EXHIBIT 99.1
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STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 3, 2002
by and between
THI HOLDINGS, LLC
and
INTEGRATED HEALTH SERVICES, INC.
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ARTICLE I CERTAIN DEFINITIONS.....................................................................................2
Section 1.1 Definitions............................................................................2
Section 1.2 References to Dollars.................................................................12
Section 1.3 References to "knowledge" and "including".............................................12
ARTICLE II PURCHASE AND SALE OF STOCK............................................................................13
Section 2.1 Purchase and Sale of Stock............................................................13
Section 2.2 Purchase Price........................................................................13
Section 2.3 Closing...............................................................................14
Section 2.4 Purchase Price Adjustment.............................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER.........................................................16
Section 3.1 Existence and Good Standing of the Seller, Subsidiaries; Authorization................16
Section 3.2 Capital Stock.........................................................................17
Section 3.3 Consents and Approvals; No Violation..................................................18
Section 3.4 Litigation............................................................................18
Section 3.5 Employees.............................................................................19
Section 3.6 Labor Relations; Compliance...........................................................19
Section 3.7 Brokers' or Finders' Fees.............................................................19
Section 3.8 Real Property.........................................................................20
Section 3.9 Financial Statements; Guaranties......................................................21
Section 3.10 Assets................................................................................22
Section 3.11 Events Subsequent to 2001.............................................................22
Section 3.12 Compliance with Law...................................................................22
Section 3.13 Contracts.............................................................................23
Section 3.14 Insurance.............................................................................25
Section 3.15 Certain Transactions..................................................................26
Section 3.16 Employee Benefits and Other Matters...................................................26
Section 3.17 Taxes.................................................................................27
Section 3.18 Intellectual Property.................................................................29
Section 3.19 Environmental, Health, and Safety Matters.............................................30
Section 3.20 Cost Reports..........................................................................31
Section 3.21 Entire Representations and Warranties.................................................31
ARTICLE IV REPRESENTATIONS OF THE PURCHASER......................................................................31
Section 4.1 Existence and Good Standing of Purchaser; Authorization...............................31
Section 4.2 Consents and Approvals; No Violations.................................................31
Section 4.3 Investment Intent; Access to Information..............................................32
Section 4.4 Available Funds.......................................................................32
Section 4.5 Litigation............................................................................32
Section 4.6 No Outside Reliance...................................................................33
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Section 4.7 Brokers' or Finders' Fees.............................................................33
ARTICLE V CERTAIN AGREEMENTS.....................................................................................33
Section 5.1 Conduct of Business of the Seller and the Subsidiaries................................33
Section 5.2 Access to Properties and Records; Notice of Developments..............................36
Section 5.3 Commercially Reasonable Best Efforts; HSR Act Matters.................................36
Section 5.4 Public Disclosure or Communications...................................................37
Section 5.5 Affected Employees....................................................................38
Section 5.6 Employee Benefits.....................................................................39
Section 5.7 Tax Matters...........................................................................39
Section 5.8 Delivery of Excluded Assets...........................................................41
Section 5.9 Formation of, and Assignment to, LTC Subsidiary and Therapy Subsidiary................42
Section 5.10 Adequate Capitalization...............................................................42
Section 5.11 Sales and Transfer Taxes and Fees.....................................................42
Section 5.12 Settlement Negotiations...............................................................43
Section 5.13 Purchase of Reorganized IHS Shares....................................................43
Section 5.14 Real Property Matters.................................................................43
Section 5.15 Discussions Between Purchaser and Seller..............................................44
Section 5.16 EBITDA Calculation....................................................................44
Section 5.17 Treatment of Claims and Equity Interests..............................................45
Section 5.18 Collective Bargaining Agreements......................................................45
Section 5.19 Good Standing Certificates............................................................45
Section 5.20 Further Assurances....................................................................45
ARTICLE VI CONDITIONS TO THE PURCHASER'S OBLIGATIONS.............................................................45
Section 6.1 Truth of Representations and Warranties...............................................45
Section 6.2 Performance of Agreements.............................................................45
Section 6.3 Certificate...........................................................................46
Section 6.4 No Injunction.........................................................................46
Section 6.5 HSR Approval..........................................................................46
Section 6.6 Resignations..........................................................................46
Section 6.7 Bid Procedures Order..................................................................46
Section 6.8 Confirmation, Etc.....................................................................46
Section 6.9 Filing................................................................................46
Section 6.10 Order Assuming Contracts..............................................................46
Section 6.11 Certified Orders......................................................................47
Section 6.12 Lease Cure Costs......................................................................47
Section 6.13 Additional Cure Costs.................................................................47
Section 6.14 EBITDA................................................................................47
Section 6.15 Material Adverse Effect...............................................................47
Section 6.16 Consents..............................................................................47
Section 6.17 Medicare Settlement...................................................................47
Section 6.18 Effective Date........................................................................47
Section 6.19 Escrow Agreement......................................................................47
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ARTICLE VII CONDITIONS TO THE SELLER'S OBLIGATIONS...............................................................48
Section 7.1 Truth of Representations and Warranties...............................................48
Section 7.2 Performance of Agreements.............................................................48
Section 7.3 Certificate...........................................................................48
Section 7.4 No Injunction.........................................................................48
Section 7.5 HSR Approval..........................................................................48
Section 7.6 Confirmation..........................................................................48
Section 7.7 Cure Costs and Other Costs............................................................49
Section 7.8 Effective Date........................................................................49
Section 7.9 Bankruptcy Court......................................................................49
Section 7.10 Escrow Agreement......................................................................49
ARTICLE VIII NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......................................................49
ARTICLE IX TERMINATION...........................................................................................49
Section 9.1 Events of Termination.................................................................49
Section 9.2 Effect of Termination.................................................................50
ARTICLE X BANKRUPTCY MATTERS.....................................................................................50
Section 10.1 Bid Procedures Motion.................................................................50
Section 10.2 Purchaser's Review of Motions and Orders..............................................52
Section 10.3 No Solicitation of Transactions.......................................................52
Section 10.4 Break-Up Fee..........................................................................53
Section 10.5 Expense Reimbursement.................................................................53
ARTICLE XI MISCELLANEOUS.........................................................................................53
Section 11.1 Expenses..............................................................................53
Section 11.2 Governing Law; Bankruptcy Court Jurisdiction..........................................54
Section 11.3 Captions; Construction................................................................54
Section 11.4 Memorandum; Disclaimer of Projections.................................................54
Section 11.5 Notices...............................................................................55
Section 11.6 Parties in Interest...................................................................56
Section 11.7 Counterparts..........................................................................56
Section 11.8 Entire Agreement; Amendment...........................................................56
Section 11.9 Third Party Beneficiaries.............................................................56
Section 11.10 Attorneys' Fees and Costs.............................................................57
Section 11.11 No Waiver.............................................................................57
Section 11.12 Rights Cumulative.....................................................................57
Section 11.13 Time..................................................................................57
Section 11.14 Specific Performance..................................................................57
Section 11.15 Severability..........................................................................57
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of December 3,
2002, is made by and between Integrated Health Services, Inc., a Delaware
corporation (the "SELLER"), and THI Holdings, LLC, a Delaware limited liability
company (the "PURCHASER").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Seller and certain of its subsidiaries are currently the
subject of cases under Chapter 11 of the Bankruptcy Code pending in the United
States Bankruptcy Court for the District of Delaware (the "BANKRUPTCY COURT"),
captioned In re Integrated Health Services, Inc., et al., Case No. 00-389 (MFW)
(Jointly Administered for procedural purposes only) (collectively, the "IHS
REORGANIZATION CASES") and the entities listed on SCHEDULE I hereto are
wholly-owned direct and indirect debtor and non-debtor subsidiaries of Seller
(except that Integrated Health Services at Silvercrest, Inc. is not
wholly-owned) (each a "SUBSIDIARY" and collectively, the "SUBSIDIARIES"); and
WHEREAS, between the date hereof and the consummation of the
transactions contemplated by this Agreement, the Seller shall form a new
wholly-owned direct subsidiary to be named IHS Long Term Care, Inc., a Delaware
corporation (the "LTC SUBSIDIARY"), and a new wholly-owned direct subsidiary to
be named IHS Therapy Care, Inc., a Delaware corporation (the "THERAPY
SUBSIDIARY"), for the primary purpose of assigning all of the capital stock of
the Seller's Subsidiaries to either the LTC Subsidiary or the Therapy Subsidiary
(collectively, the LTC Subsidiary and the Therapy Subsidiary are referred to
herein as the "PURCHASED SUBSIDIARIES"); and
WHEREAS, between the date hereof and the Closing (as defined below) (i)
the Seller shall contribute and assign to the LTC Subsidiary all of its assets
and liabilities not described in clause (ii) below, including without limitation
the capital stock of all of the Subsidiaries that conduct Seller's long-term
care business and any and all past, current and future PLGL Claims, but
excluding the Excluded Assets and the Excluded Liabilities, and (ii) the Seller
shall contribute and assign to the Therapy Subsidiary all of its assets and
liabilities that relate to the Seller's contract rehabilitation therapy
business, including without limitation the capital stock of all of the
Subsidiaries that conduct Seller's contract rehabilitation therapy business, but
excluding the Excluded Assets and the Excluded Liabilities; and
WHEREAS, the Purchaser desires to purchase from the Seller all of the
capital stock of the Purchased Subsidiaries issued and outstanding as of the
Closing in accordance with the terms and conditions of this Agreement, and
subject to the confirmation and consummation of the Plan of Reorganization to be
filed in the IHS Reorganization Cases; and
WHEREAS, the Seller desires to sell such securities to the Purchaser in
accordance with the terms and conditions of this Agreement, and subject to the
confirmation and consummation of the Plan of Reorganization to be filed in the
IHS Reorganization Cases.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
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Section 1.1 Definitions. As used in this Agreement, the following terms
have the meanings specified or referred to below (terms defined in the singular
to have the correlative meanings in the plural and vice versa).
"ACCREDITATION BODY" shall mean all Persons or Governmental Authorities
having jurisdiction over the accreditation, certification, licensing, evaluation
or operation of any of the facilities or services of the Seller or any
Subsidiary.
"ACTUAL SECURED INDEBTEDNESS" has the meaning ascribed thereto in
Section 2.4(b) of this Agreement.
"ACTUAL WORKING CAPITAL" has the meaning ascribed thereto in Section
2.4(b) of this Agreement.
"ADVISORS" has the meaning ascribed thereto in Section 4.3(b) of this
Agreement.
"AFFECTED EMPLOYEES" has the meaning ascribed thereto in Section 5.5 of
this Agreement.
"AFFILIATE" of any Person means any Person which, directly or
indirectly controls or is controlled by that Person, or is under common control
with that Person. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities or
by contract or otherwise.
"AFFILIATED GROUP" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"AGREEMENT" has the meaning ascribed thereto in the introductory
paragraph of this Agreement, as amended from time to time pursuant to its terms.
"ALLOCATION" has the meaning ascribed thereto in Section 5.7(d) of this
Agreement.
"ALTERNATIVE TRANSACTION" means any transaction described in Section
9.1(c) of this Agreement.
"ASSUMED CONTRACTS" means all executory contracts and unexpired leases
including without limitation those listed or required to be listed on SCHEDULE
3.13 that are not specified to be rejected by written notice delivered by the
Purchaser to the Seller not later than eighty (80) days after the date hereof.
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"BANKRUPTCY CODE" means title 11 of the United States Code, as amended.
"BANKRUPTCY COURT" has the meaning ascribed thereto in the first
Whereas clause of this Agreement.
"BASELINE WORKING CAPITAL" means $62,000,000.
"BID PROCEDURES ORDER" has the meaning ascribed thereto in Section 6.7
of this Agreement.
"BID PROCEDURES MOTION" has the meaning ascribed thereto in Section
10.1(a) of this Agreement.
"BREAK-UP FEE" has the meaning ascribed thereto in Section 10.4 of this
Agreement.
"BUSINESS DAY" means any day that is not a Saturday or Sunday or a day
in which banks located in New York City are authorized or required to be closed.
"CERCLA" has the meaning ascribed thereto in Section 3.19(e) of this
Agreement.
"CERTIFICATE OF NEED" or "CON" shall mean the Certificate of Need
issued by an Accreditation Body for any facility of the Seller or any Subsidiary
that is a nursing facility for the number of beds listed on such CON and the
rights thereunder to operate such beds or other facility, service or activity
subject to a Certificate of Need.
"CLOSING" has the meaning ascribed thereto in Section 2.3 of this
Agreement.
"CLOSING DATE" has the meaning ascribed thereto in Section 2.3 of this
Agreement.
"CLOSING DATE BALANCE" has the meaning ascribed thereto in Section
2.2(c)(ii) of this Agreement.
"CLOSING SECURED INDEBTEDNESS" has the meaning ascribed thereto in
Section 2.4(b) of this Agreement.
"CLOSING WORKING CAPITAL" has the meaning ascribed thereto in Section
2.4(b) of this Agreement.
"CMS" means the Centers for Medicare and Medicaid Services of the
Department of Health and Human Services, formerly known as the Health Care
Financing Administration (HCFA).
"COBRA CONTINUATION COVERAGE" has the meaning ascribed thereto in
Section 5.6(c) of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant thereto.
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"COMMERCIALLY REASONABLE BEST EFFORTS" means the efforts that a
commercially reasonable Person desirous of achieving a result would use in
similar circumstances to achieve that result as expeditiously as reasonably
practicable, provided, however, that a Person required to use commercially
reasonable best efforts under this Agreement will not be thereby required to
take any action that would result in a material adverse change in the benefits
to such Person of this Agreement or the transactions contemplated hereby or to
make any change to its business, incur any extraordinary fees or expenses or
incur any other material burden.
"CONFIDENTIALITY AGREEMENT" has the meaning ascribed thereto in Section
5.2(b) of this Agreement.
"CONFIRMATION ORDER" means the order of the Bankruptcy Court confirming
the Plan of Reorganization pursuant to Section 1129 of the Bankruptcy Code, in
form and substance reasonably satisfactory to the Purchaser.
"CORPORATE INTEGRITY AGREEMENT" has the meaning ascribed thereto in
Section 3.13 of this Agreement.
"COVERED AFFILIATED GROUP" has the meaning ascribed thereto in Section
3.17 of this Agreement.
"DEPOSIT ESCROW AGENT" has the meaning ascribed thereto in Section
2.2(b) of this Agreement.
"DEPOSIT ESCROW AGREEMENT" has the meaning ascribed thereto in Section
2.2(b) of this Agreement.
"EBITDA" means, for a Person for any period of determination, an amount
equal to the consolidated net income of such Person for such period plus, to the
extent deducted in determining such consolidated net income, interest expense,
income tax expense, depreciation expense and amortization expense, determined on
a consolidated basis in accordance with GAAP, and taking into account the pro
forma adjustments set forth on SCHEDULE V hereto.
"EMPLOYEE BENEFIT PLAN" has the meaning ascribed thereto in Section
3.16 of this Agreement.
"ENCUMBRANCE" means any mortgage, deed of trust, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"ENTERED" has the meaning ascribed thereto in Section 6.7 of this
Agreement.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local, and foreign statutes, regulations, ordinances, and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations, and all
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common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including, without limitation, all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances, or wastes, chemical substances or mixtures,
medical waste, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now or hereafter in effect.
"ERISA" has the meaning ascribed thereto in Section 3.16 of this
Agreement.
"ESCROW AGENT" means Wilmington Trust Company.
"ESCROW AGREEMENT" means an escrow agreement among the Seller, the
Purchaser and the Escrow Agent, in form and substance reasonably acceptable to
such parties.
"ESCROW AMOUNT" has the meaning ascribed thereto in Section 2.2(c) of
this Agreement
"ESTIMATED WORKING CAPITAL" has the meaning ascribed thereto in Section
2.4(a)(i) of this Agreement.
"EXCLUDED ASSETS" shall mean the assets listed on SCHEDULE III hereto.
"EXCLUDED LIABILITIES" shall mean the liabilities on SCHEDULE IV
hereto.
"FINAL ORDER" means an order of the Bankruptcy Court (i) as to which
the time to appeal, petition for certiorari, or move for reargument, rehearing
or new trial has expired and as to which no appeal, petition for certiorari, or
other proceedings for reargument, rehearing or new trial shall then be pending;
(ii) as to which any right to appeal, petition for certiorari, reargue, rehear
or retry shall have been waived in writing; or (iii) in the event that an
appeal, writ of certiorari, reargument, rehearing or new trial has been sought,
as to which (a) such order of the Bankruptcy Court shall have been affirmed by
the highest court to which such order is appealed; (b) certiorari has been
denied as to such order; or (c) reargument or rehearing or new trial from such
order shall have been denied, and the time to take any further appeal, petition
for certiorari or move for reargument, rehearing or new trial shall have expired
without such actions having been taken.
"FINANCIAL STATEMENTS" has the meaning ascribed thereto in Section 3.9
of this Agreement.
"FIRM" has the meaning ascribed thereto in Section 2.4(b) of this
Agreement.
"FIRPTA AFFIDAVIT" has the meaning ascribed thereto in Section 5.14 of
this Agreement.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
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"GOVERNMENT AUTHORITY" means any of the following: (a) the United
States of America; (b) any state, commonwealth, territory or possession of the
United States of America and any political subdivision thereof (including
counties, municipalities and the like); (c) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board, (d) any other national, federal, state
or provincial government or courts and administrative bodies thereof or (e) any
multinational authority having governmental or quasi-governmental powers and
courts or administrative bodies thereof.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"IHS REORGANIZATION CASES" has the meaning ascribed thereto in the
first WHEREAS clause of this Agreement.
"INCORPORATION DOCUMENT" has the meaning ascribed thereto in Section
3.3 of this Agreement.
"INDEBTEDNESS" means, as of a given time, after giving effect to the
assignment contemplated by Section 5.9 below, (i) all indebtedness for borrowed
money or for the deferred purchase price of property or services in respect of
which any Purchased Subsidiary or Subsidiary thereof is liable, contingently or
otherwise, as obligor or otherwise, and any commitment by which any Purchased
Subsidiary or Subsidiary thereof assures a creditor against loss, including
contingent reimbursement obligations with respect to letters of credit; (ii) all
indebtedness guaranteed in any manner by any Purchased Subsidiary or Subsidiary
thereof, including a guarantee in the form of an agreement to repurchase or
reimburse; (iii) all obligations under capitalized leases in respect of which
any Purchased Subsidiary or Subsidiary thereof is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations any Purchased Subsidiary or Subsidiary thereof assures a creditor
against loss; and (iv) all interest, prepayment penalties, premiums, fees and
expenses (if any) thereon; in each case excluding any of the foregoing to the
extent paid in full by the Seller at or prior to the Closing Date or paid,
discharged or satisfied in accordance with the Plan of Reorganization.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
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"LEASED REAL PROPERTY" means all leasehold or subleasehold estates and
other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by the Seller or any Subsidiary
other than those designated as Excluded Assets or Excluded Liabilities.
"LEASES" means all leases, subleases, licenses, concessions and other
agreements (written or oral) pursuant to which the Seller or any Subsidiary
leases any Leased Real Property.
"LEGAL REQUIREMENT" shall mean all laws, statutes, ordinances, bylaws,
codes, rules, regulations, restrictions, corporate integrity agreements, orders,
judgments, decrees and injunctions (including, without limitation, all
applicable building, health code, occupational safety and health, zoning,
subdivision and other land use and health care licensing statutes, ordinances,
bylaws, codes, rules and regulations), promulgated or issued by any Government
Authority, Accreditation Body or Third Party Payor. Without limiting the
foregoing, the term Legal Requirements includes all Environmental, Health and
Safety Requirements, Permits and Provider Agreements issued or entered by any
Government Authority, any Accreditation Body and/or any Third Party Payor.
"LICENSE" shall mean a license issued by an Accreditation Body to
operate a facility or service of the Seller or any Subsidiary.
"LTC SHARES" has the meaning ascribed thereto in Section 2.1 of this
Agreement.
"LTC SUBSIDIARY" has the meaning ascribed thereto in the second Whereas
clause of this Agreement.
"MATERIAL ADVERSE EFFECT" means (a) any event, circumstance, change,
occurrence, fact or effect that, individually or in the aggregate with all other
events, circumstances, changes, occurrences, facts and/or effects, is or is
reasonably likely to be materially adverse to the business, assets, or
liabilities of the businesses that will be conducted by the Purchased
Subsidiaries (taken as a whole) or (b) any event, circumstance, change,
occurrence, fact or effect that is or is reasonably likely to be materially
adverse to the ability of the Seller to consummate timely the transactions
contemplated hereby. Specifically excluded from this definition of Material
Adverse Effect are the following: any adverse event, circumstance, change,
occurrence, fact or effect arising from or relating to (i) general business or
economic conditions, including such general business or economic conditions
related to the businesses that will be conducted by the Purchased Subsidiaries
and their respective subsidiaries and the industries in which such businesses
are or will be conducted, (ii) the existence of or compliance with any corporate
integrity agreement (including, without limitation, the Corporate Integrity
Agreement) applicable to the businesses that will be conducted by the Purchased
Subsidiaries and their respective subsidiaries, (iii) any change in the EBITDA
or earnings of the Seller or the Purchased Subsidiaries for any period ending on
or prior to the Closing Date or (iv) any action taken at the direction of the
Purchaser in accordance with the terms of this Agreement.
"MATERIAL LEASED REAL PROPERTY" has the meaning ascribed thereto in
Section 5.14 of this Agreement.
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"MEDICAID" means the medical assistance program established by Title
XIX of the Social Security Act (42 U.S.C. Sections 1396 et seq.) and any statute
succeeding thereto.
"MEDICARE" means the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 U.S.C. Sections 1395
et seq.) and any statute succeeding thereto.
"MEDICARE OBLIGATIONS" means (a) any fees, fines, penalties or civil
monetary penalties that have arisen or may arise in any manner from Seller's and
Subsidiaries' participation in Medicare; (b) Medicare overpayments or any other
financial obligations arising from any adjustments or reductions in Medicare
reimbursement; or (c) all other monetary or non-monetary obligations, sanctions,
remedies or liabilities of any kind or nature whatsoever that have arisen or may
arise in any manner from Seller's participation in Medicare.
"MEDICARE SETTLEMENT" has the meaning ascribed thereto in Section 6.17
of this Agreement.
"MEDICARE SETTLEMENT DISCUSSIONS" has the meaning ascribed thereto in
Section 5.12 of this Agreement.
"MOBILEX" means Symphony Diagnostic Services No. 1, Inc.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning ascribed thereto in
Section 3.9 of this Agreement.
"MOST RECENT FISCAL MONTH END" has the meaning ascribed thereto in
Section 3.9 of this Agreement.
"MOST RECENT FISCAL YEAR END" has the meaning ascribed thereto in
Section 3.9 of this Agreement.
"NEW CERTIFICATE OF INCORPORATION" means the certificate of
incorporation of Reorganized IHS.
"OIG" means the Office of Inspector General for the Department of
Health and Human Services.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice, including with respect to quantity and
frequency, and any action, inaction, transaction or other event or occurrence
approved prior to the date of this Agreement by an Order of the Bankruptcy Court
pursuant to the IHS Reorganization Cases.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made, or rendered by any court,
administrative agency or other Government Authority or by any arbitrator.
"OWNED REAL PROPERTY" means all land, together with all buildings,
structures, improvements and fixtures located thereon, and all easements and
other rights and interests
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appurtenant thereto, owned by the Seller or any Subsidiary, other than those
designated as Excluded Assets.
"PERMITS" shall mean all permits, licenses, certificates of need,
approvals, registrations, qualifications, rights, variances, permissive uses,
accreditations, certificates, certifications, consents, contracts, interim
licenses, permits and other authorizations of every nature whatsoever required
by, or issued to or on behalf of the Seller or any Subsidiary under any Legal
Requirements benefiting, relating or affecting any of the facilities of the
Seller or any Subsidiary, or the construction, development, expansion,
maintenance, management, use or operation thereof, or the operation of any
programs or services in conjunction with any of their facilities and all
renewals, replacements and substitutions therefor, required or issued by any
Government Authority, Accreditation Body or Third Party Payor.
"PERMITTED ENCUMBRANCES" has the meaning ascribed thereto in Section
3.8(a)(ii) of this Agreement.
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or any other
entity or Government Authority.
"PLAN OF REORGANIZATION" means a joint Chapter 11 plan of
reorganization of the Seller and the Subsidiaries, as debtors and debtors in
possession, including the exhibits thereto, as the same may be amended or
modified from time to time in accordance with the provisions of the Bankruptcy
Code and the terms thereof, which plan of reorganization shall not be
inconsistent in any material respect with the terms and conditions of this
Agreement and which plan of reorganization shall accurately reflect the
transactions contemplated herein in all material respects.
"PLAN MOTIONS" has the meaning ascribed thereto in Section 10.1(f) of
this Agreement.
"PLGL" means professional liability and/or general liability.
"PLGL CLAIMS" means any and all claims relating to PLGL with respect to
the operation of the businesses operated by the Seller and its Subsidiaries on
or after February 2, 2000.
"PRIME RATE" means the interest rate per annum listed from time to time
as the "Prime Rate" in The Wall Street Journal in its "Money Rates" section.
"PROGRAMS" means any Federal health care program as defined in Section
1128B(h) of the Social Security Act (42 U.S.C. 1320a-7b(f)) or any State health
care program as defined in Section 1128B of the Social Security Act (42 U.S.C.
1320a-7(h)).
"PROVIDER AGREEMENTS" shall mean all participation, provider, supplier
and reimbursement agreements for the benefit of the Seller or any Subsidiary in
connection with the operation of any of their facilities relating to any right
to payment or other claim arising out of or in connection with the Seller's or
such Subsidiary's participation in any Third Party Payor Program.
9
"PURCHASE PRICE" has the meaning ascribed thereto in Section 2.2(a) of
this Agreement.
"PURCHASED SUBSIDIARIES" has the meaning ascribed thereto in the second
WHEREAS clause of this Agreement.
"PURCHASER" has the meaning ascribed thereto in the introductory
paragraph of this Agreement.
"PURCHASER DEPOSIT" has the meaning ascribed thereto in Section 2.2(b)
of this Agreement.
"PURCHASER'S CURE COSTS" means the cure amounts for which the Purchaser
is liable pursuant to Section 10.1(e) of this Agreement.
"REAL PROPERTY" means, collectively, the Owned Real Property and the
Leased Real Property.
"REAL PROPERTY LAWS" has the meaning ascribed thereto in Section 3.8(c)
of this Agreement.
"REAL PROPERTY PERMITS" has the meaning ascribed thereto in Section
3.8(d) of this Agreement.
"REORGANIZED IHS" means IHS upon the occurrence of the effective date
of the Plan of Reorganization.
"REPRESENTATIVE" means, with respect to any Person, such Person's
director, officer, employee, agent, advisor, or other representative, including
legal counsel, accountants and financial advisors.
"SALE" has the meaning ascribed thereto in Section 2.1 of this
Agreement.
"SALE MOTION" has the meaning ascribed thereto in Section 10.1(b) of
this Agreement.
"SALE ORDER" has the meaning ascribed thereto in Section 10.1(b) of
this Agreement.
"SECTION 338(h)(10) Election" has the meaning ascribed thereto in
Section 5.7(e) of this Agreement.
"SECURED INDEBTEDNESS" means, with respect to any Person, Indebtedness
of any Person secured by an Encumbrance upon property or assets owned by such
Person and any other Indebtedness that is not paid, discharged or satisfied in
accordance with the Plan of Reorganization.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning ascribed thereto in the introductory paragraph
of this Agreement.
10
"SELLER'S CURE COSTS" means the cure amounts for which the Seller is
liable pursuant to Section 10.1(e) of this Agreement.
"SHARES" has the meaning ascribed thereto in Section 2.1 of this
Agreement.
"STRADDLE PERIOD RETURN" has the meaning ascribed thereto in Section
5.7(b) of this Agreement.
"SUBSIDIARIES" and "SUBSIDIARY" have the meaning ascribed to each in
the first Whereas clause of this Agreement; provided, that such terms shall also
include the LTC Subsidiary and the Therapy Subsidiary beginning as of the date
on which each such entity is formed. For the avoidance of doubt, any reference
to "Subsidiary" with respect to Seller's obligations at Closing, including,
without limitation, the making of representations and warranties as of the
Closing, shall include the LTC Subsidiary and the Therapy Subsidiary.
"SUBSIDIARY STOCK" has the meaning ascribed thereto in Section 3.2 of
this Agreement.
"SURVEYS" has the meaning ascribed thereto in Section 5.14 of this
Agreement.
"SWDA" has the meaning ascribed thereto in Section 3.19(e) of this
Agreement.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any related fine,
penalty, interest, or addition to tax with respect thereto, imposed, assessed,
or collected by or under the authority of any Government Authority or payable
pursuant to any tax-sharing agreement relating to the sharing or payment of any
such tax.
"TAXING AUTHORITY" means any Government Authority, domestic or foreign,
having jurisdiction over the assessment, determination, collection or other
imposition of any Tax.
"TAX RETURN" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Government Authority in connection with the determination, assessment,
collection, or payment, of any Tax.
"THERAPY SHARES" has the meaning ascribed thereto in Section 2.1 of
this Agreement.
"THERAPY SUBSIDIARY" has the meaning ascribed thereto in the second
Whereas clause of this Agreement.
"THIRD PARTY PAYOR PROGRAM" shall mean any third party healthcare
payment program in which the Seller or any Subsidiary participates with regard
to any of their facilities or services, including, without limitation, any
program, plan, insurance or assistance program that is owned, operated or
administered by a Third Party Payor or other person (e.g. the Medicare,
Medicaid,
11
TRICARE programs, the Veterans Administration or any private insurance, health
maintenance organizations, preferred provider organizations, or employee
assistance programs).
"THIRD PARTY PAYORS" shall mean any Person or persons that maintain(s)
a Third Party Payor Program.
"TITLE COMMITMENTS" has the meaning ascribed thereto in Section 5.14 of
this Agreement.
"TITLE COMPANY" has the meaning ascribed thereto in Section 5.14 of
this Agreement.
"TITLE POLICIES" has the meaning ascribed thereto in Section 5.14 of
this Agreement.
"TRANSFER TAXES" has the meaning ascribed thereto in Section 5.11 of
this Agreement.
"TRICARE" shall mean the worldwide health care program for active duty
and retired uniformed service members and their dependents, which is provided,
financed, and supervised by the United States Department of Defense and
established by 10 U.S.C. Sections 1071 et. seq.
"WORKING CAPITAL" means (i) the book value of the current assets (other
than Excluded Assets) of the Purchased Subsidiaries and their respective
Subsidiaries set forth on SCHEDULE I, minus (ii) the book value of the current
liabilities (other than Excluded Liabilities) of the Purchased Subsidiaries and
their respective Subsidiaries set forth on SCHEDULE I (to the extent such
liabilities are not paid, discharged or satisfied in accordance with the Plan of
Reorganization), each such book value to be determined on a consolidated basis
and in accordance with GAAP applied on a basis consistent with the application
of GAAP in the preparation of the Financial Statements as of and for the year
ended December 31, 2001 referred to in Section 3.9, taking into account only
those line item accounts set forth on SCHEDULE A-1, and employing the same
methodology, set forth on SCHEDULE A. SCHEDULE A includes an example of the
calculation of Working Capital. For the avoidance of doubt, any and all reserve
accounts and inter-company allocations shall be calculated employing methodology
consistent with prior practice to the extent that such prior practice complies
with GAAP.
Section 1.2 References to Dollars. References to dollars or "$" in this
Agreement mean United States dollars.
Section 1.3 References to "knowledge" and "including". References in
this Agreement to "to the knowledge of the Seller" or "to the knowledge of the
Seller and its Subsidiaries" or phrases of like import are references to the
actual knowledge of any of W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ Box, ▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, after reasonable due inquiry of any other persons who
would reasonably be expected to have knowledge of the subject matter of the
inquiry. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation.
12
ARTICLE II
PURCHASE AND SALE OF STOCK
--------------------------
Section 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions set forth in this Agreement, the Seller hereby agrees to issue and
deliver to the Purchaser on the Closing Date, and the Purchaser hereby agrees to
purchase and accept from the Seller on the Closing Date, (i) an aggregate of
1,000 shares of common stock of the LTC Subsidiary (the "LTC SHARES"), which LTC
Shares upon such sale and purchase shall represent all of the issued and
outstanding shares of capital stock of the LTC Subsidiary, and (ii) an aggregate
of 1,000 shares of common stock of the Therapy Subsidiary (the "THERAPY SHARES"
and, collectively with the LTC Shares, the "SHARES"), which Therapy Shares upon
such sale and purchase shall represent all of the issued and outstanding shares
of capital stock of the Therapy Subsidiary (such sales of the LTC Shares and the
Therapy Shares, collectively, the "SALE"). At the Closing, Seller shall deliver
to the Purchaser, against payment of the Purchase Price pursuant to Section 2.2
hereof, the certificates representing the LTC Shares and the Therapy Shares, in
each case accompanied by duly-executed assignment documents.
Section 2.2 Purchase Price.
(a) On the Closing Date, subject to Section 2.4(a), the
Purchaser shall pay to the Seller a purchase price equal to $97,500,000 (the
"PURCHASE PRICE"). The Purchase Price shall be allocated between the LTC Shares
and the Therapy Shares as reasonably determined by the Purchaser.
(b) Simultaneously with the execution of this Agreement, the
Purchaser is depositing $12,000,000 in escrow (the "PURCHASER DEPOSIT") with an
escrow agent (the "DEPOSIT ESCROW AGENT") pursuant to the terms of a Deposit
Escrow Agreement that the Seller and the Purchaser shall each have executed and
delivered prior to the making of the Purchaser Deposit (the "DEPOSIT ESCROW
AGREEMENT"). Without limiting the foregoing, the Deposit Escrow Agreement shall
provide, among other things, that (i) in the event that the transactions
contemplated by this Agreement are consummated, then the Purchaser Deposit plus
any interest earned thereon shall be delivered to the Seller, or the Seller's
designee, in cash by means of wire or interbank transfer in immediately
available funds, at the Closing and credited against the Purchase Price as set
forth in Section 2.2(c) below; (ii) in the event this Agreement is terminated
for any reason (unless the provisions of clause (iii) below apply), then, upon
such termination, the Purchaser Deposit plus any interest and other earnings
earned thereon shall be returned to the Purchaser and (iii) in the event the
Seller terminates this Agreement as a result of a material breach of this
Agreement by the Purchaser or as a result of the failure of any of the
conditions set forth in Sections 7.1, 7.2, 7.3, 7.7 or 7.10, the Purchaser
Deposit plus any interest and other earnings earned thereon shall be delivered
to the Seller. The parties shall execute joint instructions to the Deposit
Escrow Agent to effectuate the foregoing. Notwithstanding anything to the
contrary herein, including without limitation, the provisions of Sections 11.12
and 11.14, the delivery of the Purchaser Deposit to the Seller shall constitute
liquidated damages for any and all breaches of the terms of this Agreement by
the Purchaser and shall constitute the sole and exclusive remedy of the Seller
for any breach by the Purchaser of the terms of this Agreement.
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(c) Subject to Section 2.4, at the Closing, the Purchase Price
shall be paid as follows:
(i) Seven Million Five Hundred Thousand Dollars
($7,500,000) (the "ESCROW AMOUNT") shall be delivered by the
Purchaser to the Escrow Agent, which amount shall be held
pursuant to the terms of the Escrow Agreement; and
(ii) the Closing Date Balance (as defined below) shall be
delivered by the Purchaser to the Seller or to the Seller's
designee by wire transfer of immediately available funds to
such account or accounts as shall be designated by Seller to
the Purchaser in writing on or before the second Business Day
prior to the Closing; the "CLOSING DATE BALANCE" shall be equal
to the Purchase Price minus the Escrow Amount and the amount of
the Purchaser Deposit (including interest and any other
earnings thereon).
Section 2.3 Closing. The closing of the Sale (the "CLOSING") shall take
place at 11:00 a.m. (New York City time) at the offices of ▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, two (2) Business Days after the
satisfaction or waiver of the conditions set forth in Articles VI and VII
hereof, or such other dates and times as may be agreed to by the parties. Such
time and date are referred to in this Agreement as the "CLOSING DATE." Subject
to the provisions of Article IX of this Agreement, the failure to consummate the
Sale contemplated by this Agreement on the date and time and at the place
determined pursuant to this Section 2.3 shall not result in the termination of
this Agreement and shall not relieve any party to this Agreement of any
obligation under this Agreement.
Section 2.4 Purchase Price Adjustment.
(a) Closing Date Adjustment. At the Closing, the Closing Date Balance
described in Section 2.2(c)(ii) will be adjusted dollar-for-dollar as set forth
in this Section 2.4(a):
(i) Working Capital. Not more than ten (10) Business Days, but in
no event less than five (5) Business Days, before the Closing Date, the Seller
and the Purchaser will, in good faith and in accordance with GAAP, jointly
estimate the Working Capital as of the close of business on the Business Day
before the Closing Date on a reasonable basis using the Seller's financial
information for the month then-most-recently ended; provided, however, that if
the Seller and the Purchaser cannot agree on an estimate of the Working Capital,
such estimate will be deemed to be equal to the average of the Seller's and the
Purchaser's good faith determinations thereof. The amount of the Working Capital
as finally estimated pursuant to this Section 2.4(a)(i), is referred to herein
as the "ESTIMATED WORKING CAPITAL." At the Closing, (x) if the Estimated Working
Capital is less than the Baseline Working Capital, then the portion of the
Purchase Price payable pursuant to Section 2.2(c)(ii) will be decreased by the
amount of such deficiency and (y) if the Estimated Working Capital is greater
than the Baseline Working Capital, then the portion of the Purchase Price
payable pursuant to Section 2.2(c)(ii) will be increased by the amount of such
excess.
(ii) PLGL. If the Closing occurs on or after July 31, 2003 then, at
the Closing, the Closing Date Balance payable pursuant to Section 2.2(c)(ii)
will be decreased by
14
$1,902,500 (or if the Closing occurs during July 2003, the Closing Date Balance
payable pursuant to Section 2.2(c)(ii) will be decreased by an amount equal to
$1,902,500 multiplied by a fraction, the numerator of which shall be equal to
the total number of days which shall have elapsed from June 30, 2003 through and
including the Closing Date and the denominator of which shall be equal to 31).
(b) Post-Closing Determination. Within thirty (30) days after
the Closing Date, the Purchaser, through its designated Representative, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ or such other Representative as it may designate in the event ▇▇.
▇▇▇▇▇▇▇▇ is unavailable, and the Seller, through its designated Representative,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or such other Representative as it may designate in the event
▇▇. ▇▇▇▇▇▇▇ is unavailable, will jointly conduct a review, and, in accordance
with GAAP applied on a consistent basis (i) determine the Working Capital amount
as of the close of business on the Business Day before the Closing Date (the
"CLOSING WORKING CAPITAL"), taking into account only those line item accounts
set forth on SCHEDULE A-1 and employing the methodology set forth on SCHEDULE A
and (ii) determine the outstanding amount of the Secured Indebtedness as of the
Closing Date (the "CLOSING SECURED INDEBTEDNESS"). If the Seller and the
Purchaser disagree on the Closing Working Capital and/or the Closing Secured
Indebtedness at the end of such 30-day period, then the Purchaser and the Seller
will use commercially reasonable best efforts to resolve any such disagreements
during the following 15 days. If the parties are unable to reach final
resolution with respect to the Closing Working Capital and/or the Closing
Secured Indebtedness within forty-five (45) days after the Closing Date, all
disputes shall be submitted for resolution to the Baltimore office of
PricewaterhouseCoopers or such other mutually acceptable nationally recognized
accounting firm (the "FIRM"). The parties shall make a one (1) day presentation
to the Firm, each party to have an equal amount of time for its respective
presentation, and the parties shall ask the Firm to report its decision and the
bases thereof to the Purchaser and the Seller within five (5) Business Days of
such presentation. The Purchaser and the Seller shall each bear 50% of the costs
and expenses of the Firm. The determination of the Firm shall be conclusive and
binding upon the parties. The amount of the Closing Working Capital and the
Closing Secured Indebtedness, as finally determined pursuant to this Section
2.4(b), are referred to herein as the "ACTUAL WORKING CAPITAL" and the "ACTUAL
SECURED INDEBTEDNESS."
(c) Post-Closing Adjustment.
(i) Payment by the Purchaser. If the Actual Working Capital
is greater than the Estimated Working Capital, then the Purchaser will, within
five (5) Business Days after the final determination thereof, pay to the Seller
or its designee an amount equal to the sum of (A) the Actual Working Capital
minus the Estimated Working Capital plus (B) interest on the amount payable
pursuant to clause (A) from the Closing Date to the date of payment at an
interest rate equal to the Prime Rate; provided, however, that the aggregate
amount payable pursuant to this Section 2.4(c)(i) with respect to Working
Capital shall not exceed $7,500,000. If the Actual Secured Indebtedness is less
than $15,000,000, then the Purchaser will, within five (5) Business Days after
the final determination thereof, pay to the Seller or its designee an amount
equal to the sum of (A) $15,000,000 minus the Actual Secured Indebtedness plus
(B) interest on the amount payable pursuant to clause (A) from the Closing Date
to the date of payment at an interest rate equal to the Prime Rate. The payment
of any amounts due pursuant to the preceding sentences will be made by wire
transfer or delivery of other immediately available funds. In
15
addition, the Purchaser shall execute and deliver written release instructions
to the Escrow Agent to effectuate the immediate release of the Escrow Funds (to
the extent applicable under either clause (i) or (ii) of this Section 2.4(c)) to
an account designated by the Seller.
(ii) Payment by the Seller. If the Actual Working Capital
is less than the Estimated Working Capital, the Seller will, within five (5)
Business Days after the final determination thereof, execute and deliver written
release instructions to the Escrow Agent to release to Purchaser from the Escrow
Amount an amount equal to (A) the difference between the Estimated Working
Capital and the Actual Working Capital plus (B) interest on the amount payable
pursuant to clause (A) of this subsection (ii) from the Closing Date to the date
of payment at an interest rate equal to the Prime Rate; provided, however, that
the aggregate amount payable pursuant to this Section 2.4(c)(ii) with respect to
Working Capital shall not exceed the Escrow Amount. If the Actual Secured
Indebtedness is more than $16,250,000, then the Seller will, within five (5)
Business Days after the final determination thereof, pay to the Purchaser or its
designee an amount equal to the sum of (A) the Actual Secured Indebtedness minus
$16,250,000 plus (B) interest on the amount payable pursuant to clause (A) from
the Closing Date to the date of payment at an interest rate equal to the Prime
Rate. The payment of any amounts due pursuant to the preceding sentence will be
made by wire transfer or delivery of immediately available funds.
(iii) If, pursuant to Section 2.4(b) above, there is a
dispute as to the final determination of the Closing Working Capital or the
Closing Secured Indebtedness, the Purchaser shall promptly pay to the Seller or
the Seller shall promptly pay to the Purchaser, as the case may be, such amounts
as are not in dispute, pending final determination of such dispute pursuant to
Section 2.4(b) above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
The Seller hereby represents and warrants to the Purchaser as follows:
Section 3.1 Existence and Good Standing of the Seller, Subsidiaries;
Authorization.
(a) The Seller and each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. The Seller and each Subsidiary has all requisite corporate power
and authority to own, lease and operate its respective properties and to carry
on its respective business as currently conducted. The Seller and each
Subsidiary is duly qualified or licensed as a foreign corporation to conduct its
respective business as currently conducted and, to the extent applicable, is in
good standing, in each jurisdiction in which the character or location of the
property owned, leased or operated by Seller or each such Subsidiary or the
nature of the business conducted by Seller or each such Subsidiary makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
16
(b) Assuming that (i) all filings required to be made in
connection with the transactions contemplated hereby under the HSR Act are made
and the waiting periods thereunder have been terminated or have expired and (ii)
the Confirmation Order has been entered, the Seller has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
Subject to the entry of the Confirmation Order, the execution, delivery and
performance of this Agreement by the Seller, and the consummation by it of the
Sale and other transactions contemplated hereby, have been duly authorized and
approved by all necessary corporate action on the part of the Seller and its
shareholders. This Agreement has been duly executed and delivered by the Seller
and, assuming the due execution of this Agreement by the Purchaser and the entry
of the Confirmation Order, constitutes a valid and binding obligation of the
Seller enforceable against it in accordance with its terms, except to the extent
that such enforceability may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, moratorium, receivership and similar laws affecting
the enforcement of creditors' rights generally and general equitable principles.
Section 3.2 Capital Stock. (a) As of the Closing, (i) the Seller shall
hold of record and own beneficially all of the LTC Shares and all of the Therapy
Shares, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), Taxes,
Encumbrances, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands (other than Encumbrances, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands that will
be released or discharged pursuant to the Confirmation Order), (ii) there shall
be no issued and outstanding shares of either the LTC Subsidiary or the Therapy
Subsidiary, except for the LTC Shares and the Therapy Shares and (iii) the LTC
Shares and the Therapy Shares shall have all been duly authorized and validly
issued and be fully-paid and nonassessable. There are no voting trusts, proxies,
or other agreements or understandings with respect to the voting of any capital
stock of either the LTC Subsidiary or the Therapy Subsidiary. Upon the formation
of each of the LTC Subsidiary and the Therapy Subsidiary and through the
Closing, there will be no outstanding subscriptions, warrants, rights, options,
calls, commitments, conversion rights, rights of exchange, plans or other
agreements providing for the purchase, issuance or sale of either the LTC Shares
or the Therapy Shares (in each case other than those in favor of the Purchaser).
(b) SCHEDULE I hereto sets forth for each Subsidiary (i) its
name and jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock and (iii) the number of issued
and outstanding shares of each class of its capital stock (all such issued and
outstanding capital stock of the Subsidiaries in the aggregate, the "SUBSIDIARY
STOCK"). Except as set forth on SCHEDULE 3.2(b), the Seller is the beneficial
owner of all of the Subsidiary Stock, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Encumbrances, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands (other than Encumbrances,
options, warrants, purchase rights, contracts, commitments, equities, claims and
demands that will be released or discharged pursuant to the Confirmation Order.
All of the Subsidiary Stock has been duly authorized and validly issued and is
fully-paid and nonassessable. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary. Except as described on SCHEDULE I, there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion
17
rights, rights of exchange, plans or other agreements providing for the
purchase, issuance or sale of the Subsidiary Stock. Except as described on
SCHEDULE I, none of Seller and the Subsidiaries controls directly or indirectly
or has any direct or indirect equity participation in any corporation,
partnership, trust, or other business association that is not a Subsidiary.
Except for the Subsidiaries set forth on SCHEDULE I attached hereto, neither
Seller nor any of the Subsidiaries owns or has any right to acquire, directly or
indirectly, any outstanding capital stock of, or other equity interests in, any
Person.
Section 3.3 Consents and Approvals; No Violation. Assuming that (a) all
filings required to be made in connection with the transactions contemplated
hereby under the HSR Act are made and the waiting periods thereunder have been
terminated or have expired and (b) the Confirmation Order has been Entered,
except as set forth on SCHEDULE 3.3 to this Agreement, the execution and
delivery of this Agreement by the Seller and the consummation of the Sale and
other transactions contemplated hereby:
(i) will not violate the provisions of the Articles of
Incorporation or Certificate of Incorporation, as the case may
be (collectively, an "INCORPORATION DOCUMENT"), or By-laws of
any Subsidiary, or the New Certificate of Incorporation or
By-laws of the Seller;
(ii) will not violate any material Legal Requirement or
Order to which the Seller or any Subsidiary is subject or by
which any of their respective properties or assets (excluding
the Excluded Assets) are bound;
(iii) will not require any permit, consent or approval of,
or the giving of any notice to, or filing with any Government
Authority or other Person;
(iv) will not result in a material violation or breach of,
conflict with, constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of
termination, cancellation, payment or acceleration) under,
require the giving of notice pursuant to, or result in the
creation of any Encumbrance upon any of the properties or
assets of the Seller or any Subsidiary (excluding any Excluded
Assets) under any of the terms, conditions or provisions of,
any material note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or any
other instrument or obligation to which the Seller or any
Subsidiary is a party, or by which their respective properties
or assets (excluding the Excluded Assets) may be bound; and
excluding from the foregoing clauses (ii), (iii) and (iv) permits, consents,
approvals, notices and filings the absence of which, and violations, conflicts,
breaches, defaults and Encumbrances (and any right of termination, cancellation
payment or acceleration thereunder) the existence of which, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.4 Litigation. Except as set forth on SCHEDULE 3.4 to this
Agreement, other than (a) PLGL Claims, (b) pre-petition claims, (c) collection
suits and (d) suits, actions and proceedings to be released or discharged
pursuant to the Plan of Reorganization, to the
18
knowledge of the Seller, there are no legal actions, suits, grievances,
arbitrations or other legal, administrative, governmental or other
investigations or proceedings (whether federal, state, local or foreign) pending
the outcome of which could reasonably be expected to result in a Material
Adverse Effect or, to the knowledge of the Seller, threatened against or
affecting Seller or any Subsidiary or the Seller's or any Subsidiary's
properties, assets or business (other than the Excluded Assets and Excluded
Liabilities) which could reasonably be expected to result in a Material Adverse
Effect.
Section 3.5 Employees. SCHEDULE 3.5 to this Agreement contains a
complete accurate list, as of October 31, 2002, of the following information for
each employee of the Seller and each Subsidiary earning an annual salary greater
than One Hundred Thousand Dollars ($100,000), including each employee on leave
of absence or layoff status: (i) employer; (ii) name; (iii) job title; and (iv)
current base salary. Except as set forth on SCHEDULE 3.5 to this Agreement,
neither Seller nor any Subsidiary is a party to any employment, severance,
change of control or similar agreement or contract with any of its respective
employees. Except as set forth on SCHEDULE 3.5 to this Agreement, to the
knowledge of the Seller and the directors and officers (and employees with
responsibility for employment matters) of the Subsidiaries, no executive, key
employee, or group of employees has threatened to terminate employment with any
Subsidiary.
Section 3.6 Labor Relations; Compliance. Except as set forth on
SCHEDULE 3.6 to this Agreement, neither the Seller nor any Subsidiary is a party
to any collective bargaining agreement or other labor contract. Except as set
forth on SCHEDULE 3.6 to this Agreement, and to the knowledge of Seller, neither
the Seller nor any Subsidiary has experienced nor is there threatened (a) any
strike, slowdown, picketing, work stoppage or collective bargaining dispute, (b)
any proceeding against or affecting the Seller or any Subsidiary relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Government Authority, organizational activity, or
other labor or employment dispute against or affecting the Seller or any
Subsidiary or its premises or (c) any application for certification of a
collective bargaining agent. Except as set forth on SCHEDULE 3.6 of this
Agreement, to the knowledge of the Seller, there is no organizational effort
presently being made (or to the Seller's knowledge, is threatened) by or on
behalf of any labor union with respect to employees of the Seller or any of the
Subsidiaries. To the knowledge of the Seller, each of the Seller and each
Subsidiary has complied in all material respects with all applicable Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant or facility closing.
Section 3.7 Brokers' or Finders' Fees. No agent, broker, firm or other
Person acting on behalf of the Seller or any Subsidiary is, or will be, entitled
to any investment banking, commission, broker's or finder's fees from any of the
parties hereto, or from any Affiliate of any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement, except
for UBS Warburg LLC.
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Section 3.8 Real Property.
(a) Owned Real Property.
(i) SCHEDULE 3.8(a) sets forth the address and description
of each Owned Real Property. With respect to each Owned Real Property: (A) the
Seller or a Subsidiary (as the case may be) has good and marketable indefeasible
fee simple title to such Owned Real Property, free and clear of all
Encumbrances, except Permitted Encumbrances and Encumbrances that will be
released or discharged pursuant to the Confirmation Order, (B) Seller or such
Subsidiary has not leased or otherwise granted to any Person the right to use or
occupy such Owned Real Property or any portion thereof, other than Seller's or
such Subsidiaries' respective patients, employees and contractors; (C) other
than the right of Purchaser pursuant to this Agreement, there are no outstanding
options, rights of first offer or rights of first refusal to purchase such Owned
Real Property or any portion thereof or interest therein. Neither the Seller nor
any Subsidiary is a party to any agreement or option to purchase any real
property or interest therein.
(ii) The term "PERMITTED ENCUMBRANCES" shall mean with
respect to each Owned Real Property: (A) real estate Taxes, assessments and
other governmental levies, fees or charges imposed with respect to such real
property that are not due and payable as of the Closing Date, or that are being
contested in good faith and for which appropriate reserves have been established
in accordance with GAAP; (B) mechanics liens and similar Encumbrances for labor,
materials or supplies provided with respect to such real property incurred in
the Ordinary Course of Business for amounts that are not due and payable and
that would not, individually or in the aggregate, have a Material Adverse
Effect; (C) zoning, building codes and other land use Legal Requirements
regulating the use or occupancy of such real property or the activities
conducted thereon that are imposed by any Government Authority having
jurisdiction over such real property that are not violated by the current use or
occupancy of such real property or the operation of the business of Seller or
any Subsidiary thereon; (D) easements, covenants, conditions, restrictions and
other similar matters of record affecting title to or use of such real property
that do not materially impair the use or occupancy of such real property in the
operation of the business of Seller or any Subsidiary conducted thereon; and (E)
Secured Indebtedness.
(b) Leased Real Property. SCHEDULE 3.8(b) sets forth the
address of each Leased Real Property, and a true and complete list of all Leases
(including all amendments, extensions, renewals, guaranties and other agreements
with respect thereto) for each such Leased Real Property (including the date and
name of the parties to such Lease document). The Seller has made available or
delivered to the Purchaser a true and complete copy of each such Lease document,
and in the case of any oral Lease, has made available a written summary of the
material terms of such Lease. With respect to each of the Leases, subject to the
entry of the Confirmation Order and except as set forth on SCHEDULE 3.8(b): (i)
such Lease is legal, valid, binding, enforceable and in full force and effect;
(ii) the Seller's or Subsidiary's possession and quiet enjoyment of the Leased
Real Property under such Lease has not been disturbed, and, to the knowledge of
Seller, there are no disputes with respect to such Lease; (iii) neither the
Seller, any Subsidiary nor any other party to the Lease is in breach or default
under such Lease; (iv) neither the Seller nor any Subsidiary has subleased,
licensed or otherwise granted any Person the right to use or occupy such Leased
Real Property or any portion thereof, other than to Seller's or any
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Subsidiaries' respective patients; (v) neither the Seller nor any Subsidiary has
collaterally assigned or granted any other security interest in such Lease or
any interest therein; and (vi) there are no Encumbrances on the estate or
interest created by such Lease, other than Permitted Encumbrances or
Encumbrances that will be released or discharged pursuant to the Confirmation
Order.
(c) Compliance with Laws. To the knowledge of the Seller, the
Real Property is in compliance with all applicable building, zoning,
subdivision, health and safety and other land use Legal Requirements, including,
without limitation, The Americans with Disabilities Act of 1990, as amended, and
all insurance requirements affecting the Real Property (collectively, the "REAL
PROPERTY LAWS"), and Seller has received no notice that the current use or
occupancy of the Real Property or operation of its business thereon violates any
Real Property Laws, except where the failure to be in compliance with such Real
Property Laws could not reasonably be expected to result in a Material Adverse
Effect.
(d) Permits. All material certificates of occupancy, permits,
licenses, franchises, approvals and authorizations (collectively, the "REAL
PROPERTY PERMITS") of each Government Authority, board of fire underwriters,
association or any other entity having jurisdiction over the Real Property, that
are required to use or occupy the Real Property or operate the business of
Seller or any Subsidiary as currently conducted have been issued and are in full
force and effect. The Seller has delivered or made available to Purchaser a true
and complete copy of all Real Property Permits in Seller's possession. The
Seller has not received any written notice from any Government Authority or
other entity having jurisdiction over the Real Property threatening a
suspension, revocation, modification or cancellation of any Real Property
Permit. Except as set forth on SCHEDULE 3.8(d), to the knowledge of the Seller,
the Real Property Permits are transferable to Purchaser without the consent or
approval of the issuing Government Authority or entity, no disclosure, filing or
other action by the Seller is required in connection with such transfer, and
Purchaser shall not be required to assume any additional liabilities or
obligations under the Real Property Permits as a result of such transfer.
(e) Access. Each parcel of Real Property has direct access (or
a valid easement allowing it access) to a public street adjoining the Real
Property, and such access is not dependent on any land or other real property
interest that is not included in the Real Property.
(f) SCHEDULE 3.8(f) sets forth the address of each Owned Real
Property and Leased Real Property from which the Seller and its Subsidiaries
conduct Seller's contract rehabilitation therapy business.
Section 3.9 Financial Statements; Guaranties. (a) Attached to SCHEDULE
3.9 are the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) audited consolidated and unaudited consolidating balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended December 31, 1999, December 31, 2000 and
December 31, 2001 (the "MOST RECENT FISCAL YEAR END") for Seller and the
Subsidiaries as of such dates; and (ii) unaudited consolidated and consolidating
balance sheets and statements of income, changes in stockholders' equity, and
cash flow (the "MOST RECENT FINANCIAL STATEMENTS") as of and for the months
ended from and including January 31, 2002 through and including the last day of
the month most recently ended at least 30 days prior
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to the date hereof (the "MOST RECENT FISCAL MONTH END") for Seller and the
Subsidiaries. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of Seller and
the Subsidiaries as of such dates and the results of operations of Seller and
the Subsidiaries for such periods; provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.
(b) Except as set forth on SCHEDULE 3.9(b), other than
Permitted Encumbrances and Encumbrances that will be released or discharged
pursuant to the Confirmation Order, neither Seller nor any of the Subsidiaries
is a guarantor or otherwise is liable for any liability or obligation (including
Indebtedness) of any other Person.
Section 3.10 Assets. (a) Excluding the Excluded Assets, the
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, or shown
on the Financial Statements for the Most Recent Fiscal Month End or acquired
after the date thereof, free and clear of all Encumbrances, except for (i)
Permitted Encumbrances, (ii) the Encumbrances listed on SCHEDULE 3.10(a) hereto,
(iii) properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Fiscal Month End, and (iv) Encumbrances that will be
released or discharged pursuant to the Confirmation Order.
(b) Excluding the Excluded Assets, the Subsidiaries own or
lease all buildings, machinery, equipment, and other tangible assets necessary
for the conduct of their businesses as presently conducted. Each such tangible
asset has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
Section 3.11 Events Subsequent to 2001. Except as set forth on SCHEDULE
3.11, since December 31, 2001, the Seller and the Subsidiaries have conducted
their respective businesses in the Ordinary Course of Business.
Section 3.12 Compliance with Law. (a) Except as set forth on SCHEDULE
3.12 and except with respect to those matters relating to Taxes that are
expressly addressed by Section 3.17 and matters relating to employee benefits
addressed by Section 3.16, to the knowledge of the Seller, each of the Seller
and the Subsidiaries has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder and including the Foreign Corrupt Practices Act, 15 U.S.C.
78dd-1 et seq.) of Governmental Authorities (and all agencies thereof). Except
as relates to Taxes and employee benefits matters, and except as set forth on
SCHEDULE 3.12 and SCHEDULE 3.4, to the knowledge of Seller, neither Seller nor
any Subsidiary is subject to or has received any written notice of any material
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice alleging any failure to comply with the foregoing. Without
limiting the generality of the foregoing;
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(b) The Seller and each Subsidiary have conducted, and are
presently conducting, its facilities and other businesses so as to comply in all
material respects with all Legal Requirements applicable to the conduct of
operation of such facilities.
(c) Except as otherwise provided in this Section 3.12 (and the
Schedules hereto), to the knowledge of the Seller, the Seller and each
Subsidiary is in substantial compliance with the statutes and regulations
related to fraud, abuse, false claims/statements, referrals and prohibition of
kickbacks. Neither the Seller, any Subsidiary, nor any current director or
employee of the Seller or any Subsidiary has been debarred, suspended or
excluded from any Medicare, Medicaid or any other Third Party Payor Program,
including, without limitation, under 42 U.S.C. 1320a-7.
(d) To the knowledge of the Seller, the Seller and each
Subsidiary has all material Permits, Licenses and CONs that are required to
operate each of their respective facilities (including, without limitation,
those required under any Environmental, Health and Safety Requirements), and is
in compliance with the terms and conditions of the Permits, Licenses, CONs and
Provider Agreements, except where the failure to have or be in compliance with
any Permit, License or CON could not individually or in the aggregate reasonably
be expected to have a Material Adverse Effect. SCHEDULE 3.12(d) hereto sets
forth a correct and complete list of each Medicare agreement, Medicaid
agreement, other Provider Agreement, CON and any other material License or
Permit applicable to any facility or service, each one of which is in full force
and effect. To the knowledge of the Seller, neither the Seller nor any
Subsidiary has received any written notice that a suspension or cancellation of
any of the material Permits, Licenses, CONs or Provider Agreements is threatened
and, to the knowledge of Seller, no cause exists for such suspension or
cancellation. Without limiting the generality of the foregoing, the facilities,
equipment and operations of each facility of the Seller and any Subsidiary
satisfies the applicable facility licensing requirements of the state in which
such facility is located and the requirements for participation in the Medicare
and Medicaid Programs.
(e) Except with respect to matters to be covered by the
Medicare Settlement and the agreements with various states relating to Medicaid
matters and listed on SCHEDULE 3.12(e), to the knowledge of the Seller, neither
the Seller nor any Subsidiary is currently subject to any fines, penalties, or
sanctions nor are any such fines, penalties or sanctions threatened, the
existence of which would reasonably be expected to have a Material Adverse
Effect.
Section 3.13 Contracts. SCHEDULE 3.13 lists the following contracts and
other agreements to which Seller or any of the Subsidiaries is a party (other
than those contracts and other agreements that constitute Excluded Assets or
Excluded Liabilities):
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of Two Hundred Fifty Thousand Dollars ($250,000) per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which extend over a period of more
23
than one (1) year, or that would result in a material loss to the Seller or any
of the Subsidiaries, or involve consideration in excess of Two Hundred Fifty
Thousand Dollars ($250,000);
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or under which it has imposed a Encumbrance on any
of its assets, tangible or intangible;
(e) any agreement concerning noncompetition;
(f) any agreement with any of the Seller and its directors,
officers or the Subsidiaries;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of Two Hundred Fifty Thousand Dollars ($250,000) or providing
severance benefits or payments upon a change of control;
(j) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(k) any settlement, conciliation or similar agreement under
which material obligations remain to be performed by any party thereto;
(l) any agreement, other than those listed on SCHEDULE 3.13,
pursuant to which the consequences of a default or termination could have a
Material Adverse Effect;
(m) any lease treated as a capitalized lease;
(n) any corporate integrity agreement;
(o) any agreement under which Seller or any of the Subsidiaries
has advanced or loaned any other Person amounts in the aggregate exceeding Two
Hundred Fifty Thousand Dollars ($250,000);
(p) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of Two Hundred Fifty
Thousand Dollars ($250,000); and
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(q) each item of Secured Indebtedness.
The Seller has made available or delivered to the Purchaser a correct
and complete copy of each written agreement (as amended to date) listed on
SCHEDULE 3.13 and a written summary setting forth the terms and conditions of
each oral agreement referred to in SCHEDULE 3.13. With respect to each such
agreement, except to the extent otherwise limited by applicable bankruptcy law
or an Order of the Bankruptcy Court, (A) the agreement is legal, valid, binding
and enforceable, and in full force and effect; (B) the agreement will continue
to be legal, valid, binding and enforceable, and in full force and effect
following the consummation of the transactions contemplated hereby; (C) neither
the Seller nor any Subsidiary (and, to the knowledge of the Seller, no other
party) is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) neither the Seller
nor any Subsidiary (and, to the knowledge of the Seller, no other party) has
repudiated any provision of the agreement. In addition, the Seller has made
available to the Purchaser a true and correct copy of the current draft of the
form of Medicare corporate integrity agreement (the "CORPORATE INTEGRITY
AGREEMENT") to be entered into with respect to the long term care business
operated by the Seller and the Subsidiaries.
Section 3.14 Insurance. (a) The Seller has made available to the
Purchaser:
(i) accurate and complete copies of all material policies
of insurance (and correspondence relating to coverage
thereunder) to which the Seller or any Subsidiary is or was a
party or under which the Seller or any Subsidiary is or has
been covered at any time since January 1, 2000 (other than
those material policies of insurance relating exclusively to
any Excluded Asset or Excluded Liability); and
(ii) accurate and complete copies of all pending
applications by the Seller or any Subsidiary for material
policies of insurance relating to the facilities or the assets
used by the Seller or any Subsidiary (other than those policies
relating exclusively to any Excluded Asset or Excluded
Liability).
(b) SCHEDULE 3.14(b) describes:
(i) other than with respect to PLGL Claims or potential
PLGL Claims and deductibles under policies of insurance, any
self-insurance arrangement by the Seller or any Subsidiary,
including any reserves established thereunder; and
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk which
involves the facilities or assets used by the Seller or any
Subsidiary.
(c) Except as set forth on SCHEDULE 3.14(c):
(i) since January 1, 2000, neither the Seller nor any
Subsidiary has received (A) any refusal of coverage or any
notice that a defense will be afforded with reservation of
rights or (B) any written notice of cancellation that any
policy
25
of insurance is no longer in full force or effect or that the
issuer of any policy of insurance is not willing or able to
perform its obligations thereunder; and
(ii) since January 1, 2000, the Seller and the Subsidiaries
have paid all premiums due, and have otherwise performed all of
their respective obligations, under each policy of insurance to
which it is a party and that provides coverage with respect to
the assets or facilities used by Seller or any Subsidiary; and
(iii) the Seller and the Subsidiaries have given notice to
the insurer of all claims that may be insured thereby; and
(iv) each policy of insurance is legal, valid, binding,
enforceable, and in full force and effect.
Section 3.15 Certain Transactions. Except as set forth in SCHEDULE
3.15, none of the Seller, the Seller's directors, officers and employees or the
Subsidiaries' directors, officers and employees has been involved in any
material business arrangement with the Seller or any of the Subsidiaries within
the past twelve (12) months, and none of the Seller, the Seller's directors,
officers and employees or the Subsidiaries' directors, officers and employees
owns any material asset, tangible or intangible, that is used in the business of
any of the Seller and the Subsidiaries.
Section 3.16 Employee Benefits and Other Matters.
(a) SCHEDULE 3.16 identifies all material bonus, deferred or
incentive compensation, profit sharing, retirement, vacation, sick leave,
hospitalization or severance plans, "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and material fringe benefit plans sponsored, maintained or
contributed to by the Seller or any Subsidiary or with respect to which the
Seller or any Subsidiary has any liability (the "EMPLOYEE BENEFIT PLANS").
SCHEDULE 3.16 indicates whether each such Employee Benefit Plan covers long-term
care Affected Employees or contract rehabilitation therapy Affected Employees.
Except as set forth in SCHEDULE 3.16, none of the Employee Benefit Plans are
subject to Title IV of ERISA nor does any Employee Benefit Plan provide for
medical or life insurance benefits to retired or former employees of the Seller
or any Subsidiary (other than as required under Code Section 4980B, or similar
state law). Except as set forth in SCHEDULE 3.16, neither the Seller nor the
Subsidiaries is a participating or contributing employer in any "multiemployer
plan" (as defined in Section 3(37) of ERISA) with respect to employees of the
Seller or its Subsidiaries nor has the Seller or any Subsidiary incurred any
withdrawal liability with respect to any multiemployer plan or any liability in
connection with the termination or reorganization of any multiemployer plan.
(b) Each such Employee Benefit Plan is in all material respects
in compliance with the applicable provisions of ERISA and the Code and all other
applicable laws, rules and regulations, including, without limitation, medical
continuation under Code Section 4980B. Since January 1, 2000, to the knowledge
of the Seller, neither the Seller nor any Subsidiary has (i) engaged in any
transaction prohibited by section 406 of ERISA or section 4975 of the Code; (ii)
breached any fiduciary duty owed by it with respect to the Employee Benefit
Plans described
26
above; or (iii) failed to file and distribute timely and properly all reports
and information required to be filed or distributed in accordance with ERISA or
the Code.
(c) All contributions, premiums or payments under or with
respect to each Employee Benefit Plan which are due on or before the Closing
Date have been made or accrued.
(d) Except as set forth on SCHEDULE 3.16, each Employee Benefit
Plan which is intended to be qualified under Code Section 401(a)(i) has been
amended to reflect all requirements of the Tax Reform Act of 1986 and all
subsequent legislation which is required to be adopted prior to the end of the
applicable remedial amendment period and (ii) has received from the Internal
Revenue Service a favorable determination letter which considers the terms of
the Employee Benefit Plan as amended for such changes in law, or has timely
filed a request seeking such determination.
(e) The Seller and each Subsidiary has not incurred and has no
reason to expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability) or under the Code with respect to
any employee pension benefit plan that the Seller, any Subsidiary or any other
entity, that together with the Seller or any Subsidiary is treated as a single
employer under Code ss. 414, has maintained, contributed to, or been required to
contribute.
Section 3.17 Taxes. Except as set forth on SCHEDULE 3.17(a): (a) to the
knowledge of the Seller, each of the Subsidiaries has timely filed, or shall
timely file, all Tax Returns required to be filed by it, except where the
failure to file any such Tax Return could not reasonably be expected to result
in a Material Adverse Effect, and each such Tax Return has in all material
respects been prepared in compliance with all applicable Legal Requirements and
is true and correct in all material respects. Each Affiliated Group of which the
Seller or any Subsidiary is or has been a member (a "COVERED AFFILIATED GROUP")
has timely filed (or shall timely file) all Tax Returns which are required to be
filed by it to the extent that such Tax Returns include (or are required to
include) the Seller or any Subsidiary, except where the failure to file any such
Tax Return could not reasonably be expected to result in a Material Adverse
Effect, and all such Tax Returns are, to the extent that they relate to the
Seller or any Subsidiary, true and correct in all material respects.
(b) Except for Tax claims that will be discharged pursuant to
the Plan of Reorganization and Tax claims set forth on SCHEDULE 3.17(a), to the
knowledge of the Seller, all material Taxes payable by the Subsidiaries (whether
or not shown or required to be shown on any Tax Return) have been paid (or shall
be paid on or prior to the Closing Date), and each of the Subsidiaries has
properly withheld and paid all material Taxes required to have been withheld and
paid in connection with amounts paid or owing to any shareholder, employee,
creditor, independent contractor, or other third party. All material Taxes due
and payable by any Covered Affiliated Group with respect to any Tax period
during which the Seller or any Subsidiary was a member of the group (whether or
not such Taxes are shown or required to be shown on any Tax Return) have been
paid or shall be paid on or before the Closing Date and no material Taxes are
delinquent.
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(c) Except as set forth on SCHEDULE 3.17(c), no material
action, suit, proceeding or audit or any notice of inquiry of any of the
foregoing is pending against or with respect to the Subsidiaries regarding
Taxes, and, to the knowledge of the Seller, no action, suit, proceeding or audit
has been threatened against or with respect to the Subsidiaries regarding Taxes.
Neither Purchaser nor any of the Subsidiaries shall be responsible for the
payment of any Taxes arising from the Section 338(h)(10) election made by Rotech
Healthcare Inc.
(d) The accrual for Taxes on the Financial Statements for the
Most Recent Fiscal Month End would be adequate to pay all Tax liabilities of the
Subsidiaries if their current tax year were treated as ending as of the end of
such month. Except as set forth on SCHEDULE 3.17(d), to the knowledge of the
Seller, none of the Subsidiaries is a party to or bound by any Tax allocation or
Tax sharing agreement with any Person and none has any current or potential
contractual obligation to indemnify any other Person with respect to Taxes. None
of the Subsidiaries (i) has been a member of an Affiliated Group (other than an
Affiliated Group the common parent of which was the Seller) or (ii) has any
liability for the Taxes of any Person (other than any of the Seller or its
Subsidiaries) under Treas. Reg. ss. 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
To the knowledge of Seller, no claim has ever been made by a Taxing Authority in
a jurisdiction where the Subsidiaries do not file Tax Returns that any of the
Subsidiaries is or may be subject to taxation by such jurisdiction.
(e) Each of the Subsidiaries has provided or shall provide or
make available prior to the Closing Date to the Purchaser true, correct and
complete copies of all Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Subsidiaries for the
past three (3) years. To the knowledge of the Seller, none of the Subsidiaries
has consented to extend the time, or is the beneficiary of any extension of
time, in which any Tax may be assessed or collected by any taxing authority.
There are no Encumbrances for Taxes (other than for Taxes not yet due and
payable) upon the assets of the Subsidiaries.
(f) None of the Subsidiaries will be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any (i) change in method of accounting for a taxable period ending on or prior
to the Closing Date under Code ss. 481(c) (or any corresponding or similar
provision of state, local or foreign income Tax law); (ii) "closing agreement"
as described in Code ss. 7121 (or any corresponding or similar provision of
state, local or foreign income Tax law); (iii) deferred intercompany gain or any
excess loss account described in Treasury Regulations under Code ss. 1502 (or
any corresponding or similar provision of state, local or foreign income Tax
law); or (iv) installment sale made prior to the Closing Date.
(g) None of the Subsidiaries has been a United States real
property holding corporation within the meaning of Code ss. 897(c)(2) during the
applicable period specified in Code ss. 897(c)(1)(A)(ii). To the knowledge of
the Seller, none of the Subsidiaries has made any payments, is obligated to make
any payments, or is a party to any agreement that has resulted or would result,
separately or in the aggregate, in the payment that will not be deductible under
Code ss. 280G or Code ss. 162(m).
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(h) SCHEDULE 3.17(h) hereto sets forth the following
information with respect to each of Seller and its Subsidiaries as of the most
recent practicable date: (i) the basis of the Subsidiaries in their assets; (ii)
the amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution allocable to
the Subsidiaries; and (iii) the amount of any deferred gain or loss allocable to
the Subsidiaries arising out of any intercompany transaction.
Section 3.18 Intellectual Property. (a) SCHEDULE 3.18 contains complete
and accurate lists of all (i) patented or registered Intellectual Property
Rights owned by the Seller or any Subsidiary or used in the business of Seller
or any Subsidiary as presently conducted, (ii) pending patent applications and
applications for registrations of other Intellectual Property Rights filed by
the Seller or any Subsidiary, (iii) unregistered trade names and corporate names
owned by the Seller or any Subsidiary or used in the business of Seller or any
Subsidiary as presently conducted and (iv) unregistered trademarks, service
marks, copyrights, mask works and material computer software owned by the Seller
or any Subsidiary or used in the business of Seller or any Subsidiary as
presently conducted. SCHEDULE 3.18 also contains a complete and accurate list of
all material licenses and other rights currently in effect and granted by the
Seller or any Subsidiary to any third party with respect to any Intellectual
Property Rights and all material licenses and other rights currently in effect
and granted by any third party to the Seller or any Subsidiary with respect to
any Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. No loss or expiration of any Intellectual Property
Right or related group of Intellectual Property Rights owned or used by the
Seller or any Subsidiary is threatened, pending or reasonably foreseeable. The
Seller and each Subsidiary has taken all reasonably necessary actions to
maintain the Intellectual Property Rights that it currently owns. To the
Seller's knowledge, the owners of any Intellectual Property Rights licensed to
the Seller or any Subsidiary have taken all reasonably necessary actions to
maintain the Intellectual Property Rights which are subject to such licenses.
(b) Except as set forth on SCHEDULE 3.18, (i) the Seller or a
Subsidiary owns exclusively all right, title and interest in and to, or has a
valid and enforceable right to use pursuant to a license set forth on SCHEDULE
3.13, all of the Intellectual Property Rights listed on SCHEDULE 3.18 and all
other Intellectual Property Rights necessary for the operation of the businesses
of the Seller and the Subsidiaries as presently conducted, free and clear of all
Encumbrances (other than Permitted Encumbrances), (ii) there have been no claims
made against either the Seller or any Subsidiary asserting the invalidity,
misuse or unenforceability of any of such Intellectual Property Rights, (iii)
neither the Seller nor any Subsidiary has received any written notices of, nor
is aware of any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Intellectual Property Rights (including, without limitation, any written demand
or request that the Seller or any Subsidiary license any rights from a third
party), (iv) the conduct of the business of Seller and the Subsidiaries has not
infringed, misappropriated or conflicted with and does not infringe,
misappropriate or conflict with any Intellectual Property Rights of other
Persons and (v) to the Seller's knowledge, the Intellectual Property Rights
owned by or licensed to the Seller or any Subsidiary have not been infringed or
misappropriated by other Persons. The transactions contemplated by this
Agreement shall have no Material Adverse Effect on the ownership of, or right to
use, any such Intellectual Property Rights by the Seller or any Subsidiary.
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Section 3.19 Environmental, Health, and Safety Matters. Except as set
forth on SCHEDULE 3.19, to the knowledge of the Seller (a) each of the Seller
and the Subsidiaries has complied and is in compliance, in each case in all
material respects, with all Environmental, Health, and Safety Requirements.
(b) Without limiting the generality of the foregoing, each of
Seller, the Subsidiaries and their respective Affiliates has obtained, has
complied, and is in compliance with, in each case in all material respects, all
material permits, licenses and other authorizations that are required pursuant
to Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business.
(c) None of the Seller and the Subsidiaries has received any
written or oral notice regarding any actual or alleged material violation of
Environmental, Health, and Safety Requirements, or any material liabilities or
potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any material investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(d) Except as set forth on SCHEDULE 3.19, none of the following
exists at any property or facility owned or operated by Seller or any
Subsidiary: (1) underground storage tanks, (2) asbestos-containing material in
any friable and damaged form or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface impoundments, or disposal
areas, it being understood that no investigation action has been conducted by
the Seller with respect to these matters.
(e) None of Seller or the Subsidiaries has treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled, or
released any substance, including without limitation any hazardous substance, or
owned or operated any property or facility (and no such property or facility is
contaminated by any such substance) in a manner that has given or would give
rise to material liabilities, including any material liability for response
costs, corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or the
Solid Waste Disposal Act, as amended ("SWDA") or any other Environmental,
Health, and Safety Requirements, it being understood that no investigation
action has been conducted by the Seller with respect to these matters.
(f) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any material
obligations for site investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(g) This Section 3.19 sets forth the sole representations and
warranties of the Seller and the Subsidiaries with respect to Environmental,
Health, and Safety Requirements, notwithstanding Section 3.12.
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Section 3.20 Cost Reports. Except as indicated on SCHEDULE 3.20 hereto,
any and all Medicare cost reports for each facility of the Seller or any
Subsidiary have been filed with the appropriate government agency or contractor
by the required filing date. Except as indicated on SCHEDULE 3.20, to the
Seller's knowledge there are no determined overpayments between either Seller or
any Subsidiary, on the one hand, and any Medicare fiscal intermediary, on the
other hand, regarding the filed cost reports of a facility that is still subject
to cost-based reimbursement from the Medicare Program for cost reporting periods
beginning on or after February 2, 2000, other than with respect to adjustments
thereto made in the Ordinary Course of Business which do not involve amounts in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate.
Section 3.21 Entire Representations and Warranties. The representations
and warranties in Sections 3.1 through 3.20 hereof constitute all the
representations and warranties made by the Seller and the Subsidiaries to the
Purchaser, and the Seller and the Subsidiaries shall not be deemed to have made
to the Purchaser any representation or warranty, other than as expressly made in
Sections 3.1 through 3.20.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER
--------------------------------
The Purchaser represents and warrants to the Seller as follows:
Section 4.1 Existence and Good Standing of Purchaser; Authorization.
(a) The Purchaser is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
(b) Assuming that all filings required to be made in connection
with the transactions contemplated hereby under the HSR Act are made and the
waiting periods thereunder have been terminated or have expired, the Purchaser
has all requisite power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Sale and the other
transactions contemplated to be consummated by the Purchaser hereby. The
execution, delivery and performance of this Agreement by the Purchaser, and the
consummation by it of the transactions contemplated to be consummated by the
Purchaser hereby, have been duly authorized and approved by the Purchaser's
board of managers, and no other action on the part of the Purchaser or its
members is necessary to authorize the execution, delivery and performance of
this Agreement by the Purchaser and the consummation of the Sale and the other
transactions contemplated to be consummated by the Purchaser hereby. This
Agreement has been duly executed and delivered by the Purchaser and, assuming
the due execution of this Agreement by the Seller, this Agreement constitutes a
valid and binding obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms, except to the extent that enforceability may be
subject to or limited by applicable bankruptcy, insolvency, reorganization,
moratorium, receivership and similar laws affecting the enforcement of
creditors' rights generally, and general equitable principles.
Section 4.2 Consents and Approvals; No Violations. Assuming that all
filings required to be made in connection with the transactions contemplated
hereby under the HSR Act are made and the waiting periods thereunder have been
terminated or have expired, the execution
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and delivery of this Agreement by the Purchaser and the consummation of the
transactions contemplated hereby, (i) will not violate any provisions of the
Certificate of Formation or limited liability company agreement of the
Purchaser, (ii) will not violate any material Legal Requirement or Order of any
court or Government Authority to which the Purchaser is subject or by which any
of its material properties or assets are bound, (iii) will not require any
permit, consent or approval of, or the giving of any notice to, or filing with
any Government Authority on or prior to the Closing Date, provided, the
Confirmation Order has been Entered, and (iv) will not result in a material
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, require the giving of notice
pursuant to, or result in the creation of any Encumbrance upon any of the
material properties or assets of the Purchaser under any of the material terms,
conditions or provisions of any material note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease, franchise agreement or any other
instrument or obligation to which the Purchaser is a party, or by which it or
any of its material properties or assets may be bound, excluding from the
foregoing clauses (ii), (iii) and (iv) permits, consents, approvals, notices and
filings, the absence of which, and violations, breaches, defaults, conflicts and
Encumbrances, the existence of which, could not reasonably be expected to
prevent the Purchaser from performing its obligations under this Agreement.
Section 4.3 Investment Intent; Access to Information. (a) The Purchaser
is acquiring the Shares to be acquired by the Purchaser in good faith solely for
its own account with the present intention of holding such Shares for purposes
of investment, and the Purchaser is not acquiring such Shares with a view to or
for subdivision, distribution, fractionalization or distribution thereof, in
whole or in part, or as an underwriter or conduit to other beneficial owners or
subsequent purchasers in any transaction that would not comply with applicable
securities laws.
(b) The Purchaser has received and reviewed carefully
information regarding the Seller and each Subsidiary and has, to the extent it
has deemed necessary or advisable, reviewed the aforementioned information and
this Agreement with its investment, tax, accounting and legal advisors who are
unaffiliated with and who are not compensated by the Seller or any Subsidiary
(collectively, the "ADVISORS"). The Purchaser and the Purchaser's Advisors have
been given a full opportunity to ask questions of and to receive answers from
the Seller and each Subsidiary concerning the acquisition of the Shares to be
acquired by the Purchaser and the business, operations and financial condition
of the Seller and each Subsidiary and, to the Purchaser's knowledge, have
received or been given access to such information and documents as are necessary
to verify the accuracy of the information furnished to the Purchaser concerning
an investment in such Shares as the Purchaser or its Advisors have requested.
Section 4.4 Available Funds. The Purchaser has sufficient funds
available to it to perform all of its obligations under this Agreement,
including, without limitation, to pay the Purchase Price and make all payments
required hereunder.
Section 4.5 Litigation. There are no legal actions, suits, arbitrations
or other legal, administrative or other governmental investigations or
proceedings (whether federal, state, local or foreign) pending, or, to the
knowledge of the Purchaser, threatened against or affecting the Purchaser, or
the Purchaser's properties, assets or business, which could prevent, enjoin,
alter or
32
materially delay any of the transactions contemplated by this Agreement. The
Purchaser has no knowledge of any facts which might reasonably be expected to
result in or form the basis for any such action, suit or other proceeding.
Section 4.6 No Outside Reliance. The Purchaser has not relied, and is
not relying, upon any statement or representation not made in this Agreement or
any Exhibit or Schedule hereto, or in any certificate or document required to be
provided by the Seller or any Subsidiary pursuant to this Agreement.
Section 4.7 Brokers' or Finders' Fees. Purchaser shall indemnify and
hold Seller harmless for all fees and expenses of any other Person acting on
behalf of the Purchaser in connection with any of the transactions contemplated
by this Agreement.
ARTICLE V
CERTAIN AGREEMENTS
------------------
Section 5.1 Conduct of Business of the Seller and the Subsidiaries.
During the period from the date hereof to the Closing Date, subject to the
terms, conditions and transactions set forth in and contemplated under this
Agreement and the Plan of Reorganization, the Seller shall, and shall cause each
Subsidiary to, conduct its respective operations in the Ordinary Course of
Business, subject to any obligations as a debtor in possession under the
Bankruptcy Code. Without limiting the generality of the foregoing, during such
period the Seller shall, and shall cause each Subsidiary to, use commercially
reasonable best efforts to preserve substantially intact its business
organization and preserve in all material respects its present business
relationships and goodwill and operate the Seller's and the Subsidiaries' long
term care business and the Seller's and the Subsidiaries' therapy business, and
each facility, in compliance in all material respects with all applicable Legal
Requirements, Permits and Licenses. Further, during the period from the date
hereof to the Closing Date, except as may be first expressly approved in writing
by the Purchaser (such approval not to be unreasonably withheld or delayed) or
as is otherwise expressly permitted, contemplated or required by this Agreement,
applicable Legal Requirements, or the Plan of Reorganization, or as set forth on
SCHEDULE 5.1 to this Agreement, the Seller shall not, and shall cause each
Subsidiary not to:
(a) amend the New Certificate of Incorporation or By-laws of
the Seller, or Incorporation Document or By-laws of any Subsidiary;
(b) enter into or amend any agreement with any director,
officer or employee, which foregoing restriction includes, without limitation,
the increase in the compensation payable by the Seller or any Subsidiary to, or
to become payable by the Seller or any Subsidiary to, any of their respective
directors, officers or employees, except for normal periodic increases in the
Ordinary Course of Business, and except as required pursuant to the terms of any
contract, agreement, plan or arrangement;
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(c) enter into any contract, lease or commitment (or series of
related contracts, leases or commitments) (other than the renewal of existing
contracts and commitments or the replacement of such contracts or commitments
(requiring over 12 months of performance thereon) on terms not significantly
different than those contracts and commitments to which the Seller or its
Subsidiaries currently are a party or parties to) which would require the Seller
or any Subsidiary to pay in excess of $250,000 individually or $1,500,000 for
the Seller and all Subsidiaries in the aggregate or that are outside the
Ordinary Course of Business or that, if in effect on the date of this Agreement
would have been be required to be listed on SCHEDULE 3.13;
(d) declare or pay any dividends or make any distributions in
respect of any capital stock of the Seller or any Subsidiary, or redeem,
purchase or otherwise acquire for value any capital stock of the Seller or any
Subsidiary; provided, however, that at or subsequent to the Closing, the Seller
shall distribute an amount equal to all cash on hand (excluding deposits and
prepaid items) of the Seller to the Seller's creditors, in accordance with the
Plan of Reorganization;
(e) issue, sell or transfer any shares of capital stock or any
other securities, or issue any securities convertible into, or options, warrants
or rights to purchase or subscribe for, or enter into any arrangement or
contract with respect to the issue and sale of, any shares of capital stock or
any other securities, or make any other changes in their capital structures, all
except as expressly set forth herein with respect to the formation of the LTC
Subsidiary and Therapy Subsidiary and the transfer of the capital stock of the
Subsidiaries;
(f) organize any subsidiary or acquire (including by merger or
consolidation) any capital stock or other securities of any Person or any equity
or ownership interest in any Person or acquire a substantial portion of the
assets of any Person, except as expressly set forth herein with respect to the
formation of, and assignment to, the LTC Subsidiary and Therapy Subsidiary;
(g) incur or guarantee any Indebtedness in the aggregate amount
of more than $250,000 or outside the Ordinary Course of Business, except for
Indebtedness under the DIP Credit Agreement (as such term is defined in the Plan
of Reorganization);
(h) pay, discharge or satisfy any claim, liability or
obligation in excess of $250,000 (whether fixed or contingent) or outside the
Ordinary Course of Business, other than those claims, liabilities or obligations
which are to be paid, discharged or satisfied in accordance with the Plan of
Reorganization;
(i) except as expressly set forth herein with respect to the
formation of, and assignment to, the LTC Subsidiary and Therapy Subsidiary,
sell, transfer, assign, convey, lease, pledge, encumber or otherwise dispose of
any material portion of its assets or properties, or any other right, other than
any Excluded Asset, in each case whether tangible or intangible, except for fair
consideration in the Ordinary Course of Business;
34
(j) other than with respect to the Excluded Liabilities, cancel
any debts or affirmatively waive any claims or rights of substantial value,
except for cancellations made or waivers granted in the Ordinary Course of
Business which, in the aggregate, are not material;
(k) other than with respect to Taxes, incur or assume any
liability or obligation (or series of related liabilities or obligations) in
excess of $250,000 or outside the Ordinary Course of Business (other than the
incurrence or accrual for PLGL and other than the Excluded Liabilities);
(l) hereafter permit, allow or suffer any of its assets (other
than the Excluded Assets) to become subjected to any Encumbrance (other than
Permitted Encumbrances);
(m) pay, loan or advance any amount to, or sell, transfer or
lease any of its assets (other than Excluded Assets) to, or enter into or amend
any agreement or arrangement with, any director, officer or employee, except for
(i) transactions in the Ordinary Course of Business and (ii) the transfers
contemplated by Section 5.8 below;
(n) enter into or become subject to any covenant not to compete
or other covenant restricting the provision and sale of the products and
services of the Seller or any Subsidiary that materially impairs the operation
of the business of the Seller and the Subsidiaries as presently conducted;
(o) make any material change in any method of accounting or
accounting practice or policy other than those required by GAAP;
(p) make any capital expenditure (or series of related capital
expenditures) involving more than $250,000 and outside the Ordinary Course of
Business;
(q) make any loan to any other Person (or series of related
capital loans) either involving more than $250,000 individually or $1,500,000
for the Seller and all Subsidiaries in the aggregate or outside the Ordinary
Course of Business;
(r) enter into, adopt, amend, modify, or terminate any material
bonus, profit sharing, incentive, severance, or other plan, collective
bargaining agreement, contract, or commitment for the benefit of any of its
directors, officers, or employees (or take any such action with respect to any
other Employee Benefit Plan);
(s) make or pledge to make any charitable or other capital
contribution outside the Ordinary Course of Business, but in any event, not more
than $250,000 individually or $1,500,000 for the Seller and all Subsidiaries in
the aggregate;
(t) outsource any employees outside the Ordinary Course of
Business;
(u) enter into any corporate integrity agreement that is
substantially less favorable to the Seller than the form of the Corporate
Integrity Agreement previously made available to the Purchaser or alter in any
material way any corporate integrity agreement actually entered into;
35
(v) in any other manner, materially modify, change or otherwise
alter the fundamental nature of the business of the Seller or any Subsidiary as
presently conducted; or
(w) agree, whether or not in writing, to do any of the
foregoing.
Notwithstanding anything in this Section 5.1 or elsewhere in
this Agreement to the contrary, the Seller shall be permitted to take any of the
following actions during the period from the date hereof to the Closing Date:
(i) dispose of any facility listed on SCHEDULE 5.1(a);
(ii) acquire (through purchase, assumption or lease) any
facility listed on SCHEDULE 5.1(b); or
(iii) acquire the right to manage or operate any other
facility;
provided, that, it shall seek and obtain the consent of the Purchaser (which
shall not be unreasonably withheld or delayed) prior to undertaking any of the
foregoing actions.
Section 5.2 Access to Properties and Records; Notice of Developments.
(a) The Seller and each Subsidiary will permit the Purchaser and the Purchaser's
Representatives to have access prior to the Closing Date to the properties and
to the books and records (including, without limitation, contracts, documents
and Tax records) of the Seller and each Subsidiary and personnel at the Seller
and each Subsidiary, during normal working hours and upon reasonable notice, to
familiarize itself with each of the Seller and each Subsidiary's respective
properties, business, operating and financial condition and to conduct any and
all financial, legal, regulatory, business and other due diligence procedures as
Purchaser or Purchaser's Representatives may deem appropriate as for any other
purpose germane to this Agreement; provided, however, that the Purchaser and
such Representatives shall take reasonable steps to avoid disruption of the
normal operations of the Seller or any Subsidiary.
(b) The Purchaser hereby acknowledges that the Purchaser has
entered into a letter agreement with UBS Warburg LLC, on behalf of the Seller,
dated October 11, 2002 (as amended from time to time), which sets forth certain
obligations of the Purchaser regarding, among other things, confidential
treatment of certain information of the Seller and each of the Subsidiaries (the
"CONFIDENTIALITY AGREEMENT"), and the Purchaser hereby confirms that it and its
Affiliates have heretofore complied with, and will continue to comply with, the
terms, conditions and restrictions thereunder, and that any and all information
obtained during any review of the Seller or any Subsidiary contemplated by this
Section 5.2 or otherwise performed by the Purchaser or any of its Affiliates
after the date hereof will be subject to the terms of the Confidentiality
Agreement as "Information" thereunder (unless specifically exempted from such
definition thereunder).
Section 5.3 Commercially Reasonable Best Efforts; HSR Act Matters. (a)
Each of the parties hereto agrees to use its commercially reasonable best
efforts to take, or cause to be taken, all action, and to do or cause to be
done, and to assist and cooperate with the other party hereto in doing, all
things reasonably necessary, proper or advisable to consummate and make
36
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, without limitation, (i) the obtaining
of all necessary waivers, consents, Licenses and Permits, and approvals from
Governmental Authorities, and the making of all necessary registrations and
filings, and the taking of all reasonable steps as may be necessary to obtain
any approval or waiver from, or to avoid any action or proceeding by, any
Government Authority, (ii) the obtaining of all necessary consents, approvals or
waivers from any Persons other than Governmental Authorities and (iii) the
defending of any lawsuits or any other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including, without limitation, seeking to have
any temporary restraining order entered by any court or administrative authority
vacated or reversed; provided that nothing in this Section 5.3(a) shall require
any party hereto to waive any condition set forth in Article VI or VII.
(b) Without limiting the generality of Section 5.3(a) hereof,
the parties shall, within three (3) Business Days after the date on which the
Bid Procedures Order is Entered, prepare and file any notifications required
under the HSR Act. The parties shall respond as promptly as practicable to (i)
any inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (ii) any
inquiries or requests received from any state attorney general, foreign
antitrust authority or other Government Authority in connection with antitrust
or related matters. Each party shall (1) give the other party prompt notice of
the commencement or threat of commencement of any legal proceeding by or before
any court or Government Authority with respect to the Sale or any of the other
transactions contemplated by this Agreement, (2) keep the other party informed
as to the status of any such legal proceeding or threat, and (3) promptly inform
the other party of any communication to or from the Federal Trade Commission,
the Department of Justice or any other Government Authority regarding the Sale.
Except as may be prohibited by any Government Authority or by any Legal
Requirement, the Purchaser, on the one hand, and the Seller, on the other hand,
will consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any legal proceeding under or relating to the HSR Act. In addition, except
as may be prohibited by any Government Authority or by any Legal Requirement, in
connection with any legal proceeding under or relating to the HSR Act, the
Purchaser, on the one hand, and the Seller, on the other, will permit authorized
Representatives of the other party to be present at each meeting or conference
relating to any such legal proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Government Authority in connection with any such legal proceeding. Nothing
herein shall be deemed to require the Purchaser to agree to divest, sell,
dispose of, hold separate or otherwise take or commit to take any action that
limits its freedom of action with respect to its or any of its subsidiaries'
ability to retain, any of its businesses, product lines or assets.
Section 5.4 Public Disclosure or Communications. Between the date of
this Agreement and the Closing Date, except to the extent required by applicable
Legal Requirements, (a) neither the Purchaser nor the Seller shall issue any
press release or public announcement of any kind concerning the Sale or the
other transactions contemplated by this Agreement without the prior written
consent of the other; and, in the event any such public announcement, release or
disclosure is required by applicable Legal Requirements, the parties
37
will consult prior to the making thereof and use their commercially reasonable
best efforts to agree upon a mutually satisfactory text; (b) the Purchaser shall
not, and shall not permit its Representatives to, communicate with customers,
suppliers or employees of the Seller or any Subsidiary or any other Person with
whom the Seller or any Subsidiary maintains a similar business or commercial
relationship, with respect to the Sale or the other transactions contemplated by
this Agreement or with respect to the business or operations of the Seller or
any Subsidiary, without the prior written consent of the Seller; and (c) except
as expressly contemplated herein, the Purchaser shall not (except with respect
to the HSR Act and pursuant to Article X) communicate with any Government
Authority or any representative thereof with respect to the Seller, any
Subsidiary, the Sale or the other transactions contemplated hereby without the
prior written consent of the Seller which consent shall not be unreasonably
withheld.
Section 5.5 Affected Employees.
(a) The Purchaser agrees that any employee of the Seller or any
Subsidiary to be assigned to either the LTC Subsidiary or the Therapy Subsidiary
pursuant to Section 5.8 (including employees on vacation, leave of absence,
short or long-term disability) (the "AFFECTED EMPLOYEES"), at the Closing Date,
will be offered employment with the LTC Subsidiary or the Therapy Subsidiary (or
their respective subsidiaries) immediately following the Closing Date, at the
salary levels (or higher) that were in effect immediately prior to the Closing
Date; provided, however, that the Purchaser shall have the right to terminate
any employee after the Closing Date. Nothing herein however shall be construed
as an offer of employment to any individual on other than an employee-at-will
basis.
(b) Within 30 days after the date of this Agreement, the
Purchaser may designate by written notice to the Seller up to 100 employees of
the Seller and the Subsidiaries who the Purchaser believes should be retained as
employees for purposes of the transition of ownership contemplated by this
Agreement. Seller shall not terminate any of the employees so designated other
than for cause. Purchaser shall be responsible for any severance costs relating
to the termination of any retained employees.
38
Section 5.6 Employee Benefits. (a) Effective as of the Closing Date,
the Purchaser shall cause all Affected Employees to be eligible for pension,
welfare and fringe benefits substantially comparable in the aggregate to the
benefits provided to such employees immediately prior to the Closing; nothing in
this Section 5.6 or elsewhere in this Agreement shall limit the right of the
Purchaser to amend or terminate any such benefits at any time thereafter. For
purposes of determining eligibility to participate and vesting under any pension
or welfare plan or program maintained by the Purchaser after the Closing, the
Affected Employees shall receive credit for pre-Closing service to the same
extent such service credit was granted under the Employee Benefit Plans, subject
to offsets for previously accrued benefits. To the extent permitted under the
applicable Employee Benefit Plan as currently in effect, the Purchaser shall
cause all limitations as to preexisting conditions, exclusions, and waiting
periods with respect to participation and coverage requirements applicable to
the Affected Employees to be waived under any welfare benefit plans that such
employees may be eligible to participate in after the Closing, other than
limitations or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Closing under any welfare
benefit plan maintained for such employees immediately prior to the Closing.
(b) Except for Excluded Liabilities, the Purchaser shall cause
the Subsidiaries to be responsible for and shall pay, when due, all direct and
indirect damages, costs, expenses and other liabilities in respect of any claim
of any Affected Employee that such Affected Employee's employment has been
terminated by Purchaser after the Closing, either voluntarily or involuntarily,
including, without limitation, any claim for severance pay, unemployment
benefits, claims under the Worker Adjustment and Retraining Notification Act of
1988, as amended, or any other liabilities, claims, costs, interest, penalties
and fees of legal counsel, asserted against, imposed upon, or incurred by the
Seller or any Subsidiaries, arising from or relating in any way to such claims.
(c) The Purchaser shall cause the Subsidiaries to be allocated
the sole responsibility for complying with all of the requirements of Section
4980B of the Code, the parallel provisions of ERISA, and the regulations
promulgated thereunder ("COBRA CONTINUATION COVERAGE") with respect to each
Affected Employee who is classified as an "M&A qualified beneficiary" (within
the meaning of Treas. Reg. ss. 54.4980B-9, Q&A-4) with respect to the
transactions contemplated by this Agreement. The Purchaser shall indemnify the
Seller for damages suffered by the Seller as a result of the Purchaser's failure
to cause the Subsidiaries to provide COBRA Continuation Coverage as required by
the foregoing or applicable law.
(d) Nothing in this Section 5.6 or elsewhere in this Agreement
shall be construed to create a right in any employee to employment with the
Purchaser, the Seller or any Subsidiary after the Closing Date and, subject to
any other legally binding agreement between any employee and the Purchaser, the
Seller or any Subsidiary, the employment of each such Affected Employee shall be
"at will" employment.
Section 5.7 Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Purchaser and the Seller for certain
Tax matters following the Closing Date:
39
(a) Tax Periods Ending on or Before the Closing Date. The
Purchaser shall prepare or cause to be prepared, and file or cause to be filed,
all Tax Returns with respect to the Seller and its Subsidiaries for all Tax
periods ending on or prior to the Closing Date which are filed after the Closing
Date and pay all Taxes with respect to such periods shown on such Tax Returns.
(i) Tax Periods Ending After the Closing Date. (A) The
Purchaser shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns with respect to the
Subsidiaries for all Tax periods which begin before the Closing
Date and end after the Closing Date (each a "STRADDLE PERIOD
RETURN") and pay all Taxes with respect to such periods shown
on such Tax Returns.
(b) Control of Tax Audits. Purchaser shall control tax audits
or tax contests relating to consolidated federal income Tax Returns and any
consolidated, combined or unitary returns filed by Seller and for state, local
or foreign Tax purposes in each case to the extent that such audits or contests
relate to the Subsidiaries. In the event that Seller wishes to participate in
such audit, it may do so, provided that any costs incurred by Seller shall be
borne solely by Seller.
(c) Assistance and Cooperation. After the Closing Date, each
party shall:
(i) assist (and cause its respective Affiliates to assist)
the other party in preparing and filing (including obtaining
all necessary signatures) any Tax Returns which such other
party is responsible for preparing and filing in accordance
with this Agreement (including, without limitation, at the
request of Seller, having Purchaser prepare, at Seller's
expense, initial drafts of Tax Returns referred to in section
5.7(a));
(ii) cooperate fully in preparing for any audits of, or
disputes with Taxing Authorities regarding, any Tax Returns and
payments in respect thereof;
(iii) make available to the other party and to any Taxing
Authority as reasonably requested all relevant information,
records, and documents relating to Taxes;
(iv) provide timely notice to the other party in writing of
any pending or proposed audits or assessments with respect to
Taxes for which the other may have a liability under this
Agreement;
(v) furnish the other party with copies of all relevant
correspondence received from any Taxing Authority in connection
with any audit or information request with respect to any Taxes
referred to in subsection (iv) above; and
(vi) bear the other party's reasonable out-of-pocket
expenses in complying with a request by a party for the other
party's assistance or cooperation to the extent that those
expenses are attributable to fees and other costs of
unaffiliated third-party service providers.
40
(d) Section 338(h)(10) Election. The Seller and its Affiliates, at the
request of the Purchaser, will join with the Purchaser in making a timely
election under Code Section 338(h)(10) (and any corresponding elections under
state, local, or foreign tax law) (collectively, the "SECTION 338(h)(10)
ELECTION") with respect to all or any part of the Sale. The Purchaser will pay
any Tax attributable to making of the Section 338(h)(10) Election (including
without limitation any federal, state or local income tax for the tax year of
sale or any subsequent tax year that would not have been incurred but for the
making of the Section 338(h)(10) Election) and will indemnify the Seller and its
Affiliates against any adverse consequences arising out of any failure to pay
such Tax. The Purchaser will pay any such Taxes 10 days prior to the earlier of
(i) the due date of such Taxes or (ii) the date that Seller will be filing the
Tax Return for such Taxes if Seller provides the Purchaser with prior written
notice of such intended filing date. The Purchaser will also pay any state,
local, or foreign Tax (and indemnify the Seller and its Affiliates against any
adverse consequences arising out of any failure to pay such Tax) attributable to
an election under state, local, or foreign law similar to the election available
under Code ss.338(g) (or which results from the making of an election under Code
ss.338(g)) with respect to the Sale). The Purchaser will be responsible for
preparing and filing any Internal Revenue Service Form 8023 and any other forms
and documents necessary to make the Section 338(h)(10) Election. The Seller and
the Purchaser shall execute such Form 8023 and such other forms and schedules,
and shall take all such other acts as are necessary to make or perfect such
Section 338(h)(10) Election. The Purchaser shall be responsible for determining
and preparing the allocation of the Purchase Price (plus assumed liabilities and
other items, to the extent properly taken into account under Code Section 338
and the Treasury regulations thereunder) among the assets of acquired companies
in accordance Code Section 338 and the regulations thereunder (and any
comparable provisions of state or local law, as appropriate) (the "ALLOCATION")
which Allocation shall be subject to approval of Seller, which approval shall
not be unreasonably withheld. At the written request of the Purchaser, the
Seller, at Purchaser's expense, shall timely and properly prepare, execute, file
and deliver all such documents, forms and other information as the Purchaser may
reasonably request to prepare such Allocation. The Purchaser and the Seller
agree to (i) be bound by the Allocation and (ii) shall report, act and file
Income Tax Returns (including, but not limited to Internal Revenue Service Form
8023) in all respects and for all purposes consistent with such Allocation.
Neither the Purchaser nor the Seller shall take any position (whether in audits,
Income Tax Returns or other applicable tax proceedings) that is inconsistent
with such allocation unless required to do so by applicable law. If an
adjustment is made with respect to the Purchase Price pursuant to Section 2.4 or
otherwise, (i) the Allocation shall be adjusted in accordance with Code Section
338 and the Treasury regulations thereunder (and any comparable provisions of
state or local law, as appropriate) and as determined by the Purchaser and (ii)
the Purchaser and the Seller agree to file any additional information return
required to be filed pursuant to Code Section 338 and the Treasury regulations
thereunder (and any comparable provisions of state or local law, as appropriate)
and to treat the Allocation Statement as adjusted in the manner described in
this Section.
Section 5.8 Delivery of Excluded Assets. The parties shall cooperate
after the Closing to deliver the Excluded Assets to the Seller.
41
Section 5.9 Formation of, and Assignment to, LTC Subsidiary and Therapy
Subsidiary. (a) Not later than fifteen (15) Business Days prior to Closing, the
Seller shall form under the Delaware General Corporation Law (i) a new
wholly-owned direct subsidiary named IHS Long Term Care, Inc. and (ii) a new
wholly-owned direct subsidiary named IHS Therapy Care, Inc.
(b) Immediately prior to Closing, (i) the Seller shall assign,
and the LTC Subsidiary shall assume, all of Seller's assets and liabilities not
described in clause (ii) below, including without limitation the capital stock
of all of the Subsidiaries that conduct Seller's long-term care business and any
and all past, current and future PLGL Claims, other than the Excluded Assets and
Excluded Liabilities, and (ii) the Seller shall assign, and the Therapy
Subsidiary shall assume, all of the Seller's assets and liabilities directly or
indirectly related to the Seller's contract rehabilitation therapy business,
including without limitation the capital stock of all of the Subsidiaries that
conduct Seller's contract rehabilitation therapy business, but excluding the
Excluded Assets and Excluded Liabilities. Each assignment and assumption
described in this Section 5.9 shall be conducted in a manner reasonably
satisfactory to the Purchaser, and shall be consummated pursuant to
documentation that is in form and substance reasonably satisfactory to the
Purchaser. The capitalization of each of the LTC Subsidiary and the Therapy
Subsidiary shall, upon the formation of each of the LTC Subsidiary and Therapy
Subsidiary, be as set forth in SCHEDULE II attached hereto, and the
capitalization and ownership of the capital stock of each such Person shall not
change prior to the Closing.
(c) Except as set forth on SCHEDULE 5.9(c), any active
Subsidiary that is not the subject of a case under Chapter 11 of the Bankruptcy
Code as of the date hereof shall be made subject to such a case within 10 days
after the date hereof, and such Subsidiary will be subject to the Plan of
Reorganization.
Section 5.10 Adequate Capitalization. No later than 45 days after the
date hereof, the Purchaser shall (a) deliver to the Seller documentation
evidencing a net worth or a commitment for an equity contribution to the
Purchaser from an investment fund managed by GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.C. or Trans
Healthcare, Inc. (or another source of equity financing reasonably acceptable to
the Seller), which equity commitment shall be in form and substance reasonably
acceptable to the Seller, of not less than $25,000,000, and (b) have arranged
for committed lines of credit from a nationally recognized financial
institution, an investment fund managed by GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.C. or Trans
Healthcare, Inc. of not less than $25,000,000 to be made available to the
Purchased Subsidiaries. The Purchaser shall maintain such minimum net worth and
keep in place such committed lines of credit through and including the Closing
Date. As of the Closing Date, the Purchaser shall not cause any Encumbrance to
be placed upon the accounts receivable in connection with financing the Purchase
Price hereunder and, among other things, such accounts receivable shall be
available to provide credit support to Seller's outstanding letters of credit.
Section 5.11 Sales and Transfer Taxes and Fees. All transfer Taxes,
sales and use Taxes, registration Taxes, documentary Taxes, recording charges,
deed Taxes, conveyance fees, stamp Taxes and other such Taxes and fees
(including penalties and interest) incurred in connection with this Agreement
and the transactions contemplated hereby (collectively "TRANSFER TAXES") shall,
unless exempt under Section 1146(c) of the Bankruptcy Code, be paid
42
50% by the Purchaser and 50% by the Seller, and the Seller shall properly file
on a timely basis all necessary Tax Returns, reports, forms, and other
documentation with respect to any Transfer Taxes. All such payments shall be
made 10 days prior to the date on which such Taxes are due. The Purchaser shall
cooperate with the Seller in the preparation and filing of such Tax Returns in
accordance with and pursuant to SECTION 5.7(d).
Section 5.12 Settlement Negotiations. In connection with any
discussions or negotiations with respect to any global settlement agreement or
corporate integrity agreement between Seller and CMS, OIG, the Department of
Justice or any other federal agency or Government Authority ("MEDICARE
SETTLEMENT DISCUSSIONS"), (i) Seller shall make reasonable efforts to keep the
Purchaser informed of ongoing material developments regarding the Medicare
Settlement Discussions, (ii) Seller shall reasonably allow Purchaser to comment
to Seller on any material matter related to the Medicare Settlement Discussions
and (iii) Seller shall otherwise reasonably cooperate in good faith with the
Purchaser in connection with the Medicare Settlement Discussions. Seller shall
provide to Purchaser's legal counsel drafts of material documents that the
Seller submits or that Seller receives in connection with the Medicare
Settlement Discussions. All such drafts (and the terms and provisions thereof)
shall be maintained in strict confidence by Purchaser and its Affiliates and
representatives.
Section 5.13 Purchase of Reorganized IHS Shares. In the event that, on
or prior to the 110th day after the date of this Agreement, the Bankruptcy Court
(i) does not enter a Final Order (which may be the Confirmation Order) that
permanently and forever bars, restrains and enjoins any and all Persons from
taking any action, directly or indirectly, against IHS, to collect, recover or
receive payment of, on, or with respect to any claim arising on or before the
date of the Confirmation Order (including claims (within the meaning of Section
101(5) of the Bankruptcy Code)) against the Seller relating to any asset or
liability being purchased or assumed by Purchaser hereunder or (ii) enters a
Final Order in which the Bankruptcy Court declines to enter an order as
described in clause (i), then the Purchaser and Seller shall, to the extent
necessary and subject to the entry of a further Order of the Bankruptcy Court,
take such actions as are reasonably necessary to consummate the transactions
contemplated hereby, including without limitation the entry of a further Order
of the Bankruptcy Court requiring Purchaser's acquisition of all of the capital
stock of Reorganized IHS issued pursuant to the Plan of Reorganization, together
with the issuance to Reorganized IHS of the capital stock of the Subsidiaries
pursuant to the Plan of Reorganization.
Section 5.14 Real Property Matters.
(a) Title Insurance. The Purchaser, at its option, shall obtain
a commitment for an ALTA Owner's Title Insurance Policy for each Owned Real
Property and a commitment for an ALTA Leasehold Title Insurance Policy for each
Leased Real Property identified by Purchaser (the "MATERIAL LEASED REAL
PROPERTY"), issued by a title insurance company reasonably satisfactory to
Purchaser (the "TITLE COMPANY"), together with a copy of all documents
referenced therein (the "TITLE COMMITMENTS").
The Purchaser, at its option, shall obtain title insurance
policies (which may be in the form of a ▇▇▇▇-up of a pro forma of the Title
Commitments) in accordance with the Title Commitments, insuring the Seller's or
any Subsidiary's fee simple title to each Owned Real
43
Property or the Seller's or any Subsidiary's legal, valid, binding and
enforceable leasehold interest in each Material Leased Real Property (as the
case may be) as of the Closing Date (including all recorded appurtenant
easements insured as separate legal parcels) with gap coverage from the Seller
through the date of recording, subject only to Permitted Encumbrances, in such
amount as Purchaser reasonably determines to be the value of the Real Property
insured thereunder (the "TITLE POLICIES"). Each of the Title Policies, at
Purchaser's option, shall include ALTA Form 3.1 zoning (with parking and loading
docks), non-imputation and all other endorsements reasonably requested by
Purchaser, in form and substance reasonably satisfactory to Purchaser. The
Seller will execute and deliver to the Title Company all customary affidavits,
undertakings, other title clearance documents and assistance necessary to issue
the Title Policies and endorsements thereto. The Purchaser shall bear all
premiums, fees, costs and expenses with respect to the Title Commitments and
Title Policies.
(b) Surveys. The Seller shall use commercially reasonable best
efforts to obtain no later than ten (10) days prior to the Closing, a survey for
each Owned Real Property and Material Leased Real Property, dated no earlier
than the date of this Agreement, prepared by a licensed surveyor reasonably
satisfactory to Purchaser, and conforming to 1999 ALTA/ACSM Minimum Detail
Requirements for Urban Land Title Surveys and such other standards as the Title
Company and Purchaser reasonably require as a condition to the removal of any
survey exceptions from the Title Policies, and certified to Purchaser,
Purchaser's lender and the Title Company, in a form reasonably satisfactory to
each of such parties (the "SURVEYS"). The Surveys shall not disclose any
material encroachment from or onto any of the Real Property or any portion
thereof or any other material survey defect which has not been cured or insured
over to Purchaser's reasonable satisfaction prior to the Closing. The Purchaser
shall bear all fees, costs and expenses with respect to the Surveys and the
Seller shall provide (at no cost or expense to the Seller) all assistance
reasonably necessary for the Purchaser to obtain the Surveys.
(c) FIRPTA Affidavit. The Seller shall use commercially
reasonable best efforts to deliver to Purchaser a non-foreign affidavit dated as
of the Closing Date and in form and substance required under the Treasury
Regulations issued pursuant to Section 1445 of the Internal Revenue Code so that
Purchaser is exempt from withholding any portion of the Purchase Price
thereunder (the "FIRPTA AFFIDAVIT").
Section 5.15 Discussions Between Purchaser and Seller. The parties
agree to discuss in good faith the possibility of the Purchaser purchasing the
Seller's corporate headquarters in Sparks, Maryland, on terms and conditions to
be agreed upon by the parties. Any such purchase shall be subject to the
approval of the holders of any Encumbrances on such property.
Section 5.16 EBITDA Calculation. Not later than 15 days before the
Closing Date, the Seller shall deliver to the Purchaser (a) a calculation of
EBITDA for the 12 months ended on the end of the month preceding the Closing
Date (i) for the Purchased Subsidiaries and their respective Subsidiaries
(excluding MobileX) and (ii) for Symphony Health Services, Inc. and its
respective Subsidiaries (excluding MobileX), in each case calculated in
accordance with the terms of this Agreement and showing the calculation thereof
in reasonable detail and (b) a certificate of the chief financial officer of the
Seller to the best of his knowledge, in accordance with the terms of this
Agreement. If before the Closing Date the Purchaser disputes the EBITDA
calculation, the parties shall attempt to resolve any such dispute. If the
parties are unable to
44
resolve any dispute relating to the calculation of EBITDA, such dispute shall be
resolved in accordance with the procedure specified in Section 2.4(b).
Section 5.17 Treatment of Claims and Equity Interests. The Plan of
Reorganization shall provide for the treatment and discharge of claims and
equity interests in the Seller and the Subsidiaries on a basis not substantially
less favorable to Purchaser than as set forth in the draft plan of
reorganization previously provided to the Purchaser. In addition, except with
respect to the treatment of Secured Indebtedness, the Plan of Reorganization
shall provide for the discharge of all pre-petition liabilities to the fullest
extent permitted by law.
Section 5.18 Collective Bargaining Agreements. The Purchaser
acknowledges that facilities of the Subsidiaries are subject to the collective
bargaining agreements set forth in SCHEDULE 3.13(h) and the Purchaser agrees to
comply with the provisions of such agreements.
Section 5.19 Good Standing Certificates. The Seller shall use
commercially reasonable best efforts to deliver to the Purchaser copies of
certificates of good standing of the Seller and each Subsidiary issued within 30
days before the Closing Date by the Secretary of State (or comparable officer)
of the jurisdiction of each such Person's incorporation or formation.
Section 5.20 Further Assurances. The Purchaser and the Seller shall
execute and deliver such certificates and other documents and take such other
actions as may reasonably be requested by the other party in order to consummate
or implement the transactions contemplated hereby; provided, that nothing in
this Section 5.20 shall require any party hereto to waive any condition set
forth in Article VI or VII.
ARTICLE VI
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
-----------------------------------------
The purchase of the Shares by the Purchaser on the Closing Date is
conditioned upon the satisfaction or waiver, at or prior to the consummation of
the Sale, of the following conditions; provided that no waiver by the Purchaser
shall be effective unless such waiver is made in writing:
Section 6.1 Truth of Representations and Warranties. The
representations and warranties of the Seller contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date, with
the same effect as though such representations and warranties had been made on
and as of such date, except (a) to the extent that a representation or warranty
is qualified by terms such as "material" and "Material Adverse Effect," in which
case such representation and warranty shall be true and correct in all respects
as of the Closing Date and (b) to the extent that any representation and
warranty is stated in this Agreement to be made as of a specific date, in which
case such representation and warranty shall be true and correct as of such
specified date.
Section 6.2 Performance of Agreements. Each of the covenants and
agreements of the Seller and each of the Subsidiaries, as the case may be, to be
performed or complied with at or prior to the Closing Date pursuant to the terms
hereof, shall have been performed or complied with in all material respects,
except to the extent that such a covenant or agreement is qualified
45
by terms such as "material" and "Material Adverse Effect," in which case such
covenant or agreement shall have been performed or complied with in all
respects.
Section 6.3 Certificate. The Seller shall have delivered to the
Purchaser a certificate, dated the Closing Date and executed by or on behalf of
the Seller, certifying as to the satisfaction of the conditions set forth in
Sections 6.1 and 6.2 of this Agreement.
Section 6.4 No Injunction. No court or other Government Authority shall
have issued an Order, which shall then be in effect, restraining or prohibiting
the completion of the transactions contemplated hereby.
Section 6.5 HSR Approval. All waiting periods under the HSR Act shall
have been terminated or expired.
Section 6.6 Resignations. All persons who are directors or officers of
the Seller or any Subsidiary immediately prior to the Closing shall have
resigned such directorships or from such office effective upon the Closing,
except for such persons set forth on a schedule to be provided by the Purchaser
to the Seller no later than five (5) Business Days prior to Closing.
Section 6.7 Bid Procedures Order. A Bankruptcy Court order approving
bid procedures, substantially in the form attached hereto as Exhibit 6.7 (the
"BID PROCEDURES ORDER"), shall have been entered on the docket ("ENTERED") on or
before the 45th day after the date hereof.
Section 6.8 Confirmation, Etc. The Confirmation Order shall have been
Entered and shall have become a Final Order, and the Bankruptcy Court shall have
approved this Agreement, on or before the 180th day after the date hereof and
all other conditions precedent to the effectiveness of the Plan of
Reorganization shall have been satisfied or duly waived in accordance with the
terms thereof; provided that no condition precedent shall be waived without the
prior written consent of the Purchaser. Notwithstanding Section 6.7 and 6.8,
nothing in this Agreement shall preclude the Purchaser or the Seller from
consummating the Sale and related transactions contemplated herein if the
Purchaser, in its sole discretion, waives the requirement that the Confirmation
Order or any other Order shall have become Final Orders. No notice of such
waiver of this or any other condition to Closing need be given except to the
Seller, it being the intention of the parties hereto that the Purchaser shall be
entitled to, and is not waiving, the protection of section 363(m) of the
Bankruptcy Code, the mootness doctrine and any similar statute or body of law if
the Closing occurs in the absence of Final Orders.
Section 6.9 Filing. The Plan Motions shall have been filed with the
Bankruptcy Court on or before the 45th day after the date hereof.
Section 6.10 Order Assuming Contracts. The Confirmation Order, or such
other Order reasonably satisfactory to the Purchaser in form and substance,
shall approve and authorize the assumption of the Assumed Contracts and the
Assumed Contracts shall have been actually assumed by and vested in the LTC
Subsidiary or the Therapy Subsidiary (or each of their respective subsidiaries),
as the case may be.
46
Section 6.11 Certified Orders. The Seller shall have delivered to the
Purchaser copies of the Sale Order and the Confirmation Order, which copies
shall be certified by the clerk of the Bankruptcy Court and shall evidence that
each such order has been Entered.
Section 6.12 Lease Cure Costs. The Seller shall have paid, or otherwise
deposited into an escrow account pursuant to a court order, all costs of cure to
achieve the assumption under section 365 of the Bankruptcy Code of Leases
including those set forth on SCHEDULE 6.12, to the extent required by Section
10.1(e)(iv).
Section 6.13 Additional Cure Costs. The Seller shall have paid, or
otherwise deposited into an escrow account pursuant to a court order, all
Seller's Cure Costs, up to the amount set forth in Section 10.1(e)(v).
Section 6.14 EBITDA. EBITDA for the 12 months ended on the last day of
the month most recently ended at least 30 days prior to the Closing Date (i) for
the Purchased Subsidiaries and their respective Subsidiaries (excluding MobileX)
shall have been not less than $37,500,000 and (ii) for Symphony Health Services,
Inc. and its respective Subsidiaries (excluding MobileX) shall have been not
less than $7,500,000.
Section 6.15 Material Adverse Effect. Between the date hereof and the
Closing, there shall not have occurred any Material Adverse Effect.
Section 6.16 Consents. All Government Authority and third-party
consents listed on SCHEDULE 6.16 attached hereto shall have been obtained and
the notifications set forth in SCHEDULE 6.16 attached hereto shall have been
given.
Section 6.17 Medicare Settlement. A comprehensive settlement agreement
with the Department of Justice, CMS, OIG and/or any other applicable federal
agency or agencies regarding the asserted claims against Seller and the
Subsidiaries shall have been executed, providing for a full settlement and
compromise of all such asserted claims against Seller and the Subsidiaries
arising under governmental health care programs, other than those claims set
forth on SCHEDULE 6.17 (the "MEDICARE SETTLEMENT"). Seller shall take reasonable
steps to negotiate an agreement under which such asserted claims (i) are the
sole and exclusive obligation of, and will be paid and satisfied solely and
exclusively by, the Seller, (ii) will not be assumed by or become in any manner
whatsoever an obligation of the Purchaser or its Subsidiaries, and (iii) do not
become the liability of the Purchaser and its Subsidiaries. Regarding the
corporate integrity agreement arising from such settlement agreement, the Seller
shall take reasonable steps to ensure that such corporate integrity agreement
(i) is limited to the facilities of the Seller that are subject to this
Agreement, and (ii) is inapplicable to, and does not impose any compliance
obligations upon, any facility that is owned or operated by the Purchaser or any
of the Purchaser's Affiliates.
Section 6.18 Effective Date. All conditions precedent to the effective
date of the Plan of Reorganization shall have been satisfied or shall have
occurred, other than those conditions which are otherwise provided for in this
Agreement.
Section 6.19 Escrow Agreement. The Escrow Agreement shall have been
duly executed and delivered by the Seller.
47
ARTICLE VII
CONDITIONS TO THE SELLER'S OBLIGATIONS
--------------------------------------
The sale of the Shares by the Seller on the Closing Date is conditioned
upon satisfaction or waiver, at or prior to the consummation of the Sale, of the
following conditions; provided that no waiver by Seller shall be effective
unless such waiver is made in writing:
Section 7.1 Truth of Representations and Warranties. The
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, with the same effect as though such representations and warranties had
been made on and as of such date, except (a) to the extent that a representation
or warranty is qualified by terms such as "material" and "Material Adverse
Effect," in which case such representation and warranty shall be true and
correct in all respects as of the Closing Date and (b) to the extent that any
representation and warranty is stated in this Agreement to be made as of a
specific date, in which case such representation and warranty shall be true and
correct as of such specified date.
Section 7.2 Performance of Agreements. Each of the covenants and
agreements of the Purchaser to be performed or complied with at or prior to the
Closing Date pursuant to the terms hereof, shall have been performed or complied
with in all material respects, except to the extent that such a covenant or
agreement is qualified by terms such as "material" and "Material Adverse
Effect," in which case such covenant or agreement shall have been performed or
complied with in all respects.
Section 7.3 Certificate. The Purchaser shall have delivered to the
Seller a certificate, dated the Closing Date and executed by a duly authorized
officer on behalf of the Purchaser, certifying as to the satisfaction of the
conditions set forth in Sections 7.1 and 7.2 of this Agreement.
Section 7.4 No Injunction. No court or other Government Authority shall
have issued an Order, which shall then be in effect, restraining or prohibiting
the completion of the transactions contemplated hereby.
Section 7.5 HSR Approval. All waiting periods under the HSR Act shall
have been terminated or expired.
Section 7.6 Confirmation. The Confirmation Order shall have been
Entered and it shall have become a Final Order and all other conditions
precedent to the effectiveness of the Plan of Reorganization shall have been
satisfied or duly waived in accordance with the terms thereof.
48
Section 7.7 Cure Costs and Other Costs. The Purchaser shall have paid,
or otherwise deposited into an escrow account pursuant to a court order, all
Purchaser's Cure Costs, if any, and the costs referred to in Section 10.1(c) to
be borne by the Purchaser.
Section 7.8 Effective Date. All conditions precedent to the effective
date of the Plan of Reorganization shall have been satisfied or shall have
occurred, other than those conditions which are otherwise provided for in this
Agreement.
Section 7.9 Bankruptcy Court. The Bankruptcy Court shall have entered a
Final Order (which may be the Confirmation Order) permanently and forever
staying, restraining and enjoining any Person from taking any action for the
purpose of, directly or indirectly, collecting, recovering, or receiving payment
of, on, or with respect to any claim arising on or before the date of such Final
Order (including Claims (within the meaning of Section 101(5) of the Bankruptcy
Code)) against the Seller and subsidiaries relating to any asset or liability
being purchased or assumed hereunder; provided, however, that if such Final
Order has not been entered the Purchaser shall have taken the actions described
in Section 5.13 herein.
Section 7.10 Escrow Agreement. The Escrow Agreement shall have been
duly executed and delivered by the Purchaser.
ARTICLE VIII
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
---------------------------------------------
The respective representations and warranties of the Seller and the
Purchaser shall not survive the Closing.
ARTICLE IX
TERMINATION
-----------
Section 9.1 Events of Termination. This Agreement may be terminated by
written notice prior to the Closing only: (a) by mutual consent of the Purchaser
and the Seller, (b) by either the Purchaser or the Seller, to the extent that
the Closing Date has not occurred prior to July 31, 2003; provided, however,
that the party exercising its right to so terminate this Agreement pursuant to
this clause (b) of this Section 9.1 shall not have been responsible for such
failure for the Closing to occur through a material breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement, (c) by either the Seller or the Purchaser, in the event an
alternative transaction with one or more third parties involving a sale or other
transfer of the Shares or a sale or other transfer of a substantial part of the
assets or properties of the business represented by the LTC Subsidiary or the
Therapy Subsidiary (after giving effect to the transfer contemplated by Section
5.9) has been approved by the Bankruptcy Court or otherwise is consummated or is
documented in an agreement executed by Seller, (d) by the Purchaser, if Seller
proposes or consents to a proposal of a plan of reorganization other than either
pursuant to the Plan of Reorganization or pursuant to Section 5.13, (e) by
either the Seller or the Purchaser, if the Plan of Reorganization shall have
been voted upon and the requisite number and amount of holders of claims in each
class provided for in the Plan of Reorganization
49
entitled to vote shall have failed to accept the Plan of Reorganization unless,
as to those classes that have failed to accept the Plan of Reorganization, a
cramdown of a plan of reorganization is obtained by Seller pursuant to Section
1129(b) of the Bankruptcy Code, (f) subject to Section 5.13, by either the
Seller or the Purchaser, if the Bankruptcy Court shall have issued an order
denying confirmation of the Plan of Reorganization, the Plan of Reorganization
is terminated in accordance with its terms or the Confirmation Order is vacated
or reversed by a Final Order or (g) by either the Seller or the Purchaser, if
one or more of the conditions set forth in Article VI (with respect to the
termination rights of the Purchaser) or VII (with respect to the termination
rights of the Seller) becomes highly unlikely to be satisfied by July 31, 2003;
provided, however, that the party exercising its right to so terminate this
Agreement pursuant to this Section 9.1(g) shall not have been responsible for
the unlikelihood of the satisfaction of any such condition through a material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement.
Section 9.2 Effect of Termination. In the event that this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties
hereto under this Agreement (other than pursuant to Section 2.2(b), Section
5.2(b), Section 10.4, 10.5 and Sections 11.1 and 11.2 and 11.10, which shall
continue in full force and effect) shall terminate without further liability or
obligation of either party to the other party hereunder; provided, however, that
no party shall be released from liability hereunder for any prior material
breach of this Agreement by such party.
ARTICLE X
BANKRUPTCY MATTERS
------------------
Section 10.1 .Bid Procedures Motion.
(a) As soon as practicable after the execution of this
Agreement (and in no event later than five (5) Business Days thereafter), the
Seller will file with the Bankruptcy Court a motion seeking entry of the Bid
Procedures Order (the "BID PROCEDURES MOTION"). Following the filing of the Bid
Procedures Motion, the Seller shall use commercially reasonable best efforts to
obtain Entry of the Bid Procedures Order. The Purchaser shall use commercially
reasonable best efforts to cooperate with and assist the Seller in its efforts
to obtain the approval and entry of the Bid Procedures Order. The Bid Procedures
Order shall require any higher and better offers to be made by prospective
purchasers of Seller's capital stock or assets on terms and conditions which are
substantially the same as those set forth in this Agreement, which bids must
conform to the following requirements: (i) all bids must (A) be submitted to
Seller and Purchaser in writing not more than 30 days after entry of the Bid
Procedures Order; (B) contain an offer to purchase the Shares or all of the
capital stock of the Seller for a cash purchase price in an amount of not less
than $107,500,000 to be paid in full at Closing; (C) be no less favorable to
Seller than the terms and conditions of this Agreement and shall not contain any
due diligence or financing contingency of any kind or nature; and (D) contain
evidence that the person or entity submitting such bid has received debt and/or
equity funding commitments sufficient in the aggregate to finance the purchase,
including proof of deposit of $12,000,000 in escrow and subject to the
jurisdiction of the Bankruptcy Court. No party submitting any other offer to
purchase the Seller's assets or stock shall be entitled to any breakup fee,
expense reimbursement or similar fee or expense protection.
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(b) Contemporaneously with the filing of the Bid Procedures
Motion, the Seller shall file with the Bankruptcy Court a motion to approve this
Agreement (the "SALE MOTION"), which motion shall seek the Bankruptcy Court's
approval of this Agreement and Seller's performance under this Agreement subject
to confirmation of the Plan of Reorganization and the Closing. Subject to the
provisions of the Bid Procedures Order, the Seller shall attempt to obtain entry
of the Order approving the Sale Motion (the "SALE ORDER") as soon as
practicable. Following the filing of the Sale Motion, the Seller shall provide
appropriate notice as is required by the Bankruptcy Code to all parties entitled
to notice including, but not limited to, all parties to Assumed Contracts and
all taxing and environmental authorities in jurisdictions applicable to the
business of Seller and its Subsidiaries.
(c) The Assumed Contracts shall be identified (by the date of
the Assumed Contract (if available), the other party to the contract or lease
and the address of such party) on an exhibit attached to the Sale Motion or a
separate Motion for Order Authorizing the Assumption of Executory Contracts and
Unexpired Leases. Such exhibit shall set forth the amounts necessary to cure
defaults under each of such Assumed Contracts as determined by the Seller based
on the Seller's books and records. The Seller shall, at the written direction of
the Purchaser delivered on or before the eightieth (80th) day after the date
hereof, remove any Assumed Contracts from such exhibit; provided, that, any
costs associated with the wind down or transition of any facility which is the
subject of such Assumed Contract shall be borne by Purchaser. In cases in which
the Seller does not reasonably believe that a monetary default exists, the
relevant cure amount shall be set at $0.00. The Sale Motion or a separate Motion
for Order Authorizing the Assumption of Executory Contracts and Unexpired Leases
shall request that Reorganized IHS's (and each Subsidiary's) promise to perform
from and after the Closing under the Assumed Contracts shall be the only
adequate assurance of future performance necessary to satisfy the requirements
of section 365 of the Bankruptcy Code.
(d) At the written direction of Purchaser delivered on or
before the eightieth (80th) day after the date hereof, the Seller shall cause
the Plan of Reorganization to provide for the surrender of the Owned Real
Property specified by the Purchaser in such written direction to the applicable
lender pursuant to the terms of Indebtedness relating to such Owned Real
Property; provided, that, any costs associated with the wind down or transition
of any facility included in such Owned Real Property shall be borne by the
Purchaser.
(e) To the extent that any Assumed Contract is subject to costs
necessary to "cure" (within the meaning of section 365(b)(1) of the Bankruptcy
Code) any "defaults" (within the meaning of section 365(b)(1) of the Bankruptcy
Code), the Purchaser and Seller shall be responsible respectively for paying or
providing for such costs of cure in accordance with the following formula and
each of the Purchaser and the Seller shall pay, or otherwise deposit into an
escrow account pursuant to a court order, such amounts for which such party is
responsible no later than 10 days prior to the Closing Date:
(i) The Purchaser shall not be responsible for any
aggregate cure amounts equal to or less than $1,275,000 (excluding cure amounts
related to Leases), and the Seller shall be responsible for all such amounts;
51
(ii) The Purchaser shall be responsible for 50% of the
aggregate cure amounts over $1,275,000 and less than $2,858,000 (excluding cure
amounts related to Leases), and the Seller shall be responsible for all such
amounts for which Purchaser is not responsible; and
(iii) The Purchaser shall be solely responsible for the
aggregate cure amounts equal to or greater than $2,858,000 (excluding cure
amounts related to Leases);
(iv) The Seller shall be solely responsible for all cure
amounts related to each Lease, including those set forth in SCHEDULE 6.12, up to
an aggregate of $1,000,000 for all Leases, with any excess to be borne by the
Purchaser; and
(v) Seller's Cure Costs shall not, in the aggregate, exceed
$3,066,500.
(f) As soon as practicable after entry of the Bid Procedures
Order, the Seller shall file with the Bankruptcy Court the Plan of
Reorganization and related Disclosure Statement, and motion(s) for approval of
voting and solicitation procedures (collectively, the "PLAN MOTIONS"). The Plan
of Reorganization shall, among other things, provide for (A) the purchase by the
Purchaser of the Shares and (B) the reorganization of each Subsidiary, with the
equity interests of each of the LTC Subsidiary and Therapy Subsidiary in such
Subsidiaries remaining unimpaired. The Seller shall, subject to the Bid
Procedures Order, use commercially reasonable best efforts to obtain entry of an
Order confirming the Plan of Reorganization and to consummate such Plan,
including, to the extent necessary, pursuant to section 1129(b) of the
Bankruptcy Code.
Section 10.2 Purchaser's Review of Motions and Orders. Prior to
submitting any motions (including, without limitation, the Sale Motion and Bid
Procedures Motion) or proposed orders relating to the Plan of Reorganization or
related Disclosure Statement, the Plan of Reorganization or related Disclosure
Statement to the Bankruptcy Court, the Seller shall provide counsel for the
Purchaser with proposed final drafts of such motions and orders and a reasonable
opportunity to comment on such motions and documents prior to their service on
parties in interest and filing with the Clerk of the Court.
Section 10.3 No Solicitation of Transactions. The Seller represents
that, other than the transactions contemplated by this Agreement, it is not a
party to or bound by any agreement with respect to a possible merger, sale,
restructuring, refinancing or other disposition of all or any material part of
the business constituting either the LTC Subsidiary or the Therapy Subsidiary
(in each case, after giving effect to the assignment contemplated by Section
5.8) or the Seller's assets or stock. Prior to the entry of the Bid Procedures
Order, and except as otherwise required by this Agreement or by the Bankruptcy
Code, Seller shall not directly or indirectly, through any officer, director,
employee or advisor, solicit any offer or proposal for an Alternative
Transaction. Subsequent to the entry of the Bid Procedures Order, Seller shall
not, directly or indirectly, through any officer, director, employee or advisor,
solicit any offer or proposal for an Alternative Transaction, except in
accordance with the Bid Procedures Order and as otherwise required by this
Agreement or the Bankruptcy Code.
52
Section 10.4 Break-Up Fee. In the event that the transactions
contemplated by this Agreement are not consummated as a result of a termination
of this Agreement pursuant to Section 9.1(c) or 9.1(d), then, upon the
consummation of the alternative transaction referred to in Section 9.1(c) or the
consummation of the plan of reorganization referred to in Section 9.1(d), the
Seller (subject to the approval of the Bankruptcy Court) shall pay to the
Purchaser an amount equal to Six Million Dollars $6,000,000 (the "BREAK-UP
FEE"). Any amounts paid to the Purchaser under this Section 10.4 shall
constitute Purchaser's sole entitlement to payment from the Seller upon the
occurrence of the events described in this Section 10.4.
Section 10.5 Expense Reimbursement. The Bid Procedures Order shall
approve an expense reimbursement agreement between the Seller and the Purchaser
providing for the reimbursement of certain costs and expenses of the Purchaser
as follows:
(a) The Seller shall pay to the Purchaser an amount equal to
the Purchaser's reasonable and documented costs and out-of-pocket expenses
incurred by the Purchaser in connection with its legal, environmental,
accounting and business due diligence, the preparation and negotiation of this
Agreement and otherwise in connection with the transactions contemplated hereby
(including, without limitation, any commitment or similar fees paid to the
Purchaser's proposed lenders) up to a maximum of Two Million Dollars
($2,000,000) in the event that after the Bankruptcy Court enters the Bid
Procedures Order the Purchaser terminates this Agreement as a result of the
failure of the conditions set forth in Sections 6.1, 6.2, 6.3, 6.9 or 6.14 of
this Agreement (whether or not any other conditions have also failed). In no
event shall the Purchaser receive or be entitled to receive the expense
reimbursement amount specified in this clause 10.5(a) if the Purchaser receives
the Break-Up Fee specified in Section 10.4 above.
(b) In the event the Seller has any liability to the Purchaser
under this Article X, and the Seller is unable to satisfy such liability in
cash, the Seller shall support the Purchaser's application to be filed with the
Bankruptcy Court for the allowance of an administrative expense priority claim
in the full amount of such unpaid liability.
Section 10.6 Limitation on Liability. Notwithstanding anything to the
contrary contained in this Agreement, including without limitation the
provisions of Sections 11.12 and 11.14 hereof, the sole and exclusive remedy of
Purchaser for any breach by the Seller of the terms of this Agreement shall be
to receive its actual damages in an amount of up to $6,000,000; provided,
however, that if the Purchaser terminates this Agreement pursuant to Section 9.1
hereof solely as a result of the willful failure of the Seller to consummate the
transactions contemplated by this Agreement, Purchaser shall be entitled to
receive $6,000,000 as liquidated damages and as its sole and exclusive remedy
for such breach and all other breaches by the Seller of the terms of this
Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.1 Expenses. Except as otherwise provided in this Agreement,
the parties hereto shall pay all of their own fees and expenses relating to the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of their respective counsel,
53
financial advisors and accountants and other Representatives; provided, however,
that the Purchaser shall pay all filing fees under the HSR Act relating to the
Sale. Without limiting the generality of the foregoing, Seller shall indemnify
and hold Purchaser harmless for all fees and expenses of UBS Warburg LLC arising
out of the transactions contemplated by this Agreement.
Section 11.2 Governing Law; Bankruptcy Court Jurisdiction. (a) Except
to the extent governed by the Bankruptcy Code, the interpretation and
construction of this Agreement, and all matters relating hereto, shall be
governed by the laws of the State of New York applicable to contracts made and
to be performed entirely within the State of New York, without giving effect to
any conflicts of law provisions thereof.
(b) During the pendency of the IHS Reorganization Cases (and
any extension of the Bankruptcy Court of its jurisdiction over matters related
to this Agreement), each party hereto hereby irrevocably submits itself in
respect of its property, generally and unconditionally, to the exclusive
jurisdiction of the Bankruptcy Court in any legal action or proceeding arising
out of this Agreement and the transactions contemplated hereby (and the parties
agree not to commence any action, suit or proceeding relating thereto, except in
such court). During the pendency of the IHS Reorganization Cases, each of the
parties hereto hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
court referred to in the preceding sentence, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in such court has been brought in an
inconvenient forum. Each party hereto hereby consents to process being served in
any such action or proceeding by the mailing of a copy thereof to the address
set forth in Section 11.5 hereof below its name and agrees that such service
upon receipt shall constitute good and sufficient service of process or notice
thereof. Nothing in this paragraph shall affect or eliminate any right to serve
process in any other manner permitted by applicable Legal Requirements.
Section 11.3 Captions; Construction. The Article and Section captions
used herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement. No party, or its respective
counsel, shall be deemed the drafter of this Agreement for purposes of
construing the provisions of this Agreement, and all language in all parts of
this Agreement shall be construed in accordance with its fair meaning, and not
strictly for or against any party.
Section 11.4 Memorandum; Disclaimer of Projections. Neither the Seller
nor any of the Subsidiaries makes any representation or warranty to the
Purchaser, except as specifically made in this Agreement. In particular, neither
the Seller nor the Subsidiaries makes any representation or warranty to the
Purchaser with respect to (a) the information set forth in any preliminary
marketing materials distributed by or on behalf of the Seller in connection with
the Sale or (b) any financial projection or forecast relating to any of the
Subsidiaries. With respect to any such projection or forecast delivered by or on
behalf of the Seller or any of the Subsidiaries to the Purchaser, the Purchaser
acknowledges that (i) there are uncertainties inherent in attempting to make
such projections and forecasts, (ii) it is familiar with such uncertainties,
(iii) it is taking full responsibility for making its own evaluation of the
adequacy and accuracy of
54
all such projections and forecasts so furnished to it, and (iv) it shall have no
claim against the Seller or any of the Subsidiaries with respect thereto.
Section 11.5 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt), in
accordance with this Section 11.5, or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties in accordance with this Section 11.5):
If to the Purchaser:
THI Holdings, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and with a copy to:
GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Perl, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Seller:
Integrated Health Services, Inc.
The Highlands
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 11.6 Parties in Interest. This Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto, without the
prior written consent of each other party; provided that, without the consent of
the Seller, Purchaser may assign (i) it rights to purchase the outstanding
capital stock of the Therapy Subsidiary and its obligations hereunder, and (ii)
its rights and obligations hereunder to any Affiliate thereof, but in each case
the Purchaser will nonetheless remain liable for all obligations hereunder. This
Agreement shall be binding upon any successor to the business, operations or
assets of the Purchaser, whether by merger, consolidation, reorganization, or
sale of all or substantially all of the Purchaser's assets, or by any other
business combination transaction.
Section 11.7 Counterparts. This Agreement may be executed in two or
more counterparts (including by means of facsimile), each of which shall
constitute an original, and all of which taken together shall constitute one
instrument.
Section 11.8 Entire Agreement; Amendment. This Agreement, including the
Exhibits, Schedules and other documents referred to herein which form a part
hereof, including the Confidentiality Agreement, Escrow Agreement and Deposit
Escrow Agreement, contain the entire understanding of the parties hereto with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior and contemporaneous agreements, arrangements, contracts,
discussions, negotiations, undertakings and understandings (whether written or
oral) between the parties with respect to such subject matter (other than the
Confidentiality Agreement, Escrow Agreement and Deposit Escrow Agreement). This
Agreement may be amended only by a written instrument executed by or on behalf
of the Seller and the Purchaser.
Section 11.9 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
56
Section 11.10 Attorneys' Fees and Costs. Should either party institute
any arbitration, action, suit or other proceeding arising out of or relating to
this Agreement, the prevailing party shall be entitled to receive from the
losing party reasonable attorneys' fees and costs incurred in connection
therewith.
Section 11.11 No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.
Section 11.12 Rights Cumulative. Subject to the last sentence of
Section 2.2(b) and to Section 10.6, all rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
Section 11.13 Time If the last day permitted for the giving of any
notice or the performance of any act required or permitted under this Agreement
falls on a day which is not a Business Day, the time for the giving of such
notice or the performance of such act will be extended to the next succeeding
Business Day.
Section 11.14 Specific Performance. Subject to the last sentence of
Section 2.2(b) and to Section 10.6, the parties agree that irreparable damages
would occur if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Subject to the
last sentence of Section 2.2(b) and to Section 10.6, it is accordingly hereby
agreed that the parties shall be entitled to an injunction or injunctions to
prevent actual breaches or threatened breaches of this Agreement and to
otherwise enforce specifically, and obtain equitable relief in connection with,
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, all of the foregoing, in addition to any other remedy to
which they are entitled at law or in equity and without the necessity of proving
damages or posting a bond or other security.
Section 11.15 Severability. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefited by such provision or any
other provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties have caused this Stock Purchase
Agreement to be duly executed, all as of the day and year first above written.
THI HOLDINGS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President, Chief Executive
Officer and Assistant Secretary
INTEGRATED HEALTH SERVICES, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President