cause, any of either Shareholder's, Xxxx-Care's and
Scripts' representations, warranties or covenants to be untrue or misleading
at any time from the date hereof to Closing.
7.7 Maintain Books and Accounting Practices. From the date hereof
until the Closing, Xxxx-Care and Scripts shall maintain their books of account
in the usual, regular and ordinary manner on a basis consistent with prior
years and shall make no change in their accounting methods or practices.
7.8 Indebtedness; Liens. Other than in the ordinary course of
business as reflected in the Financial Statements, until the Closing, with
respect to the Stock and Assets, including the Business and operations
conducted with the Assets, neither Xxxx-Care nor Scripts shall, without the
consent of the Parent, which consent will not be unreasonably withheld, 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. 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,
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encroachments or other encumbrances except for the Continuing Liabilities.
Xxxx-Care and Scripts shall repay the indebtedness referred to in Section 9.6
on or immediately prior to the Closing.
7.9 Compliance with Laws and Regulatory Consents. From the date
hereof until the Closing, (a) Xxxx-Care and Scripts shall comply with all
applicable statutes, laws, ordinances and regulations, (b) Xxxx-Care and
Scripts shall keep, hold and maintain all certificates, certificates of need,
certificates of exemption, accreditations, participation, licenses, and other
permits necessary for the business and operation of the Assets, (c)
Shareholders, Xxxx-Care and Scripts shall use their reasonable efforts and
shall cooperate fully with Parent to obtain all consents, approvals, exemptions
and authorizations of third parties, whether governmental or private, necessary
to consummate the transactions contemplated by this Agreement, and (d)
Shareholders, Xxxx-Care and Scripts shall make and cause to be made all
filings and give and cause to be given all notices which may be necessary or
desirable on either's part under all applicable laws and under their respective
contracts, agreements and commitments in order to consummate the transactions
contemplated by this Agreement.
7.10 Maintain Insurance Coverage. From the date hereof until the
Closing, Xxxx-Care and Scripts shall maintain and cause to be maintained in
full force and effect the existing insurance on the Assets and the operations
of the Business and shall provide at Closing written evidence satisfactory to
Parent that such insurance continues to be in effect and that all premiums due
have been paid.
7.11 WARN Act. Prior to Closing, neither Xxxx-Care nor Scripts
will temporarily or permanently close 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.
7.12 No Sale, Merger or Consolidation. From the date hereof until
the Closing, Shareholders shall not sell, pledge or transfer any of the Stock,
and Xxxx-Care and Scripts shall not sell all or substantially all of the
Assets, or merge or consolidate with any other entity; Shareholders, Xxxx-Care
and Scripts shall not, directly or indirectly, solicit or encourage inquiries
or proposals with respect to, furnish any information relating to, or
participate in any negotiations or discussions concerning, any of the foregoing
transactions (and Shareholders shall instruct the officers, directors, agents
and affiliates of Shareholders to refrain from doing any of the foregoing);
and Shareholders, Xxxx-Care and Scripts shall promptly notify the Parent
orally, and confirm in writing, of all relevant details relating to inquiries,
proposals or offers which either may receive relating to any of the matters
referred to in this paragraph.
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7.13 Xxxx-Xxxxx-Xxxxxx Filing. The Shareholders, Xxxx-Care and
Scripts will, if required, timely and promptly make, and the Parent will timely
and promptly make, all filings which are required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1987 (the "Antitrust Improvements Act").
7.14 Ownership of Intellectual Property. Shareholders, Xxxx-Care
and Scripts will provide any and all assistance and cooperation required by
Parent (including, but not limited to the execution of all necessary documents
and agreements) in order for Parent to create, perfect or renew rights in any
Intellectual Property ( including but not limited to rights which are created,
perfected or renewed subsequent to the Closing hereof).
7.15 Parent's Securities Law Filings. Parent will use its best
efforts to take all actions necessary to cause S.E.C.Rule 144 to be available
to the Shareholders for all shares issued pursuant to this Agreement. Parent
will at all times timely file all reports which are required under the
Securities Exchange Act of 1934. Subject to the advice of counsel that such
action is permitted under applicable securities laws and regulations, on the
third anniversary of the Closing, Parent will remove all restrictive legends on
all share certificates issued at the closing which relate to resale limitations
imposed as a result of the private placement of the shares, including all
shares held in escrow. Should the Rule 144k holding period be reduced from
three years to a shorter period, then the removal of the legends referred to in
the preceding sentence shall occur forthwith upon expiration of such shorter
period. Parent shall not unreasonably retard, delay or restrict sales under
Rule 144 by Shareholders, and shall seek to cause its counsel to issue all
opinions requisite therefor promptly after request therefor by the holder.
Parent will endeavor to take the position that the Rule 144 holding period for
all shares issued at the Closing, including escrow shares will be deemed for
Rule 144 purposes to have commenced at the Closing.
7.16 Registration Rights Agreement. Parent will use its best
efforts to amend the Registration Rights Agreement dated May 22, 1995, as
amended, by March 31, 1996 to cover all shares of stock issued pursuant hereto;
provided, however, that any shares held by the Escrow Agent pursuant to the
Escrow Agreement dated of even date herewith may not be sold until such shares
are released from escrow.
ARTICLE VIII. CLOSING
8.1 Closing. If all of the conditions to Closing set forth in
Articles IX and X hereof are satisfied, then the Merger shall occur as soon as
practicable on or after September 30, 1995 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"). In the event closing
does not occur on September 30, 1995 as a result of
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governmental or regulatory requirements or other approvals or conditions, the
parties hereto agree that they shall execute an interim management agreement
(the "Interim Management Agreement") in compliance with applicable law
providing for the management of the Business and Xxxx-Care and Scripts by
Parent pending receipt of such approvals and the Closing shall be extended to a
reasonable time after such requirements or approvals are obtained. Provided
however, notwithstanding the foregoing, if Closing has not occurred by January
31, 1995, then any party not in default hereunder may terminate this Agreement
without further obligation. In the event that the Closing does not occur as a
result solely of Parent's reliance on a condition to Closing that involves the
failure of a representation of Shareholders to be true and correct as of the
Closing, and does not involve the breach by Shareholders, Xxxx-Care or Scripts
of a covenant or obligation contained herein, then Parent's sole remedy in the
event that Parent elects not to close shall be to terminate this Agreement.
ARTICLE IX. XXXX-CARE'S, SCRIPTS'S AND
SHAREHOLDERS' CONDITIONS TO CLOSE
The obligations of Xxxx-Care, Scripts 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 Xxxx-Care, Scripts or
Shareholders, in whole or in part):
9.1 Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Parent contained in
this Agreement and in any certificate or document delivered pursuant hereto
shall be deemed to have been made again at the Closing and shall then be true
in all respects. Parent shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at Closing, and shall have tendered the Merger
Consideration as set forth in Section 2.4.
9.2 No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body or other entity shall have taken any other action
or made any request of Xxxx-Care, Scripts Shareholders or Parent as a result of
which Xxxx-Care, Scripts or Shareholders reasonably and in good xxxxx xxxx that
to proceed with the transactions hereunder may constitute a violation of law.
9.3 Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued
which would have the effect of (a) making the transactions contemplated by this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There shall have been no United States
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federal or state 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 Section.
9.4 No Action under Antitrust Legislation. The waiting periods
specified under the Antitrust Improvements Act with respect to the transactions
contemplated by this Agreement shall have lapsed or been terminated.
9.5 [reserved]
9.6 Shareholder Debt. Xxxx-Care and Scripts shall have repaid
the loans set forth on Exhibit 9.6 to the Shareholders, and caused the release
of the guaranties set forth on Exhibit 9.6.
ARTICLE X. PARENT'S CONDITIONS TO CLOSE
The obligations of Parent under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Parent, in whole or in part):
10.1 Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Shareholders, Xxxx-Care
and Scripts contained in this Agreement (including the Exhibits hereto) and in
any certificate or document delivered pursuant hereto shall be deemed to have
been made again at the Closing and shall then be true in all respects.
Xxxx-Care, Scripts and Shareholders shall have performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by them prior to or at Closing.
10.2 Regulatory Approvals. Parent shall have obtained (a)
certification for participation in the Medicaid Programs or other programs of
the states where the Business is conducted, (b) certification from the
appropriate agency of the federal government for participation in the federal
Medicare Program or other federal programs, as applicable, and (c) all other
material consents, licenses, permits, approvals, provider contracts,
determinations or certificates of need necessary in the reasonable judgment of
Parent to acquire the Stock and operate the Assets and Business as contemplated
hereunder.
10.3 No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body or other entity shall have taken any other action
or made any request of Xxxx-Care, Scripts, Shareholders or Parent as a result
of which Parent reasonably and in good xxxxx xxxxx that to proceed with the
transactions hereunder may constitute a violation of law.
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10.4 Inspection of Assets; UCC Searches, etc. Parent and its
representatives shall have had and continue to have reasonable rights of
inspection of the Business. Xxxx-Care, Scripts and Shareholders shall have
delivered to Parent, all UCC financing statement and title searches, local and
central, including fixtures, and federal and state pending litigation, tax lien
and judgment searches, with respect to Xxxx-Care and Scripts, including all
"DBA's," trade names and fictitious names of Xxxx-Care and Scripts, dated no
more than ten (10) days prior to Closing, showing no liabilities other than the
Continuing Liabilities.
10.5 Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued
which would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Parent effectively to
acquire and hold the Stock or Assets to operate the Business, or, in any case,
to exercise rights of ownership pursuant thereto. There shall have been no
federal or state 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 Section.
10.6 [RESERVED]
10.7 Employment Agreements. Parent and the Shareholders shall have
entered into employment agreements in the form attached hereto as Exhibit
9.7(a).
10.8 Shareholder's Equity. The Shareholder's Equity of Xxxx-Care
and Scripts at September 30, 1995, shall be no less than $1.35 million,
determined in accordance with generally accepted accounting principles, applied
consistently with the prior practices of Xxxx-Care and Scripts.
10.9 Third Party Consents. Shareholders, Xxxx-Care and Scripts
shall provide to the Parent all third party consents or third party
authorizations believed by Parent to be necessary for the legal and proper
consummation of all agreements and transactions contemplated within this
Agreement, each in form and substance acceptable to Parent.
10.10 No Action under Antitrust Legislation. The waiting periods
specified under the Antitrust Improvements Act with respect to the transactions
contemplated by this Agreement shall have lapsed or been terminated.
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ARTICLE XI. OBLIGATIONS OF XXXX-CARE, SCRIPTS
AND SHAREHOLDERS AT CLOSING
At Closing, Xxxx-Care, Scripts and Shareholders shall deliver or cause
to be delivered to Parent the following in form and substance reasonably
satisfactory to Parent:
11.1 Documents. Shareholders shall execute, acknowledge, deliver
and cause to be executed, acknowledged and delivered to Parent:
(a) Stock certificates, registered in the name of the
Shareholders, duly endorsed by Shareholders or with stock powers attached,
representing all of the Stock.
(b) The resignation of each member of the Board of
Directors and each officer of Xxxx-Care and Scripts effective as of the
Closing.
(c) The executed Escrow Agreement.
(d) The executed Certificates of Merger.
11.2 Possession. Xxxx-Care and Scripts shall deliver to Parent
full possession and control of the Assets.
11.3 Opinion of Counsel. Shareholders shall deliver to Parent the
favorable opinions of counsel for Shareholders, Xxxx-Care and Scripts, dated as
of Closing, in substantial the form attached hereto as Exhibit 11.3.
11.4 Corporate Good Standing and Corporate Resolutions.
Shareholders shall deliver to Parent certificates of good standing from the
Secretary of State of Xxxx-Care's and Scripts' state of organization, and
from each state in which Xxxx-Care and Scripts are qualified to do business,
certified copies of the Bylaws and Certificate of Incorporation of Xxxx-Care
and Scripts, and a certified copy of the resolutions or minutes of the Board
of Directors and shareholders of Xxxx-Care and Scripts 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 agreements and other instruments
required hereunder, sufficient in form and content to meet the requirements of
the various jurisdictions and bodies applicable to Xxxx-Care and Scripts
relevant to such transactions and certified by officers of Xxxx-Care and
Scripts to be validly adopted and in full force and effect and unamended as of
Closing.
11.5 Closing Certificate. Xxxx-Care and Scripts shall deliver to
Parent certificates of officers of Xxxx-Care and Scripts and certificates of
Shareholders dated as of Closing, certifying that (a) each covenant and
obligation of Xxxx-Care, Scripts and Shareholders has been complied with, and
(b) each representation, warranty and covenant of Xxxx-Care, Scripts and
Shareholders is true and correct on the Closing as if made on and as of the
Closing.
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11.6 Third Party Consents. Shareholders shall deliver to Parent
all consents, estoppels, approvals and authorizations of third parties that
Parent reasonably believes are necessary for the legal and proper execution,
delivery and consummation of this Agreement, and the transactions contemplated
hereby.
11.7 Taxes and Other Payments. Shareholders shall deliver, or
cause to be delivered, to Parent:
(a) At Closing a certification issued by Xxxx-Care and
Scripts pursuant to Treasury Regulation Section 1.897-2 to the effect that
Xxxx-Care and Scripts are not United States real property holding companies as
defined in Section 897 of the Internal Revenue Code of 1986, as amended; and
(b) Executed releases of all mortgages, security
interests, liens, pledges, restrictions or other encumbrances on or applicable
to the Stock or Assets.
11.8 Securities Compliance Documents. The Shareholders shall have
executed such documents as may be required to comply with applicable securities
laws in connection with the issuance to them of shares of stock of Parent.
11.9 Additionally Requested Documents; Post-Closing Assistance. At
the reasonable request of Parent at Closing and at any time or from time to
time thereafter, Shareholders shall cooperate with Parent to put Parent and the
Capstone Subs in actual possession and operating control of the Assets, execute
and deliver such further instruments as Parent may reasonably request in order
to effectuate the agreements of the parties herein, execute and deliver such
further instruments and to take such other actions as Parent may reasonably
request to release Parent, the Surviving Corporations and their Constituent
Corporations from all obligation and liability with regard to any obligation or
liability retained or assumed by Shareholders, and to execute and deliver such
further instruments and to cooperate with Parent as Parent may reasonably
request or to enable Parent and the Surviving Corporations to obtain all
necessary health care or regulatory certifications, approvals, consents and
licenses, accreditations or permits.
ARTICLE XII. OBLIGATIONS OF PARENT AT CLOSING
At Closing, Parent shall deliver or cause to be delivered to
Shareholders the following in a form and substance reasonably satisfactory to
Shareholders:
12.1 Merger Consideration. Parent shall pay the Merger
Consideration in cash and stock as provided herein.
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12.2 Corporate Good Standing and Certified Board Resolutions.
Parent and Capstone Sub shall deliver to Shareholders a certificate of good
standing from the Secretary of State of Delaware, dated the most recent
practical date prior to Closing, together with a certified copy of the
resolutions of the Board of Directors of Parent authorizing the execution,
delivery and consummation of this Agreement and all other documents executed in
connection herewith.
12.3 Opinion of Parent's Counsel. Parent shall deliver to
Shareholders a favorable opinion of counsel for Parent, dated as of Closing, in
the form specified in Article XII hereof.
12.4 [Reserved]
12.5 Certificates of Merger. Parent and Capstone Sub shall deliver
the executed Certificates of Merger which shall be filed as promptly as
practical following Closing.
ARTICLE XIII. OPINION OF PARENT'S COUNSEL
At the Closing, Parent shall deliver to Shareholders an opinion of
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C. dated the date of the Closing and
pursuant to the Legal Opinion Accord of the ABA Section of Business Law (1991),
in form and substance reasonably satisfactory to Shareholders and their counsel
to the effect that:
(a) Parent 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.
(b) Parent has the corporate power and corporate
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 Parent
hereby and thereby; Parent has taken all action required by law, and its
Certificate of Incorporation and Bylaws, to authorize such execution, delivery
and consummation of this Agreement, and this Agreement, and all other
agreements delivered by Parent at Closing constitute the valid and binding
obligations of Parent 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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ARTICLE XIV. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
14.1 Survival. The covenants, obligations, representations and
warranties of Parent, Xxxx-Care, Scripts and Shareholders contained in this
Agreement, or in any certificate or document delivered pursuant to this
Agreement, shall be deemed to be material and to have been relied upon by the
parties hereto notwithstanding any investigation prior to the Closing, shall
survive the date of Closing except as provided in Section 14.5, and shall not
be merged into any documents delivered in connection with the Closing.
14.2 Indemnification by Shareholders. Subject to the provisions
of Article 14, Shareholders shall promptly indemnify, defend, and hold harmless
Parent, the Surviving Corporation and the directors, officers, stockholders,
employees and agents of each 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
Xxxx-Care, Scripts 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 Xxxx-Care, Scripts and/or Shareholders delivered pursuant to this
Agreement, (ii) [reserved] and (iii) any claim (whether or not disclosed
herein) that is brought or asserted by any third party(s) against Parent or the
Surviving Corporation arising out of the ownership, licensing, operation or
conduct of the Business or Assets or the conduct of any of Xxxx-Care's or
Scripts' employees, agents or independent contractors, relating to all periods
of time prior to the Closing Date (unless such claim results solely from the
actions of Parent under the Interim Management Agreement); provided, however,
that the indemnification under this Section 14.2(a) shall be limited in all
instances by the provisions of Section 14.6. Any indemnification payment made
pursuant to this Article shall include interest at a floating rate equal to two
points over the prime rate of Bankers Trust Company established from time to
time (the "Rate") payable for the period measured from the date that the loss,
cost, expense or damage was incurred until the date of payment.
14.3 Indemnification by Buyer. Subject to the provisions of
Article 14, Parent shall promptly indemnify, defend, and hold Shareholders
harmless against any and all losses, costs, and expenses (including reasonable
cost of investigation, court costs and legal fees) and other damages resulting
from (i) any breach by Parent 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 Parent delivered pursuant to this Agreement, (ii) any claim which
is brought or asserted by any third party(s) against Shareholders for failure
to pay or perform any of the Continuing Liabilities, and (iii) subject to the
other provisions of this Agreement, any claim that is
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brought or asserted by any third party(s) against Shareholders arising out of
the ownership, licensing, operation or conduct of the Business or the conduct
of any of Xxxx-Care's or Scripts' employees, agents or independent contractors,
relating to periods of time subsequent to the Closing Date. Any
indemnification payment pursuant to the foregoing shall include interest at the
Rate from the date that the loss, cost, expense or damage was incurred until
the date of payment.
14.4 Rules Regarding Indemnification. The obligations and
liabilities of each party which may be subject to indemnification liability
under any provision of this Agreement (the "indemnifying party") to the other
party (the "indemnified party") shall be subject to the following terms and
conditions:
(1) Claims by Non-parties. The indemnified party shall
give written notice within a reasonably prompt period of time to the
indemnifying party 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 shall 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 shall constitute the assertion of a claim for indemnity by the
indemnified party. If, within thirty (30) 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 shall not settle or admit
liability with respect to the claim and shall afford to the indemnifying party
and defending counsel reasonable assistance in defending against the claim. If
the indemnifying party assumes the defense, counsel shall be selected by such
party and if the indemnified party then retains its own counsel, it shall do so
at its own expense. If the indemnified party does not receive a written
objection to the notice from the indemnifying party within thirty (30) days
after the indemnifying party's receipt of such notice, the claim for indemnity
shall 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 thirty (30) day period the indemnified party shall have received
written objection to a claim (which written objection shall briefly describe
the basis of the objection to the claim or the amount thereof, all in good
faith), then for a period of ten (10) days after receipt of such objection the
parties shall 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 shall be settled by arbitration at a venue to be determined by
the parties in accordance with the rules and procedures of the American
Arbitration Association.
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(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 shall be made as follows: The indemnified party
shall give written notice within a reasonably prompt period of time to the
indemnifying party of any claim by the indemnified party which has not been
made pursuant to subparagraph (1) above, stating the nature and basis of such
claim and the amount thereof, to the extent known. The claim shall 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
forty-five (45) days after the indemnifying party's receipt of the claim the
indemnified party shall not have received written objection to the claim. In
such event, the claim shall be conclusively presumed to have been assented to
and approved. If within the aforesaid forty-five (45) day period the
indemnified party shall have received written objection to a claim (which
written objection shall 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 shall 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
shall be settled by arbitration at a venue to be determined by the parties in
accordance with the rules and procedures of the American Arbitration
Association.
(3) Certain Claims. Any claim by a third party relating
to professional negligence or similar matters involving a patient or client
served both prior to the Closing Date and subsequent to the Closing Date will
be the responsibility of either Parent or Shareholders in accordance with the
following guidelines: (i) if it is a claim in which the incident giving rise to
liability clearly arose prior to the Closing Date (unless such claim results
solely from the actions of Parent under the Interim Management Agreement),
Shareholders shall jointly and severally respond to the loss and defense
expenses; (ii) subject to the other provisions of this Agreement, if it is a
claim in which the incident giving rise to liability clearly arose subsequent
to the Closing Date, Parent shall 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, Shareholders and Parent will jointly defend the case and each will fully
cooperate with the other in such defense. Once the case is closed, if Parent
and Shareholders cannot agree to the allocation of both indemnity and expenses,
then the matter shall be submitted to binding arbitration at a venue to be
determined by the parties in accordance with the rules and procedures of the
American Arbitration Association.
14.5 Indemnity Period. The representations, warranties and
indemnity obligations related thereto under this Agreement shall expire 12
months from the Closing, except for claims involving tax or third party
reimbursement, which shall expire upon the expiration of the applicable statute
of limitations. The indemnification obligations under this Agreement shall not
expire as provided herein for a claim made, but not resolved, within the above
periods.
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14.6 Limitations. Whether or not the event or matter giving rise
to a claim is disclosed herein and whether or not a failure to disclose
constitutes a breach of a representation or warranty, the Shareholders shall
have liability under this agreement only when and to the extent that the
matter or series of matters with respect to which recovery is sought (whether
recovery is sought against the Escrow or Shareholders directly) causes the pro
forma consolidated Shareholder's Equity of Xxxx-Care and Scripts at September
30, 1995, to be less than One Million Three Hundred Fifty Thousand Dollars
($1,350,000.00), as determined in accordance with generally accepted accounting
principles applied consistent with Xxxx-Care and Scripts prior financials. For
purposes of calculating the effect of any claim for recovery, to determine the
Shareholders' obligation, if any, the Surviving Corporations' auditors shall
treat the event giving rise to such claim as if it had occurred and had been
ascertainable before September 30, 1995 and shall make a pro forma adjustment
to the Interim Financial Statements as of and for the period ending as of such
date to reflect such claim and event, and to the extent that the resulting
Shareholder's Equity, as adjusted, is below $1.35 million, Shareholders shall
satisfy the claim in accordance with Section 2.5(2) hereof. In no event shall
a Shareholder's liability for a claim under this Article exceed, as to Xxxxxxx
Xxxxxx, five-sixths (5/6) and, as to Xxxxxxx Xxxxxxxxx, one-sixth (1/6) of the
total amount payable pursuant to the calculations set forth above. Parent
shall not be entitled to recision as a remedy for breaches of this Agreement.
Shareholders' obligations shall be limited to $1,350,000, even in the event
that Shareholders' Equity is less than zero.
ARTICLE XV. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
15.1 Covenant Not to Compete. Each Shareholder hereby covenants
and agrees for himself with Parent that, during the Non-Compete Period (as such
term is defined herein) Shareholders shall not directly or indirectly, (a)
within the Non-Compete Area (as such term is defined herein), acquire, lease,
manage, consult for, serve as agent or subcontractor for, finance, invest in,
own any part of or exercise management control over any pharmaceutical
operations or business which provides any goods or services competitive with
the goods and services provided by the Business as of the Closing, or (b)
solicit for employment or employ any person who at Closing or thereafter became
an employee of Parent, the
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Surviving Corporation or an affiliate unless such person is not so employed
for at least six (6) months, or (c) with respect to any customer, patient,
physician, physician group, or healthcare provider with whom Parent and/or the
Surviving Corporation contracts with or serves in connection with the Business
subsequent to Closing, or any potential customer with whom Parent and/or the
Surviving Corporation may reasonably be expected to contract with or service in
connection with the Business within six (6) months of the Closing, either
solicit the same in a manner which could adversely affect Parent or the
Surviving Corporation or make statements to the same which disparage Parent,
the Surviving Corporation, the Business or their respective operations in any
way. The "Non-Compete Period" shall commence at the Closing and terminate on
the third anniversary thereof. The "Non-Compete Area" shall mean the five
boroughs of New York City, Long Island and Westchester County. Ownership of
less than five percent (5%) of the stock of a publicly held company shall not
be deemed a breach of this covenant. Nothing in this Section 15.1 shall
prohibit a Shareholder from engaging in passive investments or from engaging in
business relationships, in areas other than the institutional pharmacy
business, with clients, patients or customers of Parent or the Surviving
Corporations, provided that Shareholder is not active on a frequent basis in
such investments or relationships. Shareholder shall periodically advise Parent
of such activities.
15.2 Enforceability. In the event of a breach of Section 15.1,
Shareholders recognizes that monetary damages shall be inadequate to compensate
Parent and The Surviving Corporation, and Parent and The Surviving Corporation
shall be entitled, without the posting of a bond, to an injunction restraining
such breach, with the costs including attorneys fees of securing such
injunction to be borne by Shareholders. Nothing contained herein shall be
construed as prohibiting Parent or The Surviving Corporation from pursuing any
other remedy available to it for such breach or threatened breach.
All parties hereto hereby acknowledge the necessity of protection
against the competition of Shareholders and that the nature and scope of such
protection has been carefully considered by the parties. The period provided
and the area covered are expressly represented and agreed to be fair,
reasonable and necessary. The consideration provided for herein is deemed to
be sufficient and adequate to compensate Shareholders for agreeing to the
restrictions contained in Section 15.1. If, however, any court determines that
the foregoing restrictions are not reasonable, such restrictions shall be
modified, rewritten or interpreted to include as much of their nature and scope
as will render them enforceable.
ARTICLE XVI. MISCELLANEOUS
16.1 Assignment. Following Closing, Parent and the Surviving
Corporations may freely assign their respective rights or delegate their
respective obligations under this Agreement without the express written consent
of Shareholders. No Shareholders may assign any rights or delegate any
obligations under this Agreement without the prior written consent of Parent,
and any prohibited assignment or delegation will be null and void. No
transfer, assignment, merger or amalgamation will relieve any party of its
respective obligations hereunder.
16.2 Other Expenses. Except as otherwise provided in this
Agreement, Shareholders shall pay the attorneys fees of Shareholders,
Xxxx-Care and Scripts in connection with the negotiation, execution, and
closing of the transactions contemplated
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by this Agreement, and Xxxx-Care and Scripts shall pay all other costs and
expenses in connection therewith, including accounting fees. Parent shall pay
all of its expenses in connection with the negotiation, execution, and closing
of the transactions contemplated by this Agreement.
16.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall 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 sending, or (c) if mailed, five days after
mailing with postage prepaid. Any such notice shall be sent as follows:
To Shareholders and, prior to Closing, Xxxx-Care and Scripts:
Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxxxxx
c/o Xxxx-Care Systems, Inc.
0000 - 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: President
with a copy to:
Xxxxx X. Xxxxxx, Esq.
000 0xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
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To the Parent and, after Closing, to Company:
Capstone Pharmacy Services, Inc.
0000 Xxxxxxxxxx Xxxx.
Xxxxxxxxx, XX 00000
Attn: President
with a copy to:
Xxxx Xxxxxxx, Esq.
DCAmerica, Inc.
000 Xxxx Xxxxxx
Xxxx Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
and a copy to:
Xxxx Manner, Esq.
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
1800 First American Center
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Fax: (000) 000-0000
16.4 Confidentiality; Prohibition on Trading. All parties agree to
maintain the confidentiality of the existence of this Agreement and the
transactions contemplated hereunder, unless disclosure is required by law or by
the rules and regulations of any stock exchange on which any party's shares are
listed for trading. Shareholders, Xxxx-Care, Scripts, Parent and their
affiliates agree not to trade in the securities of Parent or its affiliates
based upon any nonpublic information.
16.5 Controlling Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of Delaware.
16.6 Headings. Any table of contents and paragraph headings in
this Agreement are for convenience of reference only and shall not be
considered or referred to in resolving questions of interpretation.
16.7 Benefit. Subject to Section 16.1 this Agreement shall be
binding upon and shall 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 shall it, create any rights in any other
party.
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16.8 Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted. Further, there shall be
automatically substituted for such invalid or unenforceable provision a
provision as similar as possible which is valid and enforceable.
16.9 Waiver. Neither the failure nor any delay on the part of any
party hereto in exercising any rights, power or remedy hereunder shall operate
as a waiver thereof, or of any other right, power or remedy; nor shall 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 shall be valid unless it
is in writing and signed by the party against which it is sought to be
enforced.
16.10 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
16.11 Interpretation; Knowledge. All pronouns and any variation
thereof shall 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.
All references to Xxxx-Care and Scripts shall, where applicable, also be deemed
to be references to any subsidiaries of Xxxx-Care and Scripts and all
representations and warranties and covenants made by the Xxxx-Care and Scripts
shall be also deemed to have been made on behalf of any subsidiaries. Further,
it is acknowledged by the parties that this Agreement has undergone several
drafts with the negotiated suggestions of both; and, therefore, no presumptions
shall arise favoring either party by virtue of the authorship of any of its
provisions or the changes made through revisions. Whenever in this Agreement
the term "to the knowledge of Xxxx-Care, Scripts and Shareholders" or the like
is used, Xxxx-Care, Scripts and Shareholders shall each be deemed to have the
knowledge of Xxxx-Care's and Scripts' officers and directors, and of their
Affiliates; and Xxxx-Care, Scripts and Shareholders shall be under a duty of
due inquiry. The parties hereto agree that "knowledge", "best knowledge" or
the like if used herein shall be deemed to be interpreted as "to the best
knowledge of".
16.12 Entire Agreement. This Agreement, including the Exhibits and
Attachments hereto, constitutes the entire agreement between the parties hereto
with regard to the matters contained herein and it is understood and agreed
that all previous undertakings, negotiations, letters of intent and agreements
between the parties are merged herein, except for the obligations of the
parties as to confidentiality contained in the letter among them dated
September 18, 1995, which shall remain operative and in full force and effect
in the event the transactions contemplated hereby do not close. This Agreement
may not be modified orally, but only by an agreement in writing signed by
Parent, Capstone Subs, Xxxx-Care, Scripts and Shareholders.
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16.13 Further Assurance of Shareholders After Closing. Subsequent
to the Closing, Shareholders shall from time to time, at Parent's request,
execute and deliver such other instruments of conveyance and transfer, and take
such other action as Parent may reasonably request, in order to more
effectively sell, transfer, assign and deliver and vest in Parent and the
Surviving Corporations the benefits of, title to and possession of the Assets.
16.14 Legal Fees and Costs. In the event any party hereto 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 shall be entitled.
16.15 Attachment of Exhibits. This Agreement has been executed
without the attachment of all exhibits, schedules and other agreements referred
to herein. Accordingly, the parties agree that the preparation and attachment
of all such exhibits, schedules and other agreements referred to herein in form
and substance acceptable to the parties is a further condition to the
obligation of the parties to close hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"SHAREHOLDERS":
XXXX-CARE SYSTEMS, INC.
-------------------------------
Xxxxxxx Xxxxxx
By:
----------------------- -------------------------------
Xxxxxxx Xxxxxxxxx
Its:
----------------------
SCRIPTS & THINGS, INC. "PARENT":
CAPSTONE PHARMACY SERVICES, INC.
By: By:
----------------------- ----------------------------
Its: Its:
---------------------- ---------------------------
"CAPSTONE SUBS":
XXXX MERGECO, INC. "GMI"
By:
----------------------------
Its:
---------------------------
SCRIPTS MERGECO, INC. "SMI"
By:
----------------------------
Its:
---------------------------
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Xxxx-Care
Exhibit List
Exhibit A Description of The Business
Exhibit B Certificate of Merger (Xxxx-Care)
Exhibit C Certificate of Merger (Scripts)
Exhibit 2.2(1) List of Beds
Exhibit 2.2(3) Allocation of Purchase Price
Exhibit 2.5 Escrow Agreement
Exhibit 5.1 Organization, Qualifications and Authority
Exhibit 5.4 Financial Statements
Exhibit 5.5(a) Material Changes
Exhibit 5.5(d) Compensation Increases
Exhibit 5.5(i) Distributions
Exhibit 5.6 Contingent Liabilities
Exhibit 5.7 Employment Discrimination
Exhibit 5.8(1) Licenses and Permits
Exhibit 5.9(2) Statement of Deficiencies and Plan of
Correction
Exhibit 5.10 Compliance with Zoning, Land Use and other
Laws; Easements
Exhibit 5.11(3)(a) Real Estate
Exhibit 5.11(3)(b) Equipment and Furnishings
Exhibit 5.11(3)(d) Receivables
Exhibit 5.11(3)(e) Bank Accounts
Exhibit 5.11(4) Continuing Liabilities
Exhibit 5.12 Leases and Contracts
Exhibit 5.14 Appraisals, Mechanical and Structural Studies
Exhibit 5.15 Litigation
Exhibit 5.16 Employees
Exhibit 5.18 Insurance
Exhibit 5.21 Intellectual Property
Exhibit 5.23 Motor Vehicles
Exhibit 5.24(1) Welfare Benefit Plans
Exhibit 5.24(2) Pension Benefit Plans
Exhibit 5.24(3) Unfunded Liabilities
Exhibit 6.4 Parent Reports
Exhibit 9.6 Shareholder Debt
Exhibit 9.7(a) Employment Agreements
Exhibit 11.3 Opinion of Shareholder's Counsel
48
