EXHIBIT 7.2
PURCHASE AND SALE AGREEMENT
BETWEEN
MATRIA HEALTHCARE, INC., PURCHASER,
AND
▇▇▇▇▇▇ MEDICAL MANAGEMENT, L.L.C., SELLER
DATED AS OF DECEMBER 21, 1998
*** Indicates information omitted pursuant to a request for confidential
treatment under Rule 24b-2 of the Securities and Exchange Commission.
TABLE OF CONTENTS
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ARTICLE 1 SALE AND PURCHASE OF STOCK , MEMBERSHIP INTERESTS AND OTHER ASSETS 2
1.1 Sale of Stock, Membership Interests and Other Assets at the Closing 2
1.2 Purchase Price 5
1.3 Allocation of Purchase Price 5
1.4 Payment of Purchase Price 5
1.5 Additional Purchase Price Payments 6
1.6 Cash Adjustment 9
ARTICLE 2 CLOSING 10
2.1 Closing Date 10
2.2 Deliveries of the Seller 10
2.3 Deliveries of Purchaser 12
ARTICLE 3 ADDITIONAL AGREEMENTS 13
3.1 Confidentiality 13
3.2 Access to Premises, Records, Properties, Customers and Employees 14
3.3 Publicity 15
3.4 Acquisition Proposals 15
3.5 Approvals and Consents; Reasonable Efforts 15
3.6 Cooperation of the Parties; Regulatory Approvals 16
3.7 Expenses 16
3.8 Corporate Names 16
3.9 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings 17
3.10 Standstill and Restrictive Covenant Agreements 17
3.11 Lucor Management Agreement 17
3.12 Tax Matters 17
3.13 Break-Up Fee 18
3.14 Seller and Subsidiary Permits 18
3.15 Bulk Sales Law 18
3.16 Discharge of Liabilities 18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER 19
4.1 Validity 19
4.2 Definition of Material Adverse Effect 19
4.3 Corporate and Financial 19
4.3.1 Corporate Status 19
4.3.2 Authority; No Violation; Consents 20
4.3.3 Ownership and Capitalization 21
4.3.4 Title to Interest and Assets 22
4.3.5 Corporate or Other Books and Records 22
4.3.6 Taxes 23
4.3.7 Financial Statements 24
4.3.8 Accounts 25
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4.3.9 Notes Receivable; Accounts Receivable; Accounts Payable 25
4.3.10 Liabilities 25
4.3.11 Ordinary Course of Business and Absence of Changes 26
4.3.12 Litigation and Proceedings 28
4.3.13 RESERVED 28
4.3.14 Inventory 28
4.4 Business Operations 28
4.4.1 Customers and Accounts 28
4.4.2 Suppliers 28
4.4.3 Environmental 29
4.4.4 Insurance 29
4.4.5 Powers of Attorney 30
4.5 Contracts; Properties and Assets 30
4.5.1 Contracts 30
4.5.2 Licenses; Intellectual Property 31
4.5.3 Title to Assets 32
4.5.4 Conditions of Properties 33
4.5.5 Real Property and Leases 33
4.6 Employees and Benefits 34
4.6.1 Directors, Officers and Managers 34
4.6.2 Employees 34
4.6.3 Compensation Structure - Independent Contractors 35
4.6.4 Employee Benefits 36
4.6.5 Labor-Related Matters 37
4.6.6 Transactions With Management 38
4.7 Other 38
4.7.1 Approvals and Consents 38
4.7.2 Fraud and Abuse 38
4.7.3 Medicare, Medicaid, and Other Third-Party Payor Payment Liabilities 38
4.7.4 Billing Practices and Referral Sources 39
4.7.5 Contributions, Payments or Gifts 39
4.7.6 Physician Self-Referrals 39
4.7.7 Compliance with Laws 39
4.7.8 Permits 40
4.7.9 Investment Representations 41
4.7.10 Brokers 42
4.7.11 Limitation on Warranties 42
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 42
5.1 Organization and Good Standing 42
5.2 Power and Authority 43
5.3 Binding Effect 43
5.4 No Violation; Consents 43
5.5 Capitalization 43
5.6 Exchange Act Reports and Financial Statements 44
5.7 Absence of Certain Changes or Events 45
5.8 No Shareholder Vote Required 46
5.9 Reporting Company; Form S-3 46
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5.10 Trading on Nasdaq 46
5.11 Brokers 46
5.12 Absence of Litigation; Compliance 46
5.13 Takeover Status 47
5.14 Corporate Action 47
5.15 Investment Representations 47
5.16 Limitation on Warranties 48
5.17 Compliance with Securities Laws 48
ARTICLE 6 CONDUCT OF BUSINESS OF COMPANY PENDING CLOSING 48
6.1 Conduct of Business 48
6.2 Maintenance of Properties 49
6.3 Insurance 49
6.4 Issuance of Securities 49
6.5 Dividends 49
6.6 Amendment of Charter 49
6.7 No Acquisitions 49
6.8 Disposition of Assets 49
6.9 Compensation 50
6.10 Banking Arrangements 50
6.11 Indebtedness 50
6.12 Payment of Debt 50
6.13 Benefit Plans 50
6.14 Contracts 50
6.15 Books and Records 50
6.16 Other Actions 50
6.17 Seller to Advise Purchaser of Changes 51
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE PURCHASER 51
7.1 Representations and Warranties 51
7.2 Performance of Agreements 51
7.3 Deliveries 51
7.4 Approvals 51
7.5 Financing Obtained by the Purchaser 51
7.6 No Injunctions 51
7.7 Consents and Approvals of Third Parties 52
7.8 Resignations 52
7.9 Opinion of Seller's and SZI's Counsel 52
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF THE SELLER 52
8.1 Representations and Warranties 52
8.2 Performance of Agreements 52
8.3 Deliveries 52
8.4 Approvals 53
8.5 No Injunctions 53
8.6 Actions of Purchaser 53
8.7 Certificates of Designation 53
8.8 Opinion of Purchaser's Counsel 53
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ARTICLE 9 INDEMNIFICATION 54
9.1 Survival of Representations 54
9.2 Indemnification 55
ARTICLE 10 TERMINATION 60
10.1 Material Adverse Change - Subsidiaries 60
10.2 Material Adverse Change - Purchaser 60
10.3 Noncompliance of Seller 60
10.4 Noncompliance of Purchaser 60
10.5 Failure to Disclose - Seller 60
10.6 Failure to Disclose - Purchaser 60
10.7 Adverse Proceedings 60
10.8 Termination Date 61
10.9 Effect of Termination 61
ARTICLE 11 [RESERVED] 61
ARTICLE 12 MISCELLANEOUS 61
12.1 Notices 61
12.2 Entire Agreement 63
12.3 Waiver; Amendment 63
12.4 Counterparts, Faxed Signatures, Headings, Etc. 63
12.5 Successors and Assigns 63
12.6 Governing Law 63
12.7 Remedies, Damages, Injunctions and Specific Performance 64
12.8 Severability, Interpretation 64
12.9 Further Assurances 64
12.10 Law and GAAP Applicable to Foreign Subsidiaries 64
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SCHEDULES
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Schedule 1.1(a)(iv) Permitted Liens
Schedule 1.1(c) Excluded Assets
Schedule 1(e) Excluded Contracts
Schedule 1.3 Allocation of Purchase Price
Schedule 1.4(b) Convertible Preferred Stock
Schedule 1.4(c) Redeemable Preferred Stock
Schedule 4.3.1 Subsidiaries and Foreign Qualifications
Schedule 4.3.3 Stock, Equity Interests, Options, Warrants
Schedule 4.3.4 Seller's Exception to Title
Schedule 4.3.6 Tax Matters
Schedule 4.3.7 Financial Statements
Schedule 4.3.8 Accounts
Schedule 4.3.9 Accounts Receivable
Schedule 4.3.10 Liabilities
Schedule 4.3.11 Changes
Schedule 4.3.12 Litigation and Proceedings
Schedule 4.4.1 Customers and Accounts
Schedule 4.4.2 Suppliers and Managed Care Providers
Schedule 4.4.3 Environmental
Schedule 4.4.4 Insurance
Schedule 4.4.5 Powers of Attorney
Schedule 4.5.1 Contracts and Commitments
Schedule 4.5.2 Licenses; Intellectual Property
Schedule 4.5.3 Subsidiaries' Exceptions to Title
Schedule 4.5.5 Real Property and Leases
Schedule 4.6.1 Officers and Directors
Schedule 4.6.2 Compensation Structure - Employees
Schedule 4.6.3 Compensation Structure - Independent Contractors
Schedule 4.6.4 Employee Benefits
Schedule 4.6.5 Labor-Related Matters
Schedule 4.6.6 Transactions With Management
Schedule 4.7.1 Seller's Approvals and Consents
Schedule 4.7.3 Medicare, Medicaid Liabilities
Schedule 4.7.7 Compliance with Laws
Schedule 4.7.8 Permits
Schedule 5.4 Purchaser Approval and Consents
Schedule 5.5(b) Capitalization
Schedule 5.7 Changes to SEC Disclosures
Schedule 5.12 Litigation
[The Schedules have not been included with this Exhibit 7.2 to Schedule 13D.]
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EXHIBITS
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Exhibit A Earn-Out Note
Exhibit B ▇▇▇▇ of Sale and Assignment
Exhibit C Lucor Management Agreement
Exhibit D Standstill Agreement
Exhibit E Restrictive Covenant Agreement
Exhibit F Registration Rights Agreement
Exhibit G Common Stock Warrant
Exhibit H Assumption Agreement
Exhibit I Subsidiary Assumption Agreement
[The Exhibits have not been included with this Exhibit 7.2 to Schedule 13D.]
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PURCHASE AND SALE AGREEMENT
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THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered into
as of the 21st day of December, 1998, by and between MATRIA HEALTHCARE, INC., a
Delaware corporation ("Purchaser"), and ▇▇▇▇▇▇ MEDICAL MANAGEMENT, L.L.C., a
Georgia limited liability company ("GMM" or "Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, GMM owns 100% of the issued and outstanding shares of capital
stock of ▇▇▇▇▇▇ Medical Acquisition Corporation, a Georgia corporation ("GMAC"),
and GMAC is the owner of 100% of the issued and outstanding shares of capital
stock of USCI-Healthcare Management Solutions, Inc., a Delaware corporation
("HMS"), and Diabetes Self Care, Inc., a Virginia corporation ("Self Care"); and
GMM owns directly or indirectly 100% of the issued and outstanding shares of
capital stock of A.R. Medical Supplies, Inc., a Florida corporation ("AR
Medical") (GMAC, HMS, Self Care, and AR Medical are sometimes referred to herein
collectively as the "Corporation Subsidiaries" and individually as a
"Corporation Subsidiary"); and GMM is the direct or indirect owner of 100% of
the membership interests of the following limited liability companies: ▇▇▇▇▇▇
Medical North America, L.L.C., a Georgia limited liability company ("▇▇▇▇▇▇
North America"), ▇▇▇▇▇▇ Medical Direct, LLC, a Georgia limited liability company
("▇▇▇▇▇▇ Direct"), ▇▇▇▇▇▇ Medical Europe Limited, a limited company formed under
the laws of the United Kingdom ("▇▇▇▇▇▇ Europe"), ▇▇▇▇▇▇ Medical International,
L.L.C., a Georgia limited liability company ("▇▇▇▇▇▇ International"), "▇▇▇▇▇"
Achtundesechzigste Beteiligungs und Verwaltungsgesellschaft GmbH, a limited
liability company incorporated in the Federal Republic of Germany ("Germany")
and registered in the commercial register of the local court of Frankfurt under
HRB 45034 ("▇▇▇▇▇ 68"), Hans M.W. Spreth GmbH, a German limited liability
company ("Hans MW"), EU Medical GmbH, a German limited liability company ("EU
Medical"), "▇▇▇▇▇" Eimundsiebsechzigste Beteiligungs und Verwaltungsgesellschaft
GmbH, a German limited liability company ("▇▇▇▇▇ 71"), and Dia Real
Diabetesservice Kommanditgesellschaft, a limited partnership
("Kommanditgesellschaft"), duly organized, validly existing and in good standing
under the laws of Germany ("Dia Real") (▇▇▇▇▇ 68, ▇▇▇▇ ▇▇, EU Medical, ▇▇▇▇▇ 71
and Dia Real are sometimes referred to herein collectively, as the "German
Subsidiaries" and individually, as a "German Subsidiary") (▇▇▇▇▇▇ North America,
▇▇▇▇▇▇ Direct, ▇▇▇▇▇▇ Europe, ▇▇▇▇▇▇ International, and the German Subsidiaries
are sometimes referred to herein collectively as the "LLC Subsidiaries" and
individually as an "LLC Subsidiary") (the Corporation Subsidiaries and the LLC
Subsidiaries are sometimes referred to herein collectively as the "Subsidiaries"
and individually as a "Subsidiary"). The Corporation Subsidiaries, together
with ▇▇▇▇▇▇ North America and ▇▇▇▇▇▇ International are collectively referred to
herein as the "U.S. Subsidiaries." The German Subsidiaries, together with
▇▇▇▇▇▇ Europe are collectively referred to herein as the "Foreign Subsidiaries."
WHEREAS, the Seller desires to sell and Purchaser desires to purchase all
of the outstanding capital stock of the Corporation Subsidiaries, all of the
outstanding membership interests of the LLC Subsidiaries and certain other
assets of GMM, and thereby acquire all of the properties, assets and business of
GMM and the Subsidiaries as a going concern, all pursuant to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises and covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE 1
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SALE AND PURCHASE OF STOCK ,
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MEMBERSHIP INTERESTS AND OTHER ASSETS
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1.1 SALE OF STOCK, MEMBERSHIP INTERESTS AND OTHER ASSETS AT THE CLOSING
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(a) Subject to the terms and conditions set forth in this Agreement and
on the basis of and in reliance upon the representations, warranties,
obligations and covenants set forth in this Agreement, at the "Closing" (as
defined in Section 2.1 hereof), the Seller hereby agrees to sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser hereby agrees to
purchase and receive from the Seller, free and clear of any and all Liens (as
defined below), all of the business and assets of GMM on the Effective Date (as
defined below) (other than the "Excluded Assets," as defined in Section 1.1(c))
(hereinafter, the "GMM Assets"), including, without limitation, (i) 100% of the
outstanding capital stock of GMAC and 100% of the outstanding membership or
other equity interests of ▇▇▇▇▇▇ International, ▇▇▇▇▇▇ Europe, ▇▇▇▇▇▇ Direct,
▇▇▇▇▇▇ North America and ▇▇▇▇▇ 68 (collectively, the "Interests"), (ii) all
rights of Seller under contracts and agreements, (iii) all cash, cash
equivalents, deposits and investments ("Cash Items") shown on the December 31,
1998 balance sheet of Seller delivered to Purchaser pursuant to Section 2.2(u)
(the "December 31, 1998 Balance Sheet") plus any Cash Items received by Seller
in the ordinary course of the Business (as defined below) from the Effective
Date (as defined below) through the Closing Date (as defined below) (the
"Interim Period") and minus any disbursement of Cash Items by Seller in the
ordinary course of business during the Interim Period, and (iv) all other assets
shown on the December 31, 1998 Balance Sheet to the extent not disposed of after
that date in the ordinary course of business, plus all assets purchased or
received by Seller during the Interim Period. For purposes of this Agreement,
"Lien" shall mean all liens, charges, security interests, claims, pledges,
hypothecations and encumbrances of any nature whatsoever, other than those liens
and other encumbrances listed on Schedule 1.1(a)(iv) (the "Permitted Liens").
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(b) Through the Seller's conveyance of the Interests and other assets
described in Section 1.1(a) to the Purchaser, the Seller intends for the
Purchaser to thereby acquire substantially all of the properties, assets and
business of GMM and the Subsidiaries as a going concern, including, without
limitation, all items of personal property and other assets used in connection
with the business of GMM and the Subsidiaries, whether or not any of such assets
have any value for accounting purposes (collectively, the "Assets"), free and
clear of all Liens. The Seller shall deliver custody and control of the Assets
to the Purchaser at the Closing. The "Business" shall mean the diabetes supply
and disease management business, the microsampling business and all other
businesses operated by the Seller and the Subsidiaries on the date hereof.
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(c) Notwithstanding the foregoing, the term "Assets" shall not include
the following assets, properties and rights of Seller (collectively, the
"Excluded Assets"):
(i) Seller's minute books and membership interest ledgers;
provided that Purchaser may obtain copies of the foregoing and Seller hereby
covenants to provide Purchaser reasonable access to the foregoing, for all
proper purposes;
(ii) Seller's rights under this Agreement and the other agreements
to be executed in connection herewith;
(iii) those assets, properties and rights set forth on Schedule
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1.1(c);
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(iv) claims (and benefits to the extent they arise therefrom) to
the extent they relate to any Excluded Liabilities (as defined below) of Seller
and any other Excluded Assets of Seller; and
(v) rights arising from any refunds due Seller as of the Effective
Date with respect to insurance premium payments of Seller and income tax refunds
due Seller for periods ending on or prior to the Effective Date from federal,
state and local income taxing authorities.
(d) At the Closing, Purchaser shall execute and deliver to the Seller
the "Assumption Agreement" (as defined in Section 2.3(l) hereof), pursuant to
which Purchaser assumes and agrees to perform, pay and discharge in accordance
with their respective terms the following debts, liabilities and obligations of
Seller (collectively, the "Assumed Liabilities"), as of the Effective Date:
(i) all debts, liabilities and obligations arising after the Effective
Date under the contracts assigned to Purchaser pursuant to Section 1.1(a)(ii);
(ii) any liabilities and obligations reflected as current liabilities
on the unaudited balance sheet of Seller dated as of September 30, 1998
delivered to Purchaser pursuant to Section 2.2(t) (the "September 30, 1998
Balance Sheet") which remain unpaid or outstanding on the Closing Date,
including, without limitation, all amounts reflected thereon for accounts
payable, accrued taxes, accrued payroll related expense, accrued professional
fees, accrued interest, intercompany accounts incurred in the ordinary course of
Business between Seller and any Subsidiary and other current liabilities,
including deferred revenue, incurred in the ordinary course of the Business, but
specifically excluding liabilities described as Excluded Liabilities in Section
1.1(e) hereof (the foregoing type of liabilities are hereafter referred to as
"Current Liabilities");
(iii) the Current Liabilities of Seller, incurred in the ordinary
course of the Business from September 30, 1998 through Closing but expressly
excluding the Excluded Liabilities set forth in Section 1.1(e) hereof; and
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(iv) any other indebtedness for borrowed money or seller financing,
other than capital lease obligations and related accrued interest ("Funded
Debt") of Seller which Purchaser elects to assume and which results in a
reduction in the Purchase Price pursuant to Section 1.4.
(e) Notwithstanding anything else contained herein to the contrary, all
liabilities and obligations of Seller (whether known or unknown, liquidated or
unliquidated, contingent or fixed) other than the Assumed Liabilities
(collectively, the "Excluded Liabilities") are not assumed by Purchaser
(regardless of whether any such liabilities or obligations are disclosed in or
pursuant to this Agreement) pursuant hereto and all Excluded Liabilities (other
than those assumed by ▇▇▇▇▇▇ North America pursuant to the Subsidiary Assumption
Agreement (as defined in Section 2.3(m)) shall remain the liabilities and
obligations of Seller. Seller hereby agrees that it shall fully and timely pay,
perform and discharge all of its Excluded Liabilities (other than those assumed
by ▇▇▇▇▇▇ North America pursuant to the Subsidiary Assumption Agreement) in
accordance with their respective terms. Without limiting the generality of the
foregoing, Excluded Liabilities include, without limitation, the following,
whether or not reflected as Current Liabilities on the September 30, 1998
Balance Sheet or the December 31, 1998 Balance Sheet:
(i) any liability or obligation arising under any contract of Seller
listed on Schedule 1.1(e) hereof;
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(ii) any liability or obligation (including, without limitation,
taxes) related to the Excluded Assets;
(iii) any liability or obligation to any employee of Seller, not
employed by Purchaser or any Subsidiary after the Closing;
(iv) except as set forth on Schedule 1.1(e), any liability or
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obligation arising out of any termination by Seller of the employment of any
employee as a result of this transaction or otherwise and any liability or
obligation related to any former employee of Seller who retired effective as of
or prior to the Closing Date, including, without limitation, any liability under
the agreement dated June 13, 1997 between Seller and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
(v) any liability or obligation under any litigation, arbitration,
investigation or other proceeding brought against Seller with respect to any
matter occurring prior to the Closing Date (regardless of whether it is pending
as of or has been threatened or asserted prior to the Closing Date);
(vi) any liability or obligation for any income taxes owed by Seller
for any period ending on or prior to the Effective Date and any liability or
obligation for any income, sales, use or other taxes arising in connection with
the consummation of the transactions contemplated by this Agreement; (except to
the extent there is a transfer tax with respect to the transfer of stock under
UK law);
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(vii) any liability or obligation of Seller relating to any breach of
contract, breach of warranty, tort, infringement or violation of law prior to
the Closing Date;
(viii) any liability or obligation payable to any member or affiliate
of Seller;
(ix) any liability or obligation of Seller to indemnify any person by
reason of the fact that such person was an employee, officer, director or agent
of Seller (or such person was serving as an employee, officer, director or agent
of any other entity at the request of Seller) prior to the Closing Date;
(x) any liability or obligation of Seller for costs and expenses
(including, without limitation, professional fees) incurred in connection with
this Agreement and the transactions contemplated hereby;
(xi) except as set forth in Section 1.1(d)(iv), any liability or
obligation of Seller relating to any bank loan or other indebtedness for
borrowed money, including any accrued interest thereon; and
(xii) any liability covered by insurance maintained by Seller
immediately prior to the Closing Date, to the extent of such coverage.
1.2 PURCHASE PRICE. Subject to the provisions of Sections 1.4, 1.5 and
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1.6 hereof, as consideration for all of the Interests and Assets to be acquired
by Purchaser pursuant to Section 1.1, Purchaser shall pay to Seller the
aggregate amount of $130,000,000 (the "Purchase Price"). The Purchase Price
shall be allocated as provided in Section 1.3 hereof and paid as provided in
Section 1.4 hereof.
1.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
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allocated among the Interests and Assets as provided on Schedule 1.3 hereof.
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Each party hereto covenants and agrees that it will not take a position on any
tax return, before any agency charged with collection of any tax, or in any
judicial or administrative proceeding that is in any way inconsistent with the
allocation set forth on Schedule 1.3.
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1.4 PAYMENT OF PURCHASE PRICE.
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(a) At the Closing, Purchaser shall deliver to the Seller, in
immediately available U.S. funds, by wire transfer to such banks and accounts in
the United States as shall be designated by Seller, or by certified or official
bank checks, the amount of $85,000,000, less the amount of any Funded Debt of
Seller or any Subsidiary that Purchaser elects to assume pursuant to Section
1.1(d)(iv) or accepts as a liability of a Subsidiary pursuant to Section 3.16 by
notice to Seller not less than 2 days prior to the Closing.
(b) At the Closing, Purchaser shall deliver to the Seller 10,000 shares
of the $.01 par value convertible preferred stock of the Purchaser having a
liquidation value of $1,000 per share (the "Convertible Preferred Stock"). Such
Convertible Preferred Stock shall have the rights and preferences set forth on
Schedule 1.4(b) hereof.
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(c) At the Closing, Purchaser shall deliver to the Seller 35,000 shares
of the $.01 par value redeemable preferred stock of the Purchaser having a
liquidation value of $1,000 per share (the "Redeemable Preferred Stock"). Such
Redeemable Preferred Stock shall have the rights and preferences set forth on
Schedule 1.4(c) hereof.
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1.5 ADDITIONAL PURCHASE PRICE PAYMENTS.
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(a) Subject to the terms and conditions set forth in this Section 1.5,
Purchaser shall make the following additional payments, if any, to the Seller in
consideration for the Interests and Assets, which payments shall be in addition
to the Purchase Price (any such additional payment is referred to herein as an
"Additional Purchase Price Payment"), as follows:
(i) if the aggregate EBITDA (as defined below) of the Subsidiaries
equals or exceeds U.S.$*** during calendar year 1999, Purchaser shall pay to the
Seller an Additional Purchase Price Payment of $*** for each dollar of aggregate
EBITDA between U.S.$*** and U.S.$***, for a possible Additional Purchase Price
Payment of U.S.$20,000,000;
(ii) for each additional U.S.$*** of aggregate EBITDA of the
Subsidiaries during calendar year 1999 above U.S.$***, Purchaser shall pay to
the Seller an Additional Purchase Price Payment in the amount of $5,000,000;
provided that such Additional Purchase Price Payments under this clause (ii)
shall not exceed $15,000,000;
(iii) provided that if any amount is owing pursuant to Section
1.5(a)(i) or 1.5(a)(ii) above, Purchaser shall pay to the Seller an Additional
Purchase Price Payment equal to that amount of interest (at 4% per annum) that
would have accrued on the Additional Purchase Price Payments payable pursuant to
Sections 1.5(a)(i) and (ii) above, if any, had the Earn-Out Note for such
Additional Purchase Price Payments been issued on January 1, 2000, which amount
shall be added to the principal of the Earn-Out Note on the date of issuance;
(iv) provided that if any amount is owing pursuant to Section
1.5(a)(i) or (ii) above, Purchaser shall pay to the Seller an Additional
Purchase Price Payment equal to that amount of interest (at 8% per annum) that
would have accrued on the Additional Purchase Price Payments payable pursuant to
Sections 1.5(a)(i) and (ii) above, if any, had the Earn-Out Note for such
Additional Purchase Price Payments been issued on January 1, 2000, which
Additional Purchase Price Payment shall be paid in cash at the time of issuance
of the Earn-Out Note as provided below;
(v) if, due to application of the installment sale rules of the United
States Internal Revenue Code of 1986, as amended (the "Code"), the determination
of the Additional Purchase Price Payments pursuant to clauses (i) and (ii) above
causes the gross profit percentage attributed to the payments of Purchase Price
reported by the Seller for federal income tax purposes as income received by the
Seller in calendar year 1999 (the "1999 Payments") to be higher than originally
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reported, Purchaser shall pay Seller an Additional Purchase Price Payment
hereunder, in an amount equal to the lesser of (y) $250,000 or (z) the amount of
interest payable to the Internal Revenue Service with respect to any resulting
underpayment of tax on the 1999 Payments, such interest to be computed through
that date which is 30 days after the date on which the amount of the Additional
Purchase Price Payments payable under clauses (i), (ii) and (iii) above is
determined.
Any Additional Purchase Price Payment payable pursuant to this Section 1.5
shall be allocated among the Interests and Assets as provided in Schedule 1.3.
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Any Additional Purchase Price Payment payable pursuant to Sections 1.5(a)(i),
1.5(a)(ii) and 1.5(a)(iii) shall be paid by the Purchaser by the delivery to
Seller of a note of the Purchaser substantially in the form attached hereto as
Exhibit A (the "Earn-Out Note"), accompanied by an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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LLP, counsel for the Purchaser, dated the date of the Earn-Out Note, in form and
substance reasonably satisfactory to Seller. Any Additional Purchase Price
Payment payable pursuant to Section 1.5(a)(v) shall be paid by Purchaser in
cash, either by wire transfer or certified or official bank checks within 10
days of Seller's delivery to Purchaser of a detailed calculation of the amount
due. Any Additional Purchase Price Payment payable pursuant to Section
1.5(a)(iv) shall be paid by Purchaser in cash, either by wire transfer or
certified or official bank checks on the date of issuance of the Earn-Out Note.
As used in this Section 1.5, the term "EBITDA" of the Subsidiaries shall
mean the 1999 annual consolidated earnings of the Subsidiaries and, to the
extent positive, the earnings of Diabetes Management Services, Inc.'s diabetes
supply business (which business specifically excludes DMS' business of providing
clinical services or any sales of supplies incidental thereto) ("DMS") (whether
or not such business is operated through a Subsidiary) before interest, taxes,
depreciation and amortization, as reported at the conclusion of 1999 in audited
consolidated financial statements of the Subsidiaries and DMS (excluding any
financial results of any acquisitions by Purchaser or any Subsidiary subsequent
to the Closing). EBITDA shall be derived from the applicable amounts that were
determined in accordance with generally accepted accounting principles ("GAAP")
applied in a manner consistent with past practices, provided that the costs of
the audit of the Financial Statements, as defined in Section 4.3.7, of Seller,
the Subsidiaries and DMS for the year ended December 31, 1998 and for any fiscal
year prior to December 31, 1998 which Purchaser is required to file with the
Securities and Exchange Commission ("Commission") in connection with the Form
8-K report of this transaction shall be deducted in computing 1999 EBITDA.
EBITDA shall not include any allocation of overhead of Purchaser to the
Subsidiaries other than (i) charges for services actually provided to the
Subsidiaries by Purchaser at the request of Lucor Holdings, LLC ("Lucor") which
services shall be charged at a rate approximating the costs incurred by
Purchaser for providing such services, as set forth below; or (ii) charges for
services contemplated in the 1999 ▇▇▇▇▇▇ Medical Budget previously reviewed by
Purchaser as the same may subsequently be revised pursuant to this Section 1.5
(the "Budget"), so long as the amount charged to EBITDA for services under this
Section (ii) shall not exceed the amount included in the Budget therefor. The
costs incurred by Purchaser shall be determined by considering relevant pricing
factors, including, without limitation, the number of personnel hours required,
the hourly cost of the person or persons providing the services, and the cost of
materials, the allocable overhead to the Subsidiaries (including employee
benefits) and the cost of capital consumed in providing such services. In
7
addition to amounts to be billed to Subsidiaries, Subsidiaries shall either pay
directly or reimburse Purchaser for the amount of all expenses for outside
professional services reasonably incurred by Purchaser for and on behalf of
Subsidiaries, including, without limitation, public accounting and outside legal
services. Any compensation paid or expenses reimbursed by Purchaser under the
Lucor Management Agreement shall be charged against EBITDA. If the Purchaser
believes the Subsidiaries should make an expenditure that is not contemplated in
the Budget or is greater than the amount included in the Budget for such item,
and Lucor Management does not agree that the expenditure is necessary, the
matter will be submitted to the Board of Directors of the Purchaser, and the
expenditure will be charged against EBITDA and added to the Budget only if the
Board of Directors by a majority vote concludes that the expenditure is
necessary.
(b) No later than March 31, 2000, Purchaser shall cause to be prepared
in accordance with GAAP and delivered to the Seller audited consolidated
financial statements of the Subsidiaries (including DMS, whether or not operated
through a Subsidiary, but excluding any financial results of any acquisitions by
Purchaser or any Subsidiary subsequent to the Closing) for the year ended
December 31, 1999 (the "Additional Payment Financial Statements"). Payment of
all Additional Purchase Price Payments calculated by the Purchaser to be due
pursuant to Sections 1.5(a)(i) ,1.5(a)(ii) and 1.5(a)(iii) shall be made
pursuant to the Earn-Out Note which shall be executed and delivered by the
Purchaser to the Seller within 15 days following the date such Additional
Payment Financial Statements are agreed to by Purchaser and Seller or finally
resolved as hereinafter provided. The Seller and, on the Seller's behalf, an
independent national accounting firm chosen by the Seller) shall have the right
at mutually agreed times during normal business hours commencing on the Closing
Date and ending 60 days after the receipt of the Additional Payment Financial
Statements to inspect the books and records of the Subsidiaries (and DMS).
Seller shall notify Purchaser in writing of any objections to the Additional
Payment Financial Statements (in reasonable detail) within 65 days after
receiving them. If Seller fails to give such notice by such time, Seller shall
be deemed to have agreed with the Additional Payment Financial Statements as
delivered. If Seller gives such notice by such time, (i) Purchaser shall execute
and deliver to the Seller an Earn-Out Note within 15 days following receipt by
Purchaser of the Seller's Notice with regard to the undisputed portion of any
amounts owed to Seller pursuant to this Section 1.5, and (ii) Seller and
Purchaser shall then have 10 business days after such notice to agree on the
amounts of the EBITDA. If Seller and Purchaser are not able to agree by such
time, the Additional Payment Financial Statements will be submitted to Deloitte
& Touche in Atlanta, Georgia (or any successor accounting firm), who shall have
responsibility for determining the correct EBITDA, which was derived from the
applicable amounts that were determined in accordance with GAAP applied in the
manner consistent with reasonable past practices, within 30 days following such
submission. Deloitte & Touche's (or any such successor accounting firm's)
determination shall be final and binding on Seller and Purchaser. The costs of
any such determination shall be shared equally by Seller and Purchaser.
(c) During 1999, Purchaser shall keep the Business intact as a separate
unit, shall manage it in the ordinary course consistent with past practice, and
shall not, without obtaining the prior written consent of Seller, take any of
the following actions:
8
(i) liquidate, consolidate, dissolve or merge any material
Subsidiary or DMS with or into another company other than another Subsidiary,
including without limitation, into a subsidiary or affiliate of Purchaser;
(ii) cause a material change in the nature of the Business as
presently conducted by the Subsidiaries and DMS;
(iii) transfer assets or incur liabilities in the Subsidiaries or
DMS except in the ordinary course of business consistent with past practice;
(iv) remove from the premises of the Subsidiaries (other than to
the premises of the Purchaser) any books or records of the Business reasonably
necessary for the continuation of the operation of the Business; or
(v) fail to honor or perform its obligations under the Lucor
Management Agreement.
1.6 CASH ADJUSTMENT.
----------------
(a) Subject to the terms and conditions set forth in this Section 1.6,
the Purchase Price for the Interests and Assets shall be increased by the amount
(the "Cash Adjustment") of the average of the cash reported on the consolidated
daily cash balances reports of the Seller and the Subsidiaries for the period
from September 16, 1998 through December 15, 1998 inclusive (the "Average Cash
Balance"), adjusted in accordance with Section 1.6(b) below. Purchaser shall
pay at the Closing one-half of the amount of the "Estimated Cash Adjustment"
determined in accordance with Section 1.6(c) and any remaining unpaid balance of
the Cash Adjustment shall be paid in accordance with Sections 1.6(d) and (e).
(b) The Cash Adjustment shall be an amount equal to the Average Cash
Balance, plus any receipt of Cash Items by Seller related to Excluded Assets
from December 16, 1998 to the Closing Date and minus (i) any disbursement of
Cash Items by Seller or any Subsidiary related to Excluded Liabilities or
Subsidiary Excluded Liabilities (as defined in Section 3.16), and (ii)
distributions to or payments to or on behalf of members of Seller or their
affiliates from December 16, 1998 to the Closing Date (other than payments of
base salary and 1998 bonuses in the aggregate amount of $335,000).
(c) Not later than 10 days prior to the Closing, Purchaser and Seller
shall agree upon the amount of the Estimated Cash Adjustment. If Purchaser and
Seller are unable to agree by such time, then the parties shall cause a
determination to be made of such Estimated Cash Adjustment by Deloitte & Touche
in Atlanta, Georgia (or any successor accounting firm). Seller shall notify
Purchaser in writing of the amounts so determined no later than 2 days prior to
the Closing. The cost of such determination shall be shared equally by
Purchaser and Seller.
(d) On or before February 1, 1999, Lucor, with the assistance of
Purchaser's personnel, shall deliver to Purchaser the December 31, 1998 Balance
Sheet, prepared in accordance with GAAP consistently applied, together with a
detailed calculation of the Cash Adjustment determined in accordance with
9
Sections 1.6(a) and 1.6(b). On or before April 1, 1999, Purchaser shall deliver
to Seller (i) the December 31, 1998 (Consolidated) Balance Sheet, prepared in
accordance with GAAP consistently applied and audited by Purchaser's independent
certified public accountants (Purchaser's Accountants), (ii) Purchaser's
detailed calculation of the Cash Adjustment determined in accordance with
Sections 1.6(a), and 1.6(b), and (iii) payment, by wire transfer or certified or
official bank check, of the unpaid balance of the amount of the Cash Adjustment
as shown in such calculation.
(e) Seller shall notify Purchaser in writing of any objections to
Purchaser's calculation of the Cash Adjustment (in reasonable detail) within 15
days after receiving it. If Seller fails to give such notice by such time,
Seller shall be deemed to have agreed with Purchaser's calculation of the Cash
Adjustment as delivered. If Seller gives such notice by such time, Seller and
Purchaser shall then have 10 business days after such notice to agree on the
amounts of the Cash Adjustment. If Seller and Purchaser are not able to agree
by such time, the Cash Adjustment calculation will be submitted to Deloitte &
Touche in Atlanta, Georgia (or any successor accounting firm), who shall have
responsibility for determining the correct Cash Adjustment, under GAAP applied
in a manner consistent with past practices, within 30 days following such
submission. Deloitte & Touche's (or any such successor accounting firm's)
determination shall be final and binding on Seller and Purchaser. The costs of
any such determination shall be shared equally by Seller and Purchaser. If
Deloitte & Touche determines that the actual Cash Adjustment is greater than
Purchaser's calculation of the Cash Adjustment pursuant to Section 1.6(d),
Purchaser shall pay Seller within 15 days following Purchaser's receipt of
Deloitte & Touche's determination, by wire transfer or certified or official
bank check, the additional amount so determined. If Deloitte & Touche
determines that the actual Cash Adjustment is less than Purchaser's calculation
of the Cash Adjustment pursuant to Section 1.6(d), Seller shall pay Purchaser
within 15 days following Seller's receipt of Deloitte & Touche's determination,
by wire transfer or certified or official bank check, the amount of any
overpayment resulting therefrom.
ARTICLE 2
CLOSING
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2.1 CLOSING DATE. Subject to the fulfillment of the conditions
-------------
precedent specified in Articles 7 and 8 of this Agreement (or the waiver thereof
as provided therein), the purchase and sale of the Interests and Assets shall be
consummated at a closing (the "Closing") to be held at 10:00 a.m. prevailing
Eastern Standard Time at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, on January 15, 1999, or at such
other time and place as shall be determined by the mutual agreement of Purchaser
and Seller (the "Closing Date"). The Closing shall be deemed effective as of
12:01 a.m. Eastern Standard Time, January 1, 1999 (the "Effective Date").
2.2 DELIVERIES OF THE SELLER. At the Closing, the Seller shall deliver
------------------------
to Purchaser, in form and substance satisfactory to Purchaser, the following:
10
(a) any and all certificates representing the Interests, which
certificates (as to Subsidiaries directly owned by GMM) shall be duly endorsed
in blank for transfer or accompanied by properly executed transfer powers
endorsed in blank, and any other documentation reasonably requested by Purchaser
necessary or appropriate to transfer and assign all of such Interests to
Purchaser;
(b) a ▇▇▇▇ of Sale and Assignment executed by the Seller, substantially
in the form of Exhibit B attached hereto (the "▇▇▇▇ of Sale") or a similar
----------
document required by the local law applicable to any Foreign Subsidiary and such
other documents of transfer, assignment and conveyance as may be reasonably
requested by Purchaser to vest in Purchaser good and marketable title in and to
the Interests and Assets;
(c) a certificate, dated as of the Closing Date, signed by Seller
stating that (i) all conditions specified in Sections 7.1 and 7.2 have been
fulfilled; (ii) all authorizations, consents, approvals and waivers or other
action required to be obtained or taken by Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
all agreements and transactions contemplated by this Agreement have been
obtained or taken; and (iii) there has been no material adverse change in the
business, properties or assets of the Seller or Subsidiaries from the date of
this Agreement to the Closing Date;
(d) an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, L.L.P., counsel
for Seller and ▇▇▇▇ ▇. ▇▇▇▇▇▇ ("MJG"), dated the Closing Date, in form and
substance reasonably satisfactory to Purchaser;
(e) an opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C., counsel for SZ
Investments, LLC ("SZI"), dated the Closing Date, in form and substance
reasonably satisfactory to Purchaser;
(f) all minute books, stock record books, corporate seals, client
lists, books of account, bank accounts, leases, contracts, agreements, files and
other documents, instruments, work product, funds, receivables, assets, papers,
and properties, of any kind, of the Subsidiaries and all such documents, etc. in
any way related to their respective businesses, provided that Seller may retain
copies of the foregoing, and Purchaser hereby covenants to provide Seller
reasonable access to the foregoing for all proper purposes;
(g) a Management Agreement, executed by MJG through Lucor (the "Lucor
Management Agreement"), substantially in the form of Exhibit C attached hereto;
---------
(h) certificates of existence and good standing for the Seller and
Subsidiaries (other than the Foreign Subsidiaries) issued by the Secretary of
State or other applicable governmental authority of its respective state or
country of incorporation or organization, as applicable, dated as of a date no
more than five days prior to the Closing Date;
(i) copies of the Articles of Incorporation or Articles of
Organization, as applicable, of Seller and each Subsidiary (other than the
Foreign Subsidiaries) certified to be true and accurate by the Secretary of
11
State or other applicable governmental authority of its respective state or
country of incorporation or organization, as applicable, dated as of a date no
more than five days prior to the Closing Date;
(j) copies of the Bylaws or Operating Agreement, as applicable, of
Seller and each Subsidiary (other than the Foreign Subsidiaries) certified to be
true and accurate by the current Secretary of Seller or such Subsidiary, dated
as of the Closing Date;
(k) copies of the latest extracts from the Commercial Registers
(Handelsregisterausz ge) for each German Subsidiary indicating that such
Subsidiary has been duly incorporated and still exists on the respective
Register;
(l) copies of the applicable Gesellschaftsvertag for each German
Subsidiary;
(m) Standstill Agreement executed by MJG and SZI, substantially in the
form of Exhibit D attached hereto (collectively the "Standstill Agreement");
----------
(n) Required Consents of Third Parties;
(o) releases of all Liens on any of the assets, properties or rights of
the Seller or the Subsidiaries (the "Lien Releases");
(p) bank signature cards for all of Seller's and Subsidiaries' bank
accounts;
(q) all other documents, instruments, certificates and opinions
required to be delivered by the Seller pursuant to this Agreement;
(r) a Restrictive Covenant Agreement executed by Seller and MJG,
substantially in the form of Exhibit E attached hereto;
----------
(s) a Restrictive Covenant Agreement executed by SZI, substantially in
the form of Exhibit E attached hereto;
----------
(t) the unaudited Consolidating Balance Sheet as of September 30, 1998;
(u) the unaudited Consolidating Statement of Operations for the year
ended December 31, 1998 and the Consolidating Balance Sheet as of December 31,
1998; and
(v) the calculation of the Estimated Cash Adjustment in accordance with
Section 1.6(c).
2.3 DELIVERIES OF PURCHASER. At the Closing, Purchaser shall deliver
-------------------------
or cause to be delivered to the Seller the following:
(a) the Purchase Price (including, without limitation, the cash
consideration, Convertible Preferred Stock and Redeemable Preferred Stock) to
the extent required by and as provided in Section 1.4 hereof;
12
(b) a certificate, dated as of the Closing Date, signed by the
Purchaser stating that (i) all conditions specified in Sections 8.1 and 8.2 have
been fulfilled; and (ii) all authorizations, consents, approvals and waivers or
other action required to be obtained or taken by Purchaser in connection with
the execution, delivery and performance of this Agreement and the consummation
of all agreements and transactions contemplated by this Agreement have been
obtained or taken;
(c) the Standstill Agreement executed by Purchaser;
(d) an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel for the Purchaser,
dated the Closing Date, in form and substance reasonably satisfactory to Seller;
(e) a Registration Rights Agreement executed by Purchaser (the
"Registration Rights Agreement") substantially in the form of Exhibit F attached
---------
hereto;
(f) the Lucor Management Agreement, executed by Purchaser;
(g) all other documents, instruments, and certificates required to be
delivered by Purchaser pursuant to this Agreement;
(h) certificates of existence and good standing for the Purchaser
issued by the Secretary of State of Delaware, dated as of a date no more than
five (5) days prior to the Closing Date;
(i) copies of the Certificate of Incorporation of Purchaser, certified
to be true and accurate by the Secretary of State of Delaware, dated as of a
date no more than 5 days prior to the Closing Date;
(j) copies of the Bylaws of Purchaser certified to be true and accurate
by the current Secretary of Purchaser, dated as of the Closing Date;
(k) the Common Stock Warrant, substantially in the form of Exhibit G
---------
attached hereto;
(l) the Assignment and Assumption Agreement, substantially in the form
of Exhibit H attached hereto (the "Assumption Agreement"); and
----------
(m) the Subsidiary Assumption Agreement substantially in the form of
Exhibit I hereto (the "Subsidiary Assumption Agreement").
----------
ARTICLE 3
---------
ADDITIONAL AGREEMENTS
---------------------
3.1 CONFIDENTIALITY. Purchaser and the Seller acknowledge that the
---------------
Confidentiality Agreement, dated October 28, 1998, shall survive the execution
13
of this Agreement and remain binding upon Purchaser and the Seller, except that
paragraph 3 thereof is superseded by Section 3.3 of this Agreement; , provided,
however, that Purchaser hereby consents, pursuant to paragraph 9 of such
Confidentiality Agreement, to purchases of Matria Common Stock by or on behalf
of Seller and its members during the Interim Period so long as (i) Seller
informs Purchaser in writing of the number of shares so purchased and the
purchase price paid therefor, not later than 2 business days after each such
purchase; (ii) such purchases shall not cause to the "Beneficial Ownership" of
Seller and its affiliates (as defined in the Standstill Agreement), in the
aggregate, to exceed 3% of the outstanding Matria Common Stock without the prior
written consent of Purchaser; and (iii) the shares so purchased shall otherwise
remain subject to all provisions of such Confidentiality Agreement and shall be
subject to the Standstill Agreement from and after the Closing Date.
3.2 ACCESS TO PREMISES, RECORDS, PROPERTIES, CUSTOMERS AND EMPLOYEES.
------------------------------------------------------------------
(a) During the period from the date of this Agreement to the Closing,
Seller agrees to permit and to cause the Subsidiaries to permit Purchaser and
its representatives, agents, counsel and accountants to have full access at all
reasonable times to the premises, business, properties, assets, financial
statements, contracts, books, records and working papers of, and other relevant
information pertaining to, the Seller and the Subsidiaries and to cause their
respective officers and employees to furnish to Purchaser and its
representatives, agents, counsel and accountants such financial and operating
data and other information with respect to the business, properties and assets
of the Seller and the Subsidiaries, as Purchaser may reasonably request; and
Seller agrees to cause the respective officers and employees of the Subsidiaries
to cooperate with Purchaser and its representatives, agents, counsel and
accountants in order to enable Purchaser to become fully informed with respect
to the business, earnings, financial condition, prospects, properties, assets,
liabilities and obligations of the Seller and the Subsidiaries.
(b) During the period from the date of this Agreement to the Closing,
Purchaser agrees to permit the Seller and its representatives, agents, counsel
and accountants to have full access at all reasonable times to the premises,
business, properties, assets, financial statements, contracts, books, records
and working papers of, and other relevant information pertaining to, Purchaser
and its wholly-owned subsidiaries and to cause its officers and employees to
furnish to Seller and its representatives, agents, counsel and accountants such
financial and operating data and other information with respect to the business,
properties and assets of Purchaser, as Seller may reasonably request; and the
Purchaser agrees to cause its officers and employees to cooperate with Seller
and its representatives, agents, counsel and accountants in order to enable
Seller to become fully informed with respect to the business, earnings,
financial condition, prospects, properties, assets, liabilities and obligations
of Purchaser and its wholly-owned subsidiaries.
(c) During the period from the date of this Agreement to the Closing,
Seller agrees to permit, and to cause the Subsidiaries to permit, Purchaser and
its representatives, agents, counsel and accountants to talk to and meet with,
at all reasonable times, the respective customers, suppliers and employees of
the Seller and the Subsidiaries to the extent such activities do not
14
unreasonably disrupt the Business; provided, however, Purchaser shall notify
Seller prior to such conversations with customers and suppliers and allow Seller
the opportunity to be included in said conversations.
3.3 PUBLICITY. During the period from the date of this Agreement to
---------
the Closing, each party hereto agrees to obtain the approval of the other
parties hereto prior to issuing any press release, written public statement or
announcement with respect to the transactions contemplated by this Agreement,
which approval shall not be unreasonably withheld; provided, however, that the
provisions of this Section 3.3 shall not prohibit any party from making any such
release, statement or announcement if, upon advice of counsel, it is believed
that such party is required to do so under any applicable law, rule or
regulation (in which case such party shall use all reasonable efforts to give
the other party prior notice thereof and an opportunity to review and comment
thereon).
3.4 ACQUISITION PROPOSALS.
----------------------
(a) During the term of this Agreement, Seller shall not, directly or
indirectly, through any officer, director, employee or agent of Seller or the
Subsidiaries, or otherwise, (i) solicit, initiate or encourage (or authorize any
person to solicit, initiate or encourage) any inquiries, proposals or offers
from any person or entity relating to any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, or any merger,
consolidation or business combination with the Seller or the Subsidiaries or
(ii) participate in any discussions or negotiations regarding, or furnish to any
other person or entity any information with respect to, any effort or attempt by
any other person or entity to do or seek any of the foregoing. Seller will
promptly notify Purchaser if any such proposal or offer, or any inquiry or
contact with any person or entity with respect thereto, is made.
(b) During the term of this Agreement, Purchaser shall not, directly or
indirectly, through any officer, director, employee or agent of Purchaser or
otherwise, (i) solicit, initiate or encourage (or authorize any person to
solicit, initiate or encourage) any inquiries, proposals or offers from any
person or entity relating to any acquisition or purchase by Purchaser, directly
or indirectly, of all or a material amount of the assets of, or any equity
interest in, or merger, consolidation or business combination with a competitor
of Seller or the Subsidiaries other than DMS or (ii) participate in any
discussions or negotiations regarding, or furnish to any other person or entity
any information with respect to, any effort or attempt by any other person or
entity to do or seek any of the foregoing. Purchaser will promptly notify Seller
if such proposal or offer, or any inquiry or contact with any person or entity
with respect thereto, is made.
3.5 APPROVALS AND CONSENTS; REASONABLE EFFORTS. From the date hereof
--------------------------------------------
until the Closing, each party hereto hereby covenants with the other parties
hereto that it will cooperate to give all notices and obtain as soon as is
reasonably practicable all approvals, consents and waivers of state and federal
departments or agencies or of any other parties required or deemed necessary or
beneficial for consummation of the transactions contemplated by this Agreement
and shall use all reasonable efforts to take or cause to be taken all actions
and to do or cause to be done all things necessary under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement; provided, however, that nothing in this Agreement or in any
document delivered pursuant to this Agreement shall be construed as an attempt
15
to agree to assign any contract, certificate, license or other Asset which under
law, rule or regulation or by agreement is nonassignable without the consent of
a party or parties thereto, or of any governmental authority, as the case may
be, unless such consent shall be given. Seller will use its reasonable good
faith efforts to obtain all such necessary consents of the parties to any such
contracts prior to the Closing. In order, however, that the full value of the
Interests, and every such contract, certificate, license or other asset included
within the Assets and all claims and demands in such contracts may be realized,
Seller covenants with Purchaser that Seller, by itself or by its agents, will,
at the request and expense and under the direction of Purchaser, in the name of
the Seller, or otherwise, as Purchaser shall specify and as shall be permitted
by any law, rule or regulation, take all such reasonable actions and do or cause
to be done all such reasonable things as shall be necessary in order that the
rights of Seller in and under the Interests, and all such contracts,
certificates, licenses and other Assets shall be preserved. Each of the parties
shall use reasonable efforts to close the transactions contemplated herein on or
before January 15, 1999.
3.6 COOPERATION OF THE PARTIES; REGULATORY APPROVALS. Purchaser shall
-------------------------------------------------
be responsible, at its sole cost and expense, for obtaining all regulatory
approvals necessary for the consummation of the transactions contemplated by
this Agreement. The parties shall cooperate with each other and with their
respective counsel and accountants in connection with any acts or actions
required to be taken as part of or as a condition to their respective
obligations under this Agreement. Seller shall cooperate with and assist
Purchaser, as Purchaser shall reasonably request, in obtaining the approval of
all regulatory agencies and officials whose approval is required for the
transfer of all licenses and other regulatory approvals required to enable the
Purchaser to acquire the Interests and the Assets and operate the business of
the Subsidiaries.
3.7 EXPENSES. Seller will pay all fees and expenses, including,
--------
without limitation, counsel and accountants' fees, incurred by Seller and the
Subsidiaries in connection with this Agreement and any transaction contemplated
by this Agreement. The Purchaser will pay all fees and expenses, including,
without limitation, counsel and accountants' fees, incurred by it in connection
with this Agreement and any transaction contemplated by this Agreement.
Notwithstanding the foregoing, Purchaser shall pay the filing fee for the
notification required to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvement Act of 1976, as amended (the "HSR Act"). Purchaser shall also pay
the notary fees for the notarial deed regarding the transfer of the German
Subsidiaries. Purchaser shall be responsible for paying any UK transfer taxes
payable upon the transfer of the Interests.
3.8 CORPORATE NAMES. Following Closing, neither Seller nor any
----------------
affiliate of Seller will use any corporate name, trade name or advertising
symbol (other than the Seller's logo) associated with, or similar to those of
the Seller or the Subsidiaries in connection with Seller's or the Subsidiaries'
businesses other than the "▇▇▇▇▇▇" name. MJG and Seller hereby grant to
Purchaser a fully paid-up, perpetual, royalty-free, world-wide license to use
the "▇▇▇▇▇▇" name, which license shall be exclusive with respect to the health
care industry; provided, however, that such license may be revoked on not less
than 60 days' written notice specifying in detail the reasons therefor, by MJG
or Seller in the event that either of them reasonably believes that the
Purchaser's use of the ▇▇▇▇▇▇ name brings disrepute to MJG.
16
3.9 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ FILINGS. Each of the Purchaser and the Seller
--------------------------
agrees to (i) use its reasonable best efforts to file all documents with the
Federal Trade Commission and the United States Department of Justice as may be
required to comply with the HSR Act, and (ii) promptly furnish all materials and
information thereafter requested by any of the regulatory agencies having
jurisdiction over such filings, and (iii) use all reasonable efforts to obtain
an early termination of the applicable waiting period.
3.10 STANDSTILL AND RESTRICTIVE COVENANT AGREEMENTS. Prior to or at
-------------------------------------------------
the Closing, Seller shall cause MJG and SZI to enter into the Standstill
Agreement and the Restrictive Covenant Agreements as required by Sections
2.2(m), 2.2(r) and 2.2(s).
3.11 LUCOR MANAGEMENT AGREEMENT. Prior to or at the Closing, Seller
----------------------------
shall cause Lucor Management, Inc. to enter into the Lucor Management Agreement.
3.12 TAX MATTERS.
------------
(a) Seller shall pay or cause to be paid in a timely fashion all income
taxes (i) payable by Seller, or (ii) payable by Seller or any Subsidiary with
respect to periods prior to the Effective Date. Purchaser shall be responsible
for all Taxes (as defined in Section 4.3.6) of each Subsidiary with respect to
periods following the Effective Date.
(b) Seller shall file and control any returns required to be filed by
the Seller or any Subsidiary after the Closing Date relating to periods ending
on or before the Effective Date; provided that Purchaser shall have the right to
review and comment on such returns before they are filed, provided further, that
with prior written notice to Purchaser, Seller may make such extensions to Tax
filings and make such estimated interim payments as may be permitted under
applicable Tax law and regulations. In connection with such returns for the
taxable year ending December 31, 1998, Seller shall assure that all Section
338(h)(10) elections are made in accordance with applicable Tax rules and
regulations and Section 6.7 of the Universal Self Care Agreement (as defined in
Section 9.1(b)).
(c) Seller, on the one hand, and Purchaser, on the other hand, agree to
give prompt notice to each other of any proposed adjustment to Taxes for periods
prior to the Effective Date. Seller and Purchaser shall cooperate with each
other in the conduct of any Tax audit or other proceedings involving any
Subsidiary for such periods. In connection with any such audit or other
proceeding Purchaser, upon Seller's request and at Seller's expense, shall
provide Seller copies of all notices, correspondence, demands, assessments and
other documents generated in connection with any such audit or other proceeding,
all of which information shall remain subject to the confidentiality provisions
of the October 28, 1998 Confidentiality Agreement. Seller shall also have the
right to discuss the status of such audit or other proceeding with Purchaser's
representatives and, with prior written notice to Purchaser, with the applicable
taxing authorities involved. All of such activities by Seller shall be
conducted in a manner so as not to adversely impact the best interests of
Purchaser or the Subsidiaries; provided that notwithstanding the above, Seller
shall at all times be permitted to act as required by law and to deal honestly
and accurately with all applicable taxing authorities and in their preparation
for submissions to such authorities without being in violation of this
subsection (c).
17
(d) Seller, on the one hand, and Purchaser, on the other hand, agree to
furnish or cause to be furnished to each other, upon request, such information
and assistance (including access to books and records) relating to the Seller
and the Subsidiaries as is reasonably necessary for the preparation of any
return, claim for refund or audit, and the prosecution or defense of any claim,
suit or proceeding relating to any proposed adjustment.
(e) Seller agrees to indemnify Purchaser from and against any liability
Purchaser may suffer from, arising out of, relating to, in the nature of, or
caused by any liability of any Corporation Subsidiary for income taxes of any
person other than any Corporation Subsidiary (i) under Treasury Regulation
1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract, or (iv) otherwise.
3.13 BREAK-UP FEE.
-------------
(a) In the event that Seller breaches Section 3.4(a) of this Agreement
and the Closing does not occur for any reason not attributable to Purchaser or
its affiliates, and within a year following the date of this Agreement either
(i) a person other than MJG or SZI gains control of more than 15% of the
outstanding membership interests of Seller with the help, assistance, or
approval of Seller, any of its management, its Board of Directors, or any
stockholder or member of Seller or any successor to Seller, or (ii) Seller
merges, consolidates, or effects any other business combination with any person,
the result of which is that the current members of Seller own less than 80% of
the resulting entity, or (iii) Seller, the Subsidiaries, or any of them, sell,
lease or otherwise transfer all or 30% or more of their assets taken as a whole
to any person or persons, then Seller shall be liable to pay to Purchaser the
sum of $3,000,000 upon the consummation of any such transaction.
(b) In the event that Purchaser breaches Section 3.4(b) of this
Agreement and the Closing does not occur for any reason not attributable to
Seller or its affiliates, and within a year following the date of this Agreement
Purchaser acquires, directly or indirectly, through merger, consolidation,
business combination or otherwise, substantially all of the assets of, or more
than 51% of the equity interest in, any entity that was the subject of
Purchaser's breach of Section 3.4(b) then Purchaser shall be liable to pay to
Seller the sum of $3,000,000 upon consummation of any such transaction.
3.14 SELLER AND SUBSIDIARY PERMITS. Seller shall cooperate with and
--------------------------------
use its commercially reasonable efforts to assist Purchaser, both in advance of
the Closing and after the Closing, in maintaining or reapplying for any Seller
and Subsidiary Permits, as defined in Section 4.7.8, for Purchaser's use after
the Closing at Purchaser's sole cost and expense.
3.15 BULK SALES LAW. Purchaser and Seller each hereby waive compliance
--------------
with the provisions of any applicable bulk sales or transfer laws.
3.16 DISCHARGE OF LIABILITIES. Seller shall pay, perform and discharge
------------------------
when due in the ordinary course of business all debts, liabilities and
obligations of Seller or any Subsidiary (i) for any income taxes for any period
ending and prior to the Effective Date and any income, sales, use or other taxes
arising in connection with the consummation of the transaction contemplated by
18
this Agreement except to the extent there is a transfer tax with respect to the
transfer of the stock under UK law; (ii) payable to Seller or any member or
affiliate of Seller; (iii) for costs and expenses (including, without
limitation, professional fees) in connection with this Agreement or the
transactions contemplated hereby; and (iv) any Funded Debt other than Funded
Debt of any Subsidiary which Purchaser accepts as a liability of a Subsidiary by
notice to Seller not less than two (2) days prior to the Closing. The debts,
liabilities and obligations referred to in this Section 3.16 are hereinafter
referred to as the "Subsidiary Excluded Liabilities."
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, and notwithstanding any
independent investigations or verification undertaken by Purchaser or its
representatives in connection herewith, Seller hereby represents and warrants to
Purchaser that the following representations and warranties are true and correct
as of the date hereof and shall, except as may be specifically provided for in
this Agreement or otherwise specifically agreed upon or waived, in each case in
writing by Purchaser, be true and correct as of the Closing:
4.1 VALIDITY. This Agreement constitutes the legal, valid and binding
--------
obligation of Seller, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
and similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether asserted in a proceeding at law or in equity).
4.2 DEFINITION OF MATERIAL ADVERSE EFFECT. As used in this Agreement,
--------------------------------------
the term "Material Adverse Effect" shall mean a material adverse effect in the
business or in the financial condition, results of operations, properties,
assets, liabilities or prospects of Seller or the Subsidiaries, or any of them,
or on the ability of Seller to enter into this Agreement and perform its
obligations hereunder.
4.3 CORPORATE AND FINANCIAL.
-------------------------
4.3.1 CORPORATE STATUS.
-----------------
(a) Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Georgia. Seller
does not have any direct or indirect subsidiaries or own any shares of capital
stock of any corporation or any interest in the ownership or management of any
other entity except in those corporations and other entities listed on Schedule
--------
4.3.1 hereto. Seller has full power and authority, corporate or otherwise, and
-----
possesses all rights, privileges, franchises, licenses, permits, authorizations
and approvals, governmental or otherwise, necessary to entitle it to use its
corporate name and to own or lease its properties and assets and to carry on its
business as and in the places where such properties or assets are now owned,
leased or operated and such business is conducted, except where the absence of
19
such could not reasonably be expected to result in a Material Adverse Effect.
Seller is qualified to transact business as a foreign limited liability company
in the states listed on Schedule 4.3.1, and Seller is qualified to do business
--------------
in all jurisdictions in which such qualification is required, except where the
failure to so qualify would not have a Material Adverse Effect.
(b) Each of the Corporation Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective state or country of incorporation. Each of the LLC Subsidiaries
(other than Dia Real) is a limited liability company duly organized, validly
existing and in good standing under the laws of its respective state or country
of organization. None of the Subsidiaries has any direct or indirect
subsidiaries or owns any shares of capital stock of any corporation or any
interest in the ownership or management of any other entity except in those
corporations and other entities listed on Schedule 4.3.1. Each of the
---------------
Subsidiaries has full power and authority and possesses all rights, privileges,
franchises, licenses, permits, authorizations and approvals, governmental or
otherwise, necessary to entitle it to use its name and to own or lease its
properties and assets and to carry on its business as and in the places where
such properties or assets are now owned, leased or operated and such business is
conducted, except where the absence of such could not reasonably be expected to
result in a Material Adverse Effect. Each Subsidiary is qualified to transact
business as a foreign corporation or limited liability company, as applicable,
in the states listed on Schedule 4.3.1 and each Subsidiary is qualified to do
--------------
business in all jurisdictions in which such qualification is required, except
where failure to qualify would not have a Material Adverse Effect. ▇▇▇▇▇ 68
validly exists and is in good standing under the laws of the Federal Republic of
Germany and is registered in the commercial register of the local court of
Frankfurt under HRB 45034. Hans MW and EU Medical are validly existing and in
good standing under the laws of the Federal Republic of Germany. Dia Real is a
limited partnership (kommanditgessellschaft) duly organized, validly existing
and in good standing under the laws of the Federal Republic of Germany.
(c) The extracts from the Commercial Register and the articles of
incorporation of the German Subsidiaries delivered by the Seller at Closing
contain the most recent, true, accurate and complete version of the extracts
from the Commercial Register and the articles of incorporation, respectively, of
the German Subsidiaries currently valid and in full force and effect. No
changes have been made thereto.
4.3.2 AUTHORITY; NO VIOLATION; CONSENTS.
------------------------------------
(a) The Subsidiaries, and each of them, have full power and
authority to consummate the transactions contemplated by this Agreement, and all
corporate or other action necessary on the part of the Subsidiaries, or any of
them, to consummate the transactions contemplated hereby has been taken.
(b) Seller has full power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby, and all corporate or other action necessary on
the part of Seller to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby has
been taken.
20
(c) Neither the execution and delivery of this Agreement by Seller
nor the performance of its obligations hereunder, will:
(i) violate or conflict with any provision of the Certificate or
Articles of Incorporation or Articles of Organization, as applicable, or Bylaws
or operating agreement of Seller or any Subsidiary;
(ii) except as set forth on Schedule 4.7.1, breach or otherwise
---------------
constitute or give rise to a default under any material contract, commitment or
other obligation to or by which Seller or any Subsidiary is bound;
(iii) violate any material statute, ordinance, law, rule,
regulation, judgment, order or decree of any court or other governmental or
regulatory authority to which Seller or any Subsidiary is subject; or
(iv) except as set forth on Schedule 4.7.1, require any consent,
--------------
approval or authorization of, notice to, or filing, recording, registration or
qualification with any person, entity, court or governmental or regulatory
authority.
4.3.3 OWNERSHIP AND CAPITALIZATION.
------------------------------
(a) Schedule 4.3.3 accurately sets forth the members and the
---------------
percentage of membership interest owned by each member of each class of GMM.
Schedule 4.3.3 accurately sets forth GMM's direct and indirect ownership
---------------
interest in each of the Subsidiaries, and no other person or entity owns any
ownership interest in the Subsidiaries other than as shown on Schedule 4.3.3.
---------------
▇▇▇▇▇ 68 owns of record and beneficially 100% of the outstanding ownership
interests of Hans MW, EU Medical and ▇▇▇▇▇ 71. EU Medical and ▇▇▇▇▇ 71,
collectively, own of record and beneficially 100% of the outstanding ownership
interests of Dia Real. GMAC owns of record and beneficially 100% of the
outstanding capital stock of HMS and Self Care. ▇▇▇▇▇▇ Direct owns of record and
beneficially 100% of the outstanding capital stock of AR Medical.
(b) (i) Schedule 4.3.3 accurately sets forth the authorized capital
stock of each Corporation Subsidiary and the amounts of such capital stock
issued and outstanding. Schedule 4.3.3 accurately sets forth the members and
membership interest of each LLC Subsidiary and the amounts of such membership
interests issued and outstanding.
(ii) All of the outstanding capital stock and membership or
ownership interests, as applicable, of the Subsidiaries is duly and validly
issued, fully paid and non-assessable and was offered, issued and sold in
compliance with all applicable federal or national and state securities laws. No
event has occurred which could be registered as a repayment of share capital or
could otherwise give rise to an obligation to inject capital contributions into
the German Subsidiaries.
21
(iii) None of the capital stock or share capital or membership or
ownership interests, as applicable, of any Subsidiary has been issued in
violation of any preemptive or other material rights of its shareholders,
members or owners.
(c) Other than as listed on Schedule 4.3.3, none of the
---------------
Subsidiaries has outstanding any securities or other rights which are either by
their terms or by contract convertible or exchangeable into capital stock or
membership or other equity interest in such Subsidiary, or any preemptive or
similar rights to subscribe for or to purchase, or any options or warrants or
agreements for the purchase or issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, the capital stock or
membership or other equity interest (or securities convertible into capital
stock or membership or other equity interest) in such Subsidiary. None of the
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire or to register any shares of its
capital stock or membership or other equity interests.
(d) Other than as listed on Schedule 4.3.3, there are no
---------------
agreements to which Seller or any Subsidiary is a party in any way restricting
the transfer of any shares of capital stock or membership or other equity
interests of any Subsidiary.
(e) Any shares of capital stock or membership or other equity
interest in Seller or the Subsidiaries which have been purchased or redeemed by
the Seller or the Subsidiaries, as the case may be, have been purchased or
redeemed in substantial compliance with all applicable national or federal and
state laws, rules, regulations, and ordinances, including, without limitation,
all federal and state securities laws. The purchase of the Interests and the
consummation of the transactions contemplated hereby will not, with the giving
of notice or lapse of time or both, result in a material default or acceleration
of the maturity of, or otherwise materially modify, any agreement, note,
mortgage, bond, security agreement, loan agreement or other contract or
commitment of Seller or the Subsidiaries, or any of them.
4.3.4 TITLE TO INTEREST AND ASSETS. Seller has good, valid and
-------------------------------
marketable title to its Interests and Assets, free and clear of any and all
Liens except for the liens and encumbrances listed on Schedule 4.3.4 to be
--------------
removed at or prior to Closing, and will transfer good, valid and marketable
title thereto to Purchaser at Closing.
4.3.5 CORPORATE OR OTHER BOOKS AND RECORDS. The stock and
-----------------------------------------
membership records, minute books and other books and records of the Seller and
the U.S. Subsidiaries fully and accurately reflect all issuances, transfers and
redemptions of the capital stock or membership or other equity interests of the
Seller and the U.S. Subsidiaries, as the case may be, correctly show the total
number of shares of such capital stock or membership or other equity interests,
as the case may be, issued and outstanding on the date hereof, accurately
reflect in all material respects all corporate or other action taken by the
officers, directors, managers, members or shareholders, as applicable, of the
Seller and the U.S. Subsidiaries, as the case may be (including actions taken by
consent without a meeting), and contain true and complete copies or originals of
the Seller's and the U.S. Subsidiaries': (i) Certificate or Articles of
Incorporation or Articles of Organization or other organizational documents, as
the case may be, and all amendments thereto, (ii) Bylaws or Operating Agreements
or similar agreements, as the case may be, as amended and currently in force,
22
and (iii) the minutes of all meetings or consent actions of their respective
officers, directors, managers, members or shareholders, as applicable. Foreign
Subsidiaries have complied with all similar requirements of their governing law.
No resolutions, regulations or bylaws have been passed, enacted, consented to or
adopted by such officers, directors, managers, members or shareholders except
those contained in such minute books and all corporate or other actions of the
Seller and the U.S. Subsidiaries were duly and validly taken in compliance with
all applicable laws, rules, regulations and ordinances.
4.3.6 TAXES.
-----
(a) The Seller and the Subsidiaries have duly filed and will file,
either individually or as part of a consolidated return or otherwise, when due
(i) all required federal, state, local and foreign "Tax" (as hereinafter
defined) returns and reports; and (ii) all returns and reports of all other
governmental units and agencies having jurisdiction with respect to Taxes
imposed upon any of their respective income, properties, revenues, franchises,
operations or other assets or Taxes imposed which might create a lien or
encumbrance on any of their respective assets required to be filed by any of
them prior to the date hereof. All such returns and reports are true, complete
and correct in all material respects, and the Seller and the Subsidiaries have
paid and will pay when due all Taxes as set forth in such returns or reports,
and all such Taxes as set forth constitute all amounts which are due and owing
by the Seller and the Subsidiaries. All federal, state, local and foreign Taxes
and other governmental charges paid or payable by the Seller or the Subsidiaries
have been timely paid, or have been accrued or reserved on the Seller's or the
Subsidiaries' books in accordance with Internal Revenue Service rules and
regulations and GAAP applied on a basis consistent with prior periods. Adequate
reserves for the payment of Taxes have been established on the books of the
Seller and the Subsidiaries, as applicable, for all periods through the date
hereof, whether or not due and payable and whether or not disputed. Until the
Closing, the Seller and the Subsidiaries shall continue to maintain sufficient
reserve accounts for the payment of expected Tax liabilities in accordance with
GAAP applied on a basis consistent with prior periods. Except as set forth in
Schedule 4.3.6, neither Seller nor any Subsidiary has received any notice of a
---------------
Tax deficiency or assessment of additional taxes of any kind, and there is no
threatened claim against Seller or any Subsidiary, or any reasonable basis for
any such claim, for payment of any additional federal, state, local or foreign
taxes for any period, and on the Closing Date there will be no such notice, no
such claim and no basis for any such claim. Neither Seller nor any Subsidiary
has executed or otherwise agreed to or is bound by any currently effective
waiver of any statute of limitations with respect to payment or assessment of
Taxes or other agreement altering or affecting any otherwise applicable statute
of limitations with respect to the payment of Taxes or the filing of Tax
returns. There are no rulings or closing agreements executed with any taxing
authority relating to Seller or the Subsidiaries or any of their respective
assets that will be binding upon Purchaser after the Closing Date. Except for
claims for customs duties, no claim has ever been asserted by an authority in a
jurisdiction where the Seller or the Subsidiaries do not file Tax returns that
Seller or any Subsidiary is or may be subject to taxation by that jurisdiction.
(b) The Seller and the Subsidiaries have withheld proper and
accurate amounts from all of their respective employees, independent
contractors, creditors, shareholders, members or other third parties who have
23
performed services in connection with the businesses of the Seller or any
Subsidiary for all periods prior to the date hereof and will withhold proper and
accurate amounts from the date hereof until Closing, all in compliance with the
Tax withholding provisions of applicable federal, state, local and foreign Tax
laws. All federal, state, local and foreign Tax returns, proper and accurate in
all respects, have been filed by the Seller or the Subsidiaries for all periods
for which returns were due with respect to withholding, social security,
Medicare and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid in full.
(c) Each LLC Subsidiary has only one member and is treated as a
disregarded entity separate from its owner for income Tax purposes under
Treasury Regulation 301.7701-3.
(d) For purposes of this Agreement, "Tax" or "Taxes" shall mean
any taxes, fees, levies, duties, charges or similar assessments (including
interest, penalties and additions) imposed by or payable to any governmental or
other taxing authority, whether foreign, federal, state, local or otherwise,
including, without limitation, partnership, net income, gross income receipts,
franchise, assets, withholding, excise, ad valorem, value added, capital gains,
stamp, real and personal property assessment, sales, use, employment, social
security and unemployment contributions, net worth, services, customs duties and
other taxes or charges of any kind or nature.
(e) All transactions between the German Subsidiaries and any of
their present or former shareholders or persons closely related to such
shareholders have been conducted entirely on an arm's-length basis, and no event
has occurred which could be regarded as the payment of a constructive dividend.
The classification of the German Subsidiaries' equity for Tax purposes as at
December 31, 1997 is true and accurate in all material respects.
4.3.7 FINANCIAL STATEMENTS. Attached hereto as Schedule 4.3.7 are
-------------------- ---------------
true, correct and complete copies of (a) the audited consolidated financial
statements of Seller and each Subsidiary for the fiscal years ended December 31,
1996 and December 31, 1997, including fiscal balance sheets, statements of
income and retained earnings, statements of shareholders' or members' equity,
statements of cash flows and related notes (all of the foregoing described
financial statements being herein collectively referred to as the "Audited
Financial Statements"); and (b) unaudited consolidating balance sheets of Seller
and each Subsidiary dated September 30, 1998 (the "Unaudited Balance Sheets")
and unaudited statements of income and cash flows for the nine-month period
ended September 30, 1998 (together with the Unaudited Balance Sheets, the
"Unaudited Financial Statements") (the Audited Financial Statements and the
Unaudited Financial Statements are collectively referred to hereinafter as the
"Financial Statements"). Notwithstanding the foregoing, (i) audited financial
statements for only 1997 for DIA Real have been prepared and are attached in
Schedule 4.3.7 and (ii) no audited financial statements for Hans MW are
---------------
available, and only unaudited financial statements for Hans MW are attached in
Schedule 4.3.7. Except as set forth on Schedule 4.3.7 hereto, all of the
--------------- ---------------
Financial Statements were prepared in accordance with GAAP applied on a basis
consistent with prior periods, except that the Unaudited Financial Statements do
not contain normal year end adjustments and omit footnote disclosures required
by GAAP. Except as set forth on Schedule 4.3.7 hereto, the Financial Statements
--------------
present fairly the financial condition of Seller and each Subsidiary as of the
dates indicated therein and the results of operations and cash flows of Seller
and each Subsidiary for the respective periods covered thereby and are
24
consistent with the books and records of Seller and each Subsidiary.
4.3.8 ACCOUNTS. Schedule 4.3.8 contains a complete and accurate list
-------- --------------
of the names and addresses of each and every bank and other institution in which
Seller or any Subsidiary maintains an account or safety deposit box, the account
numbers of each such account, and the names of all persons who are presently
authorized to draw thereon or have access thereto.
4.3.9 NOTES RECEIVABLE; ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
-----------------------------------------------------------
(a) All notes receivable, accounts receivable and other receivables of
the Seller or the Subsidiaries or due to the Seller or the Subsidiaries at
September 30, 1998 are shown on the Unaudited Balance Sheets to the extent
required by GAAP or are set forth on Schedule 4.3.9 as of the date thereof.
---------------
Except to the extent such receivables were satisfied in full in the ordinary
course of business since the date of the Unaudited Balance Sheets, all such
notes receivable, accounts receivable and other receivables shown on the
Unaudited Balance Sheets or on Schedule 4.3.9 and all such notes receivable,
---------------
accounts receivable and other receivables arising since the date thereof
(collectively, the "Receivables") have been and will be (except to the extent
collected in the ordinary course of business consistent with past practice)
genuine, legal and valid obligations of and bona fide claims against the
respective makers thereof or debtors thereon for sales made, services performed
or other charges arising on or before the date hereof, and all of the goods
delivered and services performed that gave rise to such Receivables were
delivered or performed in all material respects in accordance with the
applicable orders, contracts, or client requirements therefor. All accounts
payable shown on the Unaudited Balance Sheets represent, and all Current
Liabilities to be reflected on the unaudited December 31, 1998 Balance Sheet
will represent expenses incurred in the ordinary course of business consistent
with past practices, except for accruals or payments incurred in connection with
this Agreement.
(b) Except as set forth on Schedule 4.3.9, neither Seller nor any
---------------
Subsidiary has written off any such Receivables since the date of the Unaudited
Balance Sheets, except nonmaterial write-offs in the ordinary course of business
consistent with past practice. All such Receivables are evidenced by written
agreements, invoices or other instruments, true and correct copies of which will
be made available to Purchaser for examination prior to the Closing. Except as
set forth in Schedule 4.3.9, none of such Receivables is the subject of a pledge
--------------
or assignment to secure debt, is subject to any security interest which will not
be released by the Lien Releases, or has been placed for collection with any
attorney or collection agency or similar individual or firm.
4.3.10 LIABILITIES.
-----------
(a) Neither Seller nor any Subsidiary has any debts, liabilities, or
obligations of any kind in excess of $25,000 in the aggregate, whether accrued,
absolute, known or unknown, contingent or otherwise, including but not limited
to any (i) liability or obligation on account of any federal, state, local or
foreign Taxes or penalties, or interest or fines with respect to such Taxes,
(ii) liability arising from or by virtue of the production, manufacture,
25
sale, lease, distribution, delivery or other transfer or disposition of personal
property or services of any type, kind or variety, or (iii) unfunded liability
with respect to any pension, profit sharing or employee stock ownership plan,
whether operated by Seller or a Subsidiary or any other entity covering
employees of Seller or a Subsidiary, except (1) those reflected on the Unaudited
Balance Sheets, (2) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Unaudited Balance Sheets
(none of which individually or in the aggregate has had, or will have a Material
Adverse Effect), and (3) as specifically disclosed in Schedule 4.3.10. Except
---------------
as set forth on Schedule 4.3.10, neither Seller nor any Subsidiary has any
----------------
liability or obligation (absolute or contingent) to provide funds on behalf of,
or to guarantee or assume any debt, liability or obligation of any corporation,
partnership, association, joint venture, individual or other person or entity.
4.3.11 ORDINARY COURSE OF BUSINESS AND ABSENCE OF CHANGES. Except
--------------------------------------------------
as set forth in Schedule 4.3.11, since September 30, 1998, Seller and each
----------------
Subsidiary has operated its respective business in the ordinary course
consistent with past practices. Without limiting the generality of the
foregoing, and except as set forth in Schedule 4.3.11, since September 30, 1998:
---------------
(a) there has been no change in the business, assets, liabilities,
results of operation, cash flow or financial condition of Seller or any
Subsidiary, or in any of their respective relationships with suppliers,
customers, employees, independent contractors, lessors, third party payors,
regulators, vendors or others, which individually or in the aggregate could have
a Material Adverse Effect;
(b) the properties and assets of Seller and each Subsidiary have
been maintained in good order, repair and condition, ordinary wear and tear
excepted;
(c) the books, accounts (including, without limitation, methods,
practices and principles of financial and tax accounting), and records of Seller
and each Subsidiary have been maintained in the usual, regular and ordinary
manner on a basis consistent with prior years;
(d) there has been no declaration, setting aside or payment of any
dividend or other distribution on or in respect of the capital stock of, or
other membership or equity interest in, Seller or any Subsidiary nor has there
been any direct or indirect redemption, retirement, purchase or other
acquisition by Seller or any Subsidiary of any of the capital stock of, or other
membership or equity interest in, Seller or such Subsidiary;
(e) there has been (i) no increase in the compensation or in the
rate of compensation or commissions payable or to become payable by Seller or
any Subsidiary to any director, officer, manager, salaried employee, or agent
earning $25,000 or more per annum; (ii) no general increase in the compensation
or in the rate of compensation payable or to become payable to hourly employees
or to salaried employees or fee-for-services contractors of Seller or any
Subsidiary earning less than $25,000 per annum ("general increase" for the
purpose hereof means any increase generally applicable to a class or group of
employees or agents, but not including increases granted to individual employees
for merit, length of service, change in position or responsibility or other
reasons applicable to specific employees or agents and not generally to a class
or group thereof); (iii) no director, officer, manager or employee hired at a
26
salary in excess of $25,000 per annum; and (iv) no increase in any payment of or
commitment to pay any bonus, profit sharing or other extraordinary compensation
to any employee;
(f) there has been no change in the Certificate or Articles of
Incorporation, Articles of Organization, Operating Agreement or Bylaws or other
organizational documents, as applicable, of Seller or any Subsidiary;
(g) there has been no mortgage, lien or other encumbrance or
security interest (other than liens for current Taxes not yet due and payable)
created on or in (including without limitation, any deposit for security
consisting of) any asset or assets of Seller or any Subsidiary or assumed by
Seller or any Subsidiary with respect to any asset other than in the ordinary
course of business;
(h) no obligation or liability of Seller or any Subsidiary has
been discharged or satisfied, other than current liabilities reflected on the
Unaudited Balance Sheets and current liabilities incurred since the date thereof
in the ordinary course of business consistent with past practice;
(i) there has been no sale, transfer or other disposition of any
asset of Seller or any Subsidiary, the fair market value of which individually
exceeds $25,000 or in the aggregate exceeds $100,000, except for sales of
inventory in the ordinary course of business consistent with past practice;
(j) there has been no amendment, termination or waiver of any
right of Seller or any Subsidiary under any contract or agreement or
governmental license, permit or permission which, individually or in the
aggregate, has had or could result in a Material Adverse Effect;
(k) there has been no creation of, amendment to or contribution,
grant, payment or accrual for or to the credit of any employee of Seller or any
Subsidiary with respect to any bonus, incentive compensation, deferred
compensation, profit sharing, retirement, pension, group insurance or other
benefit plan, or any union, employment or consulting agreement or arrangement;
(l) neither Seller nor any Subsidiary has (i) entered into any
contract, agreement or commitment other than in the ordinary course of business
consistent with past practices (none of which has had or will result in a
Material Adverse Effect); or (ii) failed to perform its obligations under any of
its contracts or agreements;
(m) no Seller or Subsidiary has failed to manage working capital
components (including cash, receivables, other current assets, trade payables
and other current liabilities) in a fashion consistent with past practice,
including failing to sell inventory and other property in an orderly and prudent
manner or failing to make all budgeted and other normal capital expenditures,
repairs, improvements and dispositions; and
27
(n) no Subsidiary shall have assumed or otherwise become obligated
to pay any liability of Seller other than liabilities properly related to the
operations of such Subsidiary and not properly an obligation of Seller.
4.3.12 LITIGATION AND PROCEEDINGS. Except as set forth on
----------------------------
Schedule 4.3.12, there are no actions, decrees, suits, counterclaims, claims,
----------------
proceedings or governmental or other investigations pending or, to the Knowledge
of Seller (as defined below) or any Subsidiary, threatened against Seller or the
Subsidiaries, or any of them, in any court or before any arbitrator or
governmental agency, and no judgment, award, order or decree of any nature has
been rendered against Seller or the Subsidiaries, or any of them, with respect
thereto by any agency, arbitrator, court, commission or other authority which
has not been paid or discharged. "Knowledge of Seller" means the actual
knowledge of an executive officer of Seller. There are no pending or threatened
claims against any of the officers, directors, employees, managers, members or
shareholders of any Seller or any Subsidiary in connection with the business or
affairs of Seller or such Subsidiary.
4.3.13 RESERVED.
4.3.14 INVENTORY. The inventory included in the Assets consists
---------
of items of a quality and quantity usable and salable in the ordinary course of
the Business and are free of material defects, and the quantity of inventory is
reasonable and warranted given the present and anticipated material
circumstances of the Business.
4.4 BUSINESS OPERATIONS.
--------------------
4.4.1 CUSTOMERS AND ACCOUNTS. Schedule 4.4.1 contains a true, complete
---------------------- --------------
and accurate list of all customers and accounts (including, without limitation,
third party payors) of Seller, ▇▇▇▇▇▇ North America, ▇▇▇▇▇▇ International,
▇▇▇▇▇▇ Europe, ▇▇▇▇▇▇ Direct, and AR Medical to whom sales of more than $25,000
were made during the period from January 1, 1997 through December 11, 1998; of
Self Care to whom sales of more than $25,000 were billed during the period from
January 28, 1998 through November 30, 1998; of HMS, constituting at least 75% of
sales during the period from February 1, 1998 through November 30, 1998; and for
the German Subsidiaries, to whom sales of more than US$25,000 were made since
June 29, 1998. To the Knowledge of Seller, except as set forth on Schedule
--------
4.4.1, relations with each such customer and account are strong, and Seller does
-----
not know of any customer or account who intends to discontinue the purchase of
products or services from Purchaser or any Subsidiary on a basis consistent with
past practice. Schedule 4.4.1 also lists all provider numbers for Seller and
---------------
each Subsidiary (identified by name of provider, provider number and the
applicable Seller or Subsidiary) pursuant to which any revenue included in the
Financial Statements was collected from a third party payor.
4.4.2 SUPPLIERS. Schedule 4.4.2 contains a list of each supplier
--------- ---------------
of goods or services to Seller or any Subsidiary to whom Seller or any such
Subsidiary paid in the aggregate more than $50,000 during the period indicated
on such Schedule, together with the amounts paid during such period. To the
28
Knowledge of Seller, except as set forth on Schedule 4.4.2, relations with each
--------------
supplier and account are strong, and Seller does not know of any supplier who
intends to discontinue to supply products or services to Purchaser or any
Subsidiary.
4.4.3 ENVIRONMENTAL.
-------------
(a) Except as set forth on Schedule 4.4.3, the Seller and the
--------------
Subsidiaries have complied in all material respects at all times and are
currently in compliance with all applicable laws, regulations, rules, judgments,
orders and decrees pertaining to health, safety or environmental matters,
including, without limitation, the Resource Conservation and Recovery Act (as
amended by the Hazardous and Solid Waste Amendments of 1984), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (as amended by
the Superfund Amendments and Reauthorization Act of 1986), the Clean Water Act,
the Clean Air Act and the Toxic Substances Control Act (collectively,
"Environmental Laws").
(b) Except as set forth on Schedule 4.4.3, neither Seller nor any
--------------
Subsidiary has received any notice from any person or entity of (and neither
Seller nor any Subsidiary is otherwise aware of) any event, condition,
circumstance, activity, practice, incident, action or plan (including, without
limitation, any intentional or unintentional release into the environment of any
hazardous or toxic substances) which may interfere with the Seller's or any
Subsidiary's operation of their respective businesses, prevent continued
compliance by the Seller or any Subsidiary with all Environmental Laws, or
otherwise give rise to any liability or serve as the basis for any claim,
action, suit or proceeding, hearing or investigation under any Environmental
Law.
(c) (i) Except as set forth on Schedule 4.4.3, no portion of the
--------------
"Real Property" (as defined in Schedule 4.5.5) has been used by the Seller or
--------------
any Subsidiary or to the Knowledge of Seller by any other party for the
generation, handling, processing, use, refinement, recycling, treatment, storage
or disposal of hazardous or toxic substances in any material amount which may
give rise to liability; (ii) to Seller's knowledge, no underground tank or other
underground storage receptacle for any hazardous or toxic substances, petroleum
or petroleum products is or has been located on any portion of such Real
Property; and (iii) there are no asbestos containing materials or structures
located at or on any of the Real Property.
(d) Neither the Seller, any Subsidiary nor any of the Real
Property listed on Schedule 4.5.5 is subject to any applicable Environmental Law
--------------
requiring the performance of site assessments, the removal or remediation of
hazardous or toxic substances, the giving of notice to any governmental agency
or the recording or delivery of an environmental disclosure document or
statement by virtue of the transactions contemplated by this Agreement.
4.4.4 INSURANCE. Schedule 4.4.4 contains a complete list and
--------- ---------------
description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, the Seller, the Subsidiaries or any of their respective
officers, directors or managers, all of which will be maintained through the
Closing Date in full force and effect. Schedule 4.4.4 also contains a complete
--------------
list of (i) all pending claims under any of such policies or bonds; (ii) all
claims made within the last three (3) years under any of such policies or bonds;
and (iii) any denial of coverage or reservation of rights to contest any such
29
claim asserted by any insurer. All material terms, obligations and provisions
of each of such policies and bonds have been complied with; all premiums due
thereon have been paid, and no notice of cancellation with respect thereto has
been received. Neither the Seller nor any Subsidiary will, as of the Closing
Date, have any liability for premiums or for retrospective premium adjustments
for any period prior to the Closing Date. The Seller and the Subsidiaries have
heretofore made available to Purchaser a true, correct and complete copy of each
such insurance policy and bond listed on Schedule 4.4.4, or a summary thereof,
--------------
and none of such policies or bonds have since been modified in any respect.
4.4.5 POWERS OF ATTORNEY. Schedule 4.4.5 contains a complete and
------------------- --------------
accurate list setting forth the names and addresses of all persons holding a
power of attorney on behalf of any Subsidiary.
4.5 CONTRACTS; PROPERTIES AND ASSETS.
-----------------------------------
4.5.1 CONTRACTS.
---------
(a) Schedule 4.5.1 includes a list of all Seller and Subsidiary
---------------
contracts or agreements with a value, expected payments or expected benefits in
excess of $25,000, identified by the Seller and Subsidiary, and all other Seller
and Subsidiary contracts or agreements that are material to the Seller's or any
Subsidiary's businesses (true, correct and complete copies of which have been
delivered to Purchaser), including without limitation the following:
(i) all agreements and participation agreements between Seller or
any Subsidiary and any provider or pharmacy which serves Medicare or Medicaid
patients;
(ii) all managed care contracts or approvals in a managed care
plan or third-party program;
(iii) all third-party payor contracts;
(iv) all agreements with Medicare, MediCal, and any state
Medicaid agency or any fiscal intermediary for Medicare, MediCal, or any
Medicaid agency;
(v) all agreements with billing agencies and financial or fiscal
intermediaries;
(vi) all contracts or other documents regarding arrangements with
referral sources and marketing agents; and
(vii) all agreements with any supplier to Seller or any
Subsidiary (other than outstanding standard form purchase orders in amounts less
than $25,000).
30
(b) True, correct and complete copies of each of the following
documents received by the Seller or any of the Subsidiaries since January 1,
1998 have been made available to Purchaser and are listed on Schedule 4.5.1:
--------------
(i) all notices or other correspondence with any third party
payor terminating a contract or relationship and the reason for such termination
and all notices or other correspondence alleging any breach of any such
contract;
(ii) all notices or other correspondence with any managed care
plan terminating a contract or relationship and the reason for such termination
and all notices or other correspondence alleging any breach of any such
contract;
(iii) all notices, if any, to terminate a provider or
participation agreement with Seller or any Subsidiary and all notices or other
correspondence alleging a breach of any such agreement; and
(iv) all discount pricing policies.
(c) Except as set forth on Schedule 4.5.1:
---------------
(i) Each contract required to be listed in Section 4.5.1(a) is in
full force and effect and constitutes a binding obligation of all parties
thereto, enforceable against the other party or parties to such contracts in
accordance with its terms; no such contract has been canceled or otherwise
terminated, and to the Knowledge of Seller there is no threat to do so; no such
contract requires assignment, and no such contract may be terminated, due to the
transfer of the Interests or Assets to Purchaser;
(ii) There are no existing defaults or events of default, real or
claimed, or events which with notice or lapse of time or both would constitute
defaults under any of the Seller's or Subsidiaries' contracts; and
(iii) No Subsidiary is subject to any contract or agreement: (1)
that contains covenants limiting the freedom of any Subsidiary to compete in any
line of business in any geographic area; (2) that requires any Subsidiary to
share any profits or make any payments or other distributions based on profits,
revenues cash flows or referrals; or (3) pursuant to which third parties have
been provided with products that can be returned to Seller or any Subsidiary in
the event they are not sold.
4.5.2 LICENSES; INTELLECTUAL PROPERTY.
---------------------------------
(a) Schedule 4.5.2 contains a correct and complete list of all (i)
--------------
copyrights, registrations and registration applications, (ii) trademarks, (iii)
service marks, (iv) logos, (v) trade names, (vi) patents, and (vii) computer
software (the "Owned Software"), except for commercially available
over-the-counter "shrink-wrap" software (the "Business Software") (collectively,
the "Intellectual Property") used by the Seller or any Subsidiary in the
ordinary course of their respective businesses (including, to the extent
applicable, registrations, applications, and renewals for registrations of each
31
of the foregoing) or which are owned or held for use by the Seller or any
Subsidiary in connection with the operation of their respective businesses.
Such items comprise all such software, patents, copyrights, trademarks, service
marks and trade names required for the Seller and the Subsidiaries to conduct
their respective businesses as presently conducted. Schedule 4.5.2 also
---------------
identifies all software and other Intellectual Property licensed from third
parties to the Seller or any Subsidiary which is material to the business of the
Seller or any Subsidiary (the "Licensed Software" and "Licensed Intellectual
Property"). Except as set forth on Schedule 4.5.2 and except for the Business
--------------
Software, the Seller and the Subsidiaries own all rights to use and protect, or
hold a valid license to use and protect, all such Intellectual Property.
Neither Seller nor any Subsidiary has violated or infringed in any material way
any patent, copyright, trademark, service ▇▇▇▇ or other intellectual property
rights of any other person or entity, and, to the Knowledge of Seller, there are
no claims pending or threatened against the Seller or any Subsidiary asserting
that the use of any Intellectual Property by the Seller or any Subsidiary
infringes the rights of any other person or entity. Neither the Seller nor any
Subsidiary has made or asserted any claim of violation or infringement of any
Intellectual Property against any other person or entity, and neither the Seller
nor any Subsidiary is aware of any such violation or infringement. Neither the
Seller nor any Subsidiary has granted any outstanding licenses or other rights
to any such Intellectual Property to any other person or entity.
(b) (i) The Business Software that is material to the operation of
the Seller's or the Subsidiaries' respective businesses, (ii) the Owned
Software, and (iii) any Licensed Software that has been incorporated into any
Owned Software is "Year 2000 Compliant" except where the failure to be so
compliant could not have a Material Adverse Effect. All hardware, computer
equipment and firmware used by the Seller and/or any Subsidiary is Year 2000
Compliant except where the failure to be so compliant would not have a Material
Adverse Effect. To the Knowledge of Seller, neither Seller nor any Subsidiary
depends to any extent on embedded computer technology or computer information
systems of its current vendors or suppliers that would, in the event that
embedded computer chips or vendor/supplier computer systems fail to be Year 2000
Compliant, have a Material Adverse Effect. For the purposes of this Agreement,
an item of computer hardware or software will be considered to be Year 2000
Compliant if it is capable of correctly processing, providing and/or receiving
(including, without limitation, calculating, comparing and sequencing) date and
time data from, into, within and between the years 1999 and 2000 and any other
years in the Twentieth and Twenty-First centuries or it can be made so compliant
or replaced without a material expenditure.
4.5.3 TITLE TO ASSETS. Except as otherwise noted on Schedule
----------------- --------
4.5.3 and for nonmaterial defects in title, the Subsidiaries have good and
-----
marketable title to all of their respective assets, as of the date hereof, free
and clear of all Liens or claims of any kind or nature, and such property and
assets (together with the "Leased Assets", "Real Property", as each is
hereinafter defined, and the Intellectual Property and Contracts) constitute and
include substantially all of the property and assets owned or leased by Seller
and its Subsidiaries or used, in the conduct of the Subsidiaries' respective
businesses. As of the date hereof, the Subsidiaries have the right to use all
of the leased assets used by the Subsidiaries (collectively, the "Leased
Assets") in connection with the operation of their respective businesses
pursuant to valid and enforceable lease agreements, true and complete copies of
32
which have been provided to Purchaser. All of the properties and assets owned
by the Subsidiaries are in good operating condition and repair (ordinary wear
and tear excepted). The businesses of the Seller and the Subsidiaries has been
operated and performed through either the Seller or the Subsidiaries, and by
acquiring the Interests and Assets, Purchaser is acquiring the entire business
of the Seller and each of the Subsidiaries.
4.5.4 CONDITIONS OF PROPERTIES. All of the buildings leased by
--------------------------
the Seller or any Subsidiary and equipment owned or leased by the Seller or any
Subsidiary and used in their respective businesses are in good condition and
repair in all material respects, normal wear and tear excepted, suited for the
uses intended, and operated in conformity with all applicable building, zoning
and other applicable ordinances, laws and regulations, and there are no proposed
changes therein that would affect such properties or their use.
4.5.5 REAL PROPERTY AND LEASES.
---------------------------
(a) Seller does not own any real property. Schedule 4.5.5 lists
--------------
all real property previously owned at any point in the last three (3) years by
Seller or any Subsidiary (the "Owned Real Property").
(b) Schedule 4.5.5 lists all of the leases (the "Facility Leases")
--------------
of real property (together with the Owned Real Property, the "Real Property")
used by Seller or any Subsidiary in the operation of its respective business,
copies of which have been delivered to Purchaser by Seller. Except as set forth
on Schedule 4.5.5, each Facility Lease is valid, in full force and effect, and
---------------
enforceable in accordance with its terms and constitutes a legal and binding
obligation of each party thereto. Neither Seller nor any Subsidiary has given
or received any notice of material default, termination or partial termination
under any Facility Lease, and there is no existing or continuing material
default by Seller or any Subsidiary or, to the Knowledge of Seller or any
Subsidiary which default has not been cured, waived, or otherwise resolved, any
other party in the performance or payment of any obligation under any Facility
Lease.
(c) Except as set forth on Schedule 4.5.5, to the Seller's
---------------
Knowledge neither Seller nor any Subsidiary has received notice that any zoning
or similar land use restrictions are presently in effect or proposed by any
governmental authority which would materially impair the use or occupancy of any
of the Real Property for the purposes for which such Real Property is currently
being used, and the Seller's and the Subsidiaries' use of the Real Property is
in compliance in all material respects with all applicable building, zoning and
land use laws and regulations and property rights of others, except to the
extent such non-compliance would not have a Material Adverse Effect. To the
Knowledge of Seller, no condemnation by taking or eminent domain of any Leased
Real Property is pending or threatened.
(d) The copies of the Facility Leases heretofore furnished by the
Seller or the Subsidiaries to Purchaser are true, correct and complete in all
material respects, and such Facility Leases have not been modified in any
respect and are in full force and effect in accordance with their respective
terms.
33
(e) The interests of the Seller or the Subsidiaries, as
applicable, in and under each of the Facility Leases are unencumbered and
subject to no present claim, contest, action or threatened action at law or in
equity.
(f) Except as set forth in Schedule 4.5.5, no rent has been paid
--------------
for more than one month in advance (excluding any amounts paid in accordance
with the Facility Leases as estimates of expenses or Lessee's share thereof) and
no security deposit has been paid by, nor is any brokerage commission payable by
the Seller or the Subsidiaries, or any or them, with respect to any Facility
Lease pursuant to which the Seller or the Subsidiaries, or any of them, are
lessees.
(g) There are no contractual obligations, agreements in principle
or present plans for the Seller or the Subsidiaries to enter into new leases of
real property or to renew or amend existing Facility Leases prior to the Closing
Date.
(h) No covenants, easements, restrictions, servitudes, rights of
way or regulations applicable to the Real Property have had or are likely to
have a Material Adverse Effect.
4.6 EMPLOYEES AND BENEFITS.
----------------------
4.6.1 DIRECTORS, OFFICERS AND MANAGERS.
-----------------------------------
(a) Schedule 4.6.1 correctly lists all of the present officers,
---------------
directors and managers of the Seller and the Subsidiaries.
(b) Except as disclosed on Schedule 4.6.1, no director, officer or
--------------
manager of Seller or any Subsidiary serves as a director, officer or manager of
any other corporation or other entity on behalf of or as a designee of Seller or
any Subsidiary.
34
4.6.2 EMPLOYEES.
---------
(a) Schedule 4.6.2 sets forth a list of all employees of the Seller
--------------
and Subsidiaries and as to each employee of Seller or any Subsidiary whose
current compensation (salary and bonus) exceeds an annual rate of $25,000: his
or her name, the Seller or Subsidiary he or she works for, the location of
employment, the date on which he or she was hired, the basic weekly or hourly
rate of pay (separately listing any bonus), such employee's accrued sick leave
entitlement up to November 30, 1998, such employee's accrued vacation up to
November 30, 1998, and all other benefits actually or contingently accruing to
such employee as of November 30, 1998. Except as set forth on Schedule 4.6.2,
---------------
neither Seller nor any Subsidiary has any obligation to pay severance to any
employee under any circumstances, contingent or otherwise.
(b) Schedule 4.6.2 sets forth as to each officer or other manager
---------------
employed by Seller or any Subsidiary, the information described in subsection
(a) above, as well as the current compensation rate (salary, bonus, commission
or other) for each such person.
(c) Except as set forth on Schedule 4.6.2, neither Seller nor any
---------------
Subsidiary has entered into any written employment agreement or any other
material written agreement with any employee, for a fixed term or otherwise.
(d) Since the date of the Unaudited Balance Sheets, no raises have
been withheld in contemplation of the Closing of the transactions contemplated
hereby.
(e) Except as set forth on Schedule 4.6.2, during the last three (3)
--------------
years no significant accident or injury to any employee has occurred at any of
the Seller's or any Subsidiary's premises.
(f) To the Knowledge of Seller, no key employee (including,
without limitation, any licensed pharmacist, pharmacy assistant or physician) of
any Subsidiary will voluntarily leave such Subsidiary or decline to continue
employment, if offered, with Purchaser in connection with the sale of the
Interests and Assets to Purchaser hereunder.
(g) The Seller and Subsidiaries have made available to Purchaser
all employment records for each employee.
(h) To the Knowledge of Seller, no employee of any Subsidiary is
subject to any no-compete, no-hire, non-solicitation or similar obligation
pursuant to any employment or other agreement with any party which would prevent
or limit such employee from performing any duty in furtherance of the businesses
acquired by Purchaser hereunder following consummation of the transactions
contemplated by this Agreement.
(i) Schedule 4.6.2 contains a list of all licensed pharmacists,
---------------
pharmacy assistants and physicians employed or engaged by or contracted with or
by Seller or any Subsidiary, the type of license, all states or other
governmental entities which have licensed each such individual, the license
number (if any), any employed physicians' DEA number and a list of all
correspondence known to Seller relating to any adverse actions against any such
persons, true, correct and complete copies of which are contained on Schedule
--------
4.6.2. All such persons are properly licensed by all applicable governmental and
-----
regulatory agencies with respect to their activities on behalf of the Seller or
the Subsidiaries, and to Seller's Knowledge there are no material problems or
adverse actions regarding any such licenses.
4.6.3 COMPENSATION STRUCTURE - INDEPENDENT CONTRACTORS. Schedule
------------------------------------------------- --------
4.6.3 contains a true and complete list of the names, titles, and compensation
-----
arrangements of each independent contractor of the Seller and Subsidiaries with
annual payments or fees greater than $25,000. No such independent contractor of
Seller or any Subsidiary has informed or advised Seller or such Subsidiary (nor
is Seller otherwise aware) that such independent contractor does not intend to
continue to provide services to the Subsidiaries after the date hereof. The
Seller and Subsidiaries have heretofore provided Purchaser with copies of all
written agreements, correspondence, memoranda and other written materials
currently in effect with any such independent contractor. A list of such
agreements is included in Schedule 4.6.3.
---------------
35
4.6.4 EMPLOYEE BENEFITS.
------------------
(a) Schedule 4.6.4 lists all "pension plans" (as such term is
---------------
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "welfare benefit plans" (as such term is defined in Section 3
of ERISA), bonus, stock option, stock purchase, restricted stock, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements to which Seller or
any Subsidiary is a party or which are maintained, contributed to or sponsored
by Seller or any Subsidiary for the benefit of any current or former employee,
manager, officer or director of Seller or such Subsidiary (all such plans listed
on Schedule 4.6.4 are sometimes referred to herein collectively as the "Plans"
---------------
and individually as a "Plan").
(b) True and complete copies of all the Plans and Plan trusts,
Summary Plan Descriptions, Actuarial Reports (if any) and Annual Reports on Form
5500 for the most recent 3 years with respect to the Plans, Internal Revenue
Service determination letters, audit reports (if any) and any other related
documents have been made available to Purchaser.
(c) Except as set forth on Schedule 4.6.4, with respect to each
--------------
Plan: (i) no litigation or administrative or other proceeding is pending or
threatened; (ii) the Plan has been administered in compliance with, and has been
restated or amended so as to comply with, all applicable requirements of law
including all applicable requirements of ERISA, the Code and regulations
promulgated thereunder by the Internal Revenue Service and the United States
Department of Labor; and (iii) no Plan nor any trustee, administrator or
fiduciary for U.S. Subsidiaries thereof has at any time been involved in any
transaction relating to such Plan which would constitute a breach of fiduciary
duty under ERISA or a "prohibited transaction" within the meaning of Section 406
of ERISA or Section 4975 of the Code.
(d) Each Plan has been administered in all material respects in
compliance with the terms of the Plan.
(e) Each "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Pension Plan") maintained by or on behalf of the Seller
or any U.S. Subsidiary is listed on Schedule 4.6.4, and copies of such Pension
--------------
Plans have been, or prior to the Closing Date will be, made available to
Purchaser. The Pension Plans are qualified plans within the meaning of Section
401(a) of the Code, and the trusts thereunder are exempt from federal income tax
under Section 501(a) of the Code, and the Seller's or U.S. Subsidiaries'
predecessors, if any, have made or accrued, and as of the Closing Date will have
made or accrued, all payments and contributions required to be made under the
provisions of the Pension Plans or by law with respect to any period prior to
the Closing Date. As of the date hereof, no contribution to any profit sharing
plan maintained by the Seller or any U.S. Subsidiary has been authorized which
has not been fully paid.
(f) Except as disclosed on Schedule 4.6.4 and except for
---------------
obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), neither Seller nor any Subsidiary has any obligation to provide, or
liability for, health care, life insurance or other benefits after termination
of employment for former or present employees. As of the Closing Date, the
36
Seller and Subsidiaries will have cured any material violations or deficiencies
under applicable statutes, orders and regulations relating to their employee
benefit plans or their administration thereof and will have provided adequate
reserves, or insurance or qualified trust funds, for all claims incurred through
the Closing Date, based on an actuarial valuation satisfactory to the actuaries
of Purchaser representing a projection of claims expected to be incurred for
such retirees during their period of coverage under such Plans.
(g) No fact or circumstance exists which could constitute grounds
in the future for the Pension Benefit Guaranty Corporation ("PBGC") (or any
successor to the PBGC) to take any action whatsoever under Section 4042 of ERISA
in connection with any plan which an "Affiliate" (as defined below) of Seller or
any U.S. Subsidiary maintains within the meaning of Section 4062 or 4064 of
ERISA, and, in either case, the PBGC has not previously taken any such action
which has resulted in, or reasonably might result in, any liability of an
Affiliate or Seller or any U.S. Subsidiary to the PBGC, which has had or could
reasonably be expected to have a Materially Adverse Effect. The term
"Affiliate" for purposes of this Section means any trade or business (whether
incorporated or unincorporated) which is a member of a group described in
Section 414(c) of the Code of which Seller or any U.S. Subsidiary is also a
member.
(h) Only current and former employees of the Seller and
Subsidiaries or their dependents participate in the Plans.
(i) Neither Seller nor any U.S. Subsidiary is an affiliate with
any entity other than entities required to be aggregated with it pursuant to
Sections 414(b), (c), (m) or (o) of the Code. No Plan is cosponsored or has
been adopted by any entity other than the Seller and the Subsidiaries.
(j) Except as set forth on Schedule 4.6.4, none of the German
--------------
Subsidiaries maintains any Plan other than Plans required by law.
4.6.5 LABOR-RELATED MATTERS. Except as set forth on Schedule
---------------------- --------
4.6.5, neither Seller nor any Subsidiary is a party to any collective bargaining
-----
agreement or agreement of any kind with any union or labor organization. No
German Subsidiary has employees who have formed a staff council (Betriebsraft).
Neither Seller nor any Subsidiary is in violation of or default under any such
collective bargaining or other agreement. The Seller and the Subsidiaries have
complied in all material respects with all obligations under the National Labor
Relations Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act, as amended, and all other
federal, state and local labor laws and regulations applicable to employees.
There are no unfair labor practice charges pending or, to the Knowledge of
Seller, threatened against Seller or any Subsidiary and there are no charges,
complaints, claims, or proceedings pending or, to the Knowledge of Seller,
threatened against Seller or any Subsidiary with respect to any alleged
violation of any legal duty (including but not limited to any wage and hour
claims, employment discrimination claims or claims arising out of any employment
relationship) by Seller or any such Subsidiary as to any of its respective
employees or as to any person seeking employment therefrom, and no such
violations exist.
37
4.6.6 TRANSACTIONS WITH MANAGEMENT. Schedule 4.6.6 contains a
------------------------------ ---------------
description, by name, amount and type, of all contracts with or commitments to
present or former shareholders, directors, officers, members, managers,
employees or agents of Seller or any Subsidiary, including any business directly
or indirectly controlled by any such person, (other than contracts or
commitments relating to services to be performed by an officer, director,
employee, or agent as a currently employed employee or contracted agent of
Seller or any Subsidiary).
4.7 OTHER.
-----
4.7.1 APPROVALS AND CONSENTS. Schedule 4.7.1 lists all consents
------------------------ --------------
or other approvals necessary in order for Seller, the Subsidiaries, and each of
them, to consummate the transactions contemplated by this Agreement, including
but not limited to all governmental and other regulatory approvals and consents
of lenders, lessors, landlords and other third parties.
4.7.2 FRAUD AND ABUSE. Neither Seller nor any Subsidiary nor any
----------------
person or entity providing services for their respective businesses have,
engaged in any activities which are prohibited under Section 1320a-7b of Title
42 of the United States Code or the regulations promulgated thereunder, or
related state or local statutes or regulations, or which are prohibited by rules
of professional conduct, including, but not limited to, the following: (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (b) any failure by a claimant to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (c) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate) directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid, or (ii) in return for purchasing, leasing or ordering or arranging
for, or recommending, purchasing, leasing or ordering any good, facility,
service or item for which payment may be made in whole or in part by Medicare or
Medicaid; (d) engaging in any activity which is a basis for exclusion from the
Medicare, Medicaid and other federally-funded programs; or (e) any violation of
the Medicare or Medicaid requirements, including any fraud and abuse provisions,
except (i) where such circumstances could not reasonably be expected to have a
Material Adverse Effect or (ii) activities which a reasonably prudent person
with knowledge of the underlying facts could reasonably conclude do not pose an
unreasonable risk of violation of such law.
4.7.3 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT
------------------------------------------------------------
LIABILITIES. Except as described in Schedule 4.7.3, neither Seller nor any
----------- ---------------
Subsidiary has or as of the Closing Date will have, any material liability to
any third party fiscal intermediary or carrier administering any state Medicaid
program or the federal Medicare program, or to any other third party payor for
the recoupment of any amounts previously paid to Seller or any Subsidiary (or
any predecessor entity) by any such third-party fiscal intermediary, carrier,
Medicaid program, Medicare program, or third party payor. Except as set forth
on Schedule 4.7.3, there are no pending or, to the Knowledge of Seller,
---------------
threatened actions by any third party fiscal intermediary or carrier
38
administering any state Medicaid or the federal Medicare program, the Department
of Health and Human Services, any state Medicaid agency, or any third party
payor to suspend payments to Seller or any Subsidiary.
4.7.4 BILLING PRACTICES AND REFERRAL SOURCES.
------------------------------------------
(a) BILLING PRACTICES GENERALLY. All billing practices by the
-----------------------------
Seller and Subsidiaries to all third party payors, including, but not limited
to, the federal Medicare program, state Medicaid programs and private insurance
companies, have been true, fair and correct in all material respects and in
substantial compliance with all applicable laws, regulations and policies of all
such third party payors.
(b) TRANSACTIONS WITH REFERRAL SOURCES. Neither the Seller, any
------------------------------------
Subsidiary nor any of their directors, officers or managers, are a party to any
contract, lease, agreement or arrangement, including, but not limited to, any
joint venture or consulting agreement with any physician, hospital, nursing
facility, home health agency or other person who to Seller's Knowledge is in a
position to make or influence referrals to or otherwise generate business for
the Seller or any Subsidiary to provide services, lease space, lease equipment
or engage in any other venture activity except to the extent the same could not
reasonably be expected to have a Material Adverse Effect.
4.7.5 CONTRIBUTIONS, PAYMENTS OR GIFTS. Neither the Seller, any
----------------------------------
Subsidiary nor any of their directors, officers or managers have directly or
indirectly (i) made or agreed to make, or is aware that there has been made or
that there are any agreements to make, any contribution, payment or gift of
funds or property to, or for the private use of, any governmental official,
employee or agent where either the contribution, payment or gift or the purpose
of such contribution, payment or gift is or was illegal under the laws of the
United States or under the laws of any state thereof or any other jurisdiction
(foreign or domestic) under which such payment, contribution or gift was made;
(ii) established or maintained any unrecorded fund or asset for any purpose or
made any false or artificial entries on any of their books or records for any
reason or (iii) made, or agreed to make, or are aware that there has been made
or that there are any agreements to make, any payment to any person with the
intention or understanding that any part of such payment would be used for any
purpose other than that described in the documents supporting such payment.
4.7.6 PHYSICIAN SELF-REFERRALS. Neither Seller nor any Subsidiary
------------------------
has submitted any claims in connection with any referrals which violated any
applicable self-referral law, including the ▇▇▇▇▇ Law (42 U.S.C. 1395nn) or
any applicable state self-referral law as those laws are currently interpreted,
except (i) to the extent that any such violation could not reasonably be
expected to have a Material Adverse Effect or (ii) to the extent claims were
submitted under circumstances that a reasonably prudent person with knowledge of
the underlying facts would conclude do not pose an unreasonable risk of
violating such law.
4.7.7 COMPLIANCE WITH LAWS. Seller and each Subsidiary and each of
--------------------
their respective predecessors in interest have complied and are in compliance in
all material respects with all federal, foreign, state and local laws, rules,
regulations and ordinances applicable to it or its business, including, without
limitation, those enforced by the Food and Drug Administration ("FDA") and any
similar foreign agencies, and any other laws, rules, regulations or ordinances
39
regarding the design, manufacture and sale of medical devices and supplies. No
present or past violation of any such law, rule, regulation or ordinance,
whether known or unknown, has occurred which could or would materially impair
the right or ability of Seller or any Subsidiary or any of their successors,
officers, directors, managers, members, employees or agents to conduct their
respective activities. All products manufactured, sold, licensed, leased or
otherwise distributed by Seller or any Subsidiary or any of its predecessors in
interest were free of material defects at the time of shipment and were
manufactured in accordance with good manufacturing practices and other
applicable requirements. All such products were labeled, packaged, and
distributed in substantial compliance with all applicable domestic or foreign
laws, rules, regulations and ordinances, and except as set forth on Schedule
--------
4.7.7 no such products have been the subject of any recall or inquiry or
-----
investigation of any federal, state or local government authority or foreign
jurisdiction (including, without limitation, the FDA). Except as set forth on
Schedule 4.7.7, no product liability claim or any other claim premised in whole
---------------
or in part on product liability is pending or threatened against Seller or any
Subsidiary with respect to any such products nor are there any unasserted
contingent liabilities involving product liability claims. No oral or written
warranties have been made or given by Seller or any Subsidiary with respect to
any such product other than those product warranties disclosed or contained in
contracts on Schedule 4.5.1.
---------------
4.7.8 PERMITS. Except as set forth on Schedule 4.7.8:
------- ---------------
(a) The Seller and the Subsidiaries and their employees, as
applicable, hold all permits, licenses, franchises and authorizations from
governmental and regulatory authorities necessary to conduct the Seller's and
the Subsidiaries' businesses in the manner in which such businesses have been
and are being conducted (the "Seller and Subsidiary Permits"). True, complete
and correct copies of the Seller and Subsidiary Permits are contained on
Schedule 4.7.8, including but not limited to the following:
---------------
(i) a list of all countries, states and other jurisdictions from,
in or to which the Seller or any Subsidiary mails prescription drugs, a
description of any governmental permits or licenses held by the Seller and any
of the Subsidiaries required to do so or regarding the use of the mails in any
of such countries, states and other jurisdictions, and a statement as to where
such mailings are made;
(ii) all medical, healthcare, and pharmacy related permits,
licenses, franchises and authorizations from governmental and regulatory
authorities, including DEA numbers and/or approvals, and Medicare, MediCal, and
any Medicaid agency supplier or provider numbers and the Seller and Subsidiaries
that use such number(s);
(iii) all approvals, certifications, or licenses granted by the
FDA (including 510(k)s), with a description of the device or procedure so
approved; and
(iv) all approvals by or participation in private accrediting
agency programs, evidence of which has been provided to Purchaser.
40
(b) True, correct and complete copies of all correspondence regarding
any material adverse information concerning any of the Seller and Subsidiary
Permits, all material notices concerning any of the Seller and Subsidiary
Permits, and other material information concerning the Seller and Subsidiary
Permits are contained or described on Schedule 4.7.8.
--------------
(c) Except as set forth on Schedule 4.7.8, all of the Seller and
---------------
Subsidiary Permits are fully transferable to Purchaser and none of the Seller
and Subsidiary Permits will be terminated, canceled, revoked or otherwise
materially adversely affected by the transactions contemplated hereby. With
respect to those Seller and Subsidiary Permits set forth on Schedule 4.7.8 which
--------------
will be terminated, canceled, revoked or otherwise materially adversely affected
by the transactions contemplated hereby, if any, all standards and conditions to
be met by the Seller and Subsidiaries necessary for the reissuance of such
Seller and Subsidiary Permits to Purchaser have been satisfied or obtained and
will continue until the Closing to be satisfied by the operation of the Seller
and the Subsidiaries. No event has occurred that allows (nor after notice or
lapse of time or both would allow) revocation or termination of any Seller or
material Subsidiary Permit or would result in any other material impairment of
the rights of the holder of any Seller or material Subsidiary Permit.
(d) Seller and each Subsidiary has all necessary certificates of
medical need and benefit assignments required to receive reimbursement from
Medicare, Medicaid and MediCal and other third party payors for each of its
customers who rely on third party payors for payment.
4.7.9 INVESTMENT REPRESENTATIONS.
---------------------------
(a) The Convertible Preferred Stock, the Redeemable Preferred
Stock, the Warrants and the Earn-Out Note (together with any underlying
securities, collectively, the "Matria Securities") to be received by Seller
pursuant to this Agreement are being acquired for Seller's own account for
investment purposes only and not with a view to any distribution or public
offering in violation of the Securities Act of 1933, as amended (the "Securities
Act").
(b) The Matria Securities to be received by Seller pursuant to
this Agreement have not been registered under the Securities Act;
(c) Seller is an "accredited investor" within the meaning of Rule
501 of the Securities Act;
(d) The Purchaser has made available to Seller at reasonable times
prior to Seller's execution of this Agreement the opportunity to ask questions
and receive answers concerning the terms and conditions of this Agreement and
the Matria Securities and to obtain any additional information which Purchaser
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information furnished to Seller;
(e) Seller understands and agrees that Seller may not sell or
otherwise transfer any of the Matria Securities except pursuant to a registered
offering or in one or more private transactions which, in the opinion of counsel
41
reasonably satisfactory to Purchaser are not required to be registered under the
Securities Act; and
(f) Seller acknowledges and agrees that each certificate
representing the Matria Securities issued pursuant to this Agreement shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR IN THE ABSENCE OF
RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE ISSUER THAT IT MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
Purchaser covenants to remove the legend on each such certificate once any such
Matria Security may be sold without restrictions in accordance with the
Securities Act and applicable state securities laws.
4.7.10 BROKERS. No broker, finder or other financial consultant
-------
has acted on behalf of Seller or any Subsidiary in connection with this
Agreement or the transactions contemplated by this Agreement.
4.7.11 LIMITATION ON WARRANTIES. Except as expressly set forth in
------------------------
this Article 4, Seller makes no express or implied warranty of any kind
whatsoever, including, without limitation, any representation as to physical
condition or value of any of the assets of Seller or any of its Subsidiaries or
the future profitability or future earnings performance of the Subsidiaries.
ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
ARE EXPRESSLY EXCLUDED.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, and notwithstanding any independent
investigation or verification undertaken by Seller or its representatives in
connection herewith, Purchaser represents and warrants that the following
representations and warranties are true and correct as of the date hereof and
shall, except as may be specifically provided for in this Agreement or otherwise
specifically agreed upon or waived, in each case in writing by the Seller, be
true and correct as of the Closing:
5.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser has full power and authority, and possesses all rights,
42
privileges, franchises, licenses, permits, authorizations and approvals,
governmental or otherwise, necessary to entitle it to use its corporate name and
to own or lease its properties and assets and to carry on its business as and in
the places where such properties or assets are now owned, leased or operated and
such business is conducted, where the absence of such could reasonably be
expected to result in, individually or in the aggregate, a Purchaser Material
Adverse Effect (as defined below). Purchaser and its subsidiaries are qualified
to do business in all necessary jurisdictions except where the failure to so
qualify would not have a Purchaser Material Adverse Effect.
5.2 POWER AND AUTHORITY. Purchaser has the full corporate power and
---------------------
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Purchaser, and no other corporate proceedings on the part of Purchaser are
necessary to authorize the execution, delivery and performance of this Agreement
by Purchaser.
5.3 BINDING EFFECT. This Agreement has been duly executed and
---------------
delivered by Purchaser and constitutes the legal, valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
and similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether asserted in a proceeding at law or in equity).
5.4 NO VIOLATION; CONSENTS. Neither the execution and delivery of this
----------------------
Agreement by Purchaser nor the performance by it of its obligations hereunder
will:
(a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Purchaser;
(b) except as set forth on Schedule 5.4, breach or otherwise constitute
------------
or give rise to a default under any contract, commitment or other obligation to
or by which Purchaser is a party or is bound, except to the extent any such
breach or default would not have a Purchaser Material Adverse Effect;
(c) violate any statute, ordinance, law, rule, regulation, judgment,
order or decree of any court or other governmental or regulatory authority to
which Purchaser is subject; or
(d) except as set forth on Schedule 5.4, require any consent, approval
------------
or authorization of, notice to, or filing, recording, registration or
qualification with any third party, court or governmental or regulatory
authority.
5.5 CAPITALIZATION.
--------------
(a) The authorized capital stock of Purchaser consists of 100,000,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), and
50,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
43
Stock"), of which two series of the Preferred Stock have been designated: the
Convertible Preferred Stock, consisting of 16,500 authorized shares, and the
Redeemable Preferred Stock, consisting of 60,000 authorized shares. As of
December 13, 1998, there were issued and outstanding 36,409,544 shares of Common
Stock and no shares of the Preferred Stock. The shares of Convertible Preferred
Stock and Redeemable Preferred Stock issuable to the Seller pursuant to this
Agreement have the rights, preferences and limitations set forth in Schedules
---------
1.4(b) and 1.4(c), respectively, and will be, when issued in accordance with the
-----------------
terms hereof, validly issued, fully paid, nonassessable and free of preemptive
rights.
(b) Except as set forth on Schedule 5.5(b) and except for (i) stock
---------------
options issued subsequent to September 30, 1998 under Purchaser's 1997 Stock
Incentive Plan and 1996 Directors' Non-Qualified Stock Option Plan (the
"Purchaser Option Plans"); (ii) stock options exercisable under Purchaser's 1996
Employee Stock Purchase Plan (together with the options outstanding under the
Purchaser Option Plans (the "Outstanding Purchaser Options"); (iii) the Rights
Agreement, dated as of January 20, 1996, by and between Purchaser and SunTrust
Bank, Atlanta, as Rights Agent, as amended (the "Purchaser's Shareholder Rights
Plan"); and (iv) 1,278,180 at September 30, 1998 in principal amount of
Purchaser's 8% Convertible Subordinated Debentures and Note due December 31,
2001 convertible into Purchaser's Common Stock at $4.90 per share, Purchaser is
not a party to or bound by any option, call, warrant, conversion privilege or
other agreement obligating Purchaser at present, at any future time, or upon
occurrence of any event to issue or sell any shares of Purchaser Common Stock or
other capital stock of Purchaser. Except as set forth on Schedule 5.5(b) and
the Registration Rights Agreement to be delivered pursuant to Section 2.3(f) of
this Agreement, Purchaser is not a party to any agreement obligating Purchaser
to register any of its securities with the SEC or any other governmental agency,
whether such registration obligation is presently existing or arises in the
future or upon the occurrence of an event.
5.6 EXCHANGE ACT REPORTS AND FINANCIAL STATEMENTS. Purchaser has filed
---------------------------------------------
with the Commission all required reports, schedules, forms, proxy, registration
and other statements and other documents (collectively, the "SEC Documents").
As of the date of this Agreement, the last SEC Document filed by Purchaser was
Purchaser's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998. As of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be,
and the rules and regulations of the Commission promulgated thereunder
applicable to the SEC Documents. As of their respective filing dates, none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent such statements have been modified or
superseded by a later SEC Document filed and publicly available prior to the
Closing Date, the circumstances or bases for which modifications or
supersessions have not and will not individually or in the aggregate result in
any material liability or obligation on behalf of Purchaser under the Securities
Act, the Exchange Act, the rules promulgated under the Securities Act or the
Exchange Act, or any federal, state or local anti-fraud, blue sky, securities or
similar laws. The consolidated financial statements of Purchaser and its
44
subsidiaries included in the SEC Documents (as amended or supplemented by any
later filed SEC Document filed and publicly available prior to November 1,
1998), comply as to form in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission) applied on a
consistent basis during the periods involved (except as may be indicated in
notes thereto) and fairly present the consolidated financial position, assets
and liabilities of Purchaser and its subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
--------------------------------------
SEC Documents and except for this Agreement and the transactions contemplated
herein since September 30, 1998, Purchaser and its subsidiaries have conducted
their businesses, in all material respects, only in the ordinary course and in a
manner consistent with past practice, and there has not occurred any event,
condition, circumstance, change or development (whether or not in the ordinary
course of business) that, individually or in the aggregate, has had or could
reasonably be expected to have a material adverse effect on the financial
condition or results of operations of Purchaser and its subsidiaries, taken as a
whole, whether or not required by GAAP to be provided or reserved against on a
balance sheet prepared in accordance with GAAP (a "Purchaser Material Adverse
Effect"). Without limiting the generality of the foregoing, except as set forth
on Schedule 5.7 hereto, or as disclosed in any SEC Documents filed with the
-------------
Commission and publicly available prior to November 1, 1998 or as contemplated
herein, since September 30, 1998, there has not been (i) any change by Purchaser
in its accounting methods, principles or practices, (ii) any revaluation by the
Purchaser of any of its or any of its subsidiary's material assets other than in
the ordinary course of business consistent with past practice, (iii) any entry
outside the ordinary course of business by Purchaser or any of its subsidiaries
into any commitments or transactions material, individually or in the aggregate,
to Purchaser and its subsidiaries taken as a whole, (iv) any declaration,
setting aside or payment of any dividends or distributions in respect of the
shares of Purchaser's capital stock or, any redemption, purchase or other
acquisition of any of its securities, or (v) any grant or issuance of any Equity
Securities of Purchaser or any of its subsidiaries. "Equity Securities" means,
with respect to the Purchaser or any of its subsidiaries, as the case may be,
(i) any class or series of common stock, preferred stock or other capital stock,
whether voting or non-voting, (ii) any other equity securities issued by
Purchaser or such subsidiary, as the case may be, whether now or hereafter
authorized for issuance by the Purchaser's or such subsidiary's, as the case may
be, Certificate of Incorporation, (iii) any debt, hybrid or other securities
issued by Purchaser or such subsidiary, as the case may be, which are
convertible into, exercisable for or exchangeable for any other Equity
Securities, whether now or hereafter authorized for issuance by Purchaser's or
such subsidiary's, as the case may be, Certificate of Incorporation, (iv) any
equity equivalents (including, without limitation, stock appreciation rights,
phantom stock or similar rights), interests in the ownership or earnings of
Purchaser or such subsidiary, as the case may be, or other similar rights, (v)
any written or oral rights, options, warrants, subscriptions, calls, preemptive
rights, rescission rights or other rights to subscribe for, purchase or
otherwise acquire any of the foregoing, (vi) any written or oral obligation of
the Purchaser or such subsidiary, as the case may be, to issue, deliver or sell,
any of the foregoing, (vii) any written or oral obligations of Purchaser or such
subsidiary, as the case may be, to repurchase, redeem or otherwise acquire any
45
Equity Securities, and (viii) any bonds, debentures, notes or other indebtedness
of Purchaser or such subsidiary, as the case may be, having the right to vote
(or convertible into, or exchangeable for securities having the right to vote)
on any matters on which the stockholders of Purchaser or such subsidiary, as the
case may be, may vote.
5.8 NO SHAREHOLDER VOTE REQUIRED. No vote of the holders of any Equity
----------------------------
Securities or other securities of Purchaser or any of its subsidiaries is
required to approve or effect this Agreement and the transactions contemplated
hereby.
5.9 REPORTING COMPANY; FORM S-3. Purchaser is subject to the reporting
---------------------------
requirements of the Exchange Act and its Common Stock is registered under
Section 12 of the Exchange Act. Purchaser is eligible to register for resale
shares of its Common Stock on a registration statement on Form S-3 under the
Securities Act.
5.10 TRADING ON NASDAQ. Purchaser's Common Stock is authorized for
-------------------
quotation on the Nasdaq National Market, and the trading in Purchaser's Common
Stock on Nasdaq has not been suspended as of the date hereof and as of the
Closing Date.
5.11 BROKERS. Both parties acknowledge that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
-------
Co. ("BHC") has acted on behalf of Purchaser in connection with the transactions
contemplated by this Agreement and that any and all fees of BHC shall be paid by
the Purchaser. Other than BHC, no other broker, finder or other financial
consultant has acted on behalf of Purchaser in connection with this Agreement or
the transactions contemplated by this Agreement.
5.12 ABSENCE OF LITIGATION; COMPLIANCE. Except as set forth on
------------------------------------
Schedule 5.12 hereto or as disclosed in any SEC Documents filed with the SEC and
-------------
publicly available prior to November 1, 1998, to the best of Purchaser's
"Knowledge" (as defined below), there are no suits, claims, actions, proceedings
or investigations pending or overtly threatened against Purchaser or any
wholly-owned subsidiary, or any properties or rights of Purchaser or any
wholly-owned subsidiary, before any court, arbitrator or "Governmental Entity"
(as defined below), which (i) if determined adversely to Purchaser or any
wholly-owned subsidiary could, individually or in the aggregate, reasonably be
expected to have a Purchaser Material Adverse Effect; or (ii) seek to delay or
prevent the consummation of the transaction contemplated by this Agreement.
Neither Purchaser nor any of its wholly-owned subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which in the future could
reasonably be expected to have, individually or in the aggregate, a Purchaser
Material Adverse Effect or could prevent or delay the consummation of the
transactions contemplated by this Agreement. To the best of Purchaser's
Knowledge, neither Purchaser nor any of its wholly-owned subsidiaries is in
violation of, nor has Purchaser or any subsidiary violated, any material
provisions of any note, bond, mortgage, indenture, contract, agreement, lease,
or other instrument or obligations to which Purchaser or any of its wholly-owned
subsidiaries is a party or by which Purchaser, any of its wholly-owned
subsidiaries or any of their respective properties are bound or affected except
for any such violations which could not, individually or in the aggregate,
reasonably be expected to have a Purchaser Material Adverse Effect.
"Governmental Entity" means any court, administrative agency or commission or
other governmental authority or instrumentality, whether domestic (federal,
state or local) or foreign. "Purchaser's Knowledge" means the actual knowledge
of any executive officer of Purchaser.
46
5.13 TAKEOVER STATUS. No "fair price", "moratorium", "control share
----------------
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws or applicable stock exchange rules or regulations,
including, without limitation, Section 203 of the Delaware General Corporation
Law, applicable to the Parent or any of its subsidiaries is applicable to the
transactions contemplated hereby, taken individually or in the aggregate.
5.14 CORPORATE ACTION. Purchaser has taken all such actions as are
-----------------
necessary or desirable in order to (i) amend in a manner satisfactory to
Seller's counsel Purchaser's Shareholder Rights Plan so that any acquisition of
securities of Matria (but not dispositions) ("Purchases") contemplated or
permitted by this Agreement and the acquisitions contemplated or permitted by
the Standstill Agreement constitute neither a "triggering event" nor a
"distribution date" as defined by such plan and so that neither Seller, MJG, nor
SZI shall become "Acquiring Persons" within the meaning of Purchaser's
Shareholder Rights Plan as a result of the Purchases contemplated or permitted
by this Agreement or acquisitions contemplated or permitted by the Standstill
Agreement; and (ii) satisfy the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203") with respect to approval of the
Purchases contemplated or permitted by this Agreement and Purchases contemplated
or permitted by the Standstill Agreement and to ensure that neither Seller nor
any of its affiliates shall be an "Interested Shareholder" within the meaning of
Section 203.
5.15 INVESTMENT REPRESENTATIONS.
---------------------------
(a) The Interests in the Subsidiaries (collectively the "Seller's
Securities") to be acquired by Purchaser pursuant to this Agreement are being
acquired for Purchaser's own account for investment purposes only and not with a
view to any distribution or public offering in violation of the Securities Act;
(b) The Seller's Securities to be received by Purchaser pursuant to
this Agreement have not been registered under the Securities Act;
(c) Purchaser is an "Accredited Investor" within the meaning of Rule
501 of the Securities Act and has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment in the Seller's Securities, and has the ability to bear the economic
risks of its investment;
(d) Seller has made available to Purchaser at a reasonable time prior
to Purchaser's execution of this Agreement the opportunity to ask questions and
receive answers concerning the terms and conditions of this Agreement and the
Seller's Securities and to obtain any additional information which Seller
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information furnished to Purchaser;
(e) Purchaser understands and agrees that Purchaser may not sell or
otherwise transfer any of the Seller's Securities except pursuant to a
registered offering or in one or more private transactions that, in the opinion
47
of counsel reasonably satisfactory to Seller, such transaction or transactions
are not required to be registered under the Securities Act; and
(f) Purchaser acknowledges and agrees that each certificate
representing the Seller's Securities acquired pursuant to this Agreement shall
include a legend in substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR IN THE ABSENCE OF
RECEIPT BY THE SELLER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE SELLER THAT IT MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
5.16 LIMITATION ON WARRANTIES. Except as expressly set forth in this
--------------------------
Article 5, Purchaser makes no express or implied warranty of any kind
whatsoever, including, without limitation, any representation as to physical
condition or value of the assets of Purchaser or any of its Subsidiaries or the
future profitability or future earnings performance of the Purchaser and its
Subsidiaries.
5.17 COMPLIANCE WITH SECURITIES LAWS. Purchaser has not taken, and
----------------------------------
will not take, any action which would subject the issuance and sale of the
Convertible Preferred Stock, the Redeemable Preferred Stock, the Warrant and the
Earn-Out Note pursuant to this Agreement to the provisions of Section 5 of the
Securities Act, or violate the registration or qualification provisions of any
securities or blue sky laws of any applicable jurisdiction, and, based in part
on the representations of Seller in Section 4.7.8, the sale of the Convertible
Preferred Stock, the Redeemable Preferred Stock, the Warrant and the Earn-Out
Note pursuant to this Agreement and the issuance of Common Stock upon exercise
of the Warrant from time to time complies with all applicable requirements of
applicable federal and state securities and blue sky laws.
ARTICLE 6
---------
CONDUCT OF BUSINESS OF COMPANY PENDING CLOSING
----------------------------------------------
Except as otherwise expressly provided herein, Seller covenants and agrees
that, without the prior written consent of Purchaser in each instance, between
the date hereof and the Closing Date:
6.1 CONDUCT OF BUSINESS. The Seller and the Subsidiaries shall carry
---------------------
on their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and preserve intact their
present business organizations, keep available the services of their respective
48
present officers, managers, employees and agents and preserve their goodwill and
their relationships with customers, suppliers, lenders and others having
business dealings with each of them.
6.2 MAINTENANCE OF PROPERTIES. The Seller and the Subsidiaries will
---------------------------
maintain their respective properties and assets in good operating condition,
ordinary wear and tear excepted.
6.3 INSURANCE. The Seller and the Subsidiaries will maintain and keep
---------
in full force and effect all of the insurance referred to in Section 4.4.4
hereof or other insurance equivalent thereto in all material respects.
6.4 ISSUANCE OF SECURITIES. Neither Seller nor any Subsidiary will
------------------------
sell, issue, authorize or propose the sale or issuance of, or purchase or
propose the purchase of, any shares of capital stock or other equity interest or
any class of securities convertible into, or rights, warrants or options to
acquire, any such shares, other equity interests or other convertible securities
or enter into any agreement with respect to the foregoing. Neither Seller nor
any Subsidiary shall exercise any option or warrant to purchase the capital
stock or other equity interest of any Seller, Subsidiary or other entity owned
or held by Seller or such Subsidiary.
6.5 DIVIDENDS. Except as expressly agreed to by Purchaser and Seller
---------
in writing, no dividend, distribution or payment will be declared or made in
respect of the capital stock or other equity interests of Seller or any
Subsidiary, except for the regular quarterly distribution to Seller's members
for taxes and neither Seller nor any Subsidiary will, directly or indirectly,
redeem, purchase or otherwise acquire any of its capital stock or other equity
interests or enter into any agreement with respect to the foregoing.
6.6 AMENDMENT OF CHARTER. Except as may be necessitated by this
----------------------
Agreement, neither the Seller nor any of the Subsidiaries will amend or cause to
be amended its respective Articles of Incorporation, Articles of Organization,
Operating Agreement, Bylaws or other organizational documents.
6.7 NO ACQUISITIONS6.7 No Acquisitions. Neither the Seller nor any
----------------
of the Subsidiaries will acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets or stock of, or by any other
manner, any business or any corporation, partnership, association or other
entity or division thereof or otherwise acquire or agree to acquire any assets
that are material, individually or in the aggregate, to the Seller or any
Subsidiary other than the cartoning machine nor will any of the Seller or
Subsidiaries enter into any agreement with respect to the foregoing.
6.8 DISPOSITION OF ASSETS. Other than in the ordinary course of
-----------------------
business consistent with past practice, the transfers expressly permitted
pursuant to Section 4.3.11 hereof, or the sale of eleven acres of undeveloped
land located in McDonough, Georgia, neither the Seller nor any of the
Subsidiaries will sell, mortgage, lease, buy or otherwise acquire, transfer or
dispose of any real property or interest therein or sell or transfer, mortgage,
pledge or subject to any lien, charge or other encumbrance any other tangible or
intangible asset or enter into any agreement with respect to the foregoing.
49
6.9 COMPENSATION. No increase will be made in the compensation payable
------------
or to become payable by any of the Seller or any Subsidiary to any director,
officer, manager, salaried employee or agent; no "general increase" (as defined
in Section 4.3.11(f) hereof) will be made in the compensation payable or to
become payable to any hourly or salaried employees or agents of any of the
Seller or any Subsidiary; no increase will be made in any payment of or
commitment to pay any bonus, profit sharing, severance pay or other
extraordinary compensation to any employee or agent of any of the Seller or any
Subsidiary; and neither the Seller nor any of the Subsidiaries will enter into
any agreement with respect to the foregoing.
6.10 BANKING ARRANGEMENTS. No change will be made in the banking and
---------------------
safe deposit arrangements referred to in Section 4.3.8 hereof, except in the
ordinary course of business, consistent with past practice, and then only after
first notifying Purchaser of each such change.
6.11 INDEBTEDNESS. Neither the Seller nor any of the Subsidiaries will
------------
incur any indebtedness for borrowed money or purchase money indebtedness or
capital lease obligations or guarantee any such indebtedness or issue or sell
any debt securities or guarantee any debt securities of others or enter into any
agreement with respect to the foregoing.
6.12 PAYMENT OF DEBT. Except as expressly agreed to by Purchaser and
-----------------
Seller in writing, neither the Seller nor any of the Subsidiaries will pay any
claim or discharge or satisfy any lien or encumbrance or pay any obligation or
liability or enter into any agreement with respect to the foregoing other than
in the ordinary course of business or as required by the terms of any instrument
evidencing or governing the same.
6.13 BENEFIT PLANS. Other than in the ordinary course of business
--------------
consistent with past practice, neither the Seller nor any of the Subsidiaries
will enter into or amend, or make or authorize the making of any contributions
to, any bonus, incentive compensation, deferred compensation, severance, profit
sharing (including, without limitation, the adoption of any resolution or taking
of any other action for or with respect to the contribution of any sum pursuant
to the terms of any existing profit sharing or similar plan), retirement,
pension, group insurance or other benefit plan, or any union, employment or
consulting agreement or arrangement, including, without limitation, any employee
benefit plan, except as and to the extent required by law or regulation.
6.14 CONTRACTS. Neither the Seller nor any of the Subsidiaries will
---------
enter into any contract, except in the ordinary course of business consistent
with past practice, provided that the written consent of Purchaser shall be
required before any of the Seller or any Subsidiary enters into any contract
with annual payments thereunder in an amount greater than $25,000.
6.15 BOOKS AND RECORDS. The books and records of the Seller and the
-------------------
Subsidiaries will be maintained in the usual, regular and ordinary course of
business consistent with past practice.
50
6.16 OTHER ACTIONS. None of the Subsidiaries or the Seller, or any of
--------------
them, will take any action that would or could reasonably be expected to result
in any of the representations and warranties concerning the Subsidiaries or the
Seller set forth in this Agreement becoming untrue in any respect at any time on
or prior to the date this Agreement terminates.
6.17 SELLER TO ADVISE PURCHASER OF CHANGES. Seller shall promptly
------------------------------------------
advise Purchaser in writing of any change or event having, or which can
reasonably be foreseen to have, a Material Adverse Effect.
ARTICLE 7
---------
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
------------------------------------------
All of the obligations of Purchaser under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions, any
one or more of which may be waived, in whole or in part, in writing by
Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of Seller contained herein or in any certificate, Schedule or other document
delivered pursuant to the provisions hereof, or in connection herewith, shall be
true in all material respects as of the date when made and shall be deemed to be
made again as of the Closing Date and shall be true in all material respects at
and as of such time, except as a result of changes or events expressly permitted
or contemplated herein.
7.2 PERFORMANCE OF AGREEMENTS. Seller shall have performed and complied
-------------------------
in all respects with all agreements and conditions required by this Agreement to
be performed or complied with by such party prior to or at the Closing.
7.3 DELIVERIES. Seller shall have delivered or caused to be delivered
----------
to Purchaser each and every item required to be delivered by Seller pursuant to
Section 2.2 hereof, including the Lien Releases, Standstill Agreement, the Lucor
Management Agreement, the ▇▇▇▇ of Sale, and the Restrictive Covenant Agreement.
7.4 APPROVALS. Purchaser and Seller shall have received from any and
---------
all governmental authorities, bodies or agencies having jurisdiction over the
transactions contemplated by this Agreement such consents, authorizations and
approvals as are necessary for the consummation thereof and all applicable
waiting or similar periods required by law shall have expired, including,
without limitation, the waiting period under the HSR Act, and such regulatory
consents, authorizations and approvals shall not contain conditions or
restrictions unduly burdensome on the operations or business of the Subsidiaries
to be conducted following the Closing Date.
7.5 FINANCING OBTAINED BY THE PURCHASER. The Purchaser shall have
---------------------------------------
completed the financing of the purchase of the Interests and Assets on terms
satisfactory to Purchaser in its sole discretion.
7.6 NO INJUNCTIONS. No preliminary or permanent injunction or other
---------------
order by any federal or state court which prevents the consummation of the
transactions contemplated by this Agreement shall have been issued and remain in
effect, and no action to obtain any such injunction or order shall have been
filed and remain pending.
51
7.7 CONSENTS AND APPROVALS OF THIRD PARTIES. All consents,
--------------------------------------------
authorizations and approvals to the transactions contemplated by this Agreement
necessary to the consummation of such transactions or that are required pursuant
to the terms of any material agreement or arrangement to which any of the Seller
or the Subsidiaries is a party or by which any of the Seller or the Subsidiaries
is bound or in order to preserve any right, license, Medicare Authorization or
franchise held or owned by the Seller or the Subsidiaries shall have been duly
obtained except where the failure to obtain such consent, authorization or
approval will not have a Material Adverse Effect, and such consents,
authorizations or approvals shall be in form and substance reasonably
satisfactory to Purchaser and without condition, cost or expense to Purchaser.
The foregoing shall include, without limitation, the consent of Nissho
Corporation ("Nissho") to the assignment by Seller to a Subsidiary designated by
Purchaser, of the exclusive distributorship agreement between Nissho and Seller
dated as of November 14, 1997.
7.8 RESIGNATIONS. Purchaser shall have received copies of written
------------
resignations from all persons serving as directors, officers and managers of the
Subsidiaries except for such officers, directors and managers as Purchaser shall
designate in writing to the Seller; such resignations shall be effective on or
prior to the Closing Date.
7.9 OPINIONS OF SELLER'S AND SZI'S COUNSEL . Purchaser shall have
-------------------------------------------
received the opinions of Nelson, Mullins, ▇▇▇▇▇ & Scarborough, L.L.P. and
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C. referenced in Sections 2.2(d) and 2.2(e) in form
reasonably satisfactory to Purchaser.
ARTICLE 8
---------
CONDITIONS TO OBLIGATIONS OF THE SELLER
---------------------------------------
All of the obligations of Seller under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the following conditions,
any one or more of which may be waived, in whole or in part, in writing by
Seller:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
------------------------------
of Purchaser contained herein or in any certificate, schedule or other document
delivered pursuant to the provisions hereof, or in connection herewith, shall be
true in all material respects as of the date when made and shall be deemed to be
made again at and as of the Closing Date and shall be true in all material
respects at and as of such time, except as a result of changes or events
expressly permitted herein.
8.2 PERFORMANCE OF AGREEMENTS. Purchaser shall have performed and
---------------------------
complied in all respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
8.3 DELIVERIES. Purchaser shall have delivered to the Seller each and
----------
every item required to be delivered by Purchaser pursuant to Section 2.3 hereof
including the Registration Rights Agreement, the Standstill Agreement, the Lucor
Management Agreement, the Warrant Agreement and the Assumption Agreement.
52
8.4 APPROVALS. The Seller and the Subsidiaries shall have received
---------
from any and all governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement such consents,
authorizations and approvals as are necessary for the consummation thereof and
all applicable waiting or similar periods required by law shall have expired,
including, without limitation, the waiting period under the HSR Act and such
regulatory consents, authorizations and approvals shall not contain conditions
or restrictions unduly burdensome on the operations or business of the
Subsidiaries to be conducted following the Closing Date.
8.5 NO INJUNCTIONS. No preliminary or permanent injunction or other
---------------
order by any federal or state court which prevents the consummation of the
transactions contemplated by this Agreement shall have been issued and remain in
effect, and no action to obtain any such injunction or order shall have been
filed and remain pending.
8.6 ACTIONS OF PURCHASER. Purchaser has taken all such actions as are
---------------------
necessary or desirable in order to (i) amend in a manner satisfactory to
Seller's counsel Purchaser's Shareholder Rights Plan so that any acquisition of
securities of Matria (but not dispositions) ("Purchases") contemplated or
permitted by this Agreement and the acquisitions contemplated or permitted by
the Standstill Agreement constitute neither a "triggering event" nor a
"distribution date" as defined by such plan and so that neither Seller, MJG, nor
SZI shall become "Acquiring Persons" within the meaning of Purchaser's
Shareholder Rights Plan as a result of the Purchases contemplated or permitted
by this Agreement or acquisitions contemplated or permitted by by the Standstill
Agreement; and (ii) satisfy the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203") with respect to approval of the
Purchases contemplated or permitted by this Agreement and Purchases contemplated
or permitted by the Standstill Agreement and to ensure that neither Seller nor
any of its affiliates shall be an "Interested Shareholder" within the meaning of
Section 203; and (iii) MJG's and SZI's representative shall have been elected
to, and shall continue to be incumbent members of, Purchaser's Board of
Directors pursuant to and upon the terms and conditions set forth in the
Standstill Agreement.
8.7 CERTIFICATES OF DESIGNATION. At or before the Closing Date,
-----------------------------
Purchaser shall have taken all necessary corporate action to designate the
relative powers, designations, preferences and relative, participating, optional
or other rights of the Convertible Preferred Stock and the Redeemable Preferred
Stock, whether by amending Purchaser's Certificate of Incorporation or by filing
a Certificate or Certificates of Designation. Such action shall be consistent
with the description of such rights and preferences of the Convertible Preferred
Stock set forth on Schedule 1.4(b) and of the Redeemable Preferred Stock set
---------------
forth on Schedule 1.4(c) hereof, and in any event shall be in form and substance
---------------
satisfactory to Seller's counsel.
8.8 OPINION OF PURCHASER'S COUNSEL. Seller shall have received the
---------------------------------
opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP referenced in Section 2.3(e) in form reasonably
satisfactory to Seller.
53
ARTICLE 9
---------
INDEMNIFICATION
---------------
9.1 SURVIVAL OF REPRESENTATIONS.
-----------------------------
(a) Except as otherwise provided in this Section 9.1, the
representations and warranties made by Seller in or pursuant to this Agreement
shall survive the Closing for a period of 18 months. The representations and
warranties made by Seller in Section 4.3.6 shall survive the Closing until 60
days following the expiration of all applicable statutes of limitation with
respect to the subject matter of such Section, and any extensions thereof; the
representations and warranties made by Seller in Sections 4.7.2, 4.7.5 and 4.7.6
with respect to Seller and the Subsidiaries other than ▇▇▇▇▇▇ North America,
▇▇▇▇▇▇ Direct, ▇▇▇▇▇▇ Europe and ▇▇▇▇▇▇ International shall survive the Closing
for a period of 2 years; the representations and warranties made by Seller in
Sections 4.7.3 and 4.7.4 with respect to Seller and the Subsidiaries other than
▇▇▇▇▇▇ North America, ▇▇▇▇▇▇ Direct, ▇▇▇▇▇▇ Europe and ▇▇▇▇▇▇ International
shall survive Closing for a period of 5 years; and the representations and
warranties made by Seller in Section 4.3.3, other than subsection (e), shall
survive the Closing indefinitely.
(b) Notwithstanding the foregoing, if the Purchaser or any Subsidiary
suffers a Loss and with respect to the event giving rise to such Loss Seller or
any Corporation Subsidiary is entitled to indemnification under Section 6.9 of
the Asset Purchase Agreement dated November 14, 1997 between Seller, Universal
Self Care, Inc. ("Universal") and certain other parties (the "Universal Self
Care Agreement") and such right to claim indemnity under the Universal Self Care
Agreement has not expired, Purchaser and Seller (or its successors and assigns)
shall jointly pursue a claim for indemnification against Universal under the
Universal Self Care Agreement (a "Universal Claim"). Purchaser and Seller shall
each bear one-half of the expenses of asserting a Universal Claim but Purchaser
shall be entitled to receive any recovery on such Universal Claim. Without
limiting the generality of the foregoing, with respect to any Loss incurred by
Purchaser or any Subsidiary which is the subject of a Universal Claim, (1)
Seller agrees to assert its right of setoff under its Convertible Subordinated
Promissory Note dated January 28, 1998 (the "Universal Self Care Note") for the
amount of any such Loss and Purchaser shall have the right to cancel the Offset
Shares (as defined in Section 9.2(e)(ii)) in the manner provided in Section
9.2(e) to the extent of any such set-off and (2) Seller shall assign to
Purchaser its rights in any escrow established pursuant to Section 5 of the
Universal Self Care Note to the extent of any such Loss. In furtherance of the
foregoing, Seller agrees that it will not waive, release or relinquish any of
its rights to receive indemnification from Universal (or its successors or
assigns) under the Universal Self Care Note (whether for breach of
representations, warranties, covenants or otherwise) whether in connection with
the discount of the Universal Self Care Agreement or for any other reason
without the prior written consent of Purchaser.
(c) Except for the representations and warranties made by Purchaser in
Section 5.5, which shall survive the Closing indefinitely, the representations
and warranties made by the Purchaser in or pursuant to this Agreement shall not
survive the Closing.
54
(d) Notwithstanding the foregoing provisions of this Section 9.1,
subject to any applicable statute of limitations, any party may make a claim at
any time based on fraud or violation of the Commission's Rule 10b-5 in
connection with any representation or warranty.
9.2 INDEMNIFICATION.
---------------
(a) BY SELLER. From and after the Closing, Seller shall indemnify,
----------
reimburse, defend and hold harmless Purchaser, its affiliates (including,
without limitation, the Subsidiaries), and their respective officers, directors,
managers, members, shareholders, employees, representatives, successors and
assigns from and against any and all direct or indirect claims, losses,
liabilities, Taxes, damages (including, without limitation, special and
consequential damages), costs (including court costs) and expenses (including,
without limitation, all reasonable attorneys' and accountants' fees and
expenses) (collectively "Losses"), arising out of or in connection with (i) any
breach, inaccuracy or untruth of any representation or warranty made by Seller
contained in this Agreement or the Schedules hereto, whether such breach,
inaccuracy or untruth exists or is made on the date of this Agreement or as of
the Closing; (ii) any breach of or noncompliance by Seller with any covenant or
agreement of Seller contained in this Agreement; (iii) the claims set forth on
Schedule 4.3.12; (iv) the indemnification obligations of GMAC under the
----------------
Universal Self Care Agreement; (v) any Excluded Liability or Subsidiary Excluded
Liability; and (vi) any contract or relationship between Seller, any Subsidiary
or any member of Seller and BT Bankers Trust or any of its affiliates; provided,
however, if Purchaser is not entitled to indemnification under Section 9.2(a)(v)
because the Excluded Liability has been assumed by ▇▇▇▇▇▇ North America under
the Subsidiary Assumption Agreement, this shall in no way limit the right of
Purchaser to indemnification under Section 9.2(a)(i) if the facts that would
constitute the Subsidiary Assumed Liability give rise to such a right
thereunder.
(b) BY PURCHASER. From and after the Closing, Purchaser shall
-------------
indemnify, reimburse, defend and hold harmless the Seller, its affiliates, and
their respective officers, directors, managers, members, shareholders,
employees, representatives, successors or assigns from and against any and all
Losses arising out of or in connection with (i) any breach, inaccuracy or
untruth solely of any representation or warranty of Purchaser contained in
Section 5.5 only, whether such breach, inaccuracy or untruth exists or is made
on the date of this Agreement or as of the Closing; (ii) any breach of or
noncompliance by Purchaser with any covenant or agreement of Purchaser contained
in this Agreement; or (iii) Purchaser's operation of the Business following the
Closing. Without limiting the generality of the foregoing, Purchaser shall have
no liability whatsoever, whether pursuant to this Section 9.2(b) or otherwise,
for any breach of any other representation or warranty of Purchaser set forth in
this Agreement, other than with respect to Section 5.5.
(c) DEFINITIONS. A person entitled to make a claim for indemnification
-----------
hereunder shall be referred to as an "Indemnified Party." A person obligated
for indemnification hereunder shall be referred to as an "Indemnifying Party."
A person entitled to make a claim for indemnification pursuant to Section 9.2(a)
shall be referred to as a "Purchaser Indemnified Party," and a person entitled
to make a claim for indemnification pursuant to Section 9.2(b) shall be referred
to as a "Seller Indemnified Party."
55
(d) CLAIM THRESHOLD. Notwithstanding the foregoing, no claim for
----------------
indemnification under Section 9.2(a) or Section 9.2(b) may be made by an
Indemnified Party against an Indemnifying Party unless and until the cumulative
total of all Losses suffered by such Indemnified Party exceeds or is reasonably
expected to exceed $500,000 (the "Threshold"); provided, however, that any Loss
incurred by Purchaser or its affiliates resulting from or arising out of (i) the
claims set forth on Schedule 4.3.12, (ii) the indemnification obligations of
---------------
GMAC under the Universal Self Care Agreement, (iii) any Excluded Liability; or
(iv) any Subsidiary Excluded Liability shall not be subject to such Threshold;
and provided further, that any Loss incurred by Seller or its affiliates
resulting from or arising out of any Subsidiary Assumed Liability, as defined in
the Subsidiary Assumption Agreement, shall not be subject to such Threshold. In
addition, the Threshold and the other provisions of this Section 9.2(d) shall
not be applicable to any Universal Claim which shall be handled in the manner
set forth in Section 9.1(b). Once Losses exceed the Threshold, the Indemnified
Party suffering such Losses may recover all Losses in excess of $250,000. The
foregoing limitations shall not apply to any Loss either intentionally caused by
the Indemnifying Party or of which the Indemnifying Party had Knowledge prior to
the Closing.
(e) SECURITY AND PRIORITY OF RECOURSE. The obligations of Seller under
---------------------------------
this Section 9.2 shall be secured as follows:
(i) Purchaser shall have the right to offset any Loss against any Cash
Adjustment payable pursuant to Section 1.6;
(ii) During the 18-month period following the Closing, the Purchaser
shall have the right to recover any Loss required to be indemnified pursuant to
Section 9.2(a) by cancellation of the Convertible Preferred Stock, the
Redeemable Preferred Stock, the Warrants and the Earn-Out Note (collectively,
but excluding any underlying Common Stock, the "Offset Shares"), to the extent
of the Loss, on a pro rata basis as among each separate class, series or type of
instrument comprising the Offset Shares, with the Offset Shares to be valued for
such purpose as follows: the Convertible Preferred Stock, at the higher of its
liquidation preference or the aggregate Current Market Price Per Share of the
underlying Common Stock, the Redeemable Preferred Stock, at its liquidation
preference, the Earn-Out Note, at its principal amount, and the Warrants, at the
excess of the Current Market Price Per Share (as defined in the Warrants) over
the exercise price of the Warrants; provided, however, that if the exercise
price of the Warrants is equal to or less than the Current Market Price Per
Share at the time such right of cancellation is exercised, the Warrants shall be
valued at zero and the amount of Warrants to be cancelled shall be the same
percentage of the total outstanding Warrants as the percentage of the total
outstanding Redeemable Preferred Stock that is cancelled to offset such Loss.
Seller shall have the right to pay in cash any Loss that would otherwise be paid
by cancellation pursuant to this Section 9.2(e)(ii). In the event Seller has
distributed or otherwise sold, assigned, transferred or disposed of any Offset
Shares within 18 months after the Closing Date, if Purchaser elects to exercise
its right of cancellation under this Section 9.2(e)(ii), Purchaser will exercise
such rights as follows:
56
(A) Purchaser shall allocate to each Member Group (as hereinafter
defined) such Member Group's Pro Rata Share (as hereinafter defined) of the
Loss;
(B) Purchaser shall cancel Offset Shares held by a Member Group in an
amount equal to the Member Group's Pro Rata Share of the Loss on a pro rata
basis as among each separate class, series or type of instrument comprising the
Offset Shares held by the Member Group;
(C) If (1) Purchaser has not recovered the entire amount of the Loss
after exercising its rights under subparagraphs (A) and (B) above because one or
more Member Groups held an insufficient amount of Offset Shares to satisfy such
Member Group's Pro Rata Share of the Loss, and (2) any other Member Group
continues to hold any Offset Shares, Purchaser shall be entitled to recover the
deficiency against any Offset Shares held by any such other Member Group
(irrespective of whether any such other Member Group has already satisfied its
Pro Rata Share of the Loss in accordance with subparagraphs (A) and (B) above)
by cancelling Offset Shares held by each such other Member Group (on a pro rata
basis if there is more than one such other Member Group, based on each such
other Member Group's Pro Rata Share of the Loss referred to in subparagraph (A)
above) on the same basis as specified in subparagraph (B) above;
(D) Each Member Group (and each member thereof) may elect in its sole
discretion to satisfy any portion of the Loss which would otherwise be satisfied
by cancellation of some or all of its Offset Shares hereunder by paying
Purchaser an amount in cash equal to such portion of the Loss, in which event
Purchaser would not be entitled to exercise the rights of cancellation hereunder
with respect to the portion of the Loss so satisfied in cash (it being
specifically understood that the relevant Member Group (or member thereof) may
select to pay cash in lieu of cancellation of any portion of any class, series
or type of instrument or any combination thereof comprising Offset Shares which
are held by it);
(E) For purposes of this Section 9.2(e)(ii), "Member Group" shall mean,
with respect to any member of Seller, such member together with each transferee
or subsequent holder of such member's Offset Shares or any subsequent transferee
or holder (other than any member of any other Member Group). "Pro Rata Share"
shall mean, with respect to, (1) any Member Group in which ▇▇▇▇ ▇. ▇▇▇▇▇▇ is a
member, 81.25%, (2) any Member Group in which ▇▇▇-▇▇▇▇▇▇ Investors, L.L.C. or SZ
Investments, L.L.C. is a member, 16.01%, and (3) any Member Group in which
Nissho is a member, 2.74%.
(iii) For periods following the 18-month period after the Closing, the
Purchaser shall have the right to recover any Loss required to be indemnified
pursuant to Section 9.2(a) by cancellation, to the extent of the Loss, of any
outstanding principal and the related accrued interest under the Earn-Out Note
up to, but not exceeding $15,000,000 in principal amount, and, to the extent the
original principal amount of the Earn-Out Note is less than $15,000,000,
Purchaser shall have the right to recover any Loss required to be indemnified
57
pursuant to Section 9.2(a) by cancellation, to the extent of the Loss, of the
Redeemable Preferred Stock at the rate of $1.10 of face amount of such
Redeemable Preferred Stock for each $1.00 of Loss. Any right of cancellation of
any outstanding principal and the related accrued interest under the Earn-Out
Note pursuant to this Section 9.2(e)(iii) shall expire as to the lesser of
one-third of the original principal amount of the Earn-Out Note or $5,000,000 on
each of the fourth, fifth and sixth anniversaries of the Closing as to claims
made by Purchaser after each such anniversary for indemnification of Losses
hereunder. Any right of cancellation of the Redeemable Preferred Stock under
this Section 9.2(e)(iii) shall expire as to one-third of the amount originally
subject to such cancellation on each of the eighth, ninth and tenth
anniversaries of the Closing as to claims made by Purchaser after each such
anniversary for indemnification of Losses hereunder.
(iv) In the event Purchaser asserts a claim for indemnification
against Seller and seeks to exercise its right of offset against the Offset
Shares pursuant to this Section 9.2(e), and Seller disputes such claim (by
delivery of written notice to Purchaser within 30 days following receipt of
notice of such claim pursuant to Section 9.2(g)), Purchaser agrees not to cancel
any instruments representing the Offset Shares until such dispute is finally
resolved; provided that Purchaser may suspend any payments and distributions
owing under such Offset Shares until such dispute is finally resolved.
(f) PROCEDURES.
----------
(i) The Indemnifying Party shall be entitled to defend any claim,
action, suit or proceeding made by any third party against an Indemnified Party;
provided, however, the Indemnified Party shall be entitled to participate in
such defense with counsel of its choice and at its own expense, and if the
Indemnifying Party does not provide a competent and vigorous defense then the
Indemnified Party's participation shall be at the expense of the Indemnifying
Party. The Indemnified Party shall provide such reasonable cooperation and
access to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to such matter; and the parties shall cooperate
with each other in order to ensure the proper and adequate defense thereof.
(ii) An Indemnifying Party shall not settle any claim subject to
indemnification hereunder without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed (provided
that an Indemnified Party shall not be deemed to be unreasonably withholding its
consent if such settlement does not include a full release of the Indemnified
Party).
(iii) With regard to claims of third parties for which indemnification
is payable hereunder, such indemnification shall be paid by the Indemnifying
Party (or amounts may be set off by the Indemnified Party) upon the earliest to
occur of: (A) the entry of a judgment against the Indemnified Party and the
expiration of any applicable appeal period, (B) the entry of an unappealable
judgment or final appellate decision against the Indemnified party, (C) the
settlement of the claim, (D) with respect to indemnities for Taxes, upon the
58
issuance of any final resolution by a taxation authority, or (E) with respect to
claims before any administrative or regulatory authority when the Loss is
finally determined and not subject to further review or appeal; provided,
however, the Indemnifying Party shall pay on the Indemnified Party's demand any
cost or expenses reasonably incurred by the Indemnified Party in defending or
otherwise dealing with such claim.
(g) NOTICE OF CLAIM. To seek indemnification hereunder, an Indemnified
---------------
Party shall notify the Indemnifying Party of any claim for indemnification,
specifying in reasonable detail the nature of the Loss and the amount or an
estimate of the amount thereof. No Indemnified Party may make a claim for
breach of a representation or warranty against an Indemnifying Party unless the
Indemnified Party delivers written notice of such breach (specifying in
reasonable detail the nature of such breach) to the Indemnifying Party prior to
the end of the survival period of such representation or warranty under Section
9.1(a) or (c). Provided that the Indemnified Party delivers written notice of
such breach to the Indemnifying Party in accordance with the preceding sentence,
the expiration of any representation or warranty in accordance with the
provisions of Section 9.1(a) or (c) shall not affect the Indemnified Party's
right to pursue any claim for a breach of such representation or warranty.
(h) NO PREJUDICE. Nothing herein shall prevent an Indemnified Party
-------------
from making a claim for a Loss hereunder notwithstanding its Knowledge of the
Loss or possibility of the Loss on, prior to, or after the Closing Date;
provided that each party agrees to notify the other party of any material loss
of which it has Knowledge prior to the Closing, but any Indemnified Party's
failure to provide such notice shall not relieve the Indemnifying Party of any
of its obligations hereunder or create in the Indemnifying Party any right to
indemnification.
(i) OTHER RIGHTS; INDEMNIFICATION; EXCLUSIVE REMEDY OF INDEMNIFIED
-------------------------------------------------------------------
PARTIES. Indemnification pursuant to the provisions of this Article 9 shall be
-------
the exclusive remedy of the Indemnified Parties for any misrepresentation or
breach of any warranty or covenant contained in this Agreement; provided,
however, that nothing herein shall be deemed to limit an Indemnified Party's
right to assert claims based on fraud or from pursuing equitable relief
(including, without limitation, injunctive relief). Except for actions based on
fraud, the only legal action which may be asserted by an Indemnified Party with
respect to any matter which is the subject of this Article 9 shall be a contract
action to enforce, or to recover damages for the breach of, this Article 9.
(j) LIMITATION ON INDEMNIFICATION OBLIGATIONS. The obligations of any
------------------------------------------
Indemnifying Party under Sections 9.2(a) or (b) are subject to the limitations
that any insurance proceeds (net of applicable deductibles) actually received by
the Indemnified Party in connection with the event giving rise to the claim for
indemnification shall be netted against the Indemnified Party's Losses arising
out of such event.
(k) TAX BENEFIT. The amount of any recovery by Indemnified Parties
------------
pursuant to Section 9.2(a) or (b), as the case may be, shall be net of any
foreign, Federal, state and/or local income tax benefits inuring to the
Indemnified Parties as a result of the state of facts which entitled the
Indemnified Parties to recover from the Indemnifying Parties pursuant to Section
9.2(a) or (b).
59
ARTICLE 10
----------
TERMINATION
-----------
This Agreement may be terminated by Purchaser or Seller for the reasons set
forth in this Article 10 at any time prior to or on the Closing Date upon
written notice to the other parties as follows. These events of termination are
intended to operate independently from any other agreements, representations,
warranties and/or conditions contained in this Agreement.
10.1 MATERIAL ADVERSE CHANGE - SUBSIDIARIES. By Purchaser if, after
-----------------------------------------
the date hereof, any event or events occur which have, individually or in the
aggregate, a Material Adverse Effect or if the Seller or any of the Subsidiaries
shall have suffered a material loss of or damage to any of its properties or
assets, which change, loss or damage materially affects or impairs the ability
of the Seller and the Subsidiaries, taken as a whole, to conduct their
businesses.
10.2 MATERIAL ADVERSE CHANGE - PURCHASER. By Seller if, after the date
-----------------------------------
hereof, any event or events occur which have, individually or in the aggregate,
a Purchaser Material Adverse Effect or Purchaser shall have suffered a material
loss of or damage to any of its properties or assets, which change, loss or
damage materially affects or impairs the ability of the Purchaser and its
subsidiaries, taken as a whole, to conduct their businesses.
10.3 NONCOMPLIANCE OF SELLER. By Purchaser, if the terms, covenants or
-----------------------
conditions of this Agreement to be complied with or performed by Seller before
the Closing shall not have been complied with or performed in all material
respects at or before the Closing Date and such non-compliance or
non-performance shall not have been waived by Purchaser.
10.4 NONCOMPLIANCE OF PURCHASER. By Seller, if the terms, covenants or
--------------------------
conditions of this Agreement to be complied with or performed by Purchaser
before the Closing shall not have been complied with or performed in all
material respects at or before the Closing Date and such non-compliance or
non-performance shall not have been waived by Seller.
10.5 FAILURE TO DISCLOSE - SELLER. By Purchaser, if it learns of any
------------------------------
material fact or condition not disclosed in this Agreement or the Schedules
which was required to be disclosed by the Seller pursuant to any provision of
this Agreement at or prior to the date of execution hereof with respect to the
business, properties, assets or earnings of the Seller or the Subsidiaries which
has a Material Adverse Effect.
10.6 FAILURE TO DISCLOSE - PURCHASER. By the Seller, if it learns of
---------------------------------
any material fact or condition not disclosed in this Agreement which was
required to be disclosed by Purchaser.
10.7 ADVERSE PROCEEDINGS. By the Seller or Purchaser, if any action,
--------------------
suit or proceeding shall have been instituted against any party to this
Agreement to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated herein,
which, in the good faith opinion of Seller or Purchaser, makes consummation of
the transactions herein contemplated inadvisable.
60
10.8 TERMINATION DATE. By the Seller or Purchaser, if the Closing has
-----------------
not been consummated on or prior to February 28, 1999.
10.9 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
-----------------------
to Section 10.1 or 10.6, or pursuant to Section 10.4 or 10.5 for a breach that
is not willful or intentional, or pursuant to Section 10.7 in the absence of any
material breach hereunder by Purchaser or Seller, all rights and obligations of
the parties hereto under this Agreement shall terminate, and no party hereto
shall have any further liability or obligation hereunder to any other party
hereto, except that the provisions of Section 3.1 hereof shall survive the
termination of this Agreement for any reason. If this Agreement is terminated
pursuant to Section 10.2, or 10.3, or, in the case of 10.4 or 10.5 for a breach
that is willful or intentional, the complying party or parties shall be entitled
to exercise and pursue all rights and remedies available to it or them
hereunder, at law, in equity or otherwise, and shall be entitled to recover from
the other party or parties all of its or their out-of-pocket expenses incurred
in connection with or relating to the negotiation, preparation, execution and
delivery of this Agreement.
ARTICLE 11
----------
[RESERVED]
----------
[RESERVED]
ARTICLE 12
----------
MISCELLANEOUS
-------------
12.1 NOTICES. All notices required or permitted to be given hereunder
-------
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given 3 business days after being deposited in the United States
mail, postage prepaid, registered or certified mail. Notices delivered by hand,
by facsimile, or by nationally recognized private carrier shall be deemed given
on receipt if received on a business day or on the first business day following
receipt if not received on a business day; provided, however, that a notice
delivered by facsimile shall only be effective if such notice is also delivered
by hand, or by nationally recognized private courier, or deposited in the Untied
States mail, postage prepaid, registered or certified mail, on or before 2
business days after its delivery by facsimile. All notices shall be addressed
as follows:
61
(a) To Purchaser:
Matria Healthcare, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
NationsBank Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, III, Esquire
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) To Seller:
▇▇▇▇▇▇ Medical Management, L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough, L.L.P.
First Union Plaza, Suite 1400
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
62
With a copy to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, P.C.
Two ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
12.2 ENTIRE AGREEMENT. This Agreement supersedes all prior discussions
----------------
and agreements between the parties hereto with respect to the matters contained
herein and the agreements referred to herein contain the sole and entire
agreement among the parties hereto with respect to the subject matter hereof and
the transactions contemplated herein.
12.3 WAIVER; AMENDMENT. Prior to or on the Closing Date, each party
------------------
hereto shall have the right to waive any default in the performance of any term
of this Agreement by any other party hereto, to waive or extend the time for the
fulfillment by such other party of any or all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to such party's
obligations under this Agreement, except any condition which, if not satisfied,
would result in the violation of any law or applicable governmental regulation.
No waiver, termination or discharge of this Agreement, or any of the terms or
provisions hereof, shall be binding upon the other parties hereto unless
confirmed in writing. No waiver by any party of any term or provision of this
Agreement or of any default hereunder shall affect such party's rights
thereafter to enforce such term or provision or to exercise any right or remedy
in the event of any other default, whether or not similar. This Agreement may
not be modified or amended except by a writing executed by all of the parties
hereto.
12.4 COUNTERPARTS, FAXED SIGNATURES, HEADINGS, ETC. This Agreement may
----------------------------------------------
be executed simultaneously in any number of counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument. Any signature page of any such counterpart, or any electronic
facsimile thereof, may be attached or appended to any other counterpart to
complete a fully executed counterpart of this Agreement, and any telecopy or
other facsimile transmission of any signature shall be deemed an original and
shall bind such party. The headings herein are for convenience of reference only
and shall not be deemed a part of this Agreement. A pronoun in one gender
includes and applies to the other gender as well.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of Purchaser, Seller and their respective successors
and assigns; provided, however, that this Agreement may not be assigned by
either party without the prior written consent of the other party, except that
Purchaser may assign this Agreement to any wholly owned subsidiary; provided
that such assignment shall not relieve Purchaser of its obligations hereunder.
12.6 GOVERNING LAW. The validity and effect of this Agreement and the
--------------
rights and obligations of the parties hereto shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia.
63
12.7 REMEDIES, DAMAGES, INJUNCTIONS AND SPECIFIC PERFORMANCE. It is
----------------------------------------------------------
expressly understood and agreed that many of the covenants, agreements and
services to be rendered and performed by the parties pursuant to this Agreement
shall survive the Closing Date and are special, unique, and of an extraordinary
character, and in the event of any default, breach or threatened breach by
either party of any term, provision or Section of this Agreement to be performed
by such persons, or any of them, hereunder, either party shall be entitled, if
it so elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, and shall be entitled to such relief
as may be available to it pursuant hereto, at law or in equity, including,
without limiting the generality of the foregoing, any proceedings to: (i)
obtain damages for any breach of this Agreement; (ii) order the specific
performance thereof; or (iii) enjoin the other party from breaching such
provisions.
12.8 SEVERABILITY, INTERPRETATION. If any provision of this Agreement
-----------------------------
shall be held void, voidable, invalid or inoperative, no other provision of this
Agreement shall be affected as a result thereof, and, accordingly, the remaining
provisions of this Agreement shall remain in full force and effect as though
such void, voidable, invalid or inoperative provision had not been contained
herein and all terms, provisions, Sections, sub-sections or paragraphs shall be
interpreted and construed in such a manner as to carry out fully the intention
of the parties hereto. This Agreement shall not be construed more strictly
against either party hereto regardless of which party is responsible for its
preparation, it being agreed that this Agreement was fully negotiated by both
parties.
12.9 FURTHER ASSURANCES. Upon the reasonable request of any other
-------------------
party, each party hereto agrees to take any and all actions, including, without
limitation, the execution of certificates, documents or instruments, necessary
or appropriate to give effect to the terms and conditions set forth in this
Agreement.
12.10 LAW AND GAAP APPLICABLE TO FOREIGN SUBSIDIARIES. For purposes of
-----------------------------------------------
this Agreement, including but not limited to for purposes of the representations
contained in Article 4, unless otherwise stipulated, the laws, regulations,
rules, judgments, orders, decrees, book keeping and accounting rules applicable
to the Foreign Subsidiaries are those applicable in their own jurisdiction or in
the jurisdiction where they are exercising substantial business activities. In
no case shall this contract require the Foreign Subsidiaries to comply with any
laws, regulations, rules, judgments, orders, decrees or bookkeeping and
accounting rules unless they are applicable to the affected Foreign Subsidiary
under general principles of law.
64
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day and year first above written.
"SELLER"
------
▇▇▇▇▇▇ MEDICAL MANAGEMENT, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------
Title: President and CEO
-------------------
"PURCHASER"
---------
MATRIA HEALTHCARE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------
Title: President and Chief Executive Officer
-------------------------------------
[CORPORATE SEAL]
65