AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 7, 1998
AMONG
INTEGRATED HEALTH SERVICES, INC.,
IHS ACQUISITION NO. 37, INC.
AND
AMERICAN MOBILE HEALTH SYSTEMS, INC.
AND
▇▇▇▇▇ ▇▇▇▇▇▇
AND
▇▇▇ ▇▇▇▇▇
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TABLE OF CONTENTS
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PAGE
ARTICLE I: MERGER................................................................1
1.1 Merger................................................................1
1.2 Taking of Necessary Action............................................1
ARTICLE II: CONVERSION...........................................................2
2.1 Conversion of Stock...................................................2
2.2 Adjustments to the Merger Consideration...............................2
2.3 Escrow................................................................4
2.4 Assets................................................................5
2.5 Liabilities...........................................................5
2.6 Employees.............................................................7
ARTICLE III: IHS STOCK...........................................................7
3.1 IHS Stock.............................................................7
ARTICLE IV: THE CLOSING.........................................................12
4.1 Time and Place of Closing............................................12
4.2 Filings at Closing...................................................12
4.3 Effective Time.......................................................12
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE
COMPANY.....................................................................12
5.1 Organization and Standing of the Company.............................12
5.2 Absence of Conflicting Agreements....................................13
5.3 Consents.............................................................13
5.4 Company Stock........................................................13
5.5 Assets...............................................................13
5.6 Trademarks...........................................................14
5.7 Contracts............................................................14
5.8 Financial Statements.................................................15
5.9 Material Changes.....................................................16
5.10 Licenses; Permits....................................................16
5.11 Title, Condition of Personal Property................................16
5.12 Legal Proceedings....................................................17
5.13 Employees............................................................18
5.14 Collective Bargaining, Labor Contracts, Employment Practices, Etc....18
5.15 ERISA................................................................19
5.16 Insurance and Surety Agreements......................................19
5.17 Relationships........................................................19
5.18 Absence of Certain Events............................................20
5.19 Compliance with Laws.................................................21
(i)
5.20 Finders..............................................................22
5.21 Tax Returns..........................................................22
5.22 Encumbrances Created by this Agreement...............................23
5.23 Subsidiaries and Joint Ventures......................................23
5.24 No Untrue Statement..................................................23
5.25 Reimbursement Matters................................................23
5.26 Medicare/Medicaid Participation......................................23
5.27 Leasehold Interests..................................................23
5.28 Power and Authority..................................................24
5.29 Binding Effect.......................................................24
5.30 Questionnaires.......................................................24
5.31 Questionable Payments................................................24
5.32 Customers............................................................24
5.33 Fee Schedules and Reimbursement......................................24
5.34 Complete Disclosure..................................................24
5.35 Books of Account; Records............................................25
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLERS ..........................25
6.1 Authority............................................................25
6.2 Binding Effect.......................................................25
6.3 Absence of Conflicting Agreements....................................25
6.4 Consents.............................................................25
6.5 Ownership of Company Stock...........................................26
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO .................26
7.1 Organization and Standing............................................26
7.2 Power and Authority..................................................26
7.3 Binding Agreement....................................................26
7.4 Absence of Conflicting Agreements....................................26
7.5 Consents.............................................................27
7.6 Securities and Exchange Commission Filings...........................27
7.7 Capital Stock........................................................27
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY AND
ITS SUBSIDIARIES............................................................27
8.1 Access to Information and Records before Closing.....................27
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING...........................28
9.1 Conduct of Business Pending Closing..................................28
9.2 Negative Covenants of the Company and its Subsidiaries...............28
9.3 Affirmative Covenants................................................28
9.4 Pursuit of Consents and Approvals....................................29
9.5 Exclusivity..........................................................30
(ii)
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..........................30
10.1 Representations and Warranties.......................................30
10.2 Performance of Covenants.............................................30
10.3 Delivery of Closing Certificate......................................30
10.4 Opinion of Counsel...................................................30
10.5 Legal Matters........................................................30
10.6 Authorization Documents..............................................30
10.7 Material Change......................................................31
10.8 Approvals............................................................31
10.9 Consents.............................................................31
10.10 Undertaking..........................................................31
10.11 Real Property Consents...............................................31
10.12 Company's Subsidiaries and Options...................................31
10.13 Board and Lender Approvals...........................................31
10.14 Consulting Agreements................................................32
10.15 Employment Agreement.................................................32
10.16 Termination of Non-Retained Agreements...............................32
10.17 Escrow Agreement.....................................................32
10.18 Stock Certificates...................................................32
10.19 Dissenter's Rights...................................................32
10.20 Insurance............................................................32
10.21 Certificate of Status................................................32
10.22 Procedure and Customer Volume Summary................................32
10.23 Other Documents......................................................32
ARTICLE XI: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS........................33
11.1 Representations and Warranties.......................................33
11.2 Performance of Covenants.............................................33
11.3 Delivery of Closing Certificate......................................33
11.4 Opinion of Counsel...................................................33
11.5 Legal Matters........................................................33
11.6 Authorization Documents..............................................33
11.7 Consulting Agreements................................................33
11.8 Employment Agreement.................................................33
11.9 Escrow Agreement.....................................................33
11.10 Other Documents......................................................34
ARTICLE XII: SURVIVAL AND INDEMNIFICATION.......................................34
12.1 Survival of Representations and Warranties...........................34
12.2 Indemnification by Shareholders......................................34
12.3 Indemnification by Buyer.............................................35
12.4 Indemnity Cap........................................................35
12.5 Control of Defense of Indemnifiable Claims...........................35
12.6 Restrictions.........................................................36
12.7 Records..............................................................37
(iii)
12.8 Dissenters' Rights...................................................37
12.9 Closing Date Balance Sheet...........................................37
ARTICLE XIII: TERMINATION.......................................................37
13.1 Termination..........................................................37
13.2 Effect of Termination................................................38
ARTICLE XIV: CASUALTY, RISK OF LOSS.............................................38
14.1 Casualty, Risk of Loss...............................................38
ARTICLE XV: MISCELLANEOUS.......................................................38
15.1 Costs and Expenses...................................................38
15.2 Performance..........................................................39
15.3 Benefit and Assignment...............................................39
15.4 Effect and Construction of this Agreement............................39
15.5 Cooperation - Further Assistance.....................................39
15.6 Notices..............................................................39
15.7 Waiver, Discharge, Etc...............................................40
15.8 Rights of Persons Not Parties........................................40
15.9 Governing Law........................................................41
15.10 Amendments, Supplements, Etc.........................................41
15.11 Severability.........................................................41
15.12 Counterparts.........................................................41
15.13 Arbitration..........................................................41
15.14 Public Announcements.................................................41
(iv)
SCHEDULES & EXHIBITS
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Schedule 2.1(b) - Allocation among Shareholders
Schedule 2.5 - Seller Liabilities
Schedule 5.3 - Consent List of Sellers
Schedule 5.4 - Company Stock
Schedule 5.5 - Liens on Assets
Schedule 5.6 - Trademarks
Schedule 5.7 - Contracts
Schedule 5.8(a) - Unaudited Financial Statements
Schedule 5.8(b) - Interim Financial Statements
Schedule 5.8(c) - Material Liabilities
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses, Permits
Schedule 5.11(a) - Liens on Personal Property
Schedule 5.11(b) - Leases of Personal Property
Schedule 5.12 - Legal Proceedings
Schedule 5.13 - Employees
Schedule 5.14 - Collective Bargaining, etc.
Schedule 5.15(b) - Employee Benefit Plans
Schedule 5.15(c) - Employees on Leave of Absence
Schedule 5.16 - Insurance and Surety Agreements
Schedule 5.17 - Relationships
Schedule 5.18 - Absence of Certain Events
Schedule 5.19 - Compliance with Laws
Schedule 5.21 - Tax Returns
Schedule 5.23 - Subsidiaries, Joint Ventures, etc.
Schedule 5.25 - Reimbursement Matters
Schedule 5.27 - Leasehold Interests
Schedule 5.32 - Customers
Schedule 5.33 - Fee Schedules and Reimbursement
- Plan of Merger
Exhibit 2.3 - Escrow Agreement
Exhibit 5.30 - Questionnaire
Exhibit 10.4 - Opinion of Shareholders' Counsel
Exhibit 10.10 - Undertaking
Exhibit 10.14 - Consulting Agreements
Exhibit 10.15 - Employment Agreement
Exhibit 11.4 - Opinion of Buyer's Counsel
(v)
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AGREEMENT AND PLAN OF REORGANIZATION
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This Agreement and Plan of Reorganization (the "Agreement") is
made as of the 7th day of May, 1998, among INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation ("Buyer"), IHS ACQUISITION NO. 37, INC., a Wisconsin
corporation ("Newco"), ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇ (collectively, the "Sellers"
or "Shareholders" and individually, a "Seller" or "Shareholder") and AMERICAN
MOBILE HEALTH SYSTEMS, INC. a Wisconsin corporation ("Company").
WHEREAS, Newco is a subsidiary of Buyer; and
WHEREAS, the Company is in the business of providing mobile
x-ray, EKG, ultrasound, ▇▇▇▇▇▇ monitor, vision and audiology services and other
fixed site examinations; and
WHEREAS, the Sellers are the owners or holders of all of the
issued and outstanding shares of the capital stock of the Company ("Company
Stock"); and
WHEREAS, the Shareholders and the Boards of Directors of Buyer,
Newco, and the Company deem it advisable to merge Newco with and into the
Company (the "Merger") pursuant to the Agreement and the Plan of Merger annexed
as Exhibit A hereto (the "Plan of Merger"); and
WHEREAS, pursuant to the Merger, all shares of Company Stock will
be converted into the right to receive the Merger Consideration (as defined in
Section 2.1(a) of this Agreement).
NOW, THEREFORE, Sellers, Buyer, Newco and the Company intending
to be legally bound, agree as follows:
ARTICLE I: MERGER
1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time of Merger (as defined in Article IV, below),
Newco shall be merged with and into the Company and the separate existence of
Newco shall cease.
1.2 TAKING OF NECESSARY ACTION. Prior to and after the Effective
Time of Merger, subject to the provisions of this Agreement, each of the
Shareholders, Buyer, Newco, and the Company shall take all such action as may be
necessary or appropriate in order to effect the Merger as contemplated
hereunder. In case at any time after the Effective Time of Merger any further
action is necessary to carry out the purposes of this Agreement and to vest
Buyer with full title to Company Stock, the parties shall take all such
necessary action.
ARTICLE II: CONVERSION
2.1 CONVERSION OF STOCK. At the Effective Time of Merger:
(A) The shares of Company Stock which are issued and
outstanding immediately prior to the Effective Time of Merger shall, without any
action by the holder thereof, be converted into the right to receive that number
of shares of the common stock, par value $.001, of Buyer ("IHS Stock")
determined as of the Closing Date in accordance with Section 3.1(a) as shall
have an aggregate value, subject to adjustment pursuant to Section 2.2 hereof,
of TWO MILLION EIGHT HUNDRED THOUSAND AND 00/100 ($2,800,000.00) DOLLARS (the
"Merger Consideration"). Each of the Shareholders whose shares are converted
into the Merger Consideration shall receive a portion of the Merger
Consideration as shall be equal to the aggregate Merger Consideration multiplied
by a fraction, the numerator of which is the number of shares of Company Stock
owned by such Shareholder immediately prior to the Effective Time of Merger, and
the denominator of which is the total number of shares of Company Stock that are
issued and outstanding immediately prior to the Effective Time of Merger.
(B) Each share of Newco common stock outstanding immediately
prior to the Effective Time of Merger, shall be converted into one share of
common stock of the Company.
(C) At the Effective Time of Merger, each holder of a
certificate theretofore evidencing outstanding shares of Company Stock, upon
surrender of such certificate, shall be entitled to receive in exchange therefor
his proportionate share of the Merger Consideration, calculated pursuant to
Section 2.1(a) above, represented by the certificate or certificates so
surrendered. Until so surrendered, each such outstanding certificate which,
prior to the Effective Time of Merger, represented shares of Company Stock, will
be deemed to evidence the right to receive the proportionate share of Merger
Consideration represented by such certificate or certificates. Upon the
surrender of such certificates, they shall be duly canceled.
(D) Immediately after the Effective Time of Merger, Buyer, as
the sole shareholder of Newco, upon surrender of stock certificate(s) evidencing
outstanding shares of Newco, shall be entitled to receive in exchange therefor a
certificate representing the shares of Company Stock, calculated on a one-to-one
basis. Until so surrendered, each such certificate which, prior to the Effective
Time of Merger, represented the outstanding shares of Newco stock will be deemed
to evidence such shares of Company Stock. Upon the surrender of such
certificate(s), they shall be duly canceled.
2.2 ADJUSTMENTS TO THE MERGER CONSIDERATION.
(A) (I) For purposes of this Section 2.2, the "Threshold
Amount" shall mean the amount of the Advanced Tech Liability (as defined in
Section 2.5, below) plus the amount of the Vehicle Lease Liability (as defined
in Section 2.5, below) plus $975,000, and the "Closing Date Receivables" shall
mean the amount of the Company's outstanding accounts receivable on the Closing
Date.
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(II) If the amount of the Closing Date Receivables that
is actually collected on or prior to the first anniversary of the Closing Date
shall be less than the Threshold Amount, then the amount of the Merger
Consideration shall be reduced by such deficiency and the Escrowee shall deliver
over to Buyer in cash or shares of IHS Stock valued in accordance with Section
3.1(a), below, or in any combination thereof, an amount equal to such
deficiency, subject to the dispute resolution mechanism set forth in Section
2.2(c), below. In the event the deficiency exceeds the Escrow Deposit held by
Escrowee, the Shareholders shall refund to Buyer the amount of such deficiency,
in the discretion of Shareholders, in cash or shares of IHS Stock valued in
accordance with Section 3.1(a), below, or in any combination thereof.
(B) RELEASE OF ESCROW. For purposes hereof, "Excess
Receivables Amount" shall mean the amount by which the amount of Closing Date
Receivables exceeds the amount of the Advanced Tech Liability plus the amount of
the Vehicle Lease Liability. During the twelve (12) month period following the
Closing Date, the Escrow Deposit shall be reduced according to the following
schedule:
(I) After the collection of twenty (20%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments (as
defined in Section 2.3, below), or in any combination thereof, in the discretion
of Shareholders) in an amount equal to $100,000 shall be released to the
Shareholders;
(II) After the collection of forty (40%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments, or in
any combination thereof, in the discretion of Shareholders) in an additional
amount equal to $100,000 shall be released to the Shareholders;
(III) After the collection of sixty (60%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments, or in
any combination thereof, in the discretion of Shareholders) in an additional
amount equal to $100,000 shall be released to the Shareholders; and
(IV) After the collection of eighty (80%) percent of the
Excess Receivables Amount, a portion of the Escrow Deposit (whether in the form
of unregistered or registered IHS Stock, cash or Permitted Investments, or in
any combination thereof, in the discretion of Shareholders) in an additional
amount equal to $100,000 shall be released to the Shareholders.
(C) DISPUTE RESOLUTION. If there shall be any dispute
regarding the calculation of the adjustments to the Merger Consideration, then
such dispute shall be submitted to an independent "big six" public accounting
firm mutually agreeable to Buyer and Sellers, which public accounting firm shall
resolve any and all disputes with respect to the adjustments to the Merger
Consideration or prepaid expense calculation set forth in Schedule 2.4. If Buyer
and Sellers are unable to agree upon an independent "big six" public accounting
firm to be selected to resolve the dispute, each party shall name one firm and
the two firms so named shall choose a third
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independent "big six" public accounting firm which shall resolve the dispute.
Such determination shall be made within sixty (60) days after the dispute is
submitted to the independent "big six" public accounting firm in accordance with
the terms of this section and shall be final and binding upon Buyer and Sellers
in the absence of manifest error. The party against whom the independent "big
six" public accounting firm shall rule shall pay the costs and expenses of the
independent "big six" public accounting firm in connection therewith.
2.3 ESCROW.
(A) At the Closing, pursuant to an Escrow Agreement to be
entered into by the parties substantially in the form and substance of Exhibit
2.3, a portion of the IHS Stock included in the Merger Consideration as shall be
equal in value to FIVE HUNDRED THOUSAND ($500,000.00) DOLLARS (the "Escrow
Deposit") based upon the valuation described in Section 3.1(a), below, shall be
delivered by Buyer, on behalf of the Shareholders, to CoreStates Bank, N.A. as
escrow agent (the "Escrowee"). The Escrow Deposit shall be held and disbursed by
the Escrowee in accordance with the following:
(I) In the event that the Shareholders become obligated
to remit IHS Stock back to Buyer pursuant to the post-Closing adjustments set
forth in Section 2.2, the Escrowee shall release to Buyer that portion of the
Escrow Deposit as shall have a value equal to the amount by which the Merger
Consideration is so reduced.
(II) In the event that the Buyer becomes entitled to
indemnification pursuant to Section 12.2, the Escrowee shall release to Buyer
that portion of the Escrow Deposit as shall be equal in value to such
indemnification.
(III) If no claim for indemnification on the part of
Buyer remains outstanding upon the expiration of one (1) year following the
Closing Date, any remaining Escrow Deposit (less any amounts offset for claims
pursuant to Section 2.3(a)(i) and (ii) or any amounts previously released
pursuant to Section 2.3(c)) shall be released to the Shareholders.
(IV) If any claim for indemnification on the part of
Buyer does remain outstanding upon the expiration of one (1) year following the
Closing Date, then any Escrow Deposit (less any amounts offset for claims
pursuant to Section 2.3(a)(i) and (ii) or any amounts previously released
pursuant to Section 2.3(c)) (including all accrued interest thereon) remaining
(after resolution of the outstanding claim and payment in respect thereof, if
any is owing, shall be made), shall be released to the Shareholders no later
than thirty (30) business days after resolution of such claim.
(V) The value of any IHS Stock to be distributed to Buyer
from the Escrow Deposit shall be calculated based upon the average closing NYSE
price of such stock for its thirty (30) business day period immediately
preceding the date of such distribution.
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(B) The terms of the Escrow Agreement shall permit the
escrowed IHS Stock comprising the Escrow Deposit to be sold (subject to
applicable securities laws and Section 3.1(e), below) and reinvested in
investments to be approved by Buyer and Shareholders from Buyer's pre-approved
list of investments (the "Permitted Investments") as specified in the Escrow
Agreement. The Shareholders shall be entitled to receive, if and when paid, any
cash dividends paid in respect of IHS Stock included in the Escrow Deposit.
(C) The costs, fees and expenses of the Escrowee shall be
borne equally by Buyer, on the one hand, and the Shareholders, on the other
hand.
2.4 ASSETS. As of the Closing Date, the consolidated assets of
the Company (the "Assets") will include its ownership interests in all of its
current operating subsidiaries, as well as all of the tangible and intangible
assets necessary to operate the business of the Company and its subsidiaries as
presently constituted, including, without limitation, all contract rights,
leasehold interests, fixed and moveable equipment, vehicles, furnishings,
tangible personal property, inventory and supplies (other than inventory,
supplies, and other assets disposed of in the ordinary course of business,
consistent with prior practice), goodwill, trade names, trademarks, all patient
records, books and files, Medicare and Medicaid provider agreements and numbers,
IPL or IDTF provider numbers, provider agreements with third party payors,
telephone numbers, and to the extent permitted by law, all permits, licenses and
other governmental approvals. The Assets of the Company as of the Closing Date
shall also include accounts receivable, and prepaid expenses. Prepaid expenses
shall include, but are not limited to, office rent and insurance premiums will
be prorated and credited to the Sellers within ninety (90) days after Closing.
Notwithstanding the foregoing, except as provided in Section 2.5(b), below, the
Assets shall not include, and the Shareholders shall be entitled to retain and
distribute from the Company, the Company's cash on or prior to Closing, whether
on hand or in marketable securities, the two personal computers currently
located at the homes of the Shareholders, the two cellular telephones currently
used by the Shareholders, and the Canon video camera.
2.5 LIABILITIES.
(A) As of the Closing Date, the Company will not have any
liabilities (including the ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Bank note payable which shall be
paid off prior to or at Closing), other than the Advanced Tech long-term
liability (the "Advanced Tech Liability"), the unpaid portion attributable to
post-Closing matters of items to be prorated as of the Closing Date, post-
Closing liabilities arising under vehicle lease (the "Vehicle Lease Liability"),
and the post-Closing liabilities which arise under those certain contracts (the
"Retained Contracts"), specifically retained by Buyer, with respect to, and only
with respect to, services to be rendered or goods to be supplied to or benefits
to be conferred upon Buyer solely after the Closing Date (collectively, the
"Retained Liabilities"). Liabilities and obligations under such Retained
Contracts that have accrued, or the performance of which is due, on or prior to
the Closing, all liabilities and obligations under all other Contracts (as
defined below) with respect to any period on or prior to the Closing Date or
which are in payment or consideration for any excluded assets, and any other
claim, lawsuit, liability, obligation or debt of any kind or nature whatsoever,
whether absolute, accrued, due, direct or indirect, contingent or liquidated,
matured or unmatured, joint or several, whether or not for a sum
5
certain, whether for the payment of money or for the performance or observance
of any obligation or condition, and whether or not of a type which would be
reflected as a liability on a balance sheet in accordance with GAAP, in each
case, arising out of any acts, omissions, facts, circumstances or matters that
occur on or prior to the Closing Date ("Seller Liabilities"), including, without
limitation, (i) any state or federal income tax on income earned with respect to
any matters that occur on or prior to the Closing; (ii) malpractice claims
asserted by patients or any other tort claims asserted, claims for breach of
contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions occurring on or
before the Closing Date to the extent not covered by insurance; (iii) amounts
due or that may become due to Medicare or Medicaid or any other health care
reimbursement or payment intermediary or any carrier, nursing home or other
facility, or other third party payor on account of Medicare cost report
adjustments or other payment adjustments attributable to any period on or prior
to the Closing Date, or any other form of Medicare or other health care
reimbursement recapture, adjustment or overpayment whatsoever, including fines
and penalties, with respect to any period on or prior to the Closing Date
("Excess Reimbursement Liabilities"); (iv) any accounts payable or employment or
other taxes, with respect to any period on or prior to the Closing Date; (v)
accrued but unpaid compensation or other benefits to any of the Company's or its
subsidiaries' employees, agents, consultants or advisers with respect to any
period on or prior to the Closing Date, including accrued vacation; and (vi) and
any undisclosed liability of the Company, shall, in each case, remain the sole
responsibility of the Sellers and shall be paid or performed on or prior to the
Closing Date. To the best of Sellers' knowledge, after diligent inquiry the
Seller Liabilities are as set forth on Schedule 2.5.
(B) At the Closing, any cash then held by the Company and not
distributed to Sellers shall be used by the Company to pay liabilities of the
Company that otherwise would constitute Seller Liabilities (the "Retained
Sellers' Liabilities"). The Company shall retain a minimum amount of $220,000 in
cash at Closing. Any of such cash retained at the Closing that is not so applied
to satisfy the Retained Sellers' Liabilities shall be paid to the Sellers on the
date that is one hundred eighty (180) days following the date hereof.
(C) Buyer shall be responsible for any and all liabilities of
the Company, including liabilities, obligations or debts of any kind or nature
whatsoever, whether absolute, accrued, direct or indirect, contingent or
liquidated, matured or unmatured, joint or several, whether or not for sum
certain, whether for the payment of money or the performance or observation of
any obligation or condition, in each case, arising out of acts, omissions, facts
or circumstances attributable to services provided after the Closing ,
including, without limitation, (i) any state or federal income taxes on income
earned with respect to services provided after the Closing Date or by reason of
the change of accounting method of the Company or any other tax or accounting
election, strategy or actions of the Buyer after the Closing; (ii) malpractice
claims asserted by patients or any other tort claims asserted, claims for breach
of contract, or any claims of any kind asserted by patients, former patients,
employees or any other party that are based on acts or omissions attributable to
services provided after the Closing Date to the extent not covered by insurance;
(iii) amounts due or that may become due to Medicare or Medicaid or any other
health care reimbursement or payment intermediary or any carrier, nursing home
or other facility, or other third party payor on account of Medicare cost report
adjustments or other payment adjustments attributable to services provided after
the Closing Date, or any other form of Medicare or other
6
health care reimbursement recapture, adjustment or overpayment whatsoever,
including fines and penalties, attributable to services provided after the
Closing Date; and (iv) any accounts payable or employment or other taxes
attributable to any period after the Closing Date.
2.6 EMPLOYEES. Except as set forth below, it is expressly
understood and agreed that Newco's merger with and into the Company does not
involve any undertaking on the part of Buyer or Newco to retain any of the
employees of the Company, including the Shareholders, although Buyer shall have
the right to offer employment to any such employees, including the Shareholders.
Prior to the Closing Date, the Company shall be obligated to pay any severance,
benefits, costs or liabilities arising out of the termination by the Company of
any of its employees, including the Shareholders. Prior to the Closing Date, the
Company shall be obligated to pay any benefits, costs, or liabilities incurred
or accrued prior to the Closing Date with respect to each employee, including
the Shareholders hired as consultants by IHS.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. The entire Merger Consideration equal to TWO MILLION
EIGHT HUNDRED THOUSAND ($2,800,000.00) DOLLARS shall be payable by means of the
delivery to the Shareholders of newly issued shares of the Common Stock, par
value $.001, of Buyer in accordance with the following:
(A) SHARE VALUE. The number of shares of IHS Stock issuable at
Closing (the "Closing Date Share Count") pursuant to Section 2.1(b) shall be
calculated based upon a price per share of such stock equal to the average
closing NYSE price of such stock for the thirty (30) trading day period
immediately preceding the date which is two (2) trading days before the Closing
Date.
(B) REGISTRATION RIGHTS. Buyer will use its best efforts to
cause to be prepared, filed and declared effective by the Securities and
Exchange Commission (the "Commission") within one hundred twenty (120) days
following the Closing Date (the "REQUIRED EFFECTIVE DATE"), a registration
statement for the registration under the Securities Act of 1933 (the "Securities
Act") of the IHS Stock issued to Shareholders pursuant to this Agreement,
including the shares issuable under Section 3.1(c) in respect of any
re-calculation of the Closing Date Share Count (the "MERGER SHARES"), and Buyer
shall maintain the effectiveness of such registration statement for a period of
one (1) year following the date on which it becomes effective (the "Registration
Date"), or until no Shareholder shall own any of the IHS Stock issued pursuant
to this Agreement, whichever shall occur first, in each case except to the
extent that an exemption from registration is available and counsel to Buyer
provides a legal opinion to the Shareholders indicating the specific exemption
available (the "REGISTRATION PERIOD").
(C) SHARE ADJUSTMENT. Upon registration of the IHS Stock as
provided above, the number of shares deliverable as part of the Merger
Consideration under Section 2.1(a) hereof shall be re-calculated based upon the
average closing NYSE price of IHS Stock for the 30- trading day period
immediately preceding the Registration Date. If the number of shares as
recalculated under this subsection (the "Adjusted Share Count") exceeds the
Closing Date Share
7
Count, the Buyer promptly shall deliver over to the Shareholders an additional
number of shares of IHS Stock as shall be equal to the amount of such excess,
and such additional shares shall be included in the aforementioned registration
statement by means of a post-effective amendment thereto. If the Closing Date
Share Count exceeds the Adjusted Share Count, the Shareholders promptly will
return to the Buyer that number of shares of IHS Stock as shall be equal to such
excess.
(D) REGISTRATION EXPENSES. Shareholders shall not be
responsible for, and Buyer shall bear, all of the reasonable expenses related to
such registration including, without limitation, the fees and expenses of
Buyer's counsel and accountants, all of its other costs, fees and expenses
incident to the preparation, printing, registration and filing under the
Securities Act of the registration statement and all amendments and supplements
thereto, the cost of furnishing copies of each preliminary prospectus, each
final prospectus and each amendment or supplement thereto to underwriters,
dealers and other purchasers of IHS Stock and the costs and expenses (including
fees and disbursements of its counsel) incurred in connection with the
qualification of IHS Stock under the Blue Sky laws of various jurisdictions.
Buyer, however, shall not be required to pay underwriter's or brokerage
discounts, commissions or expenses, or to pay any costs and expenses in excess
in the aggregate of $20,000 for Blue Sky qualifications of such Shareholder's
(and any transfee's) IHS Stock, or to pay any costs or expenses arising out of
Shareholder's or any transferee's failure to comply with its obligations under
this Article III.
(E) RESALE LIMITATIONS. All resales of IHS Stock issued
pursuant to this Agreement shall be effected solely through ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Inc., as broker, and sales by the Shareholders and, if any, their transferees of
such shares, shall not at any time, in the aggregate, exceed Fifty Thousand
(50,000) shares during any thirty (30) trading day period.
(F) REGISTRATION PROCEDURES, ETC. In connection with the
registration rights granted to the Shareholders with respect to the IHS Stock as
provided in this Section 3.1, Buyer covenants and agrees as follows:
(I) At Buyer's expense, Buyer will keep the registration
and qualification under this Section 3.1 effective (and in compliance with the
Securities Act) by such action as may be necessary or appropriate for the entire
Registration Period. Buyer will immediately notify the Shareholders, at any time
when a prospectus relating to a registration statement under this Section 3.1 is
required to be delivered under the Securities Act, of the happening of any event
known to Buyer as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing.
(II) Buyer shall furnish the Shareholders with such
number of prospectuses as shall reasonably be requested.
8
(III) Buyer shall take all necessary action which may be
required in qualifying or registering IHS Stock included in a registration
statement for offering and sale under the securities or Blue Sky laws of such
states as reasonably are requested by the Shareholders, provided that Buyer
shall not be obligated to qualify as a foreign corporation or dealer to do
business under the laws of any such jurisdiction.
(IV) The information included or incorporated by
reference in the registration statement filed pursuant to this Section 3.1 will
not, at the time any such registration statement becomes effective, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein as necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier filing of such registration
statement or any amendments thereto. The registration statement will comply in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder. Buyer shall prepare and file with the Commission
such amendments (including post-effective amendments) and supplements to the
registration statement and the prospectus used in connection with the
registration statement as may be necessary to keep the registration statement
effective at all times during the Registration Period and, during such period,
shall comply with the provisions of the Securities Act applicable to Buyer with
respect to the disposition of all IHS Stock covered by the registration
statement until such time as all of such stock has been disposed of in
accordance with the intended methods of disposition by the Sellers thereof as
set forth in the registration statement. Buyer shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
the registration statement and, if such an order is issued, shall use its best
efforts to obtain the withdrawal of such order at the earliest possible time and
to notify each Shareholder of the issuance of such order and the resolution
thereof. Buyer shall indemnify the Shareholders of IHS Stock to be sold pursuant
to the registration statement, their successors and assigns, and each person, if
any, who controls such Shareholders within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Securities Exchange Act of 1934 ("Exchange
Act"), against all loss, claim, damage expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or otherwise,
or actions or proceedings whether commenced or threatened arising out of or
based upon: (a) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement or amendments thereto executed by
Buyer or based upon written information furnished by Buyer filed in any
jurisdiction in order to qualify IHS Stock under the securities laws thereof or
filed with the Commission, any state securities commission or agency, NYSE or
any securities exchange; (b) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading; or (c) any violation or alleged violation by
Buyer of the Securities Act, Exchange Act or any state securities law or any
rule or regulation; unless and only to the extent such statement or omission was
made in reliance upon and in conformity with written information furnished to
Buyer by any of the Shareholders expressly for use in such registration
statement, any amendment or supplement thereto or any application, as the case
may be. If any action is brought against the Shareholders or any controlling
person of the Shareholders in respect of which indemnity may be sought against
Buyer pursuant to this subsection 3.1(f)(iv), the Shareholders or such
controlling person shall within thirty (30) days after the receipt thereby of a
summons or complaint, notify Buyer in writing of the institution of such
9
action and Buyer shall assume the defense of such actions, including the
employment and payment of fees and expenses of counsel (reasonably satisfactory
to the Shareholders or such controlling person). The Shareholders or such
controlling person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of the Shareholders or such controlling person unless (A) the employment of such
counsel shall have been authorized in writing by Buyer in connection with the
defense of such action, or (B) Buyer shall not have employed counsel to have
charge of the defense of such action, or (C) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it or
them which are different from or additional to those available to Buyer (in
which case, Buyer shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys for the
Shareholders and/or such controlling person shall be borne by Buyer. Buyer
agrees promptly to notify the Shareholders of the commencement of any litigation
or proceedings against Buyer or any of its officers, directors or controlling
persons in connection with the resale of IHS Stock or in connection with such
registration statement.
(V) The Shareholders of IHS Stock to be sold pursuant to
a registration statement, and their successors and assigns, shall severally, and
not jointly, indemnify Buyer, its officers and directors and each person, if
any, who controls Buyer within the meaning of ss.15 of the Securities Act or
ss.20(a) of the Exchange Act against all loss, claim, damage, or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Securities Act, the Exchange Act or any other statute, common
law or otherwise, arising solely from information furnished by or on behalf of
such Shareholders, or their successors or assigns in writing for specific
inclusion in such registration statement.
(G) NOTICE OF SALE. If the Shareholders desire to transfer all
or any portion of IHS Stock, the Shareholders will deliver written notice to
Buyer, describing in reasonable detail their intention to effect the transfer
and the manner of the proposed transfer. If the transfer is to be pursuant to an
effective registration statement as provided herein, the Shareholders will sell
the IHS Stock in compliance with the method of distribution disclosed therein
and discontinue any offers and sales thereunder upon notice from Buyer that the
registration statement relating to the IHS Stock being transferred is not
"current" until Buyer gives further notice that offers and sales may be
recommenced. In the event of any such notice from Buyer, Buyer agrees to file
expeditiously such amendments to the registration statement as may be necessary
to bring it current during the period specified in Section 3.1(b) and to give
prompt notice to the Shareholders when the registration statement has again
become current. If the Shareholders deliver to Buyer an opinion of counsel
reasonably acceptable to Buyer and its counsel and to the effect that the
proposed transfer of IHS Stock may be made without registration under the
Securities Act, the Shareholders will be entitled to transfer IHS Stock in
accordance with the terms of the notice and opinion of their counsel.
(H) FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Buyer to take any action pursuant to this Article III
that the Shareholders shall furnish to the Buyer such information regarding
themselves, the IHS Stock held by them, and the intended method of disposition
of such securities as shall be reasonably required to effect the
10
registration of their IHS Stock. In that connection, each transferee of any
Shareholder shall be required to represent to the Buyer that all such
information which is given is both complete and accurate in all material
respects. Such Shareholders shall deliver to the Buyer a statement in writing
from the beneficial owners of such securities that they bona fide intend to
sell, transfer or otherwise dispose of such securities. Each transferee will,
severally, promptly notify Buyer at any time when a prospectus relating to a
registration statement covering such transferee's shares under this Section 3.1
is required to be delivered under the Securities Act, of the happening of any
event known to such transferee as a result of which information regarding the
transferee in the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the statements as then existing.
(I) INVESTMENT REPRESENTATIONS. All shares of IHS Stock to be
issued hereunder will be newly issued shares of Buyer. The Shareholders
represent and warrant to Buyer that the IHS Stock being issued hereunder is
being acquired, and will be acquired, by the Shareholders for investment for
their own accounts and not with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act or the applicable
state securities law except in compliance with the provisions of this Article
III; the Shareholders acknowledge that the IHS Stock constitutes restricted
securities under Rule 144 promulgated by the Commission pursuant to the
Securities Act, and accordingly the resale of the IHS Stock will be restricted,
and the Shareholders agree that no shares of IHS Stock may be sold, transferred,
assigned, pledged or otherwise disposed of except pursuant to an effective
registration statement or an exemption from registration under the Securities
Act, the rules and regulations thereunder, and under all applicable state
securities laws. The Shareholders have the knowledge and experience in financial
and business matters, are capable of evaluating the merits and risks of the
investment, and are able to bear the economic risk of such investment. The
Shareholders have had the opportunity to make inquiries of and obtain from
representatives and employees of Buyer such other information about Buyer as it
deems necessary in connection with such investment.
(J) LEGEND. It is understood that, prior to sale of any shares
of IHS Stock pursuant to an effective registration pursuant to subsection (b)
above, the certificates evidencing such shares of IHS Stock shall bear the
following (or a similar) legend (in addition to any legends which may be
required in the reasonable opinion of Buyer's counsel by the applicable
securities laws of any state), and upon sale of such shares pursuant to such an
effective registration, new certificates shall be issued for the shares sold
without such legends except as otherwise required by law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
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(K) CERTAIN TRANSFEREES. Prior to the effective date of
registration of the IHS Stock, no transferee shall transfer any shares of IHS
Stock to any person or entity unless such transferee shall have agreed in
writing to be bound by the provisions applicable to the Shareholders under this
Article III.
ARTICLE IV: THE CLOSING
4.1 TIME AND PLACE OF CLOSING. The Closing under this Agreement
(the "Closing") shall be held as promptly as practicable, but not more than
seven (7) business days following the satisfaction of all conditions precedent
specified in this Agreement, including receipt of all necessary regulatory
approvals, unless duly waived by the party entitled to satisfaction thereof. The
Closing shall take place by facsimile, or at such other time and place upon
which the parties may agree. The date on which the Closing is held is
hereinafter called the "Closing Date." Subject to the conditions set forth
herein, at the Closing (a) the Shareholders shall deliver for cancellation one
or more stock certificates representing the shares of Company Stock duly
endorsed, or accompanied by one or more stock powers duly endorsed, and (b)
Buyer, as agent for the Company, shall, subject to Sections 2.2 and 2.3, deliver
to the Shareholders the Merger Consideration pursuant to Section 2.1(a) hereof.
4.2 FILINGS AT CLOSING. At the Closing Date, Buyer and the Company
shall cause the Plan of Merger or such other certificate as required to be filed
in accordance with the Wisconsin Business Corporation Law, and each of the
Shareholders, Buyer and Company shall take any and all lawful actions to cause
the Merger to become effective.
4.3 EFFECTIVE TIME. Subject to the terms and conditions set forth
herein, including receipt of all required regulatory approvals, the Merger shall
become effective at the time the Plan of Merger or such other certificate as
required by the Wisconsin Secretary of State is made effective (the "Effective
Time of Merger").
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
THE COMPANY
The Company and the Sellers hereby jointly and severally represent
and warrant to Buyer and Newco as follows (it being understood that, for the
purposes of this Article V, "Company" shall be deemed to refer collectively to
the Company and any subsidiaries listed on Schedule 5.23):
5.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Wisconsin. Copies of the Company's Articles of Incorporation and
By-Laws, and all amendments thereof to date, have been delivered to Buyer and
are complete and correct. The Company has the power and authority to own the
properties and assets now owned by it and to conduct the business presently
being conducted by it. The Company is qualified to do business as a foreign
corporation in each state where the ownership of its assets or the conduct of
its business makes such qualification necessary.
12
5.2 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement including all Schedules and Exhibits hereto, or any
of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by Sellers and the Company, nor the
performance by Sellers and the Company of the transactions contemplated hereby
and thereby, conflicts with, or constitutes a breach of or a default under (i)
the Articles of Incorporation or By-Laws of the Company; or (ii) any applicable
law, rule, judgment, order, writ, injunction, or decree of any court, currently
in effect, provided that the consents set forth in Schedule 5.3 are obtained
prior to the Closing; or (iii) to the Shareholders' knowledge, any applicable
rule or regulation of any administrative agency or other governmental authority
currently in effect; or (iv) any agreement, indenture, contract or instrument to
which the Company is now a party or by which any of the assets of the Company is
bound.
5.3 CONSENTS. Except as set forth in Schedule 5.3, no
authorization, consent, approval, license, exemption by, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
the execution, delivery and performance of this Agreement or any of the
Transaction Documents by any of the Sellers or the Company.
5.4 COMPANY STOCK. Schedule 5.4 sets forth a complete list and
description of the authorized capital stock of the Company, the number of shares
issued and outstanding of each class or series of such capital stock, and the
identity of each shareholder of the Company, in each case indicating the class
and number of shares held. No shares of Company Stock are held in the treasury
of the Company. The Shareholders are the record owners of all of Company Stock
and all of such stock is duly authorized, validly issued, and, except as
provided in Chapter 180.0622(2)(b) of the Wisconsin Statutes fully paid and
non-assessable. On the Closing Date, there will be no preemptive or first
refusal rights to purchase or otherwise acquire shares of capital stock of the
Company pursuant to any provision of law or the Articles of Incorporation or
By-Laws of the Company or by agreement or otherwise. On the Closing Date, there
shall not be outstanding any warrants, options, or other rights to subscribe for
or purchase from the Company any shares of capital stock of the Company, nor
shall there be outstanding any securities convertible into or exchangeable for
such shares.
5.5 ASSETS. As of the Closing, the consolidated Assets of the
Company will include all of the tangible and intangible assets necessary to
operate the business of the Company as presently constituted, including, without
limitation, accounts receivable; provided, however, that Assets shall not
include cash, and inventory, supplies and other assets disposed of in the
ordinary course of business, consistent with the prior practice of the Company's
business. The quantities of inventory items included in the Assets are
reasonable in light of the present and anticipated volume of the Company's
business and the inventory is good, usable, merchantable, and salable in the
ordinary course of the Company's business, in each case, as determined by the
Company in good faith and consistent with past practice. The accounts receivable
of the Company have been billed or invoiced in the ordinary course of business
consistent with past practice. The Assets are not subject to any Liens (as
defined in Section 5.11) except for Permitted Liens (as defined in Section
5.11).
13
5.6 TRADEMARKS. Schedule 5.6 sets forth a complete and accurate
list of all trademarks, service marks, or applications for any of the same,
copyrights, and other items of intellectual property that are owned, possessed
or used by the Company. There are no claims or proceedings pending or, to the
knowledge of the Company, overtly threatened against the Company asserting that
the use of any of the aforementioned properties or rights infringes the rights
of any other person, and, to the knowledge of any of the Sellers and the
Company, the Company is not infringing on the intellectual property rights of
any other person.
5.7 CONTRACTS. Schedule 5.7 sets forth a complete and correct list
of all agreements, contracts and commitments of the following type to which the
Company is a party or by which the Company or any of the Company's assets is
bound and as to which the Company has any outstanding material obligations as of
the date hereof (the "Contracts"):
(A) each contract or agreement for the employment or retention
of, or collective bargaining, severance or termination agreement with, any
director, officer, employee, consultant, agent or group of employees of the
Company;
(B) each profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay, pension, retirement,
hospitalization, insurance or other similar plan, agreement or arrangement;
(C) each agreement or arrangement for the purchase or sale of
any of the Company's assets, properties or rights outside the ordinary course of
business (by purchase or sale of assets, purchase or sale of stock, merger or
otherwise) which is currently in effect;
(D) each contract currently in effect which contains any
provisions requiring the Company to indemnify or act for, or guarantee the
obligation of, any other person or entity;
(E) each agreement restricting the Company from conducting
business anywhere in the world;
(F) each partnership or joint venture contract or similar
arrangement or agreement which is likely to involve a sharing of profits or
future payments with respect to the Company's business or any portion thereof;
(G) each licensing, distributor, dealer, affiliate, sales or
manufacturer's representative, agency or other similar contract, arrangement or
commitment;
(H) each contract under which the Company performs mobile
x-ray, EKG, ultrasound, ▇▇▇▇▇▇ monitor, vision and audiology services and other
fixed site examinations;
(I) each lease of real property;
14
(J) each agreement with a nursing home, health care facility
or any other customer with special pricing arrangements;
(K) any radiologist, cardiologist, optometrist, audiologist or
other physician's agreements;
(L) each agreement, consent order, settlement or similar
arrangement with any party, including any Governmental Authority (as defined in
Section 5.21);
(M) each agreement with a PPO; or
(N) any other agreement not made in the ordinary and normal
course of business which involves consideration of more than $10,000.
Except as indicated on Schedule 5.7, each of the Contracts was
entered into and requires performance in the ordinary course of business and is
in full force and effect. The Company is not in material default under any
Contract and there has not been asserted, either by or against the Company under
any Contract, any written notice of default, set-off or claim of default. To the
knowledge of the Company, the parties to the Contracts other than the Company
are not in material default of any of their respective obligations under the
Contracts, and there has not occurred any event which with the passage of time
or the giving of notice (or both) would constitute a material default or
material breach under any Contract. All amounts payable under the Contracts are,
or will at the Closing Date, be on a current basis. Except as set forth on
Schedule 5.7, the change of control in the Company to Buyer will not be deemed
an assignment of, or require consent under, any Contract.
5.8 FINANCIAL STATEMENTS.
(A) The unaudited balance sheet of the Company, on a
consolidated basis and by location, for the fiscal years ended March 31, 1995,
March 31, 1996 and March 31, 1997, and the related statements of operations for
the years then ended, annexed hereto as Schedule 5.8(a) (the "Unaudited
Financial Statements"), present fairly in all material respects the financial
condition and results of operations of the Company at and for the periods
therein specified.
(B) The unaudited balance sheets of the Company, on a
consolidated basis and by location, for the interim period ended January 31,
1998, and the related statements of operations for the period then ended,
annexed hereto as Schedule 5.8(b) ("Interim Financial Statements"), present
fairly in all material respects the financial condition and results of
operations of the Company at and for the period therein specified.
(C) Except as set forth on Schedule 5.8(c) or as expressly
set forth on the Interim Financial Statements, the Company has no material
non-recurring or extraordinary income or expense reduction not identified
therein or material liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any guarantees of any obligations of any other person or entity) of
any kind or nature whether or not required by GAAP to be reflected in a
corporate balance sheet and/or the notes thereto.
15
5.9 MATERIAL CHANGES. Except as noted on Schedule 5.9, between the
ending date of the Interim Financial Statements and the date of this Agreement,
there has not been any material adverse change in the condition (financial or
otherwise) of the assets, properties, operations, operating results, Medicare
and Medicaid reimbursement, third party billing and/or direct billing, customer
and employee relations or business prospects of the Company or any damage or
destruction of any of the Company's Assets or its place of business by fire or
other casualty, whether or not covered by insurance, and during such period of
time the Company has conducted its business only in the ordinary and normal
course except with respect to this transaction. Sellers have identified and
communicated to Buyer all material information with respect to any fact or
condition that is reasonably likely to adversely affect the future prospects
(financial or otherwise) of the Company.
5.10 LICENSES; PERMITS. Schedule 5.10 sets forth (a) all licenses
and other governmental or other regulatory permits, authorizations or approvals
required for the operation of the Company's business that are now in effect,
including all certificates of occupancy issued with respect to the Company's
business and; (b) each other license, permit, or other authorization that is
necessary for the operation of the Company's business (a "License" and
collectively, the "Licenses"). The Licenses constitute all of the governmental,
quasi-governmental and regulatory licenses, permits and authorizations necessary
to the operation of the businesses of the Company and its subsidiaries as they
are operated on the date hereof. The Company has delivered to Buyer copies of
all of the Licenses. The Company and its subsidiaries own, possess or otherwise
have the exclusive legal right to use the Licenses, free and clear of all liens,
pledges, claims or other encumbrances of any nature whatsoever. The Company is
not in material default under any such License, and the Company and its
subsidiaries have not received any notice of any material default or any other
material claim or proceeding relating to any such License. Each License is in
full force and effect, and neither the Company nor any of its subsidiaries has
received written notice of any proceeding to terminate or suspend any License or
of any condition or event which, if uncured, would result in the termination or
suspension of any License. None of the Licenses are: (a) provisional,
probationary, or restricted in any way except to the extent qualified by any
outstanding deficiencies or citations, particulars of which have been set forth
on Schedule 5.10; or (b) subject to any investigation, cancellation, impairment,
limitation, order, complaint, proceeding, or suspension nor is such threatened
or pending. No Seller, director or officer, employee or former employee of the
Company, or any person, firm or corporation other than the Company owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part in any of the Licenses.
5.11 TITLE, CONDITION OF PERSONAL PROPERTY.
(A) Except for the security interests listed and described on
Schedule 5.11(a), the Company has good and marketable title to, or valid and
subsisting leasehold interests in, all of the personal property located at its
places of business owned by the Company or used in connection with the operation
of its business, subject to no mortgage, security interest, pledge, lien, claim,
encumbrance or charge, or restraint on transfer whatsoever (the "Liens") other
than Permitted Liens (as defined below). Except as set forth on Schedule
5.11(a), no other person has any right to the use or possession of any of such
property which is owned and, except as set forth on Schedule 5.11(a), no
currently effective financing statement with respect to such personal property
has been
16
filed under the Uniform Commercial Code in any jurisdiction, and the Company has
not signed any such financing statement or any security agreement authorizing
any secured party thereunder to file any such financing statement. All of such
personal property comprising equipment, improvements, furniture and other
tangible personal property in use by the Company, whether owned or leased, is in
good operating condition and repair, subject to normal wear and tear, and is
sufficient to enable the Company to operate its business in a manner consistent
with its operation during the immediately preceding twelve (12) months.
(B) Except as set forth on Schedule 5.11(b), no tangible
personal property used by the Company in connection with the operation of its
business is subject to a lease, conditional sale, security interest or similar
arrangement. The Company has delivered to Buyer a complete and correct copy of
each of the leases and other agreements listed on Schedule 5.11(b). All of said
personal property leases are valid, binding and enforceable in accordance with
their respective terms and are in full force and effect. The Company is not in
material default under such leases and there has not been asserted, either by or
against the Company under any of such leases, any written notice of default,
set-off, or claim of default. To the best knowledge of Sellers and Company, the
parties to such leases other than the Company are not in default of their
respective obligations under any of such leases, and there has not occurred any
event which with the passage of time or giving of notice (or both) would
constitute such a default or breach under any of such leases.
(C) "Permitted Liens" shall mean:
(I) carriers', warehouseman's, mechanics, materialmen's,
repairmen's or other like liens arising in the ordinary course of business which
are (i) not overdue for a period of more than 30 days or (ii) which are being
contested in good faith and by appropriate proceedings, provided that if such
contest shall continue for more than 30 days, the amount thereof shall be bonded
or properly reserved against at the end of such 30-day period;
(II) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of like nature
incurred in the ordinary course of business;
(III) rights of lessors under leases set forth on
Schedule 5.11(b);
(IV) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security legislation.
5.12 LEGAL PROCEEDINGS. Other than as set forth on Schedule 5.12,
there are no claims, actions, suits or proceedings or arbitrations, either
administrative or judicial, pending, or, to the knowledge of the Company,
overtly threatened against or affecting the Company, or the Company's ability to
consummate the transactions contemplated herein, at law or in equity or
otherwise, before or by any court or governmental agency or body, domestic or
foreign, or before an arbitrator of any kind.
17
5.13 EMPLOYEES. Attached hereto as Schedule 5.13 is the payroll
register of the Company dated March 31, 1998 indicating the names, positions,
current rates of compensation and any other compensation arrangements or fringe
benefits, and Federal W-2 Forms for the 1997 calendar year, of (i) each employee
of the Company, and (ii) any consultant or agent of the Company that is not
reflected in any agreement or document referred to in Schedule 5.7. Except as
set forth on Schedule 5.13, all of such information is materially correct as of
such date and there has been no material change since then. To the knowledge of
Sellers and Company, none of the employees, while in the employ of the Company,
has ever had his or her professional license or certification denied, suspended,
revoked, terminated, or voluntarily relinquished under threat of disciplinary
action, or has ever been restricted in any way from performing the duties he or
she is to provide for the Company, and there is no proceeding pending, or
threatened, pursuant to which any of the foregoing may occur. No such employee,
consultant or agent has any vested or unvested retirement benefits or other
termination benefits, except as described on Schedule 5.13.
5.14 COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC. During the two years prior to the Closing Date, there has been no material
adverse change in the relationship between the Company and its employees or
affiliates nor any strike or material labor disturbance by such employees
affecting the Company's business and, to the knowledge of the Company, there is
no indication that such a change, strike or labor disturbance is likely.
Company's employees or affiliates are not represented by any labor union or
similar organization and the Company has no reason to believe that there are
pending or threatened any activities, the purpose of which is to achieve such
representation, of all or some of the Company's employees or affiliates. Except
as set forth on Schedule 5.7 or Schedule 5.15(b), the Company has no collective
bargaining or other labor contracts, employment contracts, pension,
profit-sharing, retirement, insurance, bonus, deferred compensation or other
employee benefit plans, agreements or arrangements with respect to its
employees. Except as set forth on Schedule 5.14, the Company is in material
compliance with the requirements prescribed by all Federal, state and local
statutes, orders and governmental rules and regulations ("Government
Requirements") applicable to any of the employee benefit plans, agreements and
arrangements identified on Schedule 5.7 and Schedule 5.15(b), including, without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Immigration Reform and Control Act, the Worker Adjustment and
Retraining Notification Act of 1988, any such Government Requirements respecting
employment determination, equal opportunity, affirmative action, employee
privacy, wrongful or unlawful termination, workers' compensation, occupational
safety and health requirements, labor management relations and unemployment
insurance, or related matters and to the knowledge of the Company and
Shareholders, there are no threatened claims related thereto, and there are no
pending claims relating thereto, in each case. Except as set forth on Schedule
5.7(a), in the event of termination of employment of an employee of the Company,
the Company will not, after the Closing, pursuant to any agreement with any
Shareholder or the Company or by reason of any representation made or plan
adopted by any Shareholder or the Company prior to the Closing, be liable to any
employee of the Company for so-called "severance pay", parachute payments or any
other similar payments or benefits (excluding liabilities with respect to
post-Closing terminations under federal and state discrimination laws),
including, without limitation, post-employment healthcare (other than pursuant
to the continuation health care provisions of Section 4980B of the Internal
Revenue Code of 1986, as amended or Section 601 through 608 of ERISA ("COBRA"))
or insurance benefits, and accrued vacation and sick days or properly accrued
for on the Estimated Closing Date Balance Sheet in accordance with GAAP.
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5.15 ERISA.
(A) The Company does not maintain or make contributions to and
have not at any time in the past maintained or made contributions to, any
employee benefit plan which is subject to the minimum funding standards of
ERISA. The Company does not now maintain or make contributions to, and has not
at any time in the past maintained or made contributions to, any multi-employer
plan subject to the terms of the Multi-Employer Pension Plan Amendment Act of
1980 (the "Multi-Employer Act").
(B) Schedule 5.15(b) sets forth each severance agreement, and
each plan, agreement, arrangement or plan, bonus plan, deferred compensation
agreement, employee pension, profit sharing, savings or retirement plan, group
life, health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, any commitment arising
under severance, holiday, vacation, Christmas or other bonus plans (including,
but not limited to, "employee benefit plans", as defined in Section 3(3) of
ERISA maintained by the Company for any employees of the Company, or with
respect to which the Company has liability with respect to any employees of the
Company, or make or have an obligation to make contributions on behalf of
employees of the Company ("Plans").
(C) Schedule 5.15(c) identifies all employees of the Company
on leave of absence eligible to receive health benefits, as required by COBRA.
Notice of the availability of COBRA coverage has been provided to all employees
of the Company on leave of absence entitled thereto, and all persons electing
such coverage are being (or have been, if applicable) provided such coverage.
5.16 INSURANCE AND SURETY AGREEMENTS. Schedule 5.16 contains a true
and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by the Company (including but not limited to medical
malpractice insurance, and any state sponsored plan or program for worker's
compensation); and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by the Company. Schedule 5.16 sets forth for each
such insurance policy the name of the insurer, the amount of coverage, the type
of insurance, the policy number, the annual premium and a brief description of
any claims made thereunder during the past two years. Such policies are owned by
and payable solely to the Company, and said policies or renewals or replacements
thereof will be outstanding and duly in force at the Closing Date. All insurance
policies listed on Schedule 5.16 are in full force and effect, all premiums due
on or before the Closing Date have been or will be paid, financed or accrued on
or before the Closing Date, the Company has not been advised by any of their
insurance carriers of an intention to terminate or modify any such policies
other than under circumstances where the Company has received a commitment for a
replacement policy, nor has the Company failed to comply with any of the
material conditions contained in any such policies.
5.17 RELATIONSHIPS. Except as disclosed on Schedule 5.17 hereto, no
Shareholder and no partner or any affiliate of any Shareholder has, or at any
time within the last two (2) years has had, a material ownership interest in any
business, corporate or otherwise, that is a party to, or in any property that is
the subject of, business relationships or arrangements of any kind relating to
the operation of the Company or its business.
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5.18 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule
5.18, since the ending date of the Interim Financial Statements, the Company has
not, and from the date of this Agreement through the Closing Date the Company
will not have:
(A) sold, assigned, or transferred any of its assets or
properties, other than in the ordinary course of business;
(B) mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other encumbrance of
any nature whatsoever, other than a Permitted Lien, any of the Company's assets;
(C) made or suffered any termination of any mobile x-ray, EKG,
ultrasound, ▇▇▇▇▇▇ monitor, vision and audiology services, Social Security,
correctional institutions, psychiatric facilities or any other fixed site
contracts or customers;
(D) sold or assigned, or made or suffered any termination of
any Contract, or made or suffered any modification or amendment of any Contract
except for terminations, modifications and amendments of Contracts made in the
ordinary course of business consistent with past practice and which would not
affect earnings or otherwise be material, and the Sellers and Company have not
received notice (written or oral) and have no knowledge that any Contract has
been terminated or will be terminated or modified or amended (as aforesaid);
(E) except in the ordinary course of business consistent with
past practices, or otherwise as necessary to comply with any applicable minimum
wage law, increased the salaries or other compensation of any of its employees,
or made any increase in, or any additions to, other benefits to which any of
such employees may be entitled;
(F) failed to pay or discharge when due any liabilities, the
failure to pay or discharge which has caused or will cause any actual damage or
give rise to the risk of a loss to the Company;
(G) changed any of the accounting principles followed by the
Company or the methods of applying such principles;
(H) entered into any transaction other than in the ordinary
course of business;
(I) dissolved, merged or entered into a share exchange with or
into any other entity;
(J) entered into any contract or agreement with union or other
collective bargaining representative representing any employees or affiliates
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld;
(K) made any change to its by-laws or articles of
incorporation;
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(L) failed to maintain its business in substantially the same
state of repair, order and condition as on the date hereof, reasonable wear and
tear or loss by casualty excepted;
(M) failed to maintain in full force and effect all Licenses
currently in effect with respect to its business unless such License is no
longer necessary for the operation of the Company;
(N) failed to maintain in full force and effect the insurance
policies and binders currently in effect, or the replacements thereof, including
without limitation those listed on Schedule 5.16;
(O) failed to preserve intact the present business
organizations of the Company; failed to keep available the services of the
Company's present employees, affiliates and agents necessary to the proper
functioning of the business of the Company; and failed to maintain the Company's
relations and goodwill with suppliers, employees, affiliates, affiliated medical
personnel and any others having business relating to the Company and where such
relationships are necessary to the proper functioning of the business of the
Company;
(P) failed to maintain all of the books and records in
accordance with its past practices;
(Q) failed to comply in all material respects with all
provisions of the Contracts listed in Schedule 5.7 and with any other material
agreements that the Company has entered into in the ordinary course of business
since the Interim Financial Statements, and failed to comply in all respects
with the provisions of all material laws, rules and regulations applicable to
the Company's business;
(R) failed to pay when due, all taxes, assessments and charges
or levies imposed upon it or on any of its properties for which it has been
required to be withheld or paid over;
(S) failed to promptly advise Buyer in writing of any threat
known to the Shareholders, or the commencement against the Company of any claim,
action, suit or proceeding, arbitration or investigation or any other event that
would materially adversely affect the operations, properties, assets or
prospects of the Company; and
(T) failed to notify the Buyer in writing of any event
involving the Company which has had or may be reasonably expected to have a
material adverse effect on the business or financial condition of the Company or
may involve the loss of contracts with any of the Company's customers.
5.19 COMPLIANCE WITH LAWS.
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(A) The Company is in compliance with all Governmental
Requirements (as defined herein). Except for notices of non-compliance as to
which the Company has taken corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule 5.19, the Company has not,
within the period of twenty-four months preceding the date of this Agreement,
received any written notice that the Company or the Assets fail to comply in any
material respect with any applicable Federal, state, local, Medicare, Medicaid,
or other governmental laws or ordinances, or any applicable order, rule or
regulation of any Federal, state, local or other governmental agency having
jurisdiction over its business ("Governmental Requirements"). The Company shall
report to Buyer, within five (5) business days after receipt thereof, any
written notices that the Company is not in compliance in any material respect
with any of the foregoing.
(B) Without limiting the generality of subsection (a) above,
the Company has at all times complied, and is complying in all respects, with
all federal, state and local environmental laws, rules or regulations applicable
to it, its leased properties, and all other real properties used by it in the
operation of its business, including, but not limited to, the Resource
Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act, and
subsequent amendments, the Federal Toxic Substances Control Act, as amended,
with respect to the environmental or healthful state, condition or quality of
any property (collectively "Environmental Laws"). The foregoing representation
and warranty applies to all aspects of the Company's operations and the use and
ownership of the Assets including, but not limited to, the use, handling,
treatment, storage, transportation and disposal of any hazardous, toxic or
infectious waste, material or substance (including medical waste), and to
petroleum products, material or waste, at any other location. No notice from any
Governmental Authority has ever been served upon the Company claiming any
violation of, or addressing any possible non-compliance with respect to, any
Environmental Law.
5.20 FINDERS. Shareholders and Company have been represented solely
by Geneva Business Services, Inc. ("Broker"), and as a result a brokerage
commission payable to the Broker by the Company or Shareholders immediately
prior to the Closing in connection with the transactions contemplated by this
Agreement is due, and no other broker or finder is entitled to any additional
broker's or finder's fee or other commission in respect thereof based in any way
on agreements, understandings or arrangements with the Shareholders or the
Company.
5.21 TAX RETURNS.
(A) Except as set forth in Schedule 5.21, (i) all Tax (as
defined below) returns, statements, reports and forms or extensions with respect
thereto required to be filed with any Federal, state, local or other
governmental department or court or other authority having jurisdiction over it
("Governmental Authority") on or before the Closing Date by or on behalf of the
Company (collectively, the "Tax Returns"), have been or will be timely filed on
or before the Closing Date in accordance in all materials respects with all
applicable Governmental Requirements; and (ii) the Company has timely paid all
Taxes payable by it.
22
(B) For purposes of this Agreement, "Tax" means any net
income, gross income, sales, use, franchise, personal, employment, pension or
real property tax.
5.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and
delivery of this Agreement, or any of the Company's Transaction Documents, does
not, and the consummation of the transactions contemplated hereby or thereby
will not, create any liens or other encumbrances on any of the Company's assets
in favor of third parties.
5.23 SUBSIDIARIES AND JOINT VENTURES. Schedule 5.23 sets forth a
complete list of all subsidiaries, joint ventures and partnerships in which the
Company is a record or beneficial owner. All of the issued and outstanding
capital stock of the subsidiaries listed on Schedule 5.23 hereto is owned of
record or beneficially by the Company or by one of the listed subsidiaries on
Schedule 5.23.
5.24 NO UNTRUE STATEMENT. None of the representations and
warranties made pursuant to this Agreement contains any untrue statement of
material fact or omits to state a material fact necessary, in light of the
circumstance under which it was made, in order to make any such representation
not misleading in any material respect.
5.25 REIMBURSEMENT MATTERS. Except as disclosed on Schedule 5.25,
(i) the Company and Sellers have not received any notice of recoupment from the
Medicare or Medicaid programs, or any other third party reimbursement source
(inclusive of facility billing to nursing homes or other health care facilities,
and managed care organizations), (ii) the Shareholders and the Company are not
aware of any basis for the assertion after the Closing Date of any such
recoupment claim against the Company, and (iii) the Sellers have not received
notice from any Medicare or Medicaid program or any other third party
reimbursement source (inclusive of facility billing to nursing homes or other
health care facilities, and managed care organizations) of any pending or
threatened investigations or surveys, and neither the Sellers, nor the Company
have any reason to believe that any such investigation or survey is pending,
threatened or imminent.
5.26 MEDICARE/MEDICAID PARTICIPATION. All services provided by the
Company are certified for participation or enrollment in all Medicare and
Medicaid programs, have a current and valid provider contract with the Medicare
and Medicaid programs or other third party reimbursement source (inclusive of
managed care organizations), are in compliance with the conditions of
participation of such programs, and have received all approvals or
qualifications necessary for capital reimbursement.
5.27 LEASEHOLD INTERESTS. Schedule 5.27 hereto sets forth a
complete and correct list of all leases pursuant to which the Company or any of
its subsidiaries leases real property. Each of the Company and its subsidiaries
has valid leasehold interests in all such real property free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever, except for
Permitted Liens. The Company has provided access to the Buyer to complete and
correct copies of the leases identified in Schedule 5.27.
23
5.28 POWER AND AUTHORITY. The Company and Sellers have all
requisite power and authority to execute, deliver and perform this Agreement,
and as of the Closing, the Company and Sellers will have all requisite power and
authority to execute and deliver the Transaction Documents required to be
delivered by each party to the Buyer at the Closing.
5.29 BINDING EFFECT. This Agreement and all Transaction Documents
executed by the Company and Sellers constitute the legal, valid and binding
obligations of such party, enforceable against such party in accordance with
their respective terms.
5.30 QUESTIONNAIRES. The health care law questionnaire heretofore
delivered to the Company by Buyer (the "Questionnaire") will be attached hereto
as Exhibit 5.30 and will as of the Closing Date have been fully and accurately
completed and will not contain any material misstatement of any fact and will
not omit any fact that would have to be stated in order not to render any
response to such questionnaire materially misleading.
5.31 QUESTIONABLE PAYMENTS. Neither the Company nor any
shareholder, director, officer, controlling person or employee of the Company,
and no affiliate of the Company, (a) has used any corporate funds of the Company
to make any illegal or unlawful payment to any officer, employee,
representative, agent of any government, or to any political party or official
thereof, including, without limitation, any of same that would violate the
Foreign Corrupt Practices Act of 1977, as amended; or (b) to the knowledge of
the Shareholders, has made or received any illegal payment, bribe, kickback,
political contribution or other similar questionable payment for any referrals
or recommendations or otherwise in connection with the operation of the
Company's business.
5.32 CUSTOMERS. Schedule 5.32 sets forth: (i) a complete and
correct list of the name and address of all current customers of the Company;
(ii) a complete and correct list of all contracts that the Company has with each
customer; and (iii) a summary of the x-ray, EKG, ultrasound, ▇▇▇▇▇▇ monitor,
vision and audiology patient volume and examinations for each patient of the
Company, on a consolidated basis and by location, for the calendar year ended
December 31, 1997 and the two (2) months ended February 28, 1998. As of the date
hereof, the Company and Shareholders have received no notice that any customer
or request a change of service.
5.33 FEE SCHEDULES AND REIMBURSEMENT. Schedule 5.33 sets forth (i)
a complete and correct list of the 1997 and 1998 fee schedules of the Company,
including the amounts charged and the Medicare and Medicaid allowable rates;
(ii) a complete and correct list of any and all Medicaid and Medicare refunds
paid by the Company or pending payment by the Company during the last three (3)
fiscal years; and (iii) a complete list of any customers having special rates or
fee arrangements with the Company, together with a list of such rates or
description of such arrangements.
5.34 COMPLETE DISCLOSURE. No representation or warranty by the
Company or the Shareholders in this Agreement or any Exhibit or Schedule
referred to herein and no written statement, certificate or other writing
furnished to the Buyer by or on behalf of the Company or the Shareholders
pursuant to this Agreement, when considered in conjunction with all other such
24
representations, warranties, schedules, written statements, certificates or
other writings furnished to Buyer by or on behalf of the Company or the
Shareholders pursuant to this Agreement, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading. To the best of the Company's and the
Shareholders' knowledge, there is no fact which materially and adversely affects
or may materially and adversely affect the business, operations, affairs,
condition, properties or assets of the Company which has not been set forth in
this Agreement or the Schedules or other documents delivered by the Company or
the Shareholders in connection with the transactions contemplated hereby.
5.35 BOOKS OF ACCOUNT; RECORDS. The Company's general ledgers,
stock record books, minute books and other material records relating to the
assets, properties, contracts and outstanding legal obligations of the Company
are, in all material respects, complete and correct, and have been maintained in
accordance with good business practices. All documents furnished to Buyer will
be correct and complete copies.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers, each as to himself, hereby severally
represents and warrants to Buyer and Newco as follows:
6.1 AUTHORITY. Such Seller has the full legal power and authority
to make, execute, deliver and perform this Agreement and the Transaction
Documents. Such execution, delivery, performance and consummation has been duly
authorized by all necessary action, corporate or otherwise, on the part of such
Seller, and any necessary consents of holders of indebtedness of such Seller
have been obtained.
6.2 BINDING EFFECT. This Agreement and all Transaction Documents
executed by such Seller constitute the legal, valid and binding obligations of
such party, enforceable against such Seller in accordance with their respective
terms.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by such Seller
nor the performance by such Seller of the transactions contemplated hereby and
thereby conflicts with, or constitutes a breach of or a default under (i) any
law, rule, judgment, order, writ, injunction, or decree of any court currently
in effect applicable to such Seller, or (ii) any rule or regulation of any
administrative agency or other governmental authority currently in effect
applicable to such Seller, or (iii) any agreement, indenture, contract or
instrument to which such party is now a party or by which any of the assets of
such Seller is bound.
6.4 CONSENTS. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents by such Seller.
25
6.5 OWNERSHIP OF COMPANY STOCK. Shareholders are the lawful record
and beneficial owners of all of Company Stock shown as owned by Shareholders in
Schedule 5.4, with good and marketable title thereto, free and clear of all
liens and encumbrances, claims and other charges thereon of any kind. Such
Shareholders have the full legal power to transfer and deliver such Company
Stock in accordance with this Agreement, and delivery of such Company Stock to
Buyer pursuant hereto will convey good and marketable title thereto, free and
clear of all liens and encumbrances, claims and other charges thereon or any
kind. The shares of Company Stock indicated on Schedule 5.4 as being owned by
the Shareholders constitute all of the issued and outstanding shares of the
capital stock of the Company. On the Closing Date, there shall not be
outstanding any warrants, options, or other rights to subscribe for or purchase
from the Company any shares of capital stock of the Company, nor shall there be
outstanding any securities convertible into or exchangeable for such shares.
ARTICLE VII: REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Buyer and Newco jointly and severally represent and warrant to the
Company and the Sellers as follows:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Newco is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
7.2 POWER AND AUTHORITY. Buyer and Newco each have the corporate
power and authority to execute, deliver and perform this Agreement, and as of
the Closing, Buyer and Newco will have the corporate power and authority to
execute and deliver the Transaction Documents required to be delivered by them
to the Sellers at the Closing.
7.3 BINDING AGREEMENT. This Agreement has been duly executed and
delivered by Buyer and Newco. This Agreement is, and when executed and delivered
by Buyer and Newco at the Closing each of the Transaction Documents executed by
Buyer and Newco will be, the legal, valid and binding obligations of Buyer and
Newco, enforceable against Buyer and Newco in accordance with their respective
terms.
7.4 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Transaction Documents by Buyer and
Newco nor the performance by the Buyer and Newco of the transactions
contemplated hereby and thereby conflicts with, or constitutes a breach of or a
default under (i) the formation documents of the Buyer and Newco, or (ii) any
law, rule, judgment, order, writ, injunction, or decree of any court currently
in effect applicable to Buyer and Newco, or (iii) any rule or regulation of any
administrative agency or other governmental authority currently in effect
applicable to Buyer and Newco, or (iv) any agreement, indenture, contract or
instrument to which the Buyer or Newco is now a party or by which any of the
assets of the Buyer or Newco is bound.
26
7.5 CONSENTS. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement or any of the Transaction Documents by Buyer and Newco.
7.6 SECURITIES AND EXCHANGE COMMISSION FILINGS. Buyer has made
available to the Sellers a correct and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by Buyer with the
Commission on or after January 1, 1997 (the "SEC Documents"), which are all the
documents (other than preliminary material) that Buyer was required to file with
the SEC on or after January 1, 1997. As of their respective dates, none of the
SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statements or omissions
of a material fact necessary so as not to render the statements therein
misleading, in light of the circumstances under which they were made, and the
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act or the Exchange Act, as the case
may be. The financial statements of the Buyer included in the SEC Documents
complied in all material respects with the then applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with GAAP during the periods
involved (except as may have been indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q promulgated by the SEC)
and fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the Buyer
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. IHS has
been notified that the most recent registration statement on Form S-3 filed by
it with the Commission is under review.
7.7 CAPITAL STOCK. Buyer's Form 10-Q filed with the Commission with
respect to the fiscal quarter ended September 30, 1997 (the "Form 10-Q"), sets
forth a true and complete description of the authorized and outstanding shares
of capital stock of Buyer as of such date. All outstanding shares of IHS Stock
are validly issued, fully paid and non-assessable and not subject to preemptive
rights. Buyer has duly authorized and reserved for issuance the IHS Stock, and,
when issued in accordance with the terms of Article III, the IHS Stock will be
validly issued, fully paid and nonassessable and free and clear of preemptive
rights, liens, encumbrances, claims and other charges thereon.
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING THE COMPANY
AND ITS SUBSIDIARIES
8.1 ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING. Prior to the
Closing Date, Buyer may make, or cause to be made, such investigation of the
Company's (it being understood that, for the purpose of this Article VIII,
"Company" shall be deemed to refer collectively to the Company and its
subsidiaries listed on Schedule 5.23) financial and legal condition as Buyer
deems necessary or advisable to familiarize itself with the Company and/or
matters relating to its history or operations. The Company shall permit Buyer
and its authorized representatives (including legal counsel and accountants), to
have full access to the Company's books and records upon
27
reasonable notice and during normal business hours, and the Company will
furnish, or cause to be furnished, to Buyer such financial and operating data
and other information and copies of documents with respect to the Company's
products, services, operations and assets as Buyer shall from time to time
reasonably request. The documents to which Buyer shall have access shall
include, but not be limited to, the Company's tax returns and related work
papers since their inception; and the Company shall make, or cause to be made,
extracts thereof as Buyer or their representatives may request from time to time
to enable Buyer and their representatives to investigate the affairs of the
Company and the accuracy of the representations and warranties made in this
Agreement. The Company shall cause its accountants to cooperate with Buyer and
to disclose the results of audits relating to the Company and to produce the
working papers relating thereto. Without limiting any of the foregoing, it is
agreed that Buyer will have full access to any and all agreements between and
among the previous and current shareholders regarding their ownership of shares
or the management or operation of the Company.
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Except with respect to
this transaction, between the date of this Agreement and the Closing, the
Company and its subsidiaries shall maintain their existence and shall conduct
their businesses in the customary and ordinary course of business consistent
with past practice.
9.2 NEGATIVE COVENANTS OF THE COMPANY AND ITS SUBSIDIARIES. Without
the prior written approval of Buyer, neither the Company nor any of its
subsidiaries shall, between the date hereof and the Closing:
(A) cause or permit to occur any of the events or occurrences
described in Section 5.18 (Absence of Certain Events) of this Agreement;
(B) dissolve, merge or enter into a share exchange with or
into any other entity;
(C) enter into any contract or agreement with any union or
other collective bargaining representative representing any employees or
affiliates without the prior written consent of Buyer, which consent shall not
be unreasonably withheld;
(D) sell off any Assets other than in the ordinary course of
business; or
(E) make any change to their by-laws or articles of
incorporation.
9.3 AFFIRMATIVE COVENANTS. Between the date hereof and the Closing,
the Company and each of its subsidiaries shall:
(A) maintain their businesses in substantially the same state
of repair, order and condition as on the date hereof, reasonable wear and tear
or loss by casualty excepted;
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(B) maintain in full force and effect all Licenses currently
in effect with respect to their businesses unless such License is no longer
necessary for the operation of the Company and its subsidiaries;
(C) maintain in full force and effect the insurance policies
and binders currently in effect, or the replacements thereof, including without
limitation those listed on Schedule 5.16;
(D) utilize their reasonable efforts to: (i) preserve intact
the present business organization of the Company and its subsidiaries; (ii) keep
available the services of the Company's and its subsidiaries' present employees,
affiliates and agents; and maintain the Company's and its subsidiaries'
relations and goodwill with suppliers, employees, affiliates, affiliated medical
personnel and any others having business relating to the Company and its
subsidiaries;
(E) maintain all of the books and records in accordance with
their past practices;
(F) comply in all material respects with all provisions of the
Contracts listed in Schedule 5.7 and with any other material agreements that the
Company and its subsidiaries have entered into in the ordinary course of
business since the date of this Agreement, and comply in all respects with the
provisions of all material laws, rules and regulations applicable to the
Company's and its subsidiaries' businesses;
(G) cause to be paid when due, all taxes, assessments and
charges or levies imposed upon them or on any of their properties for which they
are required to withhold and pay over;
(H) promptly advise Buyer in writing of any threat known to
the Sellers, or the commencement against the Company or its subsidiaries or
affiliates of any claim, action, suit or proceeding, arbitration or
investigation or any other event that would materially adversely affect the
operations, properties, assets or prospects of the Company or its subsidiaries
or affiliates; and
(I) notify the Buyer in writing of any event involving the
Company or its subsidiaries or affiliates which has had or may be reasonably
expected to have a material adverse effect on the business or financial
condition of the Company or its subsidiaries or affiliates or may involve the
loss of contracts with the Company's or its subsidiaries' customers.
9.4 PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, Buyer
shall use its reasonable efforts to obtain all consents and approvals of
governmental agencies and all other parties necessary for the lawful
consummation of the transactions contemplated hereby and the lawful use,
occupancy and enjoyment of the Company's and its subsidiaries' businesses by
Buyer in accordance herewith ("Required Approvals"). The Company and its
subsidiaries shall cooperate with and use their reasonable efforts to assist
Buyer in obtaining all such approvals.
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9.5 EXCLUSIVITY. Until the earlier of Closing or the termination of
this Agreement pursuant to Section 13.1, neither the Company nor any
Shareholder, nor any of their respective affiliates, shall enter into any
agreement, commitment or understanding with respect to, or engage in any
discussions or negotiations directly or indirectly with, or encourage or respond
to any solicitations from, any other party with respect to the sale, lease or
management of any of the Assets, or in respect of the sale of any shares of
capital stock in the Company.
ARTICLE X: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Buyer's and Newco's obligations to consummate the Merger are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any one or more of which may be waived by Buyer or Newco in writing.
Upon failure of any of the following conditions, Buyer and Newco may terminate
this Agreement pursuant to and in accordance with Article XIII herein.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and Sellers made pursuant to this Agreement shall be
true and correct in all material respects (except those representations and
warranties that are qualified by materiality, which shall be true and correct in
all respects) at and as of the Closing Date, as though such representations and
warranties were made at and as of such time.
10.2 PERFORMANCE OF COVENANTS. Each of the Sellers and the Company
shall have performed or complied in all material respects with their respective
agreements and covenants required by this Agreement to be performed or complied
with by it prior to or at the Closing.
10.3 DELIVERY OF CLOSING CERTIFICATE. Each of the Sellers and the
Company shall have executed and delivered to Buyer a certificate of its
president, dated the Closing Date, upon which Buyer and Newco may rely,
certifying that the conditions contemplated by Sections 10.1 and 10.2 applicable
to it have been satisfied.
10.4 OPINION OF COUNSEL. Each Seller and the Company shall have
delivered to Buyer and Newco an opinion, dated the Closing Date, of their
counsel, in substantially the form attached hereto as Exhibit 10.4.
10.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any governmental authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
10.6 AUTHORIZATION DOCUMENTS. Buyer shall have received a
certificate of the Secretary or other officer of the Company certifying as of
the Closing Date a copy of resolutions of the Shareholders and of the Company's
board of directors authorizing the Company's execution and full performance of
the Transaction Documents and the incumbency of the Company's respective
officers.
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10.7 MATERIAL CHANGE. Since the ending date of the Interim
Financial Statements, there shall not have been any material adverse change in
the condition (financial or otherwise) of the assets, properties or operations
of the Company and its subsidiaries.
10.8 APPROVALS.
(A) The consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby shall have been granted,
including without limitation, the Required Approvals;
(B) None of the foregoing consents or approvals (i) shall have
been conditioned upon the modification, cancellation or termination of any
material lease, contract, commitment, agreement, license, easement, right or
other authorization with respect to the Company's and its subsidiaries'
businesses, other than as disclosed or approved hereunder, or (ii) shall impose
on the Buyer or Newco any material condition or provision or requirement with
respect to the Company's and its subsidiaries' businesses or their operation
that is more restrictive than or different from the conditions imposed upon such
operation prior to Closing.
10.9 CONSENTS. Buyer shall have received the written consent to
assignment for each of the Retained Contracts set forth on Schedule 2.5, where
such consent is required by reason of the change of control of the Company and
its subsidiaries contemplated under this Agreement.
10.10 UNDERTAKING. The Shareholders shall assume and undertake in a
writing in the form and substance of Exhibit 10.10 (the "Undertaking") to
perform all Liabilities when and as the same become due in accordance with their
terms and Shareholders shall have executed and delivered the Undertaking to
Buyer.
10.11 REAL PROPERTY CONSENTS. The Company and the Sellers shall
have used their best efforts to obtain the written consent to assignment of each
landlord with whom the Company or any of its subsidiaries has a lease of real
property which, by its terms, requires consent in the event of a change of
control of the Company, and the written consent of such landlords shall have
been received by the Buyer. Alternatively, the Company and Sellers shall have
delivered a waiver from each such landlord of any provision contained in any of
such leases which would require the landlord's consent upon any change of the
voting stock of the tenant. Buyer shall have received notice from the Sellers by
the Closing Date, identifying any landlord that has not given any necessary
consent as of such date.
10.12 COMPANY'S SUBSIDIARIES AND OPTIONS. Each of the subsidiaries
of the Company as of the Closing Date will be one hundred (100%) percent owned
by the Company and there shall not be outstanding as of the Closing Date any
options, warrants or rights for the purchase of any capital stock of the Company
or its subsidiaries or any obligations to grant or issue any options, warrants
or rights for the purchase of any capital stock of the Company or its
subsidiaries.
10.13 BOARD AND LENDER APPROVALS. The Buyer will have received
all necessary Board of Director approvals and all required lender approvals.
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10.14 CONSULTING AGREEMENTS. Each of the Shareholders shall have
executed and delivered his consulting agreement in the form of Exhibit 10.14
hereto (the "Consulting Agreements").
10.15 EMPLOYMENT AGREEMENT. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed
and delivered his employment agreement in the form of Exhibit 10.15 hereto (the
"Employment Agreement").
10.16 TERMINATION OF NON-RETAINED AGREEMENTS. All Contracts, other
than the Retained Contracts, shall have been terminated, as well as any ongoing
obligations thereunder.
10.17 ESCROW AGREEMENT. The Sellers shall have executed and
delivered the Escrow Agreements in the form of Exhibit 2.3.
10.18 STOCK CERTIFICATES. Shareholders shall have delivered to
Buyer all stock certificates representing the Company Stock duly endorsed in
blank.
10.19 DISSENTER'S RIGHTS. Any rights of any holder of equity in
the Company to seek appraisal or to dissent to the transactions contemplated
hereby shall have been irrevocably waived.
10.20 INSURANCE. If the Company's existing general and professional
liability coverage is on a claim made basis, then the Shareholders shall have
paid for and delivered to Buyer a tail policy with respect to liability
insurance coverage satisfactory to Buyer, which policy shall name Buyer as an
additional insured. Shareholders shall have also provided evidence of full
payment of such policy satisfactory to Buyer.
10.21 CERTIFICATE OF STATUS. The Company shall have delivered to
Buyer a certificate of status issued by the Wisconsin Department of Financial
Institutions with respect to the Company, dated not more than thirty (30) days
prior to the Closing Date.
10.22 PROCEDURE AND CUSTOMER VOLUME SUMMARY. Company has provided
Buyer with a true and correct summary of the x-ray, EKG, ultrasound, ▇▇▇▇▇▇
monitor, vision and audiology procedures for each of its customers, including
Social Security, correctional institutions and psychiatric facilities, on a
consolidated basis and by location, for the calendar year ended December 31,
1997 and the two (2) months ended February 28, 1998.
10.23 OTHER DOCUMENTS. The Sellers and the Company shall have
furnished Buyer and Newco with all other documents, certificates and other
instruments required to be furnished to Buyer and Newco by the Sellers and the
Company pursuant to the terms hereof.
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ARTICLE XI: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Sellers' obligation to consummate the Merger is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
any one or more of which may be waived by Sellers in writing. Upon failure of
any of the following conditions, Sellers may terminate this Agreement pursuant
to and in accordance with Article XIII herein:
11.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Newco in this Agreement shall be true and correct in all
material respects (except those representations and warranties that are
qualified by materiality, which shall be true and correct in all respects) at
and as of the Closing Date as though such representations and warranties were
made at and as of such time.
11.2 PERFORMANCE OF COVENANTS. Buyer and Newco shall have performed
or complied with each of its agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
11.3 DELIVERY OF CLOSING CERTIFICATE. Buyer and Newco shall have
delivered to Sellers a certificate of an executive or senior vice president of
Buyer and Newco dated the Closing Date upon which Sellers can rely, certifying
that the conditions contemplated by Sections 11.1 and 11.2 applicable to it have
been satisfied.
11.4 OPINION OF COUNSEL. Buyer and Newco shall have delivered to
Sellers an opinion, dated the Closing Date, of Blass & ▇▇▇▇▇▇, Esqs., counsel
for Buyer and Newco, in the form attached as Exhibit 11.4.
11.5 LEGAL MATTERS. No preliminary or permanent injunction or other
order (including a temporary restraining order) of any governmental authority
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.
11.6 AUTHORIZATION DOCUMENTS. Sellers shall have received a
certificate of the Secretary or other officer of Buyer and Newco certifying as
of the Closing Date a copy of resolutions of their respective boards of
directors authorizing their execution and full performance of the Transaction
Documents and the incumbency of their officers.
11.7 CONSULTING AGREEMENTS. Symphony Diagnostic Services No. 1,
Inc. ("Symphony"), a wholly-owned subsidiary of Buyer, shall have entered into
the Consulting Agreements with each of the Shareholders.
11.8 EMPLOYMENT AGREEMENT. Symphony shall have entered into the
Employment Agreement.
11.9 ESCROW AGREEMENT. Buyer shall have executed and delivered the
Escrow Agreement in the form of Exhibit 2.3.
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11.10 OTHER DOCUMENTS. Buyer and Newco shall have furnished Sellers
with all documents, certificates and other instruments required to be furnished
to Sellers by Buyer and Newco pursuant to the terms hereof.
ARTICLE XII: SURVIVAL AND INDEMNIFICATION
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each party in this Agreement and in any
Schedule and Transaction Document delivered by any such party pursuant hereto
shall survive the Closing Date and for a period of one (1) year after the
Closing, notwithstanding any investigation at any time made by or on behalf of
the other party, provided that Excess Reimbursement Liabilities referred to in
Section 2.5 and the representations and warranties contained in Section 5.31
(Questionable Payments"), Section 5.25 (Reimbursement Matters), Section 5.26
(Medicare/Medicaid Participation), and Section 5.21 (Tax Returns), shall survive
until thirty (30) days after the applicable period of limitations for audits by
the applicable Governmental Authority shall have expired, including extensions
for any necessary appeals. All representations and warranties related to any
claim asserted in writing prior to the expiration of the applicable survival
period shall survive (but only with respect to such claim) until such claim
shall be resolved and payment in respect thereof, if any is owing, shall be
made. Notwithstanding any investigation conducted before or after the Closing or
the decision of any party to consummate the Closing, each party hereto shall be
entitled to rely and is hereby declared to have reasonably relied upon the
representations and warranties of the other party.
12.2 INDEMNIFICATION BY SHAREHOLDERS. The Shareholders, severally,
shall indemnify and defend Buyer and hold it harmless against and with respect
to any and all damage, loss, liability, deficiency, cost and expense (including,
without limitation, reasonable attorney's fees and expenses) (all of the
foregoing hereinafter collectively referred to as "Loss") resulting from:
(A) any inaccuracy in any representation or certification, or
breach of any warranty, made by any of the Sellers or the Company pursuant to
this Agreement; or
(B) the breach of any covenant or undertaking by any of the
Sellers or the Company in this Agreement; or
(C) subject to any qualifications contained in the
representations and warranties in this Agreement, the ownership or operation of
the Company or its subsidiaries or their business or assets prior to the Closing
Date, including, without limitation, (i) any Seller Liabilities, including
without limitation, Excess Reimbursement Liabilities (as defined in Section
2.5); (ii) any Taxes resulting from the operation of the business of the Company
or ownership of any of the Assets for any period ending on or before the Closing
Date; (iii) any Loss arising out of the noncompliance of the Company with COBRA
or any like statute; (iv) any claim of the type that would be covered by a
standard liability insurance policy, including, without limitation, professional
liability, malpractice, general liability, automobile liability, worker's
compensation or employer's liability insurance, arising out of the operation of
the Company's business prior to the Closing Date, including payments of any
deductibles applicable to the aforesaid policies, to the extent not covered by
any existing insurance policy; (v) any Loss arising from the matter set forth on
Schedule 5.19;
34
and (vi) any and all actions, suits, proceedings, demands, assessments,
judgments, settlements (to the extent approved by the Company, such approval not
to be unreasonably withheld, delayed or conditioned), costs and legal expenses
incident to any of the foregoing.
12.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify and defend
Shareholders and hold them harmless against and with respect to any and all Loss
resulting from:
(A) any inaccuracy in any representation or certification, or
breach of any warranty, made by Buyer pursuant to this Agreement; or
(B) the breach of any covenant or undertaking by Buyer in this
Agreement; or
(C) the ownership or operation of the Company or its
subsidiaries or their business or assets on or after the Closing Date.
12.4 INDEMNITY CAP. The maximum aggregate liability (excluding any
Loss arising from fraud, Tax liability, and Excess Reimbursement Liabilities) of
the Sellers for indemnification hereunder shall not exceed an amount equal to
the Merger Consideration.
12.5 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS.
(A) Each indemnified party (each, an "Indemnitee") shall give
the indemnifying party (the "Indemnitor") prompt notice of each claim for which
it seeks indemnification. Failure to give such prompt notice shall not relieve
any Indemnitor of its indemnification obligation, provided that such
indemnification obligation shall be reduced by any damages the Indemnitor
demonstrates it has suffered resulting from a failure to give prompt notice
hereunder. The Indemnitor shall be entitled to participate in the defense of
such claim. If at any time the Indemnitor acknowledges in writing that the claim
is fully indemnifiable by it under this Agreement, and, if requested by the
Indemnitee, the Indemnitor shall have the right to assume control of the defense
(but not the settlement) of such claim at its own expense; unless (i) Indemnitee
shall have been authorized in writing by the Indemnitor to defend such action
with counsel of its own choice in connection with the defense of such action, or
(ii) the Indemnitor shall not have employed counsel to have charge of the
defense of such action within twenty (20) days after the date of notice of the
claim for which indemnification is sought is given to the Indemnitor or (iii)
the Indemnitor shall have failed to undertake and reasonably pursue the defense
of such action, or (iv) the Indemnitee shall have reasonably concluded that
there may be material defenses available to it or them which are different from
or additional to those available to the Indemnitor. If any event described in
clauses (i) through (iv) above shall occur, then the Indemnitor shall not have
the right to direct the defense of such action on behalf of the Indemnitee with
counsel of its own choice, and the reasonable fees and expenses of the
Indemnitee shall be borne by the Indemnitor, provided that such counsel shall be
reasonably acceptable to the Indemnitor. If the Indemnitor does assume control
of the defense of any such claim in accordance with the foregoing, then: (x) the
Indemnitor shall not defend the claim for which indemnification is being sought
in any manner that would likely have a material adverse effect on the Indemnitee
or on any relationship that the Indemnitee may have with
35
any customers, vendors, suppliers or others, and (y) the Indemnitee shall not
settle such claim without the written consent of the Indemnitor, which consent
shall not be unreasonably withheld, delayed or conditioned. Nothing contained in
this Section 12.5 shall prevent either party from assuming control of the
defense and/or settling any claim against it for which indemnification is not
sought under this Agreement.
(B) Notwithstanding anything to the contrary contained in this
Agreement, if there shall be any claim for Excess Reimbursement Liabilities with
respect to which Buyer shall be seeking indemnification, Buyer will have the
sole right to contest or appeal such claim (using at least the same standard of
care as it would apply to contests or appeals with respect to reimbursement
liabilities in general). Buyer may, in its sole and absolute discretion, at any
time discontinue any such contest or appeal or enter into a settlement with
respect thereto prior to the final determination thereof.
(C) In case any event shall occur which would otherwise
entitle either party to assert a claim for indemnification hereunder, no Loss
shall be deemed to have been sustained by the Indemnitee to the extent of any
proceeds received by Indemnitee from any insurance policies with respect
thereof.
(D) Except for claims related to intentional or knowing
breaches of the representations and warranties in this Agreement or for claims
related to fraud, from and after the Closing, the remedies provided in this
Article XII shall be the sole and exclusive remedies of Article XII Indemnitees
with respect to Losses from which indemnification is provided in this Article
XII.
12.6 RESTRICTIONS.
(A) From and after the Closing Date, none of the Sellers shall
disclose, directly or indirectly, to any person outside of Buyer's employ
without the express authorization of the Buyer, any patient lists, customer
lists, pricing strategies, customer files, or patient files and records of the
Company and its subsidiaries, any proprietary data or trade secrets owned by the
Company and its subsidiaries or any financial or other information about the
Company and its subsidiaries not then in the public domain; provided, however,
that Sellers shall be permitted to make such disclosures as may be required by
law or by a court or governmental authority.
(B) After the Closing Date, none of the Sellers shall engage
or participate in any effort or act to induce any of the customers, physicians,
suppliers, associates, employees, affiliates, or independent contractors of the
Company and its subsidiaries to cease doing business, or their association or
employment, with the Company and its subsidiaries.
(C) No Seller shall, anywhere within the States of Wisconsin
and the twenty-five (25) mile radius of Zion, Illinois, for a period of three
(3) years following the termination or expiration of the initial term such
Seller's Consulting Agreement, directly, or indirectly, for or on behalf of
himself or herself or any other person, firm, entity or other enterprise, be
employed by, be a director or manager of, act as a consultant for, be a partner
in, have a proprietary interest in, give advice to, loan money to, any person,
enterprise, partnership, association, corporation, joint venture
36
or other entity which is directly or indirectly in the business of owning,
operating or managing any entity of any type, licensed or unlicensed, which is
engaged in or provides: (i) mobile x-ray, (ii) EKG, (iii) ultrasound, (iv)
▇▇▇▇▇▇ monitor, (v) vision and audiology services or (vi) any other services
which the Company or either Shareholder is currently engaged in or otherwise
provides during the period commencing on the Closing Date and ending on the date
that is three (3) years following the termination or expiration of the initial
term of such Shareholder's Consulting Agreement or in any way competes with the
Buyer or its subsidiaries.
(D) The Sellers acknowledge that the restrictions contained in
this Section 12.6 are reasonable and necessary to protect the legitimate
business interests of Buyer and that any violation thereof by any of them would
result in irreparable harm to Buyer. Accordingly, Sellers agree that upon the
violation by any of them of any of the restrictions contained in this Section
12.6, Buyer shall be entitled to obtain from any court of competent jurisdiction
a preliminary and permanent injunction as well as any other relief provided at
law or equity, under this Agreement or otherwise. In the event any of the
foregoing restrictions are adjudged unreasonable in any proceeding, then the
parties agree that the period of time or the scope of such restrictions (or
both) shall be adjusted in such a manner or for such a time (or both) as is
adjudged to be reasonable.
12.7 RECORDS. On the Closing Date, Sellers and the Company shall
deliver, or cause to be delivered, to Buyer all records and files not then in
Buyer's possession relating to the operations of the Company and its
subsidiaries.
12.8 DISSENTERS' RIGHTS. In the event that any holder of Company
Stock asserts dissenter's rights with respect to the Merger under the Wisconsin
Business Corporation Law, the Shareholders, severally, shall indemnify and hold
harmless Buyer from and against (i) any amount which becomes payable to such
holder by the Company in satisfaction of such dissenter rights, to the extent
that such amount exceeds the Merger Consideration that would have been payable
to such holder had such holder not exercised his or her dissenter's rights, and
(ii) any costs or expenses, including reasonable attorneys fees, incurred by the
Company in investigating or litigating such dissenters' rights; provided,
however, that as a condition to the recovery of attorneys fees and expenses,
Buyer shall provide prompt notice to the Sellers of any exercise of dissenters'
rights and will permit Shareholders a reasonable opportunity to select and
direct counsel for the Company in respect of the investigation and litigation of
such rights.
12.9 CLOSING DATE BALANCE SHEET. Sellers and the Company shall
deliver to Buyer the balance sheet of the Company on a consolidated basis dated
as of the Closing Date, certified by the Company's Chief Financial Officer to be
his or her best good faith estimate thereof within thirty (30) days following
the Closing Date.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time at
or prior to the Closing by:
37
(A) Buyer or Newco, if any condition precedent to Buyer's or
Newco's obligations hereunder, including without limitation those conditions set
forth in Article X hereof, have not been satisfied by the Closing Date or
pursuant to Section 14.1 if any portion of the Assets is damaged or destroyed as
a result of fire, other casualty or for any reason whatsoever;
(B) Sellers, if any condition precedent to the obligations of
any Seller or the Company hereunder, including without limitation those
conditions set forth in Article XI hereof, have not been satisfied by the
Closing Date; or
(C) the mutual consent of Buyer, Newco and Sellers.
13.2 EFFECT OF TERMINATION. If a party terminates this Agreement
because one of its conditions precedent has not been fulfilled, or if this
Agreement is terminated by mutual consent, or if it is terminated pursuant to
Section 14.1, this Agreement shall become null and void without any liability of
any party to the other; provided, however, that if such termination is by reason
of the breach by any party of any of its representations, warranties or
obligations under this Agreement, the other party shall be entitled to be
indemnified for any Losses incurred by it by reason thereof in accordance with
Article XII hereof (and for such purposes such Article XII shall survive the
termination of this Agreement). Further, nothing in this Section 13.2 shall
affect Buyer's right to specific performance of the obligations of the Company
and Sellers at Closing hereunder.
ARTICLE XIV: CASUALTY, RISK OF LOSS
14.1 CASUALTY, RISK OF LOSS. The Company and Sellers shall bear the
risk of all loss or damage to any of the Assets from all causes which occur
prior to the Closing. If at any time prior to the Closing any portion of the
Assets is damaged or destroyed as a result of fire, other casualty or for any
reason whatsoever, the Company and Sellers shall immediately give notice thereof
to Buyer. Buyer shall have the right, in its sole and absolute discretion,
within ten (10) days of receipt of such notice, to (1) elect not to proceed with
the Closing and terminate this Agreement, or (2) proceed to Closing and
consummate the transactions contemplated hereby and receive any and all
insurance proceeds received or receivable by any Seller or the Company on
account of any such casualty. Nothing contained in this Section 14.1 shall limit
or adversely affect the right of Buyer to receive indemnification for any Losses
incurred by either of them by reason of any breach by any Seller or the Company
of any representation, warranty or obligation under this Agreement in accordance
with Section 12.2 hereof (and for such purposes such Section 12.2 shall survive
the termination of this Agreement).
ARTICLE XV: MISCELLANEOUS
15.1 COSTS AND EXPENSES. Except as expressly otherwise provided in
this Agreement, Buyer, Newco and Sellers shall bear their own costs and expenses
in connection with this Agreement and the transactions contemplated hereby;
provided, however, that no such pre- Closing costs and expenses of the Company
and its subsidiaries shall be paid by the Buyer or Newco.
38
15.2 PERFORMANCE. In the event of a breach by any party of its
obligations hereunder, the other party shall have the right, in addition to any
other remedies which may be available, to obtain specific performance of the
terms of this Agreement, and the breaching party hereby waives the defense that
there may be an adequate remedy at law. Should any party default in its
performance, or other remedy, the prevailing party shall be entitled to its
reasonable attorneys' fees.
15.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the
benefit of each party hereto and its successors, heirs, and proper assigns.
Buyer and Newco may not assign their interests under this Agreement to any other
person or entity without the prior written consent of Sellers; provided,
however, that Buyer and Newco may assign their rights, duties and obligations
hereunder to one or more subsidiaries or affiliates of Buyer; and further
provided that in the instance of such assignment Buyer shall guaranty the
performance of its assignee hereunder.
15.4 EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and
the Exhibits and Schedules hereto embody the entire agreement and understanding
of the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein. The captions used herein
are for convenience only and shall not control or affect the meaning or
construction of the provisions of this Agreement. This Agreement may be executed
in one or more counterparts, and all such counterparts shall constitute one and
the same instrument.
15.5 COOPERATION - FURTHER ASSISTANCE. From time to time, as and
when reasonably requested by any party hereto after the Closing, the other
parties will (at the expense of the requesting party) execute and deliver, or
cause to be executed and delivered, all such documents, instruments and consents
and will use reasonable efforts to take all such action as may be reasonably
requested or necessary to carry out the intent and purposes of this Agreement,
and to vest in Buyer good title to, possession of and control of all of the
Assets.
15.6 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed to be properly given or made when personally
delivered to the party or parties entitled to receive the notice or within five
(5) days when sent by certified or registered mail, postage prepaid, or on the
next business day if sent for next day delivery by a nationally recognized
overnight courier, in either case, properly addressed to the party or parties
entitled to receive such notice at the address stated below:
If to the Company: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇ ▇▇▇▇▇
American Mobile Health Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Sellers: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
39
▇▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Van Deuren
▇▇▇▇▇▇ & Rieselbach
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Newco: IHS Acquisition No. 37, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
cc: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel
If to the Buyer: Integrated Health Services, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
cc: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Blass & ▇▇▇▇▇▇, Esqs.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
15.7 WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer or representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
15.8 RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns of the parties hereto.
40
15.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, disregarding
any rules relating to the choice or conflict of laws.
15.10 AMENDMENTS, SUPPLEMENTS, ETC. At any time before or after the
execution and delivery of this Agreement by the parties hereto, this Agreement
may be amended or supplemented by additional agreements, articles or
certificates, as may be mutually determined by the parties to be necessary,
appropriate or desirable to further the purposes of this Agreement, to clarify
the intention of the parties, or to add to or to modify the covenants, terms or
conditions hereof or thereof. The parties hereto shall make such technical
changes to this Agreement, not inconsistent with the purposes hereof, as may be
required to effect or facilitate any governmental approval or acceptance of this
Agreement or to effect or facilitate any filing or recording required for the
consummation of any portion of the transactions contemplated hereby. This
Agreement may not be amended except by an instrument in writing signed by each
of the parties.
15.11 SEVERABILITY. Any provision, or distinguishable portion of
any provision, of this Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 12.6 shall be
determined to be overly broad in any respect, then it should be enforceable to
the maximum extent permissible under the law. To the extent permitted by
applicable law, the parties waive any provision of law which renders a provision
hereof prohibited or unenforceable in any respect.
15.12 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall
together constitute one and the same instrument.
15.13 ARBITRATION. Any dispute or controversy between any of the
parties hereto pertaining to the performance or interpretation of this Agreement
shall be settled by binding arbitration pursuant to the rules of the American
Arbitration Association. The cost of such proceeding shall be shared equally by
all parties thereto, and each such party shall bear its own costs incurred as a
result of its participation in any such arbitration.
15.14 PUBLIC ANNOUNCEMENTS. Following the execution of this
Agreement, any general public announcements or similar media publicity with
respect to this Agreement or the transactions contemplated herein shall be at
such time and in such manner as Buyer shall determine; provided that nothing
herein shall prevent either party, upon as much prior notice as shall be
possible under the circumstances to the other, from making such written
announcements as such party's counsel may consider advisable in order to satisfy
the party's legal and contractual obligations in such regard.
41
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
COMPANY:
WITNESS: AMERICAN MOBILE HEALTH
SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. DELL By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- --------------------------------
Its: President
WITNESS: SELLERS:
By: /s/ ▇▇▇▇▇▇▇ ▇. DELL /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
WITNESS:
By:/s/ ▇▇▇▇▇▇▇ ▇. DELL /s/ ▇▇▇ ▇▇▇▇▇
------------------------- -----------------------------------
▇▇▇ ▇▇▇▇▇
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:
--------------------------------
Executive Vice President
Corporate Development
NEWCO:
IHS ACQUISITION NO. 37, INC.
By:
--------------------------------
Executive Vice President
42
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
COMPANY:
WITNESS: AMERICAN MOBILE HEALTH
SYSTEMS, INC.
By: By:
------------------------- --------------------------------
Its: President
WITNESS: SELLERS:
By:
------------------------- -----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
WITNESS:
By:
------------------------- -----------------------------------
▇▇▇ ▇▇▇▇▇
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By: [SIG]
--------------------------------
Executive Vice President
Corporate Development
NEWCO:
IHS ACQUISITION NO. 37, INC.
By: [SIG]
--------------------------------
Executive Vice President
43