EXHIBIT 10.85
STOCK PURCHASE AGREEMENT
among
PRONETICS HEALTH CARE GROUP, INC.
the Company,
▇▇▇▇▇▇▇ PHARMACEUTICAL CORPORATION
the Shareholder,
and
AMERICAN HOMEPATIENT, INC.
the Buyer
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE....................................... 1
1.1 Purchase and Sale...................................... 1
1.2 Assets at Closing...................................... 1
1.3 Excluded Items......................................... 3
1.4 Continuing Contracts, Leases and Liabilities........... 3
1.5 Simultaneous Transfer of Receivables................... 4
1.6 Closing................................................ 4
ARTICLE II. PURCHASE PRICE......................................... 4
2.1 Purchase Price......................................... 4
2.2 Interest on Purchase Price............................. 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDER........................................ 5
3.1 Organization, Qualification and Authority.............. 5
3.2 Capitalization and Stock Ownership..................... 5
3.3 Absence of Default..................................... 6
3.4 Financial Statements................................... 6
3.5 Operations Since December 31, 1996..................... 7
3.6 Litigation............................................. 8
3.7 Licenses............................................... 8
3.8 Medicare, Medicaid and Other Third-Party Payors........ 9
3.9 Title to and Condition of Assets....................... 10
3.10 Contracts.............................................. 11
3.11 Environmental Matters.................................. 12
3.12 Miscellaneous Representations Relating to Real Estate.. 13
3.13 Company Employees...................................... 13
3.14 Employee Benefit Plans................................. 14
3.15 Insurance.............................................. 15
3.16 Conflicts of Interest.................................. 15
3.17 Compliance with Healthcare and Other Laws.............. 15
3.18 WARN Act............................................... 16
3.19 Tax Returns; Taxes..................................... 16
3.20 Asset Value; Statement of Income and Net Revenues...... 16
3.21 No Omissions or Misstatements.......................... 16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER................ 17
4.1 Organization, Qualification and Authority.............. 17
4.2 Absence of Default..................................... 17
ARTICLE V. COVENANTS OF PARTIES................................... 18
5.1 Preservation of Business and Assets.................... 18
5.2 Books and Records...................................... 18
5.3 Preserve Accuracy of Representations and Warranties.... 20
5.4 Broker's or Finder's Fee............................... 20
5.5 Indebtedness; Liens.................................... 20
5.6 Compliance with Laws and Regulatory Consents........... 20
5.7 Maintain Insurance Coverage............................ 21
5.8 Tangible Net Worth..................................... 21
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5.9 Medicare and Medicaid Reporting........................ 21
5.10 Current Return Filing.................................. 21
5.11 The Election........................................... 21
ARTICLE VI. COMPANY'S AND SHAREHOLDER'S CONDITIONS TO CLOSE........ 22
6.1 Representations and Warranties True at Closing;
Compliance with Agreement.............................. 22
6.2 No Action/Proceeding................................... 22
6.3 Order Prohibiting Transaction.......................... 22
6.4 Receivables Agreement.................................. 22
6.5 Exhibits............................................... 22
ARTICLE VII. BUYER'S CONDITIONS TO CLOSE............................ 23
7.1 Representations and Warranties True at Closing;
Compliance with Agreement.............................. 23
7.2 Regulatory Approvals................................... 23
7.3 No Action/Proceeding................................... 23
7.4 Inspection of Assets; U.C.C. Searches, etc............. 23
7.5 Order Prohibiting Transaction.......................... 23
7.6 Confidentiality and Non-Compete Agreements............. 24
7.7 Employment Agreements.................................. 24
7.8 Operating Targets...................................... 24
7.9 Approval of Board of Directors......................... 24
7.10 Exhibits............................................... 24
ARTICLE VIII. OBLIGATIONS OF COMPANY AND SHAREHOLDER AT
CLOSING................................................ 24
8.1 Documents Relating to Title............................ 24
8.2 Possession............................................. 25
8.3 Opinion of Counsel..................................... 25
8.4 Corporate Good Standing and Corporate Resolution....... 25
8.5 Closing Certificate.................................... 25
8.6 Third Party Consents................................... 26
8.7 Receivables and Confidentiality Agreements............. 26
8.8 Assumption Agreement................................... 26
8.9 Closing Statement...................................... 26
8.10 Additionally Requested Documents; Post-Closing
Assistance............................................. 26
ARTICLE IX. OBLIGATIONS OF BUYER AT CLOSING........................ 26
9.1 Purchase Price......................................... 26
9.2 Corporate Good Standing and Certified Board
Resolutions............................................ 26
9.3 Closing Certificate.................................... 27
9.4 Opinion of Buyer's Counsel............................. 27
ARTICLE X. SURVIVAL OF PROVISIONS AND INDEMNIFICATION............. 27
10.1 Survival............................................... 27
10.2 Indemnification by Shareholder......................... 27
10.3 Indemnification by Company and Buyer................... 28
10.4 Rules Regarding Indemnification........................ 28
ARTICLE XI. PRESERVATION OF BUSINESS AND NONCOMPETE
RESTRICTIONS........................................... 30
11.1 Covenant Not to Compete................................ 30
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11.2 Enforceability......................................... 31
ARTICLE XII. MISCELLANEOUS.......................................... 31
12.1 Assignment............................................. 31
12.2 Other Expenses......................................... 31
12.3 Notices................................................ 32
12.4 Confidentiality; Prohibition on Trading................ 32
12.5 Partial invalidity; Waiver............................. 33
12.6 Interpretation; Knowledge.............................. 33
12.7 Entire Agreement; Counterparts......................... 33
12.8 Further Assurance of Shareholder After Closing......... 33
12.9 Legal Fees and Costs................................... 34
12.10 Controlling Law ....................................... 34
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STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT is entered into on January 31, 1997, by and
among PRONETICS HEALTH CARE GROUP, INC., a North Carolina corporation, (the
"Company"), ▇▇▇▇▇▇▇ PHARMACEUTICAL CORPORATION, a New Jersey corporation (the
"Shareholder"), and AMERICAN HOMEPATIENT, INC., a Tennessee corporation
("Buyer").
R E C I T A L S:
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WHEREAS, the Company owns and operates a home health care business (the
"Business") located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇; and
WHEREAS, Shareholder owns all of the issued and outstanding capital stock
of the Company (the "Stock"); and
WHEREAS, Shareholder desires to sell and transfer the Stock to Buyer, and
Buyer desires to purchase the same from Shareholder, subject to the terms and
conditions set forth in this Agreement; and
WHEREAS, the parties have agreed to make a joint election in accordance
with Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the
"Election").
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1 Purchase and Sale. Shareholder agrees to sell, transfer, assign,
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convey and deliver to Buyer, and Buyer agrees to purchase from Shareholder, all
right, title and interest in and to the Stock, which consists of all of the
issued and outstanding capital stock of the Company. Shareholder will deliver to
Buyer at Closing all stock certificates representing the Stock, duly endorsed
for transfer or accompanied by duly executed stock powers. The Stock will be
conveyed to Buyer fully paid and nonassessable with good and valid title, free
and clear of all liens, charges, claims, liabilities, encumbrances, security
interests, restrictive agreements, options, rights of others and imperfections
of title of any nature whatsoever, including all amounts due and payable for
federal, state and local transfer taxes.
1.2 Assets at Closing. At Closing the Company will own or lease, as
-----------------
specified, all assets, tangible and intangible, real and personal, that are used
to operate the Business (collectively, the "Assets"), free and clear of all
encumbrances, mortgages, pledges, liens, security interests, obligations and
liabilities other than the Continuing Liabilities (as defined in paragraph 1.4),
which Assets will include, without limitation, the following:
(1) All leasehold right, title and interest in and to all of the real
property leased by the Company and/or used in connection with the Business as
listed in Exhibit 1.2(1) attached hereto, including improvements, fixed assets
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and fixtures including fixed machinery and fixed equipment situated thereon or
forming a part thereof and in which Company has an interest (collectively, the
"Real Estate");
(2) All medical and other equipment, machinery, data processing hardware
and software, furniture, furnishings, appliances, vehicles and other tangible
personal property and all replacement parts therefor used in connection with the
Business including, without limitation, the items listed on Exhibit 1.2(2)
------
attached hereto (collectively, the "Equipment and Furnishings");
(3) All inventory of goods and supplies used or maintained in connection
with the Business reflected on the Financial Statements (collectively, the
"Inventory");
(4) All accounts and notes receivable existing as of December 31, 1996 and
the proceeds thereof (collectively, the "Receivables");
(5) One-half (1/2) of the aggregate amount of cash of the Business existing
as of December 31, 1996 and all cash generated from operation of the Business on
and after the Effective Date, and any related bank accounts (as listed by name
and address of banking institution, account name and account and routing numbers
on Exhibit 1.2(5) attached hereto, money market accounts, other accounts,
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certificates of deposit and other investments of the Company (the "Cash and Cash
Equivalents"), and all prepaid expenses;
(6) All patient, medical, personnel, corporate and other records related to
the Business (including both hard and microfiche copies), and all manuals, books
and records used in operating the Business, including, without limitation,
personnel policies and files and manuals, accounting records, and computer
software;
(7) To the full extent transferable, all federal, state and local licenses,
permits, registrations, certificates, consents, accreditations, approvals and
franchises currently held by Company and necessary to operate and conduct the
Business (collectively, the "Licenses"), together with assignments thereof, if
required, and all waivers which the Company currently has, if any, of any
requirements pertaining to the Licenses;
(8) All goodwill, and, to the extent assignable by the Company, all
warranties (express or implied) and rights and claims related to the Assets or
the operation of the Business;
(9) Contract and leasehold rights and interests arising out of or released
to the Business and that are Continuing Liabilities; and
(10) All intangible or intellectual property owned, leased, licensed or
possessed by either the Company or the Shareholder and utilized in connection
with the Business, including without
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limitation, the names "Pronetics Health Care Group" and derivatives thereof, to
the extent the Company or Shareholder has rights in or to each such name. Buyer
acknowledges and agrees that it is not acquiring, and Company is not retaining
or acquiring, any license or other right regarding the name "▇▇▇▇▇▇▇
Pharmaceutical" or derivatives thereof.
1.3 Excluded Items. Immediately prior to conveyance of the Stock, Company
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will transfer to the Shareholder one-half (1/2) of the aggregate amount of cash
existing as of December 31, 1996 and all debts, liabilities and other
obligations of any nature whatsoever, whether known or unknown, contingent or
otherwise, other than the Continuing Liabilities as specifically set forth in
paragraph 1.4(1). The parties acknowledge and agree that Company is not
retaining the Excluded Items and that, following Closing, neither Company nor
Buyer will, directly or indirectly, have any right, title, interest or
obligation with respect to the Excluded Items.
1.4 Continuing Contracts, Leases and Liabilities.
---------------------------------------------
(1) At Closing, Company will retain and agree to pay or perform, as
the case may be, only (a) those obligations existing at December 31, 1996
constituting working capital liabilities incurred in the ordinary course of
business with respect to the purchase of equipment, inventory or fixed assets,
exclusive of long-term and interest bearing debt, which Company expressly elects
to retain as specifically set forth on Exhibit 1.4 attached hereto, (b) those
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obligations constituting working capital liabilities incurred in the ordinary
course of business on and after the Effective Date (as such term is defined in
paragraph 1.6), exclusive of long-term and interest bearing debt, and (c) those
obligations arising on and after the Effective Date under those Contracts (as
defined in paragraph 3.10) which Company expressly elects to retain
(collectively, the "Continuing Liabilities").
(2) Buyer is not assuming any debt, liability or obligation of the
Company or of Shareholder and, except for the Continuing Liabilities, it is
expressly agreed and understood by each of the parties to this Agreement that
after the Closing Company will not retain or be liable for, any debt, liability
or obligation of Company prior to the Closing or of Shareholder of any type or
description whatsoever, whether related or unrelated to the Stock, the Business
or the transactions contemplated under this Agreement and that Shareholder will
be liable and responsible for the payment or performance, as the case may be, of
all debts, liabilities, obligations, contracts, leases, notes payable, accounts
payable, commitments, agreements, suits, claims, indemnities, mortgages, taxes,
contingent liabilities and other obligations of Company arising prior to Closing
and of Shareholder including, without limitation, any and all investment tax
credit recapture, depreciation recapture, recapture or prior period adjustments
under Medicare, Medicaid and Blue Cross, all impositions of income tax and other
taxes; all employee wages, salaries and benefits including, without limitation,
COBRA and WARN obligations, accrued vacation and
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sick pay not expressly assumed by Buyer pursuant to this paragraph, and other
accrued employee benefits including rights of Company's retirees to participate
in medical plans.
1.5 Simultaneous Transfer of Receivables. Immediately upon Closing,
-------------------------------------
Company will transfer the Receivables to Shareholder and Shareholder will pay in
consideration therefor the fair market value of the Receivables as of December
31, 1996, as such value is mutually determined by the parties (the "Receivables
Price"). The parties acknowledge and agree that the fair market value of the
Receivables will be equal to the tax basis of the Receivables for Buyer
immediately subsequent to the transfer of Stock. The Receivables Price will be
payable in cash at Closing.
1.6 Closing. If all of the conditions to Closing set forth in Articles VI
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and VII are satisfied, then the Closing will occur on or by February 21,1997 at
the offices of Shareholder, Eatontown, New Jersey, or at such other time or
place as the parties may mutually agree (the "Closing"). Upon consummation, the
Closing will be deemed to be effective and the transfer of the Stock will be
deemed to have occurred, as of 12:01 a.m. Eastern Standard Time on January 1,
1997 (the "Effective Date"). Accordingly, all income generated from operation
of the Business on and after the Effective Date will remain with the Company
and, indirectly, be for the benefit of Buyer. Shareholder hereby acknowledges
that for the period from the Effective Date until the Closing when the physical
transfer of certificate(s) evidencing the Stock will actually take place,
Shareholder will hold such certificate(s) for the benefit of Buyer and such
certificates will be deemed delivered as of the Effective Date, subject to the
other provisions of this Agreement. If Closing has not occurred by March 31,
1997, then any party not in default hereunder may terminate this Agreement
without further obligation.
ARTICLE II. PURCHASE PRICE
2.1 Purchase Price. The purchase price payable by Buyer to Shareholder
---------------
for the Stock and in consideration for the agreements contained herein,
including the agreements contained in Article XI, will be the sum of Six Hundred
Fifty Thousand and No/l00 Dollars ($650,000.00) plus the Receivables Price (the
"Purchase Price"). The Purchase Price will be subject to adjustment as set forth
in this Agreement and will be payable in immediately available funds by wire
transfer at Closing in the following manner:
2.2 Interest on Purchase Price. In addition to the Purchase Price
---------------------------
described in paragraph 2.1, Buyer will deliver to Shareholder, in immediately
available funds by wire transfer at Closing, interest on $650,000.00 of the
Purchase Price at the rate of seven percent (7.0%) per annum from the Effective
Date through Closing.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereunder, Shareholder hereby
represents and warrants to Buyer, which representations and warranties will be
true and correct on the date of Closing, as follows:
3.1 Organization, Qualification and Authority. Company is a corporation
------------------------------------------
duly organized and validly existing in the State of North Carolina, and is not
required to be qualified to do business as a foreign corporation in any other
jurisdiction. Since the date of its organization and incorporation, Company has
consistently observed and operated within the corporate formalities of the
jurisdictions in which it is incorporated and/or conducts its business, and has
consistently observed and complied with the general corporation law of such
jurisdictions. Company has full power and authority to own, lease and operate
its facilities and assets as presently owned, leased and operated; and to carry
on its business as it is now being conducted. Company has never operated any
other business. Except for Shareholder, no other person or entity owns or holds,
has any interest in, whether legal, equitable or beneficial, or has the right to
purchase, any capital stock or other security of Company. Company owns no
capital stock, security, interest or other right, or any option or warrant
convertible into the same, of any corporation, partnership, joint venture or
other business enterprise. Company and Shareholder have the full right, power
and authority to execute, deliver and carry out the terms of this Agreement and
all documents and agreements necessary to give effect to the provisions of this
Agreement, to consummate the transactions contemplated on the part of each such
party hereby, and to take all actions necessary, in their respective capacities,
to permit or approve the actions of Company and Shareholder taken in connection
with this Agreement. The execution, delivery and consummation of this
Agreement, and all other agreements and documents executed in connection
herewith by Company and Shareholder, have been duly authorized by all necessary
action on the part of such parties. No other action, consent or approval on the
part of Company, Shareholder or any other person or entity is necessary to
authorize due and valid execution, delivery and consummation, of this Agreement
and all other agreements and documents executed in connection herewith. This
Agreement and all other agreements and documents executed in connection herewith
by Company and/or Shareholder, upon due execution and delivery thereof, will
constitute the valid and binding obligations of Company and/or Shareholder, as
the case may be, enforceable against each in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
general principles of equity.
3.2 Capitalization and Stock Ownership. Except for Shareholder, no other
-----------------------------------
person or entity owns or holds, has any interest in, whether legal, equitable or
beneficial, or has the
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right to purchase, any capital stock or other security of Company. The Stock,
being 45 shares, $.01 par value, of common stock, constitutes all issued and
outstanding securities of Company, is duly authorized, validly issued, fully
paid and nonassessable, and is owned free and clear of any liens, charges,
encumbrances, security interests, pledges or any other restrictions whatsoever.
At Closing, Company will have no outstanding subscriptions, options, warrants,
calls, contracts, convertible securities or other instruments, agreements or
arrangements of any nature whatsoever under which Company is or may be obligated
or compelled to issue any capital stock, security or interest of any kind, or to
transfer or modify any right with respect to any capital stock, security or
other interest, and no one has any preemptive rights, right of first refusal or
similar rights with respect to the Stock or any equity interest in Company.
Neither Company nor Shareholder is a party to any, and there exist no, voting
trusts, stockholder agreements, pledge agreements or other agreements relating
to or restricting the transferability of any shares of the Stock or equity
interests of Company. The Stock has been issued in accordance with all
applicable federal and state securities laws.
3.3 Absence of Default. The execution, delivery and consummation of this
-------------------
Agreement, and all other agreements and documents executed in connection
herewith by Company and Shareholder will not constitute a violation of, or be in
conflict with, will not, with or without the giving of notice or the passage of
time, or both, result in a breach of, constitute a default under, create (or
cause the acceleration of the maturity on any debt, indenture, obligation or
liability affecting Company or its Business or rights in the Stock, result in
the creation or imposition of any security interest, lien, charge or other
encumbrance upon any of the Stock, or otherwise adversely affect Buyer, Company
or the Business under: (a) any term or provision of the Charter or Bylaws of
Company; (b) any contract, lease, purchase order, agreement, document,
instrument, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Company and/or Shareholder is a party or by which
Company, Shareholder, Stock or the Assets are bound; (c) any judgment, decree,
order, regulation or rule of any court or regulatory authority; or (d) any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority or arbitration tribunal to which Company,
Shareholder, the Stock and/or the Assets are subject.
3.4 Financial Statement
-------------------
(1) Attached hereto as Exhibit 3.4 are true and correct copies of
Company's unaudited balance sheets as of December 31, 1996, and its unaudited
income statements for the year then ending (the "Financial Statements"). The
Financial Statements are based on the books and records of Company and present
fairly, in compliance with generally accepted accounting principles, the
financial position of Company as of, and the results of its operations for, the
periods specified. Except as set forth in the Financial Statements, Company
has, and as of the Closing will have, no
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contingent liabilities or obligations.
(2) The books and records of Company are in such order and
completeness so that an unqualified audit may be performed for any period prior
to Closing not already audited. Shareholder will fully and readily cooperate
with Buyer in Buyer's attempt to perform an audit of Company for any period
prior to Closing not already audited.
3.5 Operations Since December 31, 1996. Since December 31, 1996, there has
-----------------------------------
been no:
(1) material change in the condition, financial or otherwise, which
has, or could reasonably be expected to have, an adverse effect on any of the
Assets, the Business or future prospects of the Business, or in the results of
the operations of the Company;
(2) material loss, damage or destruction of or to any of the Assets,
whether or not covered by insurance;
(3) sale, lease, transfer or other disposition by Company of, or
mortgages or pledges of or the imposition of any lien, charge or encumbrance on,
any portion of the Assets, except inventory for sale and equipment held for rent
in the ordinary course of business;
(4) increase in the compensation payable by Company to Shareholder or
any employees, directors, independent contractors or agents, or material
increase in, or institution of, any bonus, insurance, pension, profit-sharing or
other employee benefit plan or arrangements made to, for or with the employees,
directors, independent contractors or agents of Company;
(5) cumulative net operating loss incurred in the operation of the
Business, adjustment or write-off of Receivables or reduction in reserves for
Receivables outside of the ordinary course of business, or change in the
accounting methods or practices employed by Company or change in adopted
depreciation or amortization policies;
(6) issuance or sale by Company, or contract or other commitment
entered into by Company or Shareholder for the issuance or sale, of any shares
of capital stock or securities convertible into or exchangeable for capital
stock of Company;
(7) payment by Company of any dividend, distribution or extraordinary
or unusual disbursement or expenditure or intercompany payable;
(8) merger, consolidation or similar transaction; or solicitation
therefor;
(9) security interest, guarantee or other encumbrance, other than in
the ordinary course of business, obligation or liability, in each case whether
absolute, accrued, contingent or
7
otherwise, or whether due or to become due, incurred or paid by Company to any
person or entity; or the making by Company of any loan or advance to, or an
investment in, any person or entity;
(10) federal, state or local statute, rule, regulation, order or case
adopted, promulgated or decided which, to the best knowledge of Company and
Shareholder, materially adversely affects Company, Stock, Business or Assets;
(11) strike, work stoppage or other labor dispute adversely affecting
the Business; or
(12) termination, waiver or cancellation of any rights or claims of
Company, under contract or otherwise.
Further, since the Effective Date, neither Shareholder nor any of its
affiliates has received any compensation, benefits or distributions from
Company, whether as salary, bonus, fees, dividends or any other form of
compensation.
3.6 Litigation. Except as disclosed in Exhibit 3.6 attached hereto, no
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person or party (including, without limitation, any governmental agency) has
asserted, or to the best knowledge of the Company or Shareholder, has threatened
to assert, any claim for any action or proceeding, against Company (or any
officer, director, employee, agent or Shareholder of Company) arising out of any
statute, ordinance or regulation relating to wages, collective bargaining,
discrimination in employment or employment practices or occupational safety and
health standards (including, without limitation, the Fair Labor Standards Act,
Title VII of the Civil Rights Act of 1964, as amended, the Occupational Safety
and Health Act, the Age Discrimination in Employment Act of 1967, or the
Americans With Disabilities Act). Neither Company nor Shareholder has received
notice of any violation of any law, rule, regulation, ordinance or order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality (including, without limitation,
legislation and regulations applicable to the Medicare and Medicaid programs,
environmental protection, civil rights, public health and safety and
occupational health). Except as set forth in Exhibit 3.6. there are no
------------
lawsuits, proceedings, actions, arbitrations, governmental investigations,
claims, inquiries or proceedings pending or threatened involving Company,
Shareholder, Stock, any of the Assets or the Business. The claims disclosed in
Exhibit 3.6, if any, will not result in any liability to or obligation of Buyer,
------------
directly or through the Company, and will not cause or lead to any lien or
encumbrance being placed, created or filed against or upon any of the Stock or
Assets, and Shareholder will indemnify and hold Buyer and Company harmless with
respect to the same.
3.7 Licenses.
---------
(1) Company has all Licenses necessary for Company to occupy, operate
and conduct the Business, and there do not exist any waivers or exemptions
relating thereto. There is no material
8
default on the part of Company or any other party under any of the Licenses.
There exist no grounds for revocation, suspension or limitation of any of the
Licenses. Copies of each of the Licenses are attached to and listed on Exhibit
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3.7(1) attached hereto. The most recent licensure surveys, deficiency reports
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and plans of correction, if any, related to each of these items has also been
included in Exhibit 3.7(1). Company is, and at the time of Closing will be,
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licensed by the regulatory bodies listed on Exhibit 3.7(1). No notices have been
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received by Company or Shareholder with respect to any threatened, pending, or
possible revocation, termination, suspension or limitation of the Licenses.
(2) Company is not required to have any certificates of need or
equivalents in order to operate the Business.
(3) Each employee of Company has all Licenses required for each such
employee to perform such employee's designated functions and duties for Company
in connection with conducting the Business, and there exist no waivers or
exemptions relating thereto. There is no material default under, nor does there
exist any grounds for revocation, suspension or limitation of, any such
Licenses.
(4) Company is duly accredited by the Joint Commission on
Accreditation of Healthcare Organizations ("JCAHO") to operate and conduct the
Business. Included in Exhibit 3.7(4) attached hereto are the certificates of
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accreditation issued by the JCAHO, and copies of the most recent JCAHO
accreditation survey report, including a list of deficiencies, if any.
3.8 Medicare, Medicaid and Other Third-Party Payors.
------------------------------------------------
(1) Company participates in the Medicare and Medicaid Programs
(collectively, the "Programs"). A list of and copies of its existing Medicare
and Medicaid contracts and other documentation evidencing such participation
(collectively, the "Program Agreements") are included in Exhibit 3.10 attached
------------
hereto. Company is, and will be at the time of Closing, in full compliance with
all of the material terms, conditions and provisions of the Program Agreements.
(2) No notice of any offsets against future reimbursements under or
pursuant to the Programs has been received by either Company or Shareholder, nor
is there any basis therefor. There are no pending appeals, adjustments,
challenges, audits, litigation, notices of intent to recoup past or present
reimbursements with respect to the Programs. Company has not been subject to or
threatened with loss of waiver of liability for utilization review denials with
respect to the Programs during the past twelve (12) months, nor has either
Company or Shareholder received notice of any pending, threatened or possible
decertification or other loss of participation in, any of the Programs.
(3) Company currently has contractual arrangements with
9
Blue Cross and other third party Payors. A list of and copies of its existing
Blue Cross contract(s) and other third party payor contract(s) are included in
Exhibit 3.10. Company is, and will be at the time of Closing, in full compliance
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with all of the material terms, conditions and provisions of such contracts.
(4) All liabilities and contractual adjustments of Company under any
third party payor or reimbursement programs have been properly reflected and
adequately reserved for in the Financial Statements. If, following Closing,
Company suffers any offsets against any reimbursement under any third-party
payor or reimbursement programs due to Buyer or Company relating to the periods
on or prior to the Closing, then Shareholder will immediately pay to Company the
amounts so offset, with interest at a rate equal to seven percent (7.0%) per
annum; provided, however that Buyer will bear the risk of offset as to
operations from the Effective Date through Closing so long as such offsets are
not caused by the wilful acts or omissions, or negligence, of Shareholder,
Company and/or their respective employees, representatives or agents. The
interest will accrue from the date of offset by the third party until the date
paid by Shareholder to Company. Buyer hereby agrees to notify Shareholder
promptly in the event for such an offset.
3.9 Title to and Condition of Assets.
---------------------------------
(1) Company is the sole legal and beneficial owner of the personal
property included in the Assets, free and clear of all mortgages, security
interests, liens, leases, covenants, assessments, easements, options, rights of
refusal, restrictions, reservations, defects in the title, encroachments, and
other encumbrances, except the Continuing Liabilities. No debt of Shareholder
imposes any lien or other encumbrance on the Assets. The Assets are all the
assets set forth on the Financial Statements or used in the operation of the
Business.
(2) The description of the Real Estate contained in Exhibit 1.2(1) is
--------------
accurate and include all real property leased by Company, used in connection
with the Business or set forth on the Financial Statements. Company owns no
real property. Company is in lawful possession of all of the Real Estate.
Additionally, the transfer and conveyance of the Stock to Buyer as contemplated
by the terms of this Agreement once effected as contemplated hereunder, will
vest in the Buyer, either directly or indirectly through Company, the lawful
right to possess and use the Real Estate.
(3) The Equipment and Furnishings are all of the "Equipment" reflected
on the Financial Statements, other than those items sold and replaced in the
ordinary course of business. The Assets comprise all assets owned by the Company
and all assets used in connection with the Business. All components of all of
the Equipment and Furnishings (a) operate in accordance with their respective
specifications, (b) perform the functions they are supposed to perform, (c) are
free of patent structural,
10
installation, engineering, or mechanical defects or problems, and (d) are
otherwise in good working order. The Company has received no written
recommendation from any insurer to repair or replace any of the Assets with
which the Company has not complied.
(4) The Inventory is, and on Closing will be, of a quality and
quantity previously used by Company in the ordinary course of business
determined and valued consistent with Company's past practice. The Inventory is
properly valued at the lower of cost or market value on a first-in/first-out
basis in accordance with generally accepted accounting principles consistently
applied. Since the date of the Financial Statements, Company has not decreased
or substituted its items of Inventory other than in the ordinary course of
business.
(5) All motor vehicles used in the Business, whether owned or leased,
are listed in Exhibit 1.2(2) attached hereto, are properly licensed and are
--------------
registered in accordance with applicable law.
(6) All trademarks, service marks, trade names, patents, inventions,
processes, copyrights and applications therefor, whether registered or at common
law (collectively, the "Intellectual Property"), owned by Company are listed and
described in Exhibit 3.9 attached hereto. No proceedings have been instituted
-----------
or are pending or, to the best knowledge of Company and Shareholder, threatened
which challenge the validity of the ownership by Company of any such
Intellectual Property. Company has not licensed anyone to use any such
Intellectual Property, and neither Company nor Shareholder has any knowledge of
the use or the infringement of any of such Intellectual Property by any other
person. Company owns or possesses adequate and enforceable licenses or other
rights to use all Intellectual Property now used in the conduct of its Business.
3.10 Contracts.
----------
(1) Exhibit 3.10 attached hereto sets forth a complete and accurate
------------
list of all written contracts, including the Program Agreements, agreements,
purchase orders, leases, subleases, options and commitments, oral-or written,
and all assignments, amendments, schedules, exhibits and appendices thereof,
affecting or relating to the Business, Stock or any Asset or any interest
therein, to which either Company and/or Shareholder is a party or by which
Company, the Assets or the Business is bound or affected, including, without
limitation, service contracts, management agreements, equipment leases and
building leases pertaining to any part of the Real Estate (collectively, the
"Contracts"). To the best knowledge of Company and Shareholder, there are no
oral contracts or agreements to which Company is a party or by which Company,
the Assets or the Business is bound or affected. Attached to Exhibit 3.10 are
------------
accurate and complete copies of all written Contracts. Except for the
Continuing Liabilities, all obligations under the Contracts will be assumed by
Shareholder.
11
(2) None of the Contracts has been modified, amended, assigned or
transferred and each is in full force and effect and is valid, binding and
enforceable in accordance with its respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by general principles of equity. No event or
condition has happened or currently exists which constitutes a default or breach
or, after notice or lapse of time or both, would constitute a default or breach
by any party under any of the Contracts. There are no counterclaims or offsets
under any of the Contracts.
(3) There does not exist any security interest, lien, encumbrance or
claim of others created or allowed to exist on any interest created under any of
the Contracts (except for those that result from or relate to leased Assets).
No purchase commitment by Company is in excess of Company's ordinary business
requirements.
(4) Conveyance to Buyer of the Stock will not cause a default under,
alter or terminate any of those Contracts which constitute Continuing
Liabilities, and Buyer, directly or through Company, will be entitled to all
rights thereunder.
3.11 Environmental Matters.
----------------------
(1) Hazardous Substances. As used in this paragraph, the term
---------------------
"Hazardous Substances" means any hazardous or toxic substances, materials or
wastes, including but not limited to those substances, materials, and wastes
defined in Paragraph 101 of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed in the
United States Department of Transportation Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances pursuant to 40 CFR Part
302, or which are regulated under any other Environmental Law (as such term is
defined herein), and any of the following: hydrocarbons, petroleum and petroleum
products, asbestos, polychlorinated biphenyls, formaldehyde, radioactive
substances (other than naturally occurring materials in place), flammables and
explosives.
(2) Compliance with Laws and Regulations. (a) All operations or
-------------------------------------
activities on, and any use or occupancy of the Real Estate by Company, any
Affiliates of Company (wherein the term "Affiliates" will mean any person or
entity controlling, controlled by or under common control at any time with
Company, and the term "control" will mean the power, directly or indirectly to
direct the management or policies of such person or entity), and any agent,
contractor or employee of any agent or contractor of Company or its Affiliates
("Agents") is and has been in compliance with any and all laws, regulations,
orders, codes, judicial decisions, decrees, licenses, permits and other
applicable requirements of governmental authorities with respect to Hazardous
Substances, pollution or protection of human health and safety (collectively,
"Environmental Laws"), except where the failure to be in compliance could not
materially adversely affect
12
the Business or Assets. To the knowledge of Company and Shareholder, all prior
owners, operators and occupants of the Real Estate complied with Environmental
Law. Other than in the ordinary course of business, neither Company nor its
Affiliates or Agents have allowed the use, generation, treatment, handling,
manufacture, voluntary transmission, disposal discharge or storage of any
Hazardous Substances on the Real Estate. Neither Company nor its Affiliates or
Agents have installed or permitted to be installed, on the Real Estate friable
asbestos or any substance containing asbestos in condition or amount deemed
hazardous by Environmental Law.
(b) Company has not, and to the knowledge of Company and Shareholder the
Landlord of the Real Estate has not, either received or been issued a notice,
demand, request for information, citations, summons or complaint regarding an
alleged failure to comply with Environmental Law; to the knowledge of Company or
Shareholder, the Real Estate is not subject to any existing, pending or
threatened investigation or inquiry by any governmental authority for
noncompliance with, or any remedial obligations under Environmental Law; and
there are no circumstances known to Company or Shareholder which could serve as
a basis therefor. The Company has not assumed any liability of a third party for
clean-up under or noncompliance with Environmental Law. Neither the Company nor
its Affiliates or Agents have transported or arranged for the transportation of
any Hazardous Substances to any location which is listed or, to the best
knowledge of Company and Shareholder, proposed for listing under Environmental
Law or is the subject of any enforcement action, investigation or other inquiry
under Environmental Law.
3.12 Miscellaneous Representations Relating to Real Estate.
------------------------------------------------------
To the knowledge of Company and Shareholder, no part of the Real Estate is
currently subject to condemnation proceedings, no condemnation or taking is
threatened or contemplated, and none of the Real Estate is in violation of any
zoning, public health, building code or other similar laws applicable thereto or
to the ownership, occupancy and/or operation thereof. All utilities serving the
Real Estate are adequate to operate the Real Estate in the manner it is
currently operated and any associated charges accrued to date have been fully
paid. There are no facts known to either Company or Shareholder that would
adversely affect the possession, use or occupancy of the Real Estate.
3.13 Company Employees.
------------------
(1) Exhibit 3.13 attached hereto sets forth: (a) a complete list of all of
------------
the Company's employees, (b) their respective rates of pay, (c) the employment
dates and job titles of each such person, and (d) categorization of each such
person as a full-time or part time employee of Company. For purposes of this
paragraph, "part-time employee" means an employee who is employed for an average
of fewer than twenty hours per week or who has been employed for fewer than six
(6) of the twelve (12) months preceding the date on which notice
13
is required pursuant to the "Worker Adjustment and Retraining Notification Act"
("WARN"), 29 U.S.C. Section 2102 et seq. Except as provided in Exhibit 3.10,
-- ---- -------------
Company has no employment agreements with its employees and all such employees
are employed on an "at will" basis. Exhibit 3.13 also (a) lists, and has
------------
attached copies of all employee fringe benefits and personnel policies, and (b)
lists all ex-employees of Company utilizing or eligible to utilize COBRA (health
insurance). Shareholder agrees to indemnity and hold Buyer and Company harmless
from and against any and all claims of employees, whenever made, relating to
their employment by Company through Closing. Company has adequately accrued all
salaries and wages, related payroll taxes and all sick leave, holiday, vacation
benefits, retirement and other fringe benefits that have accrued to Company
employees through the Closing Date, including related payroll taxes.
(2) Company is not a party to any labor contract, collective
bargaining agreement, contract, letter of understanding, or any other
arrangement with any labor union or organization which obligates Company to
compensate employees at prevailing rates or union scale, nor are any of its
employees represented by any labor union or organization. There is no pending
or, to the best knowledge of Company and Shareholder, threatened labor dispute,
work stoppage, unfair labor practice complaint, strike, administrative or court
proceeding or order between Company and any present or former employee(s) of
Company. There is no pending or, to the best knowledge of Company and
Shareholder, threatened suit, action, investigation or claim between Company and
any present or former employee(s) of Company. There has not been any labor union
organizing activity at any location of Company, or elsewhere, with respect to
Company's employees.
3.14 Employee Benefit Plans.
-----------------------
(1) Exhibit 3.14 attached hereto contains a true, accurate and
------------
complete list of each (a) "employee welfare benefit plan" (as defined in
Paragraph 3(1) of the Employee Retirement Income Security Act of 1974 as amended
("ERISA")) maintained by Company or to which Company contributes or is required
to contribute, and (b) "employee pension benefit plan" (as defined in Paragraph
3(2) of ERISA) maintained by Company, to which Company contributes or is
required to contribute, or which covered employees of Company during the period
of their employment with any predecessor of Company, including any multi-
employer pension plan as defined under Internal Revenue Code of 1986, Paragraph
414(f) (such employee welfare benefit plans and pension benefit plans being
hereinafter collectively referred to as the "Benefit Plans"). Copies of all
Benefit Plans have previously been provided to Buyer.
(2) Liabilities. There are no unfunded liabilities under any Benefit
------------
Plan currently due and owing. Neither Buyer nor Company will be liable or
responsible for any debt, obligation, responsibility or liability under any such
plans. Shareholder hereby assumes liability under such plans for all claims due
and
14
unpaid thereunder, whether or not incurred, paid or presented before Closing.
(3) Termination of Participation. Shareholder will, at its cost, take
-----------------------------
all necessary action so that Company, by Closing, will cease to be a
participating employer under all Benefit Plans, and any such action will in no
way diminish Shareholder's obligations to Buyer or Company.
3.15 Insurance. Company has in effect and has for at least five (5) years
----------
continuously maintained insurance coverage for all of its operations, personnel
and assets, and for the Assets and the Business. A complete and accurate list
of all current insurance policies is included in Exhibit 3.10. Exhibit 3.15
------------- ------------
attached hereto sets forth a summary of Company's current insurance coverage
(listing type, carrier and limits), includes a list of any pending insurance
claims relating to Company or Business, and includes a recent three-year claims
history relating to Company and the Business as prepared by the applicable
insurance carrier(s). Shareholder agrees to indemnity and hold Buyer and
Company harmless from and against such pending insurance claims to the extent
such claims are not satisfied by Company's insurance policies. Company is not
in default or breach with respect to any provision contained in any such
insurance policies, nor has Company failed to give any notice or to present any
claim thereunder in due and timely fashion.
3.16 Conflicts of Interest. None of the following is either a supplier of
----------------------
goods or services to Company, or directly or indirectly controls or is a
director, officer, employee or agent of any corporation, firm, association,
partnership or other business entity that is a supplier of goods or services to
Company: (a) Shareholder, other than as reflected in intercompany payables noted
in the Financial Statements (b) any director or officer of Company, or (c) any
entity under common control with Company or controlled by or related to
Shareholder.
3.17 Compliance with Healthcare and Other Laws. Neither Company nor
------------------------------------------
Shareholder has made any kickback, bribe or payment to any person or entity,
directly or indirectly, for referring, recommending or arranging business or
patients with, to or for Company which action could have a material adverse
effect on the Business. No bulk sales or similar statute applies to the
transactions contemplated under this Agreement. Neither WARN nor any similar
state law applies to such transactions, and such transactions comply with
applicable state antitrust and similar laws. None of the Contracts and no
activity of Company or Shareholder violates Paragraph 1877 of the Social
Security Act or any similar provision of applicable state law in any material
respect. None of the Contracts and no activity of Company or Shareholder
violates provisions of applicable state law relating to the corporate practice
of medicine in any material respect. Company is in compliance (without obtaining
waivers, variances or extensions) with all federal, state and local laws, rules
and regulations which relate to the operations of the Business, except
15
where the failure to be in compliance would not have a material adverse effect
on the Business. All Certificates of Medical Necessity filed by the Company
have been properly completed, executed and filed in compliance with all
applicable laws, rules and regulations. All healthcare, tax and other returns,
reports, plans and filings of any nature required to be or otherwise filed by
Company or Shareholder with any governmental authorities or third party payors
have been properly completed, except where the failure to be so completed or
filed could not have a material adverse effect on the Business, and timely filed
in compliance with all applicable requirements. Each return, report, plan and
filing contains no materially untrue or misleading statements and does not omit
anything which could cause it to be misleading or inaccurate in any material
respect. Shareholder will be responsible for any liability incurred in
connection with any such, return, report, plan and filing.
3.18 WARN Act. Since ninety (90) days prior to Effective Date, Company has
---------
not temporarily or permanently closed or shut down any single site of employment
or any facility or any operating unit, department or service within a single
site of employment, as such terms are used in WARN.
3.19 Tax Returns; Taxes. Company and Shareholder have filed all federal,
-------------------
state and local tax returns and tax reports related to Company which are
required by governmental authorities to be filed as of the time of Closing.
Company and Shareholder have paid all taxes, assessments, governmental charges,
penalties, interest and fines due or claimed to be due as of the time of Closing
(including, without limitation, taxes on properties, income, franchises,
licenses, sales and payrolls) by any governmental authority. Additionally, the
reserves for taxes reflected in the Financial Statements are adequate to cover
all tax liabilities accrued as of the respective dates thereof. There is no
pending tax examination or audit of, nor any action, suit, investigation or
claim asserted or, to the best knowledge of Company and Shareholder, threatened
against Company or Shareholder by any governmental authority; and Company and/or
Shareholder have not been granted any extension of the limitation period
applicable to any tax claims.
3.20 Asset Value; Statement of Income and Net Revenues. The aggregate book
--------------------------------------------------
value of the Assets owned by Company at Closing will be no less than One Hundred
Ten Thousand and No/100 Dollars ($110,000.00). For the twelve(12) month period
ended December 31, 1996, Company suffered a loss, before interest and taxes, of
no more than Eight Thousand and No/100 Dollars ($8,000.00), and revenues, net of
contractual adjustments, bad debt reserves, bad debt write-offs and billing
adjustments, of at least One Million One Hundred Nineteen Thousand and No/100
Dollars ($1,119,000.00).
3.21 No Omissions or Misstatements. There is no material fact applicable to
------------------------------
the Stock, Assets, liabilities, Business or prospects of Company which has not
been set forth or described in this Agreement or in the Exhibits hereto and
which is material to
16
the conduct, prospects, operations or financial condition of Company, Business
or the Assets. None of the information included in this Agreement and Exhibits
hereto, or other documents furnished or to be furnished by Shareholder or
Company, or any of its representatives, contains any untrue statement of a
material fact or is misleading in any material respect or omits to state any
material fact necessary in order to make any of the statements herein or therein
not misleading in light of the circumstances in which they were made. Copies of
all documents referred to in any Exhibit hereto have been delivered or made
available to Buyer and constitute true, correct and complete copies thereof and
include all amendments, exhibits, schedules, appendices, supplements or
modifications thereto or waivers thereunder.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Shareholder and Company to enter into this Agreement
and to consummate the transactions contemplated hereunder, Buyer hereby
represents and warrants to Shareholder and Company, which representations and
warranties will be true and correct on the date of Closing, as follows:
4.1 Organization, Qualification and Authority. Buyer is a corporation
------------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Tennessee. Buyer has the full corporate power and authority to own,
lease and operate its properties and assets as currently owned, leased and
operated and to carry on its business as it is now being conducted. Buyer has
the full right, power and authority to execute, deliver and carry out the terms
of this Agreement and all documents and agreements necessary to give effect to
the provisions of this Agreement and to consummate the transactions contemplated
on the part of Buyer hereby. The execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection herewith
by Buyer has been duly authorized by all necessary corporate action on the part
of Buyer. No other action on the part of Buyer or any other person or entity is
necessary to authorize the execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection
herewith. This Agreement, and all other agreements and documents executed in
connection herewith by Buyer, upon due execution and delivery thereof, will
constitute the valid binding obligations of Buyer, enforceable in accordance
with their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
4.2 Absence of Default. The execution, delivery and consummation of this
-------------------
Agreement and all other agreements and documents executed in connection herewith
by Buyer will not constitute a violation of, be in conflict with, or, with or
without the giving of notice or the passage of time, or both, result in a breach
of, constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, indenture, obligation or
17
liability or result in the creation or imposition of any security interest,
lien, charge or other encumbrance upon any of the Assets (except in the ordinary
course pursuant to the existing credit agreement of Buyer's parent) under any
judgment, decree, order, regulation or rule of any court or regulatory
authority, or any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Buyer is subject.
ARTICLE V. COVENANTS OF PARTIES
5.1 Preservation of Business and Assets. From the Effective Date until
------------------------------------
Closing, Company and Shareholder will use their best efforts and will do or
cause to be done all such acts and things as may be necessary to preserve,
protect and maintain intact the operation of the Business and Assets as a going
concern consistent with prior practice and in ordinary course of business, to
preserve, protect and maintain for Buyer the goodwill of the suppliers,
employees, clientele, patients and others having business relations with Company
or the Business. Company will use its best efforts to retain its employees in
their current positions up to Closing. Following Closing, Company will provide
its employees such medical and health benefits as are provided to employees of
Buyer of similar rank and responsibility. Until termination of this Agreement,
Company and Shareholder will not sell, transfer or pledge, or negotiate the
sale, transfer or pledge of, either any of the Assets (other than inventory in
the ordinary course of business) or Stock or other security oil Company, nor
merge or consolidate with any other entity; neither Seller nor Shareholder will
solicit any inquiries, proposals or offers relating to any such transactions;
and both parties will promptly notify Buyer orally, and confirm in writing, of
all relevant details relating to inquires, proposals or offers which either may
receive relating to any such matters. From the Effective Date until Closing,
Company will pay no dividend, and will make no distribution or extraordinary
payment to Shareholder or any third party or pay any intercompany payable and,
other than in the ordinary course of business, Company will not sell, discard or
dispose of any of the Assets. None of the Contracts will be amended in any
material respect between the date hereof and Closing without the prior written
consent of Buyer, and Company will not enter into any new material contract,
commitment or other transaction with respect to the Business or the Assets
without the prior written consent of Buyer. From the Effective Date until
Closing, Company and any party in possession of all or any part of the Assets
will maintain and keep the Assets in a sanitary, well-maintained condition and
in good order and repair, ordinary wear and tear expected. Buyer, Company and
Shareholder shall use their best efforts to facilitate the consummation of the
transactions contemplated under this Agreement.
5.2 Books and Records.
------------------
(1) From the date hereof until the Closing, Company will maintain its
books of account in the usual, regular and ordinary
18
manner on a basis consistent with prior years and will make no change in its
accounting methods or practices.
(2) Until Closing, Company and Shareholder will give to Buyer full
access to all of Company's offices, properties, books, contracts, commitments,
records and affairs relating to the Stock, Assets or the Business so that Buyer
may inspect and audit them and will furnish to Buyer a copy of all documents and
information concerning the properties and affairs of Company, the Business,
Stock or the Assets as Buyer may request. If any such books, records and
materials are in the custody of third parties, Company and Shareholder will
direct such third parties to provide them promptly to Buyer.
(3) Following the Closing, Buyer will permit Shareholder, during
normal business hours, to have reasonable access to, and examine and make copies
of, all books and records of the Business which relate to transactions or events
occurring prior to the Closing. All out-of-pocket costs associated with the
delivery of the requested documents will be paid by Shareholder.
(4) Following the Closing, Shareholder will permit Buyer to have
access to, and examine and make copies of, any books and records relating to the
Business, Stock or Assets which Shareholder is required by law to retain, if
any, and which relate to transactions or events occurring prior to the Closing.
For a period of five (5) years after the Closing, Shareholder agrees that, prior
to the destruction or disposition of any such books or records, Shareholder will
provide not less than forty-five (45) days', nor more than ninety (90) days',
prior written notice to Buyer of such proposed destruction or disposal. If Buyer
desires to obtain any such documents or records, it may do so by notifying
Shareholder in writing at any time prior to the date scheduled for such
destruction or disposal. In such event, Shareholder will not destroy such
documents or records and the parties will then promptly arrange for the delivery
of such documents or records to Buyer, its successors or assigns. All out-of-
pocket costs associated with the delivery of the requested documents or records
will be paid by Buyer.
(5) Shareholder will use its best efforts to cause Company's
accounting firm to consent to the inclusion of the Financial Statements in any
registration statements, private placement memoranda, and periodic reports, if
any, necessary or appropriate in order to enable Buyer or its Affiliates to
comply with any applicable registration or reporting requirements of federal or
state securities laws. After Closing, Shareholder will make the books and
records of Company available to Buyer and will otherwise cooperate with Buyer in
order to permit Buyer, at its expense, to conduct an audit of Company's
financial statements for any period prior to Closing not already audited.
Shareholder agrees to cooperate with Buyer in Buyer's preparation of financial
statements relating to such periods and Buyer's filing in a timely manner of
registration statements, private placement memoranda and periodic reports, if
any, pursuant to any applicable federal or
19
state securities law.
5.3 Preserve Accuracy of Representations and Warranties. Shareholder and
----------------------------------------------------
Company will refrain from taking any action which would render any
representation and warranty contained in Article Ill untrue, materially
inaccurate or misleading as of Closing. Shareholder and Company will promptly
notify Buyer of any lawsuit, claim, audit, investigation, administrative action
or other proceeding asserted or commenced against Company or its directors,
officers or Shareholder, that may involve or relate in any way to Company, the
Assets, Stock, Shareholder or the operation of the Business. Shareholder and
Company will promptly notify Buyer of any facts or circumstances that come to
its attention and that cause, or through the passage of time may cause, any of
Shareholder's or Company's representations, warranties or covenants to be untrue
or misleading at any time from the date hereof through Closing.
5.4 Broker's or Finder's Fee. Other than Corporate Development Associates,
-------------------------
for whose fees and expenses Shareholder will be solely responsible, neither
Buyer, Company nor Shareholder has employed or is liable for the payment of any
fee to any finder, broker or similar person in connection with the transactions
contemplated under this Agreement.
5.5 Indebtedness; Liens. Other than in the ordinary course of business as
--------------------
reflected in the Financial Statements, from the Effective Date through Closing
Company will not create, incur, assume, guarantee or otherwise become liable or
obligated with respect to any indebtedness for borrowed money, nor make any loan
or advance to, or any investment in, any person or entity, nor create any lien,
security interest, mortgage, right or other encumbrance in any of the Assets,
without Buyer's prior written approval. At Closing, the Assets will be free and
clear of all mortgages, security interests, liens, leases, covenants,
assessments, easements, options, rights of first refusal, restrictions,
reservations, defects in title, encroachments or other encumbrances, except as
set forth in those Leases and Contracts which are to be retained by Company, and
Company will deliver to Buyer such pay-off letters, releases, U.C.C. termination
statements and other documents as Buyer may reasonably request to evidence the
same.
5.6 Compliance with Laws and Regulatory Consents. From the date hereof
---------------------------------------------
through Closing, (a) Company will comply in all material respects with all
applicable statutes, laws, ordinances and regulations, (b) Company will keep,
hold and maintain all Licenses necessary for the Business and operation of the
Assets, (c) Shareholder and Company will use their reasonable efforts and will
cooperate fully with Buyer to obtain all consents, approvals, exemptions and
authorizations of third parties, whether governmental or private, necessary to
consummate the transactions contemplated by this Agreement, and (d) Shareholder
and Company will make and cause to be made all filings and give and cause to be
given all notices which may be necessary on their part under
20
all applicable laws and under their respective contracts, agreements and
commitments in order to consummate the transactions contemplated under this
Agreement.
5.7 Maintain Insurance Coverage. From the date hereof through Closing,
----------------------------
Company will maintain and cause to be maintained in full force and effect the
existing insurance on the Assets and the operations of the Business and will
provide at Closing written evidence satisfactory to Buyer that such insurance
continues to be in effect, that all premiums due have been paid, and that Buyer
has been named additional insured since the Effective Date.
5.8 Tangible Net Worth. Shareholder will maintain a tangible net worth of
-------------------
at least One Million and No/100 Dollars ($1,000,000.00) for at least five (5)
years following Closing.
5.9 Medicare and Medicaid Reporting. Up to the Effective Date, Shareholder
--------------------------------
will assume and be responsible for any liability incurred as a result of the
failure to file or improper filing of all reports and claims of every kind,
nature or description required by law or by written contract to be filed with
respect to the purchase of services by third party payors, including, without
limitation, Medicare, Medicaid and Blue Cross; provided, however, that if any
adverse adjustments or offsets with respect to the same regarding operations on
or after the Effective Date are the result of the wilful acts or omissions, or
negligence, of Company, Shareholder and/or either's employees, representatives
and agents, Shareholder will also be responsible for such adjustments and
offsets. As of the Effective Date and through Closing, Company has adequately
accrued or reserved for all liabilities for contractual adjustments, discounts,
refunds and other offsets in connection with such reports. Shareholder will be
entitled to receive any refund or other benefit which may result from the filing
of said reports and claims for operations up to the Effective Date, and Buyer
will likewise be so entitled with respect to operations on and after the
Effective Date.
5.10 Current Return Filing. Shareholder will be responsible for the
----------------------
preparation and filing of all federal, state and local income tax and gross
receipts and use tax returns of Company which are due on or before Closing.
Buyer will be responsible for the preparation and filing of all such returns
which relate to periods beginning subsequent to Closing.
5.11 The Election. The parties agree to properly make the Election to have
-------------
the effect that the Company will, for income tax purposes only, pay tax as if it
had sold its assets to Buyer. Notwithstanding the foregoing, Shareholder will be
solely responsible for the timely and proper payment of any and all federal,
state and local taxes and other assessments which may under law be payable by
any party hereto in connection with the transfer of Stock, whether deemed a sale
of stock or assets, including but not limited to taxes which may be payable by
Company or Buyer pursuant to Regulation 1.338(h)(1O)-1(e)(5) under the Internal
Revenue Code or under private letter rulings and
21
regulations adopted by the State of North Carolina, and Shareholder hereby
agrees to indemnify and hold harmless Company, Buyer and their representatives
and agents for any damages caused by the failure to pay the same timely and
properly. Attached hereto as Exhibit 5.11 is an asset-based allocation of the
------------
Purchase Price.
ARTICLE VI. COMPANY'S AND SHAREHOLDER'S CONDITIONS TO CLOSE
The obligations of Company and Shareholder under this Agreement are subject
to the satisfaction on or prior to Closing, of the following conditions (which
may be waived in writing by Company or Shareholder, in whole or in part):
6.1 Representations and Warranties True at Closing; Compliance with
---------------------------------------------------------------
Agreement. The representations and warranties of Buyer contained in this
----------
Agreement and in any certificate or document delivered pursuant hereto will be
deemed to have been made again at the Closing and will then be true in all
respects. Buyer will have performed and complied with all covenants, agreements
and conditions required by this Agreement to be performed or complied with by it
prior to or at Closing.
6.2 No Action/Proceeding. No action or proceeding before a court or any
---------------------
other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transactions hereunder contemplated, and no
governmental agency or body or other entity will have taken any other action or
made any request of Company, Shareholder or Buyer as a result of which
Shareholder reasonably and in good ▇▇▇▇▇ ▇▇▇▇ that to proceed with the
transactions hereunder may constitute a violation of law.
6.3 Order Prohibiting Transaction. No order will have been entered in any
------------------------------
action or proceeding before any court or governmental agency, and no preliminary
or permanent injunction by any court will have been issued which would have the
effect of (a) making the transactions contemplated by this Agreement illegal, or
(b) otherwise preventing consummation of such transactions. There will have been
no United States federal or state statute, rule or regulations enacted or
promulgated after the date of this Agreement that would reasonably, directly or
indirectly, result in any of the consequences referred to in this paragraph.
6.4 Receivables Agreement. Company and Shareholder will execute and deliver
----------------------
at Closing an agreement regarding the collection of certain Receivables, the
form of which is attached hereto as Exhibit 6.4. Such agreement will stipulate
------------
the terms under which a temporary employee of Shareholder will be retained for
purposes of collecting the Receivables and the allocation among Shareholder,
Buyer and Company of the expenses associated with retention of such temporary
employee.
6.5 Exhibits. The Exhibits to this Agreement will be completed to the
---------
mutual satisfaction of the parties.
22
ARTICLE VII. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Buyer, in whole or in part):
7.1 Representations and Warranties True at Closing; Compliance with
---------------------------------------------------------------
Agreement. The representations and warranties of Shareholder and Company
----------
contained in this Agreement (including the Exhibits hereto) and in any
certificate or document delivered pursuant hereto will be deemed to have been
made again at the Closing and will then be true in all respects. Company and
Shareholder will have performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at Closing.
7.2 Regulatory Approvals. Buyer will have obtained (a) certification for
---------------------
participation in the Medicaid Programs of the states where the Business is
conducted, (b) certification from the appropriate agency of the federal
government for participation in the federal Medicare Program, and (c) all other
consents, licenses, permits, approvals, provider contracts, determinations or
certificates of need necessary in the judgment of Buyer to acquire the Stock and
operate the Assets and Business as contemplated hereunder. Buyer will use its
best efforts to obtain promptly the items referenced in this paragraph 7.2.
7.3 No Action/Proceeding. No action or proceeding before a court or any
---------------------
other governmental agency or body will have been instituted or threatened to
restrain or prohibit the transaction herein contemplated, and no governmental
agency or body or other entity will have taken any other action or made any
request of Company, Shareholder or Buyer as a result of which Buyer reasonably
and in good ▇▇▇▇▇ ▇▇▇▇▇ that to proceed with the transactions hereunder may
constitute a violation of law.
7.4 Inspection of Assets; U.C.C. Searches, etc. Buyer and its
-------------------------------------------
representatives will have had and continue to have reasonable rights of
inspection of the Business in connection with Buyer's due diligence review, and
the results of Buyer's inspection and due diligence review will be acceptable to
it. Buyer will obtain, at its expense, all U.C.C. financing statements, local
and central, and federal and state pending litigation, tax lien and judgment
searches with respect to Company, with results satisfactory to Buyer in its sole
discretion. Company and Shareholder hereby covenant to Buyer that such searches
need only be done in the corporate name of Company.
7.5 Order Prohibiting Transaction. No order will have been entered in any
------------------------------
action or proceeding before any court or governmental agency, and no preliminary
or permanent injunction by any court will have been issued which would have the
effect of (a) making the transactions contemplated by this Agreement illegal,
(b) otherwise
23
preventing consummation of such transactions, or (c) imposing material
limitations on the ability of Buyer effectively to acquire and hold the Stock or
Assets, to operate the Business, or, in any case, to exercise rights of
ownership pursuant thereto. There will have been no federal or state statute,
rule or regulations enacted or promulgated after the date of this Agreement that
would reasonably result, directly or indirectly, in any of the consequences
referred to in this paragraph.
7.6 Confide and Non-Compete Agreements. Shareholder will execute and
-----------------------------------
deliver to Buyer a Confidentiality and Non-Compete Agreement in the form
attached hereto as Exhibit 7.6.
------------
7.7 Employment Agreements. Buyer and each of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
----------------------
Blikslager and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ will have entered into an employment agreement in
the respective forms included in Exhibit 7.7 attached hereto.
-----------
7.8 Operating Targets. As of the date of Closing, Company and the Business
------------------
will meet the following minimum operating thresholds: (i) for the twelve (12)
month period ended December 31, 1996, Company will have suffered a loss, before
interest and taxes, of no more than Eight Thousand and No/100 Dollars
($8,000.00) and revenues, net of contractual adjustments, bad debt reserves, bad
debt write-offs and billing adjustments of at least One Million One Hundred
Nineteen Thousand and No/100 Dollars ($1,119,000.00); and (ii) as of the date of
Closing, the Assets will have an aggregate book value of at least One Hundred
Ten Thousand and No/100 Dollars ($1 10,000.00). The Assets will be free and
clear of all liabilities and encumbrances whatsoever other than the Continuing
Liabilities.
7.9 Approval of Board of Directors. This Agreement and consummation of the
-------------------------------
transactions contemplated hereunder will have been approved by the Board of
Directors of Buyer.
7.10 Exhibits. The Exhibits to this Agreement will be completed to the
---------
mutual satisfaction of the parties.
ARTICLE VIII. OBLIGATIONS OF COMPANY AND SHAREHOLDER AT CLOSING
At Closing, Company and Shareholder will deliver or cause to be delivered
to Buyer the following in form and substance reasonably satisfactory to Buyer:
8.1 Documents Relating to Title. Shareholder will execute, acknowledge,
----------------------------
deliver and cause to be executed, acknowledged and delivered to Buyer:
(1) Stock certificates, registered in the name of the Shareholder,
duly endorsed by Shareholder or with stock powers attached, representing all of
the Stock.
(2) The resignation of each member of the Board of Directors and each
officer of Company effective as of the Closing.
24
8.2 Possession. Company will deliver to Buyer full possession and control
-----------
of the Stock, Business and Assets, including but not limited to the Cash and
Cash Equivalents.
8.3 Opinion of Counsel. Shareholder will deliver to Buyer a favorable
-------------------
opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Shareholder's Vice President and General Counsel,
dated as of Closing, in form and substance reasonably satisfactory to Buyer and
its counsel to the effect that:
(1) Shareholder is a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey. Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina and has all requisite corporate power and
corporate authority to own, operate and lease its properties and assets and to
carry on its business as now conducted.
(2) Each of Shareholder and Company has the corporate power and
corporate authority to execute, deliver and carry out the terms of this
Agreement and all documents and agreements delivered by each such corporation at
Closing and to consummate the transactions contemplated on the part of each such
corporation hereby and thereby. Each of Shareholder and Company has taken all
action required by law and its Charter and Bylaws to authorize such execution,
delivery and consummation of this Agreement, and this Agreement, and all other
agreements delivered by Shareholder and Company at Closing constitute the valid
and binding obligations of each such corporation, enforceable against it in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general principles of equity.
8.4 Corporate Good Standing and Corporate Resolution. Shareholder will
-------------------------------------------------
deliver to Buyer certificates of good standing from the Secretary of State of
Company's state of organization, certified copies of the Bylaws and Charter of
Company, and a certified copy of the resolutions of the Board of Directors and
Shareholder of Company authorizing the execution, delivery and consummation of
this Agreement and the execution, delivery and consummation of all other
agreements and documents executed in connection herewith by them, including all
assumption agreements and other instruments required hereunder, sufficient in
form and content to meet the requirements of the law of the State of Company's
incorporation relevant to such transactions and certified by officers of Company
to be validly adopted and in full force and effect and unamended as of Closing.
8.5 Closing Certificate. Company will deliver to Buyer a certificate of an
--------------------
officer of Company and of Shareholder, dated as of Closing, certifying that (a)
Company and Shareholder are in compliance with each covenant and obligation
applicable to Company and Shareholder pursuant to this Agreement, and (b) each
representation, warranty and covenant of Company and Shareholder pursuant to
this Agreement is true and correct at the Closing as if made on and as of the
Closing.
25
8.6 Third Party Consents. Shareholder will deliver to Buyer by Closing all
---------------------
consents, estoppels, approvals, releases, pay-off letters, U.C.C. termination
statements and other filings, and authorizations of third parties that Buyer
believes are necessary for the legal and proper execution, delivery and
consummation of this Agreement, and the transactions contemplated hereunder,
including but not limited to releases of all mortgages, security interests,
liens, pledges, restrictions or other encumbrances on or applicable to the Stock
or Assets.
8.7 Receivables and Confidentiality Agreements. Shareholder will deliver
--------------------------------------------
to Buyer each of the agreements described in paragraphs 6.4 and 7.6.
8.8 Assumption Agreement. Shareholder will deliver to Buyer and the
---------------------
Company an Assumption Agreement evidencing that Shareholder will be responsible
for all obligations pertaining to past operations of the Business other than the
Continuing Liabilities.
8.9 Closing Statement. Shareholder and Company will, along with Buyer,
------------------
execute a Closing Statement setting forth the Purchase Price and various
adjustments thereto.
8.10 Additionally Requested Documents; Post-Closing Assistance. At the
---------------------------------------------------------
reasonable request of Buyer at Closing and at any time for a period of one year
thereafter, Shareholder will (a) cooperate with Buyer to put Buyer in actual
possession and operating control of the Stock, Company, Business and Assets, (b)
execute and deliver such further instruments of sale, conveyance, transfer and
assignment effectively to sell, convey, transfer and assign the same to Buyer,
(c) execute and deliver such further instruments and to take such other actions
as Buyer may reasonably request to release Buyer and Company from all obligation
and liability with regard to any obligation or liability retained or assumed by
Shareholder, and (d) execute and deliver such further instruments and to
cooperate with Buyer as Buyer may reasonably request to enable Buyer and Company
to obtain all necessary health care or regulatory certifications, approvals,
consents and licenses, accreditation or permits.
ARTICLE IX. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer will deliver or cause to be delivered to Shareholder the
following in a form and substance reasonably satisfactory to Shareholder:
9.1 Purchase Price. Buyer will pay to Shareholder the Purchase Price upon
---------------
the terms specified in this Agreement.
9.2 Corporate Good Standing and Certified Board Resolutions. Buyer will
-------------------------------------------------------
deliver to Shareholder a certificate of existence from the Secretary of State of
Tennessee, dated the most recent practical date prior to Closing, together with
a certified copy of the resolutions of the Board of Directors of Buyer
authorizing the execution, delivery and consummation of this Agreement and the
26
consummation of the transactions contemplated hereunder.
9.3 Closing Certificate. Buyer will deliver to Shareholder a certificate of
--------------------
an officer of Buyer, dated as of Closing, certifying that (a) Buyer is in
compliance with each covenant and obligation applicable to Buyer pursuant to
this Agreement, and (b) each representation, warranty and covenant of Buyer
pursuant to this Agreement is true and correct at the Closing as if made on and
as of the Closing.
9.4 Opinion of Buyer's Counsel. Buyer will deliver to Shareholder an
---------------------------
opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & Manner, P.C. dated the date of the
Closing and pursuant to the Legal Opinion Accord of the ABA Section of Business
Law (1991), in form and substance reasonably satisfactory to Shareholder and its
counsel to the effect that:
(1) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee and has all requisite
corporate power and corporate authority to own, operate and lease its properties
and assets and to carry on its business as now conducted.
(2) Buyer has the corporate power and corporate authority to execute,
deliver and carry out the terms of this Agreement and all documents and
agreements delivered by Buyer at Closing and to consummate the transactions
contemplated on the part of Buyer hereby and thereby; Buyer has taken all action
required by law, and its Charter and Bylaws, to authorize such execution,
delivery and consummation of this Agreement, and this Agreement, and all other
agreements delivered by Buyer at Closing constitute the valid and binding
obligations of Buyer enforceable in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and by general principles
of equity.
ARTICLE X. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
10.1 Survival. The covenants, obligations, representations and warranties
---------
of Buyer, Company and Shareholder contained in this Agreement, or in any
certificate or document delivered pursuant to this Agreement, will be deemed to
be material and to have been relied upon by the parties hereto notwithstanding
any investigation prior to the Closing, will not be merged into any documents
delivered in connection with the Closing, and will survive the date of Closing
for a period of two (2) years; provided, however, that the representations,
warranties and covenants set forth in paragraphs 3.8, 3.11, 3.17 (as such
paragraph pertains to healthcare matters), 3.19, 5.9 and 5.10 will each survive
for the applicable statute of limitations.
10.2 Indemnification by Shareholder. Subject to the provisions of paragraph
-------------------------------
13.4, Shareholder will promptly indemnify, defend, and hold harmless Buyer,
Company and the directors,
27
officers, stockholders, employees and agents of each against any and all losses,
costs, and expenses (including reasonable cost of investigation, court costs and
legal fees actually incurred) and other damages resulting from (i) any breach by
either Company or Shareholder of any of the covenants, obligations,
representations or warranties or breach or untruth of any representation,
warranty, fact or covenants contained in this Agreement or any certificate or
document of Company and/or Shareholder delivered pursuant to this Agreement,
(ii) any liability of Company not expressly retained by Company or assumed by
Buyer pursuant to paragraph 1.4, and (iii) any claim (whether or not disclosed
herein) that is brought or asserted by any third party(ies) against Buyer or
Company arising out of the ownership, licensing, operation or conduct of the
Business or Assets or the conduct of any of Company's employees, agents or
independent contractors, relating to all periods of time prior to the Effective
Date. Any indemnification payment made pursuant to the foregoing will include
interest at an annual rate of seven percent (7.0%) payable for the period
measured from thirty (30) days after determination that such payment is due
until the date of payment.
10.3 Indemnification by Company and Buyer. Subject to the provisions of
-------------------------------------
paragraph 10.4, Company and Buyer will promptly indemnify, defend, and hold
Shareholder harmless against any and all losses, costs, and expenses (including
reasonable cost of investigation, court costs and legal fees) and other damages
resulting from (i) any breach by Buyer of any of its covenants, obligations,
representations or warranties or breach or untruth of any representation,
warranty, fact or conclusion contained in this Agreement or any certificate or
document of Buyer delivered pursuant to this Agreement, (ii) any claim which is
brought or asserted by any third party(ies) against Shareholder for failure to
pay or perform any of the Continuing Liabilities, and (iii) subject to the other
provisions of this Agreement, any claim that is brought or asserted by any third
party(ies) against Shareholder arising out of the ownership, licensing,
operation or conduct of the Business or the conduct of any of Company's
employees, agents or independent contractors, relating to periods of time
subsequent to the Effective Date. Any indemnification payment made pursuant to
the foregoing will include interest at an annual rate of seven percent (7.0%)
payable for the period measured from thirty (30) days after determination that
such payment is due until the date of payment.
10.4 Rules Regarding Indemnification. The obligations and liabilities of
--------------------------------
each party which may be subject to indemnification liability hereunder (the
"indemnifying party") to the other party (the "indemnified party") will be
subject to the following terms and conditions:
(1) Claims by Non-parties. The indemnified party will give written
----------------------
notice within a reasonably prompt period of time to the indemnifying party of
any written claim by a third party which is likely to give rise to a claim by
the indemnified party against the indemnifying party based on the indemnity
agreements contained
28
in this Article, stating the nature of said claim and the amount thereof, to the
extent known. The indemnified party will give notice to the indemnifying party
that pursuant to the indemnity, the indemnified party is asserting against the
indemnifying party a claim with respect to a potential loss from the third party
claim, and such notice will constitute the assertion of a claim for indemnity by
the indemnified party. If, within twenty (20) days after receiving such notice,
the indemnifying party advises the indemnified party that it will provide
indemnification and assume the defense at its expense, then so long as such
defense is being conducted, the indemnified party will not settle or admit
liability with respect to the claim and will afford to
the indemnifying party and defending counsel reasonable assistance in defending
against the claim. If the indemnifying party assumes the defense, counsel will
be selected by such party and if the indemnified party then retains its own
counsel, it will do so at its own expense. If the indemnified party does not
receive a written objection to the notice from the indemnifying party within
twenty (20) days after the indemnifying party's receipt of such notice, the
claim for indemnity will be conclusively presumed to have been accepted to and
approved, and in such case the indemnified party may control the defense of the
matter or case and, at its sole discretion, settle or admit liability. If
within the aforesaid twenty (20) day period the indemnified party will have
received written objection to a claim (which written objection will briefly
describe the basis of the objection to the claim or the amount thereof, all in
good faith), then for a period of sixty (60) days after receipt of such
objection the parties will attempt to settle the dispute as between the
indemnified and indemnifying parties. If they are unable to settle the dispute,
the unresolved issue or issues will be settled by arbitration in accordance with
the rules and procedures of the American Arbitration Association. If the
indemnified party is Buyer or Company, such arbitration will be conducted in
Nashville, Tennessee, and if the indemnified party is Shareholder, such
arbitration will be conducted in New York, New York.
(2) Claims by a Party. The determination of a claim asserted by a
------------------
party hereunder (other than as set forth in subparagraph (1) above) pursuant to
this Article will be made as follows: The indemnified party will give written
notice within a reasonably prompt period of time to the indemnifying party of
any claim by the indemnified party which has not been made pursuant to
subparagraph (1) above, stating the nature and basis of such claim and the
amount thereof, to the extent known. The claim will be deemed to have resulted
in a determination in favor of the indemnified party and to have resulted in a
liability of the indemnifying party in an amount equal to the amount of such
claim estimated pursuant to this paragraph if within thirty (30) days after the
indemnifying party's receipt of the claim the indemnified party will not have
received written objection to the claim. In such event, the claim will be
conclusively presumed to have been assented to and approved. If within the
aforesaid thirty (30) day period the indemnified party will have received
written objection to a claim (which written objection will briefly
29
describe the basis of the objection to the claim or the amount thereof, all in
good faith), then for a period of sixty (60) days after receipt of such
objection the parties will attempt to settle the disputed claim as between the
indemnified and indemnifying parties. If they are unable to settle the disputed
claim, the unresolved issue or issues will be settled by arbitration in
accordance with the rules and procedures of the American Arbitration
Association. Notwithstanding the provisions of this clause (2), the enforcement
provisions set forth in paragraph 11.2 will be available in the event of a
breach of paragraph 11.1. If the indemnified party is Buyer or Company, such
arbitration will be conducted in Nashville, Tennessee, and if the indemnified
party is Shareholder, such arbitration will be conducted in New York, New York.
(3) Claims by a Straddle Patient. Any claim by a patient relating to
-----------------------------
professional negligence or similar matters involving a patient served both prior
to the Effective Date and subsequent to the Effective Date will be the
responsibility of either Company or Shareholder in accordance with the following
guidelines: (i) if it is a claim in which the incident giving rise to
allegations of liability clearly arose prior to the Effective Date, Shareholder
will respond to the loss and defense expenses; (ii) subject to the other
provisions of this Agreement, if it is a claim in which the incident giving rise
to allegations of liability clearly arose on or after the Effective Date,
Company will respond to the loss and defense expenses; and (iii) if the incident
giving rise to allegations of liability is not clear as to time, Shareholder and
Company will jointly defend the case and each will fully cooperate with the
other in such defense. Once the case is closed, if Buyer, Company and
Shareholder cannot agree to the allocation of both indemnity and expenses, then
the matter will be submitted to binding arbitration in New York, New York in
accordance with the rules and procedures of the American Arbitration
Association.
ARTICLE XI. PRESERVATION OF BUSINESS
AND NONCOMPETE RESTRICTIONS
11.1 Covenant Not to Compete. Shareholder hereby covenants and agrees with
------------------------
Buyer that, during the NON-COMPETE PERIOD (as such term is defined herein) and
within the NON-COMPETE AREA (as such term is defined herein), Shareholder will
not directly or indirectly, (a) acquire, lease, manage, consult for, serve as
agent or subcontractor for, finance, invest in, own any part of or exercise
management control over any health care operation or business which provides any
goods or services competitive with the goods and services provided by the
Business as of the Closing, or (b) solicit for employment or employ any person
who at Closing or thereafter became an employee of Buyer, Company or an
affiliate unless such person is not so employed for at least six (6) months, or
(c) with respect to any customer, patient, physician, physician group, or
healthcare provider with whom Buyer, Company and/or an Affiliate contracts with
in connection with the Business, either solicit the same in a manner which could
adversely affect Buyer, Company or an Affiliate, or make
30
statements to the same which disparage Buyer, Company, an Affiliate or their
respective operations in any way. The "Non-Compete Period" will commence at the
Closing and terminate on the fifth (5th) anniversary thereof. The "Non-Compete
Area" will mean the area within a fifty (50) mile radius of each location from
which the Business is operated or conducted as of the Closing. Ownership of
less than five percent (5%) of the stock of a publicly held company will not be
deemed a breach of this covenant.
11.2 Enforceability. In the event of a breach of paragraph 11.1,
---------------
Shareholder recognizes that monetary damages will be inadequate to compensate
Buyer and Company, and Buyer and Company will be entitled, without the posting
of a bond or similar security and notwithstanding the arbitration provisions
contained in Article X, to an injunction restraining such breach, with the costs
(including attorney's fees) of securing such injunction to be borne by
Shareholder. Nothing contained herein will be construed as prohibiting Buyer or
Company from pursuing any other remedy available to either for such breach or
threatened breach. All parties hereby acknowledge the necessity of protection
against the competition of Shareholder and that the nature and scope of such
protection has been carefully considered by the parties. The period provided
and the area covered are expressly represented and agreed to be fair, reasonable
and necessary. The consideration provided for herein is deemed to be sufficient
and adequate to compensate Shareholder for agreeing to the restrictions
contained in paragraph 11.1. If, however, any court determines that the
forgoing restrictions are not reasonable, such restrictions will be modified,
rewritten or interpreted to include as much of their nature and scope as will
render them enforceable.
ARTICLE XII. MISCELLANEOUS
12.1 Assignment. Following Closing, Buyer and Company may freely assign any
-----------
or all of their respective rights or delegate any or all of their respective
obligations under this Agreement to any Affiliate without the express written
consent of Shareholder. Buyer and Company may not assign any rights or delegate
any obligations under this Agreement to any other party without the prior
written consent of Shareholder, and Shareholder may not assign any rights or
delegate any obligations under this Agreement without the prior written consent
of Buyer. Any prohibited assignment or delegation will be null and void.
Subject to the foregoing, this Agreement will be binding upon and inure to the
exclusive benefit of the parties hereto and their respective legal
representatives, successors and assigns. This Agreement is not intended to nor
will it, create any rights in any other party.
12.2 Other Expenses. Except as otherwise provided in this Agreement,
---------------
Shareholder will pay all of its and Company's expenses in connection with the
negotiation, execution, and implementation of the transactions contemplated
under this Agreement and Buyer will pay all of its expenses in connection with
the negotiation, execution, and implementation of the transactions contemplated
under
31
this Agreement. All sales and use taxes, recording fees and transfer taxes
incurred in connection under the transactions contemplated within this Agreement
will be borne by Shareholder and paid at Closing.
12.3 Notices. All notices, requests, demands, waivers and other
--------
communications required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given: (a) if delivered personally
or sent by facsimile, on the date received, (b) if delivered by overnight
courier, on the day after mailing, and (c) if mailed, five days after mailing
with postage prepaid. Any such notice will be sent as follows:
To Shareholder and, prior to Closing, Company:
----------------------------------------------
▇▇▇▇▇▇▇ Pharmaceutical Corporation
Meridian Center 11
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Pharmaceutical Corporation
Meridian Center II
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
To the Buyer and, after Closing to the Company:
-----------------------------------------------
American HomePatient, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ & Manner, P.C.
1800 First American Center
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
12.4 Confidentiality; Prohibition on Trading. Except for press releases
----------------------------------------
issued by Buyer and Shareholder in the ordinary course following Closing, all
parties agree to maintain the confidentiality of the existence of this Agreement
and the transactions contemplated hereunder, unless disclosure is required by
law. Both Buyer and Shareholder will provide the other a copy of such press
release two (2) business days prior to issuance for review and comment. Each
party and its Affiliates agree not to trade in the securities of the other
parties based upon any nonpublic information.
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12.5 Partial Invalidity: Waiver. The invalidity or unenforceability of any
---------------------------
particular provision of this Agreement will not affect the other provisions
hereof, and this Agreement will be construed in all respects as if such invalid
or unenforceable provisions were omitted. Further, there will be automatically
substituted for such invalid or unenforceable provision a provision as similar
as possible which is valid and enforceable. Neither the failure nor any delay
on the part of any party hereto in exercising any rights, power or remedy
hereunder will operate as a waiver thereof, or of any other right, power or
remedy; nor will any single or partial exercise of any right, power or remedy
preclude any further or other exercise thereof, or the exercise of any other
right, power or remedy. No waiver of any of the provisions of this Agreement
will be valid unless it is in writing and signed by the party against which it
is sought to be enforced.
12.6 Interpretation; Knowledge. All pronouns and any variation thereof will
--------------------------
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or entity, or the context, may require. Further, it is
acknowledged by the parties that this Agreement has undergone several drafts
with the negotiated suggestions of both; and, therefore, no presumptions will
arise favoring either party by virtue of the authorship of any of its provisions
or the changes made through revisions. Any table of contents and paragraph
headings in this Agreement are for convenience of reference only and will not be
considered or referred to in resolving questions of interpretation. Whenever in
this Agreement the term "to the best knowledge of Company or Shareholder" or the
like is used, Company and Shareholder will each be deemed to have the knowledge
of its respective officers and directors; and Company and Shareholder will each
be under a duty of due inquiry.
12.7 Entire Agreement; Counterparts. This Agreement, including the Exhibits
-------------------------------
and Attachments hereto, constitutes the entire agreement between the parties
hereto with regard to the matters contained herein and it is understood and
agreed that all previous undertakings, negotiations, letters of intent and
agreements between the parties related to the subject matter hereof are merged
herein. This Agreement may not be modified orally, but only by an agreement in
writing signed by Buyer, Company and Shareholder. This Agreement may be
executed simultaneously in two or more counterparts each of which will be deemed
an original and all of which together will constitute one and the same
instrument.
12.8 Further Assurance of Shareholder After Closing. Subsequent to the
-----------------------------------------------
Closing, Shareholder will from time to time, at Buyer's request, execute and
deliver such other instruments of conveyance and transfer, and take such other
action as Buyer may reasonably request, in order more effectively to sell,
transfer, assign and deliver and vest in Buyer and Company, as the case may be,
the benefits of, title to and possession of the Stock and Assets.
33
12.9 Legal Fees and Costs. If any party hereto incurs legal expenses to
---------------------
enforce or interpret any provision of this Agreement, the prevailing party will
be entitled to recover such legal expenses, including, without limitation,
attorney's fees, costs and disbursements, in addition to any other relief to
which such party may be entitled.
12.10 Controlling Law. This Agreement will be construed, interpreted and
enforced in accordance with the substantive laws of the State of Tennessee,
without giving effect to its conflicts of laws provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
"COMPANY":
PRONETICS HEALTH CARE GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: Vice President
------------------------------
"SHAREHOLDER":
▇▇▇▇▇▇▇ PHARMACEUTICAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: Vice President
"BUYER":
AMERICAN HOMEPATIENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
34