Exhibit 10.42
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("AGREEMENT") is made and entered into as
of the date below stated, by, between and amongst MANAGED RESPIRATORY CARE
SERVICES, INC. ("MRCS"), an Arizona corporation ("Seller") with principal
offices at Phoenix, Arizona; ▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), and ▇▇▇ ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇"), each and all of whom are the sole stockholders, directors and
officers of Seller (individually referred to by their last names, as indicated
above, and collectively referred to as "Stockholders"); and SCRS &
COMMUNICOLOGY, INC. OF OHIO, an Ohio corporation ("Buyer", or sometimes referred
to as "SCRS-Ohio"), with principal offices at Laguna Hills, California.
Whereas, Seller is in the business of providing or furnishing marketing,
contract management and practice management services for and on behalf of
respiratory care therapists or the employers of such therapists (the "Seller's
Business"); and
Whereas, the parties hereto desire that Seller shall sell to Buyer, and that
Buyer shall purchase from Seller, all of the assets directly related to the
operation of the Seller's Business (sometimes hereinafter referred to as the
"Purchased Assets"), as more fully identified in this Agreement or in the
exhibits or other schedules appended hereto, upon the terms and conditions
hereinafter set forth; and
Whereas, the Seller and Buyer have entered into a certain Letter of Intent,
dated and made as of June 13, 1996, together with any amendments or supplements
thereto, generally describing the proposed acquisition by Buyer of the Purchased
Assets and Seller's Business, which Letter of Intent is to be and shall hereby
be superseded by and upon timely execution of this Agreement; and
Whereas, ▇▇▇▇▇▇▇ owns fifty-one percent (51%) of the issued and outstanding
shares of stock of Seller, is a director and officer of Seller, is one of the
persons responsible for origination and development of the Seller's Business,
and is a full-time employee of Seller directing and planning the day-to-day
activities of Seller's Business; and
Whereas, ▇▇▇▇▇▇▇ owns forty-nine percent (49%) of the issued and outstanding
shares of stock of Seller, is a director and officer of Seller, is one of the
persons responsible for origination and development of the Seller's Business and
is a full-time employee of Seller directing and planning the day-to-day
activities of Seller's Business;
Whereas, Stockholders (collectively or as individually named, as appropriate)
participate in, and have executed, this Agreement primarily for the purpose of
assuming and being personally and primarily bound, jointly and severally, by
each, every and all of Seller's agreements, indemnities, representations and
warranties contained herein, the same as though Stockholders, and each of them
as specifically or collectively named, were a seller hereunder, and having made
such agreements, indemnities, representations and warranties to Buyer,
personally and directly with Seller to Buyer as obligations of a principal, and
not as a surety (each Stockholder hereby conclusively acknowledging his or her
direct, personal benefit hereunder); the parties, however, now herewith agreeing
that this obligation of Stockholders is not intended to nor shall it create
either directly or indirectly any new liability or obligation on the behalf of
Stockholders as concerns or relates to any person or other entity not a party to
this Agreement; in addition, Stockholders hereby join in and otherwise
participate in this Agreement, and execute it individually as it relates to
other contractual agreements they herewith make, referenced herein, which shall
become effective upon execution and consummation of this Agreement;
Now, Therefore, in consideration of the premises and mutual covenants and
agreements herein contained, and for other good and valuable consideration
(including the purchase price specified in Article Three, below), the
sufficiency of which is hereby acknowledged, Seller, Stockholders (collectively
or individually, to the extent as provided herein) and Buyer do mutually agree
as follows:
ARTICLE ONE. SALE AND PURCHASE OF ASSETS
Section 1.1. Assets Sold and Purchased. Subject to and on the terms and
conditions set forth herein, at the Closing (as defined in Section 4.1., which
shall occur on the "Closing Date"), Seller shall sell, deliver, transfer and
assign to Buyer free and clear of all liens, claims, charges, restrictions and
encumbrances of every kind, nature and description (except only any as are
expressly identified as such, set forth in Exhibit 2.1, and which Buyer, in
connection therewith, shall have agreed to accept), and Buyer shall purchase for
the consideration herein provided, all of the assets, properties and business of
Seller of every kind, nature and description, wherever located, whether tangible
or intangible, and whether or not fully depreciated or amortized, as the same
shall exist as of the Closing Date (and excepting only such specifically
identified assets as are to be retained by Seller pursuant to Section 1.2.
hereof). Such assets to be purchased by Buyer, hereinafter sometimes referred to
as the "Purchased Assets", are those specifically set forth in Exhibit 1.1.,
attached hereto, and which is intended and shall include all of those assets now
and presently required for and used in the operation of Seller's Business,
including existing or pending licenses, contracts and incomes from and after
Closing Date, and expressly including the following: (a) All furniture,
fixtures, equipment, and inventory owned by Seller; (b) All right, title and
interest in and to the name "Managed Respiratory Care Services, Inc." and any
registered copyright or service ▇▇▇▇ related thereto; (c) All intellectual
property rights of Seller, and trade secrets including the Seller's client list;
(d) All right, title and interest of Seller in, to and under each assignable
license, contract, agreement, commercial document, memorandum, letter of intent,
order or commitment, whether written or oral, in the name of or intended for the
benefit of Seller and related to Seller's Business; (e) All accounts, licenses
and prospective customer lists, files, correspondence and databases and any
other information relating to the Purchased Assets, including without
limitation, any prospects list (except for any of the foregoing which Seller
requires to operate its business after the Closing or is required to retain in
order to comply with any applicable law, as to which only copies thereof are to
be conveyed hereunder (collectively, the "Purchased Asset Information"); and (f)
All membership or other similar interests in "Phoenix Solutions, LLC", or any
contracts regarding such entity.
Section 1.2. Assets Retained by Seller. Seller shall not sell, deliver,
transfer, assign or convey, and Buyer shall not purchase, the assets of Seller
(if any) as are set forth in Exhibit 1.2 hereto. Such assets are hereinafter
referred to as the "Retained Assets".
Section 1.3. Instruments of Transfer. At Closing, Seller shall deliver
to Buyer bills of sale, endorsements, assignments, and such other good and
sufficient documents and instruments of transfer as shall be effective, in the
opinion of Seller's counsel (see Section 4.2(f)(ix) of this Agreement), and
acceptable to Buyer's counsel, to vest in Buyer good, marketable and
indefeasible title to the Purchased Assets as contemplated hereby.
Section 1.4. Further Assurances by Seller and Stockholders. Seller and
Stockholders further agree that, at any time and from time to time after
Closing, they will, upon the request of Buyer and at Seller's and Stockholder's
sole expense, do, execute, acknowledge, and deliver, or will use their best
efforts to cause to be done, executed, acknowledged or delivered, all such
further acts, assignments, transfers, conveyances, or assurances as may be
reasonably required in order to further transfer, assign, convey, assure and
confirm to Buyer, or to aid and assist in the collection or reducing to
possession by Buyer, of any of the Purchased Assets or to vest in Buyer good,
marketable and indefeasible title to such Purchased Assets.
Section 1.5. Assignment of Contracts, Rights, Etc. Anything contained
in this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any contract, license, lease, commitment,
sales order, purchase order, or any claim or right of benefit arising thereunder
or resulting therefrom, if an attempted assignment thereof, without the consent
of a third party thereto (which third party is not a party to this Agreement)
would constitute a breach thereof or in any way affect the rights of Buyer
thereunder. In such event, Seller and Stockholders shall use their best efforts
to obtain the consent of the third party to the assignment thereof to Buyer in
all cases in which such consent is required for assignment or transfer. If such
consent is not obtained, Seller and Stockholders agree to cooperate with Buyer
in any reasonable arrangements designed to provide and assure to Buyer the
benefits thereunder, including enforcement for the benefit of Buyer of any and
all rights of Seller against the third party arising out of the cancellation
undertaken or attempted by such third party or otherwise.
Section 1.6. Access by Seller and Stockholders. For a period of three
years after Closing or such longer period of time as may be necessary for
Seller's or Stockholders' compliance with requirements of any taxing
authorities, Buyer shall, during normal business hours, provide Seller,
Stockholders and their authorized agents or representatives, with such access to
the books and records of the Seller's Business, as are to be conveyed,
transferred and assigned to Buyer in connection with the Purchased Assets, as
the Seller and Stockholders may reasonably require. Such access shall be limited
to the books and records of the Seller's Business prior to the Closing Date.
Seller and Stockholders shall be entitled, at their own expense, to make
extracts of copies of such books and records. Notwithstanding anything contained
herein to the contrary, Buyer shall not be obligated to give Seller,
Stockholders or any such agents or representatives, access to any material
relating to any period subsequent to the Closing Date or developed by Buyer at
its expense or for its benefit, including, without limitation, tax returns for
any subsequent periods of time, provided, Buyer shall give reasonable access to
Seller, as Seller may reasonably determine to be directly relevant, of such
books and records developed and maintained by Buyer after Closing Date, and as
necessary to verify the amount of any Earn-Out Payments to which Seller may
become entitled, after Closing Date, under Section 3.4 (or related section, if
applicable) of this Agreement.
ARTICLE TWO. ASSUMPTION OF LIABILITIES
Section 2.1. Liabilities Assumed. Buyer shall not assume any
liabilities (or obligations) whatsoever of either Seller or Stockholders,
whether in connection with Seller's Business or the Purchased Assets, except
those specifically listed, identified and enumerated in Exhibit 2.1., attached
hereto (the "Assumed Liabilities").
Section 2.2. Liabilities Retained. Seller agrees to retain all
liabilities and obligations of Seller, pertaining to the Seller's Business and
the Purchased Assets, except as specifically assumed by Buyer and as fully shown
in Exhibit 2.1. (if any). Except as so shown, Seller shall remain fully
obligated, and shall discharge all liabilities and obligations thereof
(hereinafter collectively referred to as the "Liabilities)", including but not
limited to the following: (a) All long-term liabilities of Seller, including the
current portion thereof; (b) All liabilities for federal, state, provincial,
local and foreign taxes relating to Seller's Business, whether arising prior to
the Closing Date or thereafter, and related to the Seller's prior use, ownership
or possession, or Seller's transfer, conveyance and assignment, of the Purchased
Assets contemplated by this Agreement, including without limitation, property,
franchise, gross receipts, sales, and income taxes of every kind and
description; (c) All liabilities of Seller to its accounts, clients or
customers, arising out of or connected with matters on or prior to the Closing
Date; (d) All liabilities (including short term) of Seller of any nature
whatsoever, based on events occurring before the Closing Date or services
performed by Seller before the Closing Date, notwithstanding that the date on
which the claim is first made known is after the Closing Date, including without
limitation those liabilities pertaining to any employment relationship, or
regulations or laws relating to health and safety of employees; regulations or
laws relating to hazardous materials and pollution of the environment; (e) All
liabilities of Seller with respect to any pending, threatened or unasserted
litigation, claims, demands, investigations or proceedings relating to events on
or before the Closing Date, or arising thereafter; (f) All liabilities of Seller
with respect to or arising out of the transactions contemplated by this
Agreement; (g) Any liability, the existence of which is a breach of any
representation, warranty, or covenant of either Seller or Stockholders (whether
collectively, or individually by name) under or within this Agreement; and (h)
All liabilities of Seller with respect to all employee pay, salary, benefit and
bonus plans based on events occurring or arising prior to the Closing Date, or
arising thereafter.
ARTICLE THREE. CONSIDERATION FOR PURCHASED ASSETS
Section 3.1. Total Purchase Price to be Determined. Buyer, at Closing and
from time to time thereafter as provided in this Agreement, shall pay Seller for
the Purchased Assets a total money purchase price consisting of a "Minimum
Purchase Price" (see Section 3.2), and "Earn-Out Payments", in an amount to be
determined after Closing in accord with this Article Three. In no event shall
the total of Minimum Purchase Price and Earn-Out Payments, regardless of when
determined or payable, exceed the sum of $800,000.00.
Section 3.2. Closing; "Minimum Purchase Price" due at Closing. On Closing
Date, and if the transaction is then ready to be consummated to the reasonable
satisfaction of each party, and in a manner consistent with the terms of this
Agreement, and if Seller and Stockholders shall have performed prior to Closing
all matters as required of them under this Agreement, and all conditions shall
have been satisfied or otherwise waived by the party having the power to so
waive, Buyer shall thereupon pay Seller the sum of $300,000.00, by cashier's
check or money order payable to Seller's order, or wire transfer to Seller's
designated account. This sum shall be the "minimum purchase price" to be paid by
Buyer.
Section 3.3. "Earn-Out Payments"; Definitions and Principles. The
additional amount of the purchase price (over and above that payable under
Section 3.2), if any, shall be known as the "Earn-Out Payments", as may be
determined to be earned by Seller, and due and owing by Buyer, from time to time
following Closing Date and during the "Earn-Out Period"(which begins the first
day following the Closing Date and ends December 31, 1998), all pursuant to the
provisions of this Section 3.3 and the formula in following Section 3.4.
Earn-Out Payments shall be based on "After-Tax Profitability" ("ATP"), which for
purposes of this Section 3.3 (and related sections) shall be determined in
accord with the following: Gross Revenues (as defined for each of the accounting
periods contained within the Earn-out Period) of that defined or described
portion of Buyer's RT Division (as more fully qualified herein), less Cost of
Sales, Overhead, General & Administrative Costs, Amortization, Interest,
Depreciation, and Other Expenses, (in accord with generally accepted accounting
principles, consistently applied) and less Taxes, for each of the respective
accounting periods ("Years") during the Earn-Out Period. The result, so
determined, subject to the definitions and determinations hereinafter provided,
shall be After-Tax Profitability ("ATP"), upon which determination the amount of
any Earn-Out Payment shall ultimately be further determined. As a general rule,
for purposes of determining Earn-Out Payments under this (and related) sections
of this Agreement, the parties intend that Buyer's RT Division shall include
operations under and sales generated by those Purchased Assets as comprised the
Seller's Business immediately prior to Closing Date, together with that such new
and additional business as Buyer's RT Division, as initially constituted, shall
develop with either existing accounts or third-parties unrelated to Buyer
following Closing Date. Determination of Gross Revenues of Buyer's RT Division,
for this purpose, shall not include any sales derived from the assets included
within such division, if any, hereafter purchased from a third party seller.
Further, unless included within Gross Revenue for a particular Year (by and
under the definitions following), Gross Revenue of the Buyer's RT Division shall
not include sales directly or indirectly related to Regency Health Services,
Inc. (Buyer's parent corporation), or any subsidiaries thereof, or divisions of
subsidiaries. The following definitions (or principles) shall be applied to
determine ATP, which, following adjustments and subject to those provisions more
fully stated in Section 3.4, shall yield the Earn-Out Payments to be determined
during the Earn-Out Period: o Gross Revenue (Year One): the gross revenues of
Buyer's RT Division, excluding sixty per cent (60%) of sales directly or related
to Buyer's parent corporation, Regency Health Services, Inc., and subsidiaries
or divisions owned by said parent corporation. o Gross Revenues (Year Two): the
gross revenues of Buyer's RT Division, excluding sixty per cent (60%) of those
sales directly or related to Buyer's parent corporation, Regency Health
Services, Inc. and subsidiaries or divisions owned by said parent corporation
arising during that period of time of Year Two as is within 12 months of the
Closing Date (and excluding all such sales thereafter). o Gross Revenues (Year
Three): the gross revenues of Buyer's RT Division, excluding those sales
directly or related to Buyer's parent corporation, Regency Health Services, Inc.
and subsidiaries or divisions owned by said parent corporation. o Cost of Sales:
all expenses directly attributable to generation and support of gross revenues.
o Overhead: all expenses indirectly attributable to generation and support of
gross revenues. o General & Administrative Expenses: those expenses necessary to
support the RT Division, and which cannot be directly or indirectly allocated to
any portion of the gross revenue. o Depreciation, Interest, and Other Expenses:
determinations to be made consistent with generally accepted accounting
principles. o Taxes: all federal, state, local and other governmental taxes
based on income and profit, determined to be applicable to the Buyer's RT
Division, during the Earn-out Period, without regard to any surtax exemption. o
Inter-company allocations of expenses: inter-company (or divisional) allocations
shall be limited to those expenses which, because of cost and/or efficiency
advantages, can be directly associated with the operation of Buyer's RT
Division. Buyer will provide detailed explanation in support of the allocation.
For purposes of applying and determining the Earn-Out Payments as may
be due Seller from time to time, Buyer shall track and record ATP (as that term
is specially defined in and for the purposes of this Section 3.3 and related
sections hereof) of Buyer's RT Division (as limited in this Section 3.3) during
three (3) consecutive accounting periods or calendar years, namely, 1996 (from
and after Closing Date only, expressly excluding any period of calendar year
1996 prior to the Closing Date), 1997 and 1998 (such periods or years being
collectively referred to as the "Earn-Out Period", each such year being
individually referred to, in succession, as "Year One", "Year Two", and "Year
Three"). If ATP for the Year in question, is equal to or greater than "ATP
Target" as shown in Column 2 of table, Section 3.4, below, the Earn-Out Payment
shall be deemed fully earned, due and payable. If ATP for the Year in question
is less than "ATP Target" as shown in Column 2, table, Section 3.4, the Earn-Out
Payment shall be reduced by a ratio of $3 for each $1 said ATP is less than the
ATP Target, to be applied until the Earn-Out Payment for the Year reaches zero.
Earn-Out Payments are not dependent upon Stockholders' continued employment by
Buyer, nor upon the maintenance of such employment for any particular or minimum
period of time.
Section 3.4. Table of ATP Targets, Earn-Out Payments. When ATP equals or
exceeds ATP Target, Earn-Out Payments ("EOP") shall be deemed fully earned by
Seller, and become fully payable by Buyer in accord with the following table:
Column 1 Column 2 Column 3
Year ATP Target EOP
One (1996) $63,000.00 $25,000.00
Two (1997) $186,000.00 $175,000.00
Three (1998) $293,000.00 $300,000.00
In no event shall the cumulative total of the Earn-Out Payments, for the
entire Earn-Out Period, exceed the sum of $500,000.00. If ATP does not equal or
exceed ATP Target, in one or more Years, apply EOP reduction formula stated in
Section 3.3.
Section 3.5. Delivery of Buyer's RT Division Financial Statements. Within
forty-five days after the end of each of the Years comprising the Earn-Out
Period, Buyer shall have prepared and delivered to Seller internally-prepared
and maintained balance sheet and income statements for such year for Buyer's RT
Division (the "Financial Statements"), prepared in accordance with generally
accepted accounting principles (GAAP), consistently applied, along with a
statement in reasonable detail computing and showing Gross Revenue (as variously
defined in Section 3.3, for the Year in question), along with a "Earn-Out
Report", containing an identification of all other applied elements and items
leading to a determination of ATP, with all necessary back up calculations and
determinations.
Section 3.6. Calculation of Earn-Out Payments; Dispute by Seller. (A) The
contents of the Financial Statements and Earn-Out Report, as determining the
Earn-Out Payment payable for that Year, in accord with Section 3.3 and Section
3.4, shall be binding upon the parties unless Seller gives written notice
("Earn-Out Report Dispute Notice") that Seller disputes the calculations
therein, serving such Earn-Out Report Dispute Notice within twenty (20) days
after the Financial Statements and Earn-Out Report have been transmitted to
Seller. (B) If Seller delivers an Earn-Out Report Dispute Notice in accordance
with Subsection 3.6(A), such notice shall set forth in reasonable detail the
exclusions, calculations or determinations being disputed in good faith. If
Buyer and Seller have not resolved the dispute within fifteen (15) days after
Seller serves the Earn-Out Report Dispute Notice, the parties shall promptly
submit the dispute to a nationally recognized, mutually-agreed, "Big Six"
accounting firm or its successor (other than any such auditors used by Buyer
within the previous three (3) years) with instructions to finally determine, by
compilation or review, within thirty (30) days, Gross Revenue (as variously
defined in Section 3.3, for the Year in question), along with such other
necessary and appropriate determinations leading to ATP (as that term is
specially defined in and for the purpose of Section 3.3, and related sections),
of the Buyer's RT Division (as qualified in Section 3.3) and whether ATP, when
compared to ATP Target, is sufficient to entitle Seller to an Earn-Out Payment
(whether in full, per the table in Section 3.4, or reduced by the formula in
Section 3.3). All expenses relating to such determination, including attorneys'
fees, shall be borne equally by the parties. The accounting firm so selected
shall by compilation or review set forth the exclusions, calculations and
determinations, thereby establishing the Auditor's Earn-Out Report for the Year
in question, and such Auditor's Earn-Out Report shall thereupon become binding
upon and non-appealable by the parties.
Section 3.7. Payments. (A). The Earn-Out Payments, if, when and to
the extent deemed earned, shall be paid to Seller according to
the following schedule:
Year: EOP Due Date:
1996 March 15, 1997
1997 March 15, 1998
1998 ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇). Except as provided in Subsection 3.6(A), any amount of Earn-Out Payments
deemed earned, and due and owing from Buyer, but not paid in full within ten
(10) days following the due date specified in Subsection 3.7(A), shall
thereafter bear interest until paid, at ten percent (10%) per annum. (C). If the
Auditor's Earn-Out Report determines that any additional amount of Earn-Out
Payments are earned, and due and owing by Buyer, the Earn-Out Payment shall be
paid to Seller within ten (10) days of the determination, and if not so paid,
the amount of any unpaid Earn-Out Payments shall bear interest as provided in
Subsection 3.7(B).
Section 3.8. Continuation of Operations. Buyer represents and agrees as
follows: (a) that all Purchased Assets, including all contracts, agreements,
commitments and any renewals, modifications or amendments to same, will be
retained in Buyer's RT Division during the Earn-Out Period (Buyer, however,
shall not be in breach for any loss, diminishment, cancellation, termination or
curtailment of any such Purchased Assets by the actions or activities of third
parties, including the cancellation or termination of any contract or agreement
by the other party thereto, nor shall Buyer be prevented, in good faith, from
cancelling, terminating or curtailing one or more operations under any
particular contract, agreement, commitment or any renewals by reason of such
operations generating inadequate sales, margins or profits, in Buyer's sound
business discretion); (b) that, unless otherwise provided for in (a) above, the
operations of Seller's Business, as existed immediately prior to Closing Date,
will be continued and developed in Buyer's RT Division (with the direction,
efforts, full cooperation and assistance of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, during such
time as they each may be employed by Buyer's RT Division following Closing Date,
pursuant to other portions of this Agreement) during the Earn-Out Period; (c)
that Buyer's RT Division will not merge with, and that the assets of the RT
Division will not be sold to, or otherwise consolidate with any other division
or entity, affiliated with Buyer or otherwise, during the Earn-Out Period
(without Seller's written consent, which consent shall not be unreasonably
refused if and in the event Buyer's proposed transfer, by sale or otherwise, of
all or any Purchased Assets or the RT Division is to an entity, division or a
third party which transferee shall have expressly agreed to assume the
continuing responsibilities of Buyer under this Agreement, including the ongoing
obligation of Buyer to determine and pay to Seller the Earn-Out Payments, and
shall have further agreed to continue the operations of the Buyer's RT Division
consistently and in substantially the same manner as Buyer shall have undertaken
same following Closing Date); and (d) that until end of the Earn-Out Period,
neither Buyer's parent corporation or other subsidiaries thereof will not
establish or own a business directly competing with Buyer's RT Division, or any
business that would compete with the Seller's Business as it existed immediately
prior to the Closing Date (for purposes of this Section 3.8, "Competing
Business" shall mean any business that engages in, and "Compete" shall mean the
practice of, providing or furnishing marketing, contract management or practice
management services for and on behalf of respiratory care therapists or
employers of such therapists within the state of Arizona, provided Buyer shall
not be precluded from acquiring the assets of any such Competing Business, to be
operated as part of the RT Division); and (e) that Buyer will maintain adequate
books and records during the Earn-Out Period and for two years thereafter in
order to allow Seller to review the books and records during reasonable business
hours.
Section 3.9. Buyer's Default and Seller's Remedy. (A) Each of the following
shall constitute an Event of Default with respect to Buyer's continued
performance under this Article Three, when occurring or transpiring during the
Earn-Out Period: (1) failure by Buyer to issue payment of any Earn-Out Payment
(when such is deemed earned, due and owing under the Earn-Out Report) by the due
date specified in Section 3.7, or within ten (10) days thereafter; (2) failure
by Buyer to provide Financial Statements or the Earn-Out Report to Seller in a
timely manner as required by Section 3.5; (3) the transfer, by sale or
otherwise, of any of the Purchased Assets to any other entity or division other
than Buyer's RT Division, without Seller's written consent, which consent shall
not be unreasonably refused if and in the event Buyer's proposed transfer (by
sale or otherwise) of all or any Purchased Assets is to an entity, division or a
third party which transferee shall have expressly agreed to assume the
continuing responsibilities of Buyer under this Agreement, including the
determination and payment to Seller of any remaining Earn-Out Payments, when and
as due, and shall have further agreed to continue the operations of the Buyer's
RT Division consistently and in substantially the same manner as Buyer shall
have undertaken same following Closing Date; (4) Buyer's discontinuance of the
RT Division prior to the expiration of the Earn-Out Period (unless by transfer,
by sale or otherwise, to which Seller shall have consented); (5) engagement by
Buyer, or its parent corporation, in any Competing Business, or any business
that would Compete with the business of Seller's Business as it existed prior to
the Closing Date, and within any point in Arizona; or (6) any bankruptcy,
reorganization, debt arrangement or other proceeding under any bankruptcy or
insolvency law, or any dissolution or liquidation proceeding, instituted by or
against Buyer or a subsidiary of Buyer, if not dismissed within 90 days.
(B) In the event one or more Events of Default have occurred, Buyer shall be in
breach of this Agreement and Seller is then entitled to pursue all available
remedies, including damages or specific performance, to which Seller may then be
entitled under applicable law.
ARTICLE FOUR. THE CLOSING
Section 4.1. Date, Time and Place. Closing of the purchase and sale of all
Purchased Assets, as contemplated herein, shall take place on August 9, 1996, at
the hour of 11:00 A.M., local time, at the Buyer's offices at Laguna Hills,
California, or such earlier date and hour as the parties may mutually agree
upon, or such later date and hour, or at such other place, as the parties may
mutually agree in writing. If Closing does not take place because of the actions
or inactions of Seller, or if there is any material, adverse change to the
Purchased Assets, or the Seller's Business generated thereby, as a result of any
condition, occurrence or event predating the Closing, then and in such event,
Buyer may, at Buyer's sole option, declare this Agreement null and void, no
longer in effect and neither party shall have any further obligation or
liability hereunder. If Closing does not take place solely because of the
actions or inactions of Buyer, then and in such event Seller may, at Seller's
sole option, declare this Agreement null and void, no longer in effect.
Section 4.2. Conditions Precedent to Buyer's Obligations. The obligation of
Buyer to perform in accordance with this Agreement is contingent upon, and
subject to, satisfaction or waiver by Buyer of the following conditions by
Seller and/or Stockholders (collectively or individually, as the case may be) at
or prior to Closing, or compliance with the following conditions to Buyer's
reasonable satisfaction: (a) Performance by Seller and Stockholders of all
agreements and covenants to be performed by them at or prior to Closing; (b)
Continued accuracy of the representations and warranties of Seller and
Stockholders, as herein contained; (c) Absence of any pending or threatened
legal action against Seller or Stockholders which, if successful, would prohibit
or hinder consummation, or require substantial rescission of the transactions
contemplated by this Agreement; (d) Absence of a material, adverse change in the
financial condition, results of operations, assets (including the Purchased
Assets) or business of Seller; (e) Continuation in full force and effect,
without modification, of Seller's presently existing and material leases,
contracts, licenses, permits and other similar contracts and rights; (f)
Delivery of the following documents to Buyer or confirmation to Buyer of
compliance with the following requirements at or before Closing, all of which
shall be in form and of such substance acceptable to Buyer and its counsel: (i)
Instruments of transfer required by Section 1.3 hereof; (ii) Releases (or copies
thereof) of all liens, claims, charges, encumbrances, security interests and
restrictions, if any, on the Purchased Assets necessary to provide Buyer with
good, marketable and indefeasible title to each and all of the Purchased Assets
at Closing (excepting only any such matters which Buyer has agreed to accept
thereon and at such time, and as are specifically listed and shown as such in
Exhibit 2.1); (iii) Consents and approvals of all third parties, if any,
necessary for Seller and Stockholders to execute, deliver or perform this
Agreement; (iv) Consents and approvals of all third parties having business
relationships with seller, if consent to transactions of the nature herein
contemplated is or may be required in order to prevent a material adverse change
in such business relationship, such as cancellation of services or any software
license by a customer; (v) Certified copies of corporate actions taken by
Seller's Board of Directors, and Seller's Stockholders, authorizing the
execution, delivery and performance of this agreement, and the filing of
amendments to Seller's Articles of Incorporation, changing Seller's name to
eliminate any and all reference, in any form, to "MANAGED RESPIRATORY CARE
SERVICES, INC."; (vi) Articles of Amendment to the Articles of Incorporation of
Seller, in form suitable for filing forthwith, changing its name to eliminate
the words "MANAGED RESPIRATORY CARE SERVICES" (to be thereafter filed at
Seller's expense, with the Arizona Corporation Commission, and proof thereof
being furnished to Buyer's counsel not more than 15 days following Closing);
(vii) Certificate of Good Standing and Status for Seller from the State of
Arizona, dated no earlier than ten (10) days prior to the Closing Date; (viii)
Certificate signed by one or more duly authorized officers of Seller, and
Stockholders, dated the Closing Date, to the effect that the representations and
warranties of Seller and Stockholders contained herein are true and correct as
of the Closing Date, just as if such representations had been made thereat and
on such date; (ix) Opinion of counsel for Seller and Stockholders, addressed to
Buyer and dated the Closing Date, to the effect that the representations and
warranties contained in Sections 5.1.1; 5.2.1; 5.2.2.; 5.2.3. clause (i) and
(iv); and Subsection 5.4.2. (the third sentence) are true and correct subject,
where appropriate, to the standard bankruptcy and equitable remedies exceptions
and subject to such changes as are reasonably acceptable to Buyer's counsel; (x)
UCC searches showing no liens, security interests, or claims against the
Purchased Assets or Seller's Business being hereby acquired, brought current to
the Closing Date by supplemental affidavits of Seller and Stockholders; and (xi)
Satisfaction of all bank indebtedness required to consummate the transaction
with delivery of pay-off letters or documents from the involved bank(s) or other
lenders to be addressed to Seller.
Section 4.3. Conditions Precedent to Seller's and Stockholder's
Obligations. The obligation of Seller and Stockholders (collectively or
individually, as applicable) to perform in accordance with this Agreement is
contingent upon, and subject to, satisfaction of the following conditions by
Buyer at or before Closing: (a) Performance by Buyer of all agreements and
covenants to be performed by it at or prior to Closing; (b) Continued accuracy
of the representations and warranties of Buyer, as herein contained; (c) Absence
of any pending or threatened legal action against Buyer which, if successful,
would prohibit or hinder consummation, or require substantial rescission of the
transactions contemplated by this Agreement; (d) Delivery or tender of the
following documents to Seller, at Closing, all of which shall be in form and of
such substance acceptable to Seller and its counsel: (i) That portion of the
purchase price as required by Section 3.2. hereof; (ii) Instruments by which
Buyer assumes the Assumed Liabilities (if any); (iii) Certified copies of
corporate actions taken by Buyer, and Buyer's shareholder, authorizing the
transactions contemplated hereby; (iv) Certificate of good standing for Buyer
dated no earlier than 10 days prior to the Closing Date; (v) Certificate signed
by Buyer's President, dated the Closing Date, to the effect that the
representations and warranties of Buyer contained herein are true and correct as
of the Closing Date, just as if such representations and warranties had been
made thereat; and (vi) Opinion of counsel for Buyer, addressed to Seller and
Stockholders, dated the Closing Date, to the effect that the representations and
warranties contained in Section 6.1. are true and correct, and that to the best
of said counsel's knowledge, the representations and warranties contained in
Subsections 6.2.2. and 6.2.3. are true and correct, subject, where appropriate,
to the standard bankruptcy and equitable remedies exceptions and subject to such
changes as are reasonably acceptable to Seller's counsel.
Section 4.4. Non-fulfillment of Buyer's Conditions. The conditions
contained in Section 4.2. hereof have been inserted for the exclusive benefit of
Buyer. In case any material conditions shall not be fulfilled at or before
Closing, Buyer may rescind this Agreement by notice to Seller and in such event,
Buyer shall be released from all further obligation hereunder and, unless Buyer
can show that the condition or conditions for the non-performance of which Buyer
has rescinded this Agreement were reasonably capable of being performed or
caused to be performed by Seller and/or Stockholders without undue delay or
postponement of the Closing, then Seller and Stockholders shall also be released
from all obligations hereunder; provided, that any of the said conditions may be
waived in whole or in part by Buyer without prejudice to Buyer's right of
rescission in the event of the non-fulfillment of any other condition or
conditions.
Section 4.5. Non-fulfillment of Seller's and Stockholder's Conditions. The
conditions contained in Section 4.3. hereof have been inserted for the exclusive
benefit of Seller and Stockholders. In case any material conditions shall not be
fulfilled at or before Closing, Seller may rescind this Agreement by notice to
Buyer and in such event, Seller and Stockholders shall be released from all
further obligation hereunder and, unless Seller and Stockholders can show that
the condition or conditions for the non-performance of which Seller and
Stockholders have rescinded this Agreement were reasonably capable of being
performed or caused to be performed by Buyer without undue delay or postponement
of the Closing, then Buyer shall also be released from all obligations
hereunder; provided, that any of the said conditions may be waived in whole or
in part by Seller and Stockholders without prejudice to their right of recission
in the event of the non-fulfillment of any other condition or conditions.
ARTICLE FIVE. REPRESENTATIONS, WARRANTIES OF SELLER, STOCKHOLDERS
Seller and Stockholders, jointly and severally, represent and warrant
to Buyer that the following statements are true and correct to the best of their
knowledge, respectively, as of the date hereof and that said statements will be
true and correct to the best of their knowledge, respectively, as of the Closing
Date (unless specific reference is made to only one of such dates or to some
other date):
Section 5.1. Corporate Status of Seller:
5.1.1. Organization, Good Standing and Power of Seller. Seller (i) is a
corporation duly organized, validly existing and in good standing under the
laws of Arizona and (ii) has full corporate power and authority to own,
lease and operate its properties (including the Purchased Assets) and to
carry on Seller's Business, as such business is presently being conducted,
and to execute, deliver and perform this Agreement in all and every material
respect.
5.1.2. Ownership of Seller. All of the issued and outstanding shares of the
capital stock of Seller are owned by the Stockholders, all parties hereto,
and that no persons not parties hereto have any right, warrant, or option to
acquire (or to exercise the voting powers or rights represented by) any such
shares.
5.1.3. Subsidiaries. Seller has no subsidiaries or affiliate companies.
5.1.4. Foreign Qualification. Seller is not qualified to transact business
in any foreign jurisdiction.
Section 5.2. Status of Agreements:
5.2.1. Authorization and Enforceability. All requisite corporate action to
approve, execute, deliver and perform this Agreement, and each of the other
agreements, instruments and other documents to be delivered in connection
herewith, has been taken by the Seller's Directors and all Stockholders. This
Agreement has been duly and validly executed and delivered by Seller and all
Stockholders and constitutes the valid and binding obligation thereof,
enforceable in accordance with its terms. All such other agreements, instruments
and other documents to be executed and delivered by Seller or Stockholders will,
when executed and delivered, constitute the valid and binding obligation of the
Seller or Stockholders, enforceable in accordance with its terms. 5.2.2.
Consents. Except as set forth on and fully identified in Disclosure Schedule
5.2.2., and as required or indicated by the provisions hereof, no authorization,
approval, consent or order of, or registration, declaration or filing with, any
court, governmental body or agency or other public or private body, entity or
person is required in connection with the execution, delivery, or performance of
this Agreement or any other agreement, instrument or document to be delivered by
or on behalf of Seller or Stockholders in connection herewith. 5.2.3. Absence of
Conflicts or Disruptions. Except as set forth on and fully identified in
Disclosure Schedule 5.2.3., neither the execution, delivery or performance of
this Agreement, or any other agreement, instrument or document to be executed
and delivered by Seller or Stockholders in connection herewith, does or will
violate or conflict with, result in a breach of or give rise to a right of
acceleration or termination under (i) Seller's Articles of Incorporation or
Bylaws; (ii) any lien, mortgage, security agreement or other encumbrances or
restriction affecting Seller's Business or Purchased Assets; (iii) any
commitment, contract, agreement, plan, arrangement, understanding, instrument,
lease, or license to which Seller is a party or to which it is bound; or (iv)
any order, arbitration, award, judgment, decree or similar restriction to which
Seller is subject or by which it is bound. Such execution, delivery and
performance will also not result in the imposition of any lien, mortgage,
pledge, encumbrance, easement, claim, or other restriction or charge on Seller's
Business, or the Purchased Assets, or impair any material business relationship
which Seller has with any current customer, licensee, or other person, except as
set forth in this Disclosure Schedule 5.2.3.
Section 5.3. Status of Business:
5.3.1. Financial Statements Disclosure Schedule 5.3.1. consists of the
following financial statements:
Internally prepared balance sheet of Seller as of June 30, 1996, together
with the related statement of income;
All of such financial statements and information are true, correct and
complete and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods. The balance sheet
referenced above, (the "Balance Sheet") presents fairly the financial condition
of Seller, as at the date stated, and the statement of income presents fairly
the results of operations for the period covered thereby, given the limited
purpose for which those financial statements were prepared. 5.3.2. Absence of
Undisclosed Liabilities. Seller does not have any knowledge of any liabilities
other than (i) liabilities adequately reflected or reserved against in the
Balance Sheet and which, in accordance with generally accepted accounting
principles, should have been reflected therein, (ii) current liabilities
incurred in the ordinary course of business since the date of such Balance
Sheet, all of which are reflected in the journals and ledgers of Seller, and
(iii) the liabilities set forth in Disclosure Schedule 5.3.2. 5.3.3. Absence of
Certain Changes. Since the date of the Balance Sheet, Seller's Business has been
operated only in the ordinary course, and, except as set forth in Disclosure
Schedule 5.3.3., or otherwise reflected in the Balance Sheet or in other
provisions of this Agreement, there has not been with respect to Seller, and as
shall apply only to the Purchased Assets, being sold to Buyer hereunder: (a) Any
change in its condition, financial or otherwise, assets, liabilities, business,
earnings or prospects, except changes in the ordinary course of business or of
which Buyer has knowledge, none of which individually or in the aggregate has
been materially adverse; (b) Any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting its properties, assets,
business or prospects; (c) Any executory sales commitments in excess of its
ability to produce or conduct operations at a profit; (d) Any general increase
in the level or rate of sales or compensation of employees; (e) Any liability
incurred or assumed, or any contract, agreement, arrangement, license or other
commitment entered into or assumed by it or on its behalf, whether written or
oral, involving more than $5,000.00 in each instance, except in the ordinary
course of business; (f) Any loan or advance made to any officer, director,
consultant, agent, employee or shareholder, or other loan or advance made
otherwise than in the ordinary course of business; (g) Any change in its
accounting methods or practices or any change in depreciation or amortization
policies or rates theretofore adopted by it; (h) Any purchase or sale of assets
in anticipation of this Agreement, or any purchase, lease, sale, abandonment or
other disposition of assets otherwise than in the ordinary course of business;
(i) Any acquisition of all or any substantial part of the stock or the business
or operating assets of any other person, firm, association, corporation, limited
liability company, or business organization except as disclosed to Buyer; (j).
Any actual or threatened material adverse change in its revenue earnings,
business, operations, condition, prospects or business relationships; (k) Any
mortgage, pledge, lien, charge, security interest or other encumbrance against,
any of its assets; (l) Any waiver of release of any rights, except for rights of
insubstantial value; or (m) Any transfer or grant of any material rights under
any leases, licenses, agreements, copyrights, trade names, or service marks.
5.3.4. Taxes. The books of account of Seller accurately reflect all known items
of income and expense (including accruals) and all assets and liabilities of
Seller in accordance with normal accrual accounting practices, subject to
customary month-end, quarterly, or year-end adjustments, and customary audit
adjustments. Except as listed in Disclosure Schedule 5.3.4., Seller has (i)
filed all federal and local income tax, excise tax, sales tax, use tax, gross
receipts tax, franchise tax, employment and payroll related tax, real and
personal property tax, and all other tax returns which it is required to file
with respect to Seller and which have become due, (ii) paid or accrued all taxes
owed by Seller as well as all deficiencies or other assessments of tax interest
or penalties, and (iii) provided for all taxes not yet payable by Seller. There
are no claims pending against Seller for deficient or past due taxes of any
nature, and Seller has no knowledge of any unassessed tax deficiency proposed or
threatened against Seller. No audits of any tax return of Seller are currently
in progress, and there are not in force any extensions of time with respect to
the dates on which any tax return was or is due to be filed by Seller or any
waivers or agreements for the extension of time for the assessment or payment of
any tax. 5.3.5. Compliance with Laws. Except as set forth in Disclosure Schedule
5.3.5., Seller (i) is not in violation of any outstanding judgment, order,
injunction, award or decree specifically relating to it; (ii) is not in
violation of, in any material respect, any federal, state, provincial, local or
foreign law, ordinance or regulation applicable to Seller's Business or the
Purchased Assets, including without limitation environmental laws and
occupational health and safety laws. 5.3.6. Litigation. Except as set forth in
Disclosure Schedule 5.3.6., no claim, litigation, action, investigation, or
proceeding is pending, or, to the knowledge of Seller or Stockholders,
threatened, and no order, injunction or decree is outstanding, against or
relating to Seller, Seller's Business or the Purchased Assets, and neither
Seller nor Stockholders know or has a reasonable basis for knowing of any
information which may result in any such claim, litigation, action,
investigation or proceeding. 5.3.7. Materials and Supplies. Seller and
Stockholders are not aware of any actual or potential shortage of materials or
supplies from any source which might materially and adversely affect Seller's
Business. 5.3.8. Lists of Properties, Contracts, Etc. Disclosure Schedule 5.3.8.
contains a complete and accurate list and description of the following with
respect to Seller's Business: (a) All real property leased from others; (b) All
equipment, furniture, fixtures, vehicles, leasehold improvements, other personal
property used in the conduct of Seller's Business with an original cost in
excess of $1,000.00, or which are leased for others at an annual rental in
excess of $500.00; (c) All licenses, franchises, permits, orders,
authorizations, concessions, copyrights, trademarks, service marks, trade names,
patents or other intellectual property items used in the conduct of Seller's
Business; (d) All agreements for the purchase, sale or other disposition of
goods, materials, equipment, supplies, capital assets, or services which cannot
be terminated at any time on less than thirty (30) days notice without
liability, which by their terms will not be fully performed on or before the
Closing Date or which involve terms or quantities exceeding normal commitments
in the ordinary course of business; (e) All instruments or agreements evidencing
liens, financing arrangements or secured transactions for Seller's Business or
any Purchased Asset; (f) All management, employment or agency agreements; (g)
All agreements with directors, officers, or any Stockholders, or with the spouse
or other relative of any such persons; (h) All agreements and instruments
pursuant to which credit has or may be obtained or indebtedness for borrowed
money has or may be incurred; (i) All guarantees of payment or performance by or
on behalf of a third-party; (m) All other contracts, agreements, commitments or
understandings entered into other than in the ordinary course of business and
consistent with past practices; (n) The names and addresses of all current
officers and directors, and current compensation rates or arrangements for each
such person; and (o) The names and addresses of all persons, if any, now holding
proxies, powers of attorney, or other like instruments and powers to act on
behalf of Seller, and a summary of the terms thereof.
True and complete copies of all written documentation pertaining to
each of the foregoing, as disclosed on Disclosure Schedule 5.3.8., have been
previously delivered to or made available for inspection by Buyer.
5.3.9. Compliance with Contracts and Commitments. With respect to the
agreements, leases, licenses, commitments, instruments and undertakings, oral or
written, to which Seller is a party or by which it is bound, (i) Seller has
performed all of the obligations to be performed by it; (ii) Seller is not in
any material respect in default under or in violation of any thereof; (iii)
there is no basis for a valid claim of such a violation or default; and (iv) no
event has occurred which, with notice or lapse of time or both, would constitute
such a default. Neither Seller nor Stockholders are aware of any material
default under or any material violation of any of the foregoing by any other
party thereto.
Section 5.4. Status and Quality of Assets:
5.4.1. Completeness. Except for the Retained Assets, included in the Purchased
Assets are all those assets which are necessary in order to operate Seller's
Business in the ordinary course as presently conducted. 5.4.2. Seller's Title.
Except as set forth in Disclosure Schedule 5.4.2., Seller owns all of the
Purchased Assets with good, absolute and marketable title thereto, free and
clear of all liens, security interests, claims, charges, encumbrances and other
restrictions or limitations affecting the ability to use or transfer such
assets. All of the agreements, leases, licenses, instruments, commitments and
undertakings to which Seller is a party or by which it is bound with respect to
which Buyer is acquiring the rights of Seller pursuant hereto, are valid, in
full force and effect and enforceable in accordance with their terms by Seller,
as the case may be. Subject to the terms of this Agreement, the instruments of
transfer required hereby to be executed and delivered by Seller to Buyer will,
when so executed and delivered, effectively vest in Buyer good, marketable and
indefeasible title to the Purchased Assets and the full rights of Seller to
enforce the aforesaid agreements, leases, licenses, instruments, commitments and
undertakings to which it is a party or by which it is bound in accordance with
their terms. 5.4.3. Trademarks and Copyrights. Exhibit 1.1. includes, as a
Purchased Asset, all trademarks, service marks, and copyrights and their
registrations or applications, owned by Seller and used in association with
Seller's Business and the Purchased Assets. 5.4.4. Patents. There are no patents
or patent rights associated with the Purchased Assets. To the best of Seller's
knowledge, there are no claims that the use of the Purchased Assets violates or
infringes on the patent or patent right of any person. 5.4.5. Trade Secrets.
Exhibit 1.1. includes a description of Seller' trade secrets associated with the
Purchased Assets. Seller is the sole owner of each of these trade secrets, free
and clear of any encumbrances, restrictions or legal or equitable claims of
others. Seller has taken all reasonable security measures to protect the
secrecy, confidentiality, and value of these trade secrets; and any of its
employees and other persons who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed these secrets,
or who have knowledge of or access to information relating to them, have been
put on notice and, if appropriate, have entered into agreements that these
secrets are proprietary to Seller and are not to be divulged or misused.
Further, to the best knowledge of Seller, all of these trade secrets are
presently valid and protectible and are not part of the public knowledge or
literature; nor, to Seller's knowledge have they been used, divulged or
appropriated for the benefit of any past or present employees or other persons,
or to the detriment of Seller.
Section 5.5. Miscellaneous:
5.5.1. Conflicts of Interest. Except as set forth in Disclosure Schedule 5.5.1.,
no officer, director or shareholder of Seller or any relative thereof, or any
entity controlled by any of said persons (i) owns, directly or indirectly, any
interest in, or is an employee or representative of or consultant to, any
corporation, firm, limited liability company, association, or other business
entity which is, or is engaged in business as, a competitor, lessor, lessee,
customer, licensee, licensor, or supplier of Seller; or (ii) owns, directly or
indirectly, in whole or any part, any tangible or intangible property which
Seller is using or the use of which is necessary for the conduct of Seller's
Business, or (iii) has any claim or cause of action whatsoever against Seller.
5.5.2. Brokers, Agents. Except as set forth in Disclosure Schedule 5.5.2., no
broker, finder or other person or entity acting in similar capacity has
participated on behalf of Seller or Stockholders in bringing about the
transaction herein contemplated, rendered any services with respect thereto or
been in any way involved therewith. 5.5.3. Accuracy and Completeness. No
representation or warranty made by Seller or Stockholders in this Agreement, and
no statement contained in any exhibit, certificate, disclosure schedule or other
document delivered to Buyer pursuant hereto or in connection with the
transaction contemplated hereby contains, or will contain, any untrue statement
of a material fact, or omits, or will omit, to state a material fact necessary
to make the statements contained therein, in light of the circumstances in which
they are made, not misleading. 5.5.4 Survival. Seller and Stockholders
acknowledge and agree that the representations and warranties of Seller and
Stockholders contained in Article Five of this Agreement shall survive for a
period of one (1) year after the Closing Date, except for those in Section
5.3.4, which shall survive for the longest period with respect to which any
taxing authority can assess additional taxes (including any extensions thereof).
Otherwise, any representations and warranties of Seller and Stockholders made
within this Agreement shall survive for a period of three (3) years after
Closing Date. No investigation or lack thereof by Buyer or any agents on behalf
of Buyer shall be deemed to constitute or imply a waiver of any representation
or warranty of Seller or Stockholders.
ARTICLE SIX. REPRESENTATIONS, WARRANTIES OF BUYER
Buyer represents and warrants to Seller and Stockholders that the
following statements are true and correct to the best of its knowledge as of the
date hereof and that said statements will be true and correct to the best of its
knowledge as of the Closing Date (unless specific reference is made to only one
of such dates or to some other date):
Section 6.1. Corporate Status of Buyer:
6.1.1. Organization, Good Standing and Power of Buyer. Buyer (i) is a
corporation duly organized, validly existing and in good standing under the
laws of Ohio and (ii) has full corporate power and authority to own, lease
and operate its properties, as and where such properties are now owned or
leased and as such business is presently being conducted, and to execute,
deliver and perform this Agreement in all and every respect.
6.1.2. Ownership of Buyer. All of the issued and outstanding shares of
the capital stock of Buyer are owned by Regency Health Services, Inc. of
Tustin, California.
Section 6.2. Status of Agreements:
6.2.1. Authorization and Enforceability. All requisite corporate action to
approve, execute, deliver and perform this Agreement, and each of the other
agreements, instruments and other documents to be delivered in connection
herewith, has been taken by the Buyer's Directors and (if required) by Buyer's
shareholders. This Agreement has been duly and validly executed and delivered by
Buyer and constitutes the valid and binding obligation thereof, enforceable in
accordance with its terms. All such other agreements, instruments and other
documents to be executed and delivered by or on behalf of Buyer will, when
executed and delivered, constitute the valid and binding obligation of the party
executing same, enforceable in accordance with its terms. 6.2.2. Consents. No
authorization, approval, consent or order of, or registration, declaration or
filing with, any court, governmental body or agency or other public or private
body, entity or person is required in connection with the execution, delivery,
or performance of this Agreement or any other agreement, instrument or document
to be delivered by or on behalf of Buyer. 6.2.3. Absence of Conflicts. Neither
the execution, delivery or performance of this Agreement, or any other
agreement, instrument or document to be delivered by or on behalf of Buyer in
connection herewith, does or will (i) conflict with or violate or result in any
breach of any judgment, decree, order, statute, rule or regulation applicable to
Buyer; (ii) conflict with, violate or result in breach of any agreement or
instrument to which Buyer is a party or by which it is bound; or (iii) conflict
with or violate any provision of the Articles of Incorporation or Bylaws of
Buyer.
Section 6.3. Miscellaneous:
6.3.1. Brokers, Agents. No broker, finder or other person or entity acting in
similar capacity has participated on behalf of Buyer in bringing about the
transaction herein contemplated, rendered any services with respect thereto or
been in any way involved therewith. 6.3.2. Accuracy and Completeness. No
representation or warranty made by Buyer in this Agreement, and no statement
contained in any exhibit, certificate, disclosure schedule or other document
delivered to Seller and/or Stockholders pursuant hereto or in connection with
the transaction contemplated hereby contains, or will contain, any untrue
statement of a material fact, or omits, or will omit, to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not misleading. 6.3.3 Survival. Buyer
acknowledges and agrees that the representations and warranties of Buyer
contained in Article Six of this Agreement shall survive for a period of one (1)
year after the Closing Date, otherwise, such representations and warranties as
are made by Buyer in this Agreement shall survive for a period of three (3)
years after Closing Date. No investigation or lack thereof by Seller or any
agents on behalf of Seller shall be deemed to constitute or imply a waiver of
any representation or warranty of Buyer.
ARTICLE SEVEN. INTERIM OPERATIONS
Section 7.1. Conduct of Business. Seller and Stockholders agree that from
the date of this Agreement to and until Closing, except to the extent that Buyer
may otherwise consent in writing, Seller has and will operate its business
substantially as presently operated and only in the ordinary course and,
consistent with such operations, will use its best efforts to preserve intact
the present business organization and the relationships with persons having
business dealings with it.
Section 7.2. Access to Information; Confidentiality. From the date hereof
until Closing, Seller shall make available to the accountants, attorneys and
other representatives of Buyer for examination during normal business hours,
upon reasonable request, all books, records and documents of Seller, whether or
not related to Seller's Business, of every nature, kind and character. Buyer
acknowledges that certain information about Seller's Business is non-public,
confidential information. Buyer agrees that if the transactions contemplated by
this Agreement are not consummated for any reason, Buyer will not disclose, use
or permit the use of any non-public, confidential information that Seller has
provided or will provide from time to time pursuant to its investigation. Buyer
agrees that until the Closing Date, it and its representatives shall not
disclose, use or permit the use of, any non-public confidential information that
Seller has provided or will provide from time to time, except for purposes of
evaluating Seller's Business and in moving towards completing the transactions
contemplated hereby.
Section 7.3. Notice to Buyer. Seller and Stockholders covenant and agree
that they have not and will not prior to Closing engage in any transaction or
commence any judicial or other proceeding under Title 11 of United States Code,
or any other law for the relief or restructuring of any of Seller's indebtedness
or affairs or for the reorganization of Seller's affairs, or for an arrangement
or composition with seller's creditors, or any of them, without first notifying
Buyer and allowing the opportunity, but never the obligation, to provide Seller
such assistance, financial or otherwise, as may be appropriate, in the sole and
absolute discretion of Buyer, to avoid any such proceeding or transaction; it
being understood and agreed that the aforementioned notice to Buyer shall be in
writing and delivered to Buyer not less than ten (10) days prior to Seller's
entering into any such proceeding or contemplated transaction.
ARTICLE EIGHT. INDEMNIFICATION
Section 8.1. Indemnification by Seller and Stockholders. From and after the
Closing Date, for a period of three (3) years thereafter, Seller and
Stockholders shall indemnify, defend and hold harmless Buyer, its successors and
assigns, from and against any and all claims, demands, liabilities, obligations,
actions, suits, proceedings, losses, damages, costs, expenses, assessments,
judgments, recoveries and deficiencies, including interest, penalties and
reasonable attorneys; fees (including without limitation attorneys' fees
incurred in investigating or in attempting to avoid the same or oppose the
imposition thereof), of every kind and description, contingent or otherwise (the
foregoing hereinafter collectively referred to as "Damages") against Buyer or
the Purchased Assets, occasioned by, arising out of or resulting from any
misrepresentation (and during the period of time for which a representation
shall survive Closing Date), breach of warranty or covenant (and during the
period of time for which a warranty or covenant shall survive, or be enforceable
following, the Closing Date), or default or nonfulfillment of any agreement on
the part of Seller under this Agreement, or any certificate, agreement,
appendix, schedule or other instrument furnished to or to be furnished to Buyer
pursuant to this Agreement. Buyer, with reasonable promptness, shall notify
Seller and Stockholders of any claim against Buyer for Damages, and Seller and
Stockholders shall have, at their election, the right to compromise or defend
any such matter through counsel of their own choosing, any such compromise or
defense to be at the expense of Seller and Stockholders. Buyer agrees, at the
expense of Seller and Stockholders, to cooperate in the defense of any such
claim for Damages. Seller and Stockholders shall take whatever action is
necessary in the course of defending any claim to which the foregoing
indemnification applies to avoid the imposition of any lien on Buyer's assets.
If Seller and Stockholders fail to take such action after reasonable notice,
Buyer may, in the settlement of any claim for such Damages, exercise the right
of set-off against all or any sum of money then due, or to become due, to Seller
(or its successors and assigns, if any) as Earn-Out Fees under Section 3.3,
together with any other remedy or right which Buyer may then exercise against
Seller or Stockholders (in their individual capacity, as parties to this
Agreement) under this Section 8.1.
Section 8.2. Indemnification by Buyer. From and after Closing Date, for a
period of three years thereafter, Buyer shall indemnify, defend and hold
harmless Seller, its successors and assigns, from and against any and all
claims, demands, liabilities, obligations, actions, suits, proceedings, losses,
damages, costs, expenses, assessments, judgments, recoveries and deficiencies,
including interest, penalties and reasonable attorneys; fees (including without
limitation attorneys' fees incurred in investigating or in attempting to avoid
the same or oppose the imposition thereof), of every kind and description,
contingent or otherwise (the foregoing hereinafter collectively referred to as
"Damages") against Seller, occasioned by, arising out of or resulting from any
misrepresentation (and during the period of time for which a representation
shall survive Closing Date), breach of warranty or covenant (and during the
period of time for which a warranty or covenant shall survive, or be enforceable
following, Closing Date), or default or nonfulfillment of any agreement on the
part of Buyer under this Agreement, whether in connection with the Assumed
Liabilities or otherwise. Seller, with reasonable promptness, shall notify Buyer
of any claim against Seller for Damages, and Buyer shall have, at its election,
the right to compromise or defend any such matter through counsel of its own
choosing, any such compromise or defense to be at the expense of Buyer. Seller
agrees, at the expense of Buyer, to cooperate in the defense of any such claim
for Damages. Buyer shall take whatever action is necessary in the course of
defending any claim to which the foregoing indemnification applies to avoid the
imposition of any lien on Seller's Retained Assets (or other assets).
ARTICLE NINE. MISCELLANEOUS AGREEMENTS AND PROVISIONS.
Section 9.1. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Employment Agreements. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇, and each of them, agree to enter into at Closing an Employment
Agreement with Buyer substantially in the form attached hereto as Exhibit 9.1.
Section 9.2. Seller's Non-Compete and Termination Agreement. Seller agrees
and represents to Buyer, with full understanding that Buyer is relying on this
representation, that Seller is terminating "Seller's Business", and for a period
of one year after the last to occur of the (i) completition of the Earn Out
Period (see Article Three), or (ii) the termination of Stockholders' employment
with Buyer (see Section 9.1, above), Seller, as to any point or place in any
county in Arizona where Seller, prior to Closing Date, has conducted business
under any completed contract, or negotiated any pending or proposed contract
pertaining to Seller's Business, will not reenter that business, or any other
similar business dealing with, related or pertaining to, directly or indirectly,
respiratory therapy practice management or marketing on behalf of hospitals or
health care providers or other identical, comparable or similar entities
otherwise employing or obtaining the benefit of respiratory therapists, in which
business Seller is now engaged, and that Seller is herewith divesting itself of
its present corporate name and all of its service names. Seller is taking such
action and making such representation in exchange for the consideration it is
receiving from Buyer under the terms of this Agreement. Seller agrees that the
agreements and representations made under this Section 9.2 are reasonable and
necessary for the protection of Buyer in connection with acquisition of the
Purchased Assets, and expressly acknowledges that such is an essential part of
the benefit of the bargain for Buyer. Any breach of this Section 9.2 by Seller
will cause irreparable injury to Buyer for which damages would be an inadequate
remedy and that (in addition to and without limitation of any other rights Buyer
may have and exert against Seller) Buyer shall have the right to issuance of an
injunction by a court of competent jurisdiction, enjoining such breach upon
notice and without bond. Notwithstanding any other provision of this Agreement,
Seller may directly or indirectly do all or any of the following: (a) enforce
any and all rights and remedies afforded Seller under this Agreement; (b)
manage, collect, enforce and act as a lessor and otherwise realize upon all
assets of Seller as are not sold to Buyer under this Agreement. Further, this
provision shall not be construed as prohibiting Seller from entering into or
otherwise keeping or maintaining any other business not listed in this Section
9.2., and not presently or formerly a part of "Seller's Business" within the
meaning of this Agreement.
Section 9.3. Publicity. All public announcements relating to this
Agreement or the transactions contemplated hereby will be made only as
determined by Buyer.
Section 9.4. Expenses, etc. Buyer shall bear and pay all of the expenses
incident to the transactions contemplated by this Agreement which are incurred
by Buyer. Seller and Stockholders shall bear and pay all of the expenses
incident to the transactions contemplated by this Agreement which are incurred
by them.
Section 9.5. Notices. All notices and other communications required by or
in connection with this Agreement shall be in writing and be deemed given if
delivered by hand, or mailed by certified U.S. mail, or transmitted by Federal
Express United Parcel Service or similar nationwide overnight-priority courier
service, to the intended, appropriate recipient at the following address (or
such other address as the party shall specify by notice pursuant hereto):
If to Buyer, to: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Operating Officer
SCRS & COMMUNICOLOGY, INC. ▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., SVP & General Counsel
REGENCY HEALTH SERVICES, INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Seller, to: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇, Director
▇▇. ▇▇▇ ▇▇▇▇▇▇▇, Director
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Stockholders, to: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Section 9.6. Binding Effect. Except as may be otherwise provided herein,
this Agreement and all provisions hereof shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, personal representatives,
successors, designatees, and assigns.
Section 9.7. Disclosure Schedules and Exhibits. All disclosure schedules
and exhibits referred to in this Agreement constitute an integral part of this
Agreement as if fully rewritten herein.
Section 9.8. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same document.
Section 9.9. Governing Law. This Agreement and all disputes arising
hereunder shall be construed in accordance with and governed by the laws
of the State of California.
Section 9.10. Severability. If any provision of this Agreement shall be
held unenforceable, invalid or void to any extent and for any reason, such
provision shall remain in force and effect to the maximum extent allowable, if
any, and the enforceability or validity of the remaining provisions of this
Agreement shall not be affected thereby.
Section 9.11. Waivers. No waiver of any of the provisions of this Agreement
shall be valid and enforceable unless such waiver is in writing and signed by
the party to be charged therewith, and, unless otherwise stated therein, no such
waiver shall constitute a waiver of any other provision hereof, or a continuing
waiver.
Section 9.12. Termination. This Agreement may be terminated by (i) Buyer if
the conditions set forth in Section 4.2 hereof shall not have been met by
Closing Date, and by Seller and Stockholders if the conditions set forth in
Section 4.3. shall not have been met by Closing Date, and (ii) Buyer if any
change shall have occurred or be threatened in the business, financial
conditions, operations, results of operations, or prospects of Seller's Business
which is or will be materially adverse, or if Buyer shall become aware of any
presently existing facts which has or will have a material adverse effect on the
business, financial condition, operations, results of operations, or prospects
of Seller. Upon such termination, neither party shall have any further
obligations under this Agreement.
Section 9.13. Entire Agreement. This Agreement together with the
agreements, instruments, and other documents to be delivered hereunder,
constitute the entire understanding and agreements between the parties hereto
and concerning the subject matter hereof. All negotiations between the parties
hereto are merged into this Agreement, and there are no representations,
warranties, covenants, understandings, or agreements, oral or otherwise, in
relation thereto between the parties other than those incorporated herein and to
be delivered hereunder. Except as otherwise expressly contemplated by this
Agreement, nothing expressed or implied in this Agreement is intended or shall
be construed so as to grant or confer on any person, firm or corporation, other
than the parties hereto, any rights or privileges hereunder. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by the parties wishing to be bound thereby.
Section 9.14. Right of Setoff. If Buyer be required to pay at any time any
obligation of Seller or all or any Stockholders arising out of or related to the
transaction covered by this Agreement and the agreements provided for herein,
which amount was not the obligation of Buyer, or should Buyer experience any
loss or expense by reason of Seller's or Stockholders' breach (whether all and
collectively or less than all of such Stockholders) of any provision of this
Agreement and the agreements provided for herein, Buyer shall have the right of
setoff against any money due Seller and/or Stockholders (whether collectively or
individually) under the terms of any agreement or transaction between or amongst
the parties, which right shall be in addition to the right of setoff as
identified in Section 8.1., above.
Section 9.15. Default and Remedies. In the event any party to this
Agreement fails to perform any material act, duty or obligation which said party
is bound to perform and is then due or owed to any other party hereto at any
time after Closing Date and said party is thereupon in breach of this Agreement
(including Section 3.9 hereof), then and in such event the party so aggrieved
may send written notice to the party in breach, specifying the material act,
duty or obligation due or owing, whereupon the party receiving such notice shall
have fifteen (15) days to cure such breach by performance to the reasonable
satisfaction of the party so aggrieved (if a longer or shorter period of time is
expressly provided in any section, as to a specific act, duty or obligation,
such other period of time shall control). In the absence of a timely cure after
such notice, the party so aggrieved (without further notice) shall have the
right to declare a default in the performance of this Agreement, and thereafter
may seek any relief or remedy as may then be available to such party, not
otherwise inconsistent with this Agreement, including damages arising out of
such breach, or, if applicable, specific performance, compelling performance of
the act, duty or obligation. Upon default, any party seeking relief, and
substantially prevailing therein, shall have the right to seek and recover of
the party in default, all costs of suit and reasonable attorneys' fees, in
addition to any other relief as may be available.
In Witness Whereof, the parties, personally and individually, or by and
through their duly authorized officers or agents, do hereby enter into this
Asset Purchase Agreement, intending to be bound by the provisions hereof, the
dates recorded below, due authority being warranted, and understanding and
agreeing that this instrument may be executed in two or more counterparts, each
party having executed each counterpart in original or facsimile form, each and
all such counterparts being one and the same instrument:
Buyer:
SCRS & COMMUNICOLOGY, INC. OF OHIO
By: Date:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, COO
Seller:
MANAGED RESPIRATORY CARE SERVICES, INC.
By: Date:
▇▇▇▇ ▇▇▇▇▇▇▇, President
Stockholders:
Date:
▇▇▇▇ ▇▇▇▇▇▇▇
Date:
▇▇▇ ▇▇▇▇▇▇▇