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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 24, 1997
AMONG
INTEGRATED HEALTH SERVICES, INC.,
INTEGRATED AG ACQUISITION, INC.
AND
ARCADIA SERVICES, INC.
AND
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AND
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AND
COMMITTEE
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TABLE OF CONTENTS
PAGE
ARTICLE I: MERGER..............................................................1
1.1 Merger.......................................................1
1.2 Taking of Necessary Action...................................2
ARTICLE II: CONVERSION.........................................................2
2.1 Conversion of Stock..........................................2
2.2 Adjustments to the Merger Consideration......................3
2.3 General Escrow...............................................4
2.4 Arizona Litigation and Arizona Escrow........................6
2.5 Assets.......................................................7
2.6 Liabilities..................................................7
ARTICLE III: IHS STOCK........................................................8
3.1 IHS Stock....................................................8
ARTICLE IV: THE CLOSING......................................................13
4.1 Time and Place of Closing...................................13
4.2 Filings at Closing..........................................13
4.3 Effective Time..............................................13
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SELLERS AND ARCADIA..................................................13
5.1 Organization and Standing of Arcadia........................13
5.2 Absence of Conflicting Agreements...........................14
5.3 Consents....................................................14
5.4 Arcadia Stock...............................................14
5.5 Assets......................................................14
5.6 Trademarks..................................................15
5.7 Contracts...................................................15
5.8 Financial Statements........................................16
5.9 Material Changes............................................17
5.10 Licenses; Permits; Certificates of Need.....................17
5.11 Title, Condition of Personal Property.......................18
5.12 Legal Proceedings...........................................19
5.13 Employees...................................................19
5.14 Collective Bargaining, Labor Contracts, Employment
Practices, Etc..............................................19
5.15 ERISA.......................................................20
5.16 Insurance and Surety Agreements.............................21
5.17 Relationships...............................................21
(i)
5.18 Absence of Certain Events...................................21
5.19 Compliance with Laws........................................23
5.20 Finders.....................................................23
5.21 Tax Returns.................................................24
5.22 Encumbrances Created by this Agreement......................24
5.23 Subsidiaries and Joint Ventures.............................24
5.24 No Untrue Statement.........................................24
5.25 Medicare and Medicaid Programs..............................24
5.26 Leasehold Interests.........................................24
5.27 Power and Authority.........................................25
5.28 Binding Effect..............................................25
5.29 Questionnaires..............................................25
5.30 Questionable Payments.......................................25
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SELLERS
....................................................................25
6.1 Authority...................................................25
6.2 Binding Effect..............................................25
6.3 Absence of Conflicting Agreements...........................25
6.4 Consents....................................................26
6.5 Ownership of Arcadia 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...........................27
7.5 Consents....................................................27
7.6 Securities and Exchange Commission Filings..................27
7.7 Capital Stock...............................................27
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING ARCADIA AND ITS
SUBSIDIARIES.........................................................28
8.1 Access to Information and Records before Closing............28
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING.........................28
9.1 Conduct of Business Pending Closing.........................28
9.2 Negative Covenants of Arcadia and its Subsidiaries..........28
9.3 Affirmative Covenants.......................................29
9.4 Pursuit of Consents and Approvals...........................30
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.............................31
10.4 Opinion of Counsel..........................................31
10.5 Legal Matters...............................................31
10.6 Authorization Documents.....................................31
10.7 Material Change.............................................31
10.8 Approvals...................................................31
10.9 Consents....................................................31
10.10 Estimated Closing Date Balance Sheet........................31
10.11 Real Property Consents......................................32
10.12 Arcadia's Subsidiaries and Options..........................32
10.13 Board Approvals.............................................32
10.14 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇...........................................32
10.15 Employment Agreements.......................................32
10.16 Required Transactions.......................................32
10.17 Termination of Non-Retained Agreements......................32
10.18 Escrow Agreements...........................................32
10.19 Termination of Certain Contracts............................33
10.20 Grayrose....................................................33
10.21 Stock Certificates..........................................33
10.22 Dissenter's Rights..........................................33
10.23 Captive Insurance...........................................33
10.24 Other Documents.............................................33
ARTICLE XI: CONDITIONS PRECEDENT TO PRINCIPAL SELLERS' OBLIGATIONS...........33
11.1 Representations and Warranties..............................33
11.2 Performance of Covenants....................................33
11.3 Delivery of Closing Certificate.............................34
11.4 Opinion of Counsel..........................................34
11.5 Legal Matters...............................................34
11.6 Authorization Documents.....................................34
11.7 H-S-R Filings...............................................34
11.8 Employment Agreements.......................................34
11.9 Escrow Agreements...........................................34
11.10 Other Documents.............................................34
ARTICLE XII: SURVIVAL AND INDEMNIFICATION....................................34
12.1 Survival of Representations and Warranties..................34
12.2 Indemnification by Shareholders and/or Principal Sellers....35
12.3 Indemnification by Buyer....................................36
(iii)
12.4 Assertion of Claims.........................................36
12.5 Indemnity Basket and Cap....................................36
12.6 Control of Defense of Indemnifiable Claims..................37
12.7 Restrictions................................................37
12.8 Records.....................................................38
12.9 Buyer's Affirmative Covenants...............................38
12.10 Dissenters' Rights..........................................38
12.11 Special Provisions with Regard to Indemnification of
Representations and Warranties..............................39
ARTICLE XIII: TERMINATION....................................................39
13.1 Termination.................................................39
13.2 Effect of Termination.......................................40
ARTICLE XIV: CASUALTY, RISK OF LOSS...........................................40
14.1 Casualty, Risk of Loss......................................40
ARTICLE XV: MISCELLANEOUS....................................................40
15.1 Costs and Expenses..........................................40
15.2 Performance.................................................40
15.3 Benefit and Assignment......................................41
15.4 Effect and Construction of this Agreement...................41
15.5 Cooperation - Further Assistance............................41
15.6 Notices.....................................................41
15.7 Waiver, Discharge, Etc......................................42
15.8 Rights of Persons Not Parties...............................42
15.9 Governing Law...............................................42
15.10 Amendments, Supplements, Etc................................43
15.11 Severability................................................43
15.12 Counterparts................................................43
15.13 Arbitration.................................................43
15.14 Public Announcements........................................43
(iv)
SCHEDULES & EXHIBITS
Schedule 2.1(b) - Allocation among Shareholders
Schedule 2.6 - Assumed Liabilities
Schedule 5.3 - Consent List of Principal Sellers
Schedule 5.4 - Arcadia Stock
Schedule 5.5 - Liens on Assets
Schedule 5.6 - Trademarks
Schedule 5.7 - Contracts
Schedule 5.8(a) - Audited Financial Statement
Schedule 5.8(b) - Monthly Financial Statements
Schedule 5.8(c) - March 31 Balance Sheets
Schedule 5.8(d) - Material Liabilities
Schedule 5.9 - Material Changes
Schedule 5.10 - Licenses, Permits, Certificates of Need
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 5.15(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 - Medicare and Medicaid Programs
Schedule 5.26 - Leasehold Interests
Schedule 7.5 - Consent List of Buyer
Exhibit A - Plan of Merger
Exhibit 2.3 - Escrow Agreement
Exhibit 2.4 - Arizona Litigation Escrow Agreement
Exhibit 5.29 - Questionnaire
Exhibit 10.4 - Opinion of Shareholders' Counsel
Exhibit 10.15 - Employment Agreements
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 24th day of July, 1997, among INTEGRATED HEALTH SERVICES, INC., a Delaware
corporation ("Buyer"), INTEGRATED AG ACQUISITION, INC., a Delaware corporation
("Newco"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (collectively, the "Principal
Sellers" and individually, the "Principal Seller") and the Principal Sellers in
their collective capacity as the "Committee" and ARCADIA SERVICES, INC. a
Michigan corporation ("Arcadia").
WHEREAS, Newco is a subsidiary of Buyer; and
WHEREAS, Arcadia is in the business of providing home health care services
and medical staffing services and Arcadia's wholly-owned subsidiary, Grayrose,
Inc. ("Grayrose") is in the business of providing clerical and light industrial
staffing services; and
WHEREAS, the Principal Sellers are the owners or holders of a majority of
the issued and outstanding shares of the capital stock of Arcadia; and
WHEREAS, all owners or holders of the issued and outstanding shares of the
capital stock of Arcadia (the "Shareholders") (the "Arcadia Stock") will be
authorizing the Committee to act as their agent for the purpose of taking any
action under this Agreement; and
WHEREAS, the Shareholders and the Boards of Directors of Buyer, Newco, and
Arcadia deem it advisable to merge Newco with and into Arcadia (the "Merger")
pursuant to this Agreement and the Plan of Merger annexed as Exhibit A hereto
(the "Plan of Merger"); and
WHEREAS, pursuant to the Merger, all shares of Arcadia Stock will be
converted into the right to receive the Merger Consideration (as defined in
Section 2.1(a) of this Agreement).
NOW, THEREFORE, Principal Sellers, Committee, Buyer, Newco and Arcadia
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 Arcadia 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 Arcadia 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 or
desirable to carry out the purposes of this Agreement and to vest Buyer with
full title to Arcadia 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 Arcadia 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, and subject to adjustment pursuant to Section 2.2 hereof, of EIGHTEEN
MILLION SEVEN HUNDRED THOUSAND AND 00/100 ($18,700,000.00) DOLLARS (the "Merger
Consideration"); provided that the aggregate Merger Consideration shall be
reduced by an amount equal to that portion of the Merger Consideration which is
allocable to any shares of Arcadia Stock as to which the holder of such shares
has exercised his or her dissenter's rights under the Michigan Business
Corporation Act. Each of the Shareholders whose shares are converted into the
Merger Consideration (other than those who have exercised dissenter's rights as
aforesaid) 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 Arcadia 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 Arcadia 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
Arcadia.
(C) at the Effective Time of Merger, each holder of a certificate
theretofore evidencing outstanding shares of Arcadia Stock, upon surrender of
such certificate, shall be entitled to receive in exchange therefor his or her
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 Arcadia 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.
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(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 Arcadia 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 Arcadia Stock. Upon the surrender of such
certificate(s), they shall be duly canceled.
2.2 ADJUSTMENTS TO THE MERGER CONSIDERATION.
(A) At the Closing, Arcadia shall deliver a certificate signed by its
Chief Financial Officer certifying his best good faith estimate of Arcadia's
aggregate working capital (as defined herein) as of the Closing Date on a
consolidated basis (the "Estimated Closing Date Working Capital"). In the event
that the Estimated Closing Date Working Capital is less than $791,000 (the
"Minimum Working Capital"), the Merger Consideration payable to the Shareholders
at Closing will be reduced on a dollar-for-dollar basis by an amount equal to
the amount of such deficiency. If the Estimated Closing Date Working Capital
exceeds the Minimum Working Capital, the Merger Consideration payable to the
Shareholders at Closing will be increased by an amount equal to the excess above
the Minimum Working Capital, payable in IHS Stock. For the purposes hereof,
"working capital" means the excess of current assets over current liabilities,
as determined in accordance with generally accepted accounting principles,
consistently applied ("GAAP"); provided that any prepayment obligation related
to any accounts receivable factoring arrangements entered into by Arcadia or any
of its subsidiaries as of or prior to the Closing Date will be included as a
current liability in the calculation of working capital; provided further that
any waiver of the Shareholders' debt shall be treated as a reduction of current
assets in the calculation of working capital; provided further the Shareholders
will have reserved $809,000 for the Arizona Receivables (as defined in Section
2.4, below) and $50,000 for the Arizona Litigation (as defined in Section 2.4,
below) on the Estimated Closing Date Balance Sheets; provided further all assets
and liabilities associated with the Mutual Indemnity (Bermuda) Limited captive
insurance (the "Captive Insurance") will be excluded in the calculation of
working capital on the Estimated Closing Date Balance Sheet; provided further
all obligations related to terminations of employment agreements with Arcadia or
its subsidiaries shall be treated as current liabilities in the calculation of
working capital on the Estimated Closing Date Balance Sheet and; provided
further any liabilities and obligations, other than Assumed Liabilities, must be
reflected as current liabilities to the extent and only to the extent they are
reflected on the Estimated Closing Date Balance Sheet. Additionally, at the
Closing, Arcadia shall deliver to Buyer the balance sheet of Arcadia on a
consolidated basis dated as of the Closing Date, certified by Arcadia's Chief
Financial Officer to be his best good faith estimate thereof (the "Estimated
Closing Date Balance Sheet"). In the event that the Estimated Closing Date
Balance Sheet discloses that the aggregate amount of Arcadia's long-term
liabilities as determined in accordance with GAAP exceeds $1,300,000 (the
"Maximum Long-Term Liabilities"), the Merger Consideration payable to the
Shareholders at Closing will be reduced by an amount equal to the amount of such
excess. For the purposes hereof, "long-term liability" means any liability that
would be set forth as a long-term liability on a balance sheet in accordance
with GAAP, excluding any liabilities specifically classified as current
liabilities in this Section 2.2(a).
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(B) As soon as is reasonably practicable, but in any event within ninety
(90) days following the Closing Date, Buyer shall complete a review (the
"Post-Closing Review") of Arcadia's Estimated Closing Date Balance Sheet. The
Merger Consideration, after giving effect to any adjustments made at the Closing
pursuant to Section 2.2(a), above, (the "Adjusted Merger Consideration"), shall
be subject to further adjustment based upon the Post-Closing Review indicating
that the aggregate working capital of Arcadia as of the Closing Date (the
"Actual Working Capital") was different from the Estimated Closing Date Working
Capital, then the parties shall make such payments to each other as shall result
in the Merger Consideration being the amount that it would have been had the
Actual Working Capital been used at Closing in lieu of the Estimated Closing
Date Working Capital. Any increase to the Adjusted Merger Consideration shall be
in IHS Stock by Buyer to Shareholders, and if the Adjusted Merger Consideration
is reduced, then the Escrowee (as defined below) shall deliver over to Buyer
shares of IHS Stock having a value determined in accordance with Section
2.3(a)(vii), below, equal to such deficiency. In the event the deficiency
exceeds the Escrow Deposit (as defined below) held by Escrowee, the Principal
Sellers shall refund to Buyer the amount of such deficiency in IHS Stock valued
in accordance with Section 2.3(a)(vii), below. Furthermore, if the Post-Closing
Review reveals the aggregate amount of Arcadia's long-term liabilities as of the
Closing Date exceeded the greater of (w) Maximum Long-Term Liabilities, or (x)
the amount of Arcadia's long-term liabilities as indicated on the Estimated
Closing Date Balance Sheet, the Merger Consideration shall be deemed to have
been reduced by the amount of such excess, and the Escrowee shall deliver over
to Buyer IHS Stock having a value equal to such excess. In the event the amount
of such excess is greater than the Escrow Deposit held by Escrowee, the
Principal Sellers shall be jointly and severally obligated to refund to Buyer
the amount of such excess in IHS Stock. The value of any IHS Stock to be
distributed to the Buyer from the Escrowee will be as set forth in Section
2.3(a)(vii), below. If there shall be any dispute regarding the calculation of
the working capital as of the Closing Date or the amount of long-term
liabilities as of the Closing Date, such dispute shall be submitted to a
mutually agreed upon "big six" accounting firm other than KPMG Peat Marwick LLP
or Coopers & ▇▇▇▇▇▇▇ LLP (the "Accountants") for final resolution and the party
against whom the Accountants shall rule shall pay the costs and expenses of the
Accountants in connection therewith. Principal Sellers will have reasonable
access to such records as are necessary for the calculation of the working
capital in connection with the Post- Closing Review.
2.3 GENERAL 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 Merger Consideration as shall be equal in value to ONE MILLION FIVE HUNDRED
THOUSAND ($1,500,000) 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
Principal Sellers shall be designated by the Shareholders as Shareholders'
Committee under the Escrow Agreement, to take any and all action, and to give
any and all notices, on behalf of the Shareholders under the Escrow Agreement.
Subject to the provisions of this Section 2.3, $1,000,000 (less any amounts
offset for claims pursuant to Section 2.3(a)(i) and (ii)) shall be released to
the Shareholders one (1) year following
4
the Closing Date (the "General Indemnification Fund"). The balance of the Escrow
Deposit shall continue to be held solely to indemnify against Excess
Reimbursement Liabilities (as defined below) and shall be released to the
Shareholders three (3) years following the Closing Date. 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(b), 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 General Indemnification Fund (less any amounts offset for claims
pursuant to Section 2.3(a)(i) and (ii)) 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 General Indemnification Fund (less any amounts offset for claims pursuant to
Section 2.3(a)(i) and (ii)) (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 promptly
after resolution of such claim.
(V) If no claim for indemnification on the part of Buyer in connection
with Excess Reimbursement Liabilities (as defined below) remains outstanding
upon the expiration of three (3) years following the Closing Date, then any
remaining Escrow Deposit then held by the Escrowee shall first be used to pay
off any attorney's fees and expenses in connection with indemnification pursuant
to Section 12.2, below, properly chargeable, and then any remaining Escrow
Deposit shall be released to the Shareholders.
(VI) If any claim for indemnification on the part of Buyer in
connection with Excess Reimbursement Liabilities remains outstanding upon the
expiration of three (3) years following the Closing Date, then any Escrow
Deposit (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 first be used to pay off any attorney's fees and expenses in
connection with Excess Reimbursement Liabilities, properly chargeable, and then
any remaining Escrow Deposit shall be released to the Shareholders promptly
after resolution of such claim.
5
(VII) 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.
(B) 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 ARIZONA LITIGATION AND ARIZONA 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 2.4, a portion of
the Merger Consideration as shall be equal in value to EIGHT HUNDRED AND NINE
THOUSAND ($809,000) DOLLARS (the "Arizona Escrow Deposit") based upon the
valuation described in Section 3.1(a), below, shall be delivered by Buyer, on
behalf of the Shareholders, to Escrowee. The Principal Sellers shall be
designated by the Shareholders as Shareholders' Committee under the Escrow
Agreement, to take any and all action, and to give any and all notices, on
behalf of the Shareholders under such Escrow Agreement. The Arizona Escrow
Deposit shall be held and disbursed by the Escrowee in accordance with the
following:
(I) To the extent Buyer is able to collect any proceeds from Arcadia's
accounts receivable with respect to the matter currently in litigation in
Maricopa County, Arizona (the "Arizona Receivables"), the Buyer shall instruct
the Escrowee to distribute from the Arizona Escrow Deposit to the Shareholders
such portion which equals the amount of Arizona Receivables actually collected
by Buyer. Said distribution from the Arizona Escrow Deposit shall be paid first
in shares of IHS Stock (to the extent available) and then in cash, with the form
of such payment to be in the discretion of the Shareholders.
(II) Upon the expiration of eighteen (18) months following the Closing
Date, any remaining Arizona Escrow Deposit (including all accrued interest
thereon) (less any amounts previously distributed to the Shareholders pursuant
to Section 2.4(a)(i), above), shall be released to Buyer.
(III) The value of any IHS Stock to be distributed to Shareholders
from the Arizona 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.
(B) 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.
(C) Upon the expiration of eighteen (18) months following the Closing
Date and the release of any remaining Arizona Escrow Deposit to Buyer, then, in
such event, Buyer agrees to assign all of its rights and interests under and to
the Arizona Receivables to a liquidating trust for the benefit of the
Shareholders in order to facilitate the Shareholders' efforts with respect to
litigation concerning the Arizona Receivables (the "Arizona Litigation").
6
(D) Principal Sellers shall have the exclusive right to direct the
collection efforts regarding the Arizona Receivables and the Arizona Litigation;
provided; Buyer will not incur any attorneys' fees, costs and expenses in excess
of $50,000 in connection with the Arizona Receivables and the Arizona
Litigation; and provided further Buyer shall only provide reasonable access to
Arcadia and its resources, including its employees.
2.5 ASSETS. As of the Closing Date, the consolidated assets of Arcadia (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 businesses of Arcadia 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,
Certificates of Need, Medicare and Medicaid provider agreements and numbers,
provider agreements with third party payors, investments in affiliate offices,
telephone numbers, and to the extent permitted by law, all permits, licenses and
other governmental approvals. The Assets of Arcadia as of the Closing Date shall
also include cash, accounts receivable, and prepaid expenses.
2.6 LIABILITIES. As of the Closing Date, Arcadia shall only have such
liabilities which (i) are reflected as a liability on the Estimated Closing Date
Balance Sheet in accordance with GAAP, and (ii) arise under those certain
contracts (the "Retained Contracts") set forth on Schedule 2.6, specifically
assumed by Buyer and assigned by the Principal Sellers to 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 "Assumed 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) 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 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, including, without limitation, (i) 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; (ii) amounts due or that
may become due to Medicare or Medicaid or any other health care reimbursement or
payment intermediary 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"); (iii) any accounts payable or employment or other taxes; and (iv)
accrued but unpaid compensation or other benefits to any
7
of Arcadia's or its subsidiaries' employees, agents, consultants or advisers,
including accrued vacation, shall remain the sole responsibility of the
Principal Sellers and shall be paid or performed on or prior to the Closing
Date, unless such liabilities shall have been properly accrued for on the
Estimated Closing Date Balance Sheet.
ARTICLE III: IHS STOCK
3.1 IHS STOCK. The entire Merger Consideration equal to EIGHTEEN MILLION
SEVEN HUNDRED THOUSAND ($18,700,000.00) 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 (the "IHS Stock") 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 ninety (90) days following the Closing 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, 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 may be available.
(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
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.
8
(D) REGISTRATION EXPENSES. Shareholders shall not be responsible for, and
Buyer shall bear, all of the reasonable expenses of Buyer related to such
registration including, without limitation, the fees and expenses of its 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 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 One Hundred Thousand (100,000) 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 so long as
the Shareholders own any of the IHS Stock except to the extent that an exemption
from registration may be available. 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.
(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.
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(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 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,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in such registration statement 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; or 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, unless 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 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. Except as expressly provided in the previous sentence,
in the event that Buyer shall not previously have assumed the defenses of any
such action or claim, Buyer shall not thereafter be liable to the Shareholders
or such controlling person in investigating, preparing or defending any such
action or claim. Buyer agrees promptly to notify the Shareholders of the
commencement or 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.
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(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 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 disclosure 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 required to effect the 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 IHS 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 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.
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(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;
the Shareholders acknowledge that the IHS Stock constitutes restricted
securities under Rule 144 promulgated by the Commission pursuant to the
Securities Act, and may have to be held indefinitely, 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
opinion of IHS'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.
(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.
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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 at the offices of the Buyer, 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 Arcadia Stock duly
endorsed, or accompanied by one or more stock powers duly endorsed, and (b)
Buyer, as agent for Arcadia, shall, subject to Sections 2.3 and 2.4, 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 Arcadia shall cause
the Plan of Merger or such other certificate as required to be filed in
accordance with the Michigan Business Corporation Act and Delaware General
Corporation Law, and each of the Shareholders, Buyer and Arcadia 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 Michigan Secretary of State and the Delaware Secretary of State is made
effective (the "Effective Time of Merger").
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL
SELLERS AND ARCADIA
Arcadia and the Principal 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, "Arcadia" shall be deemed to refer collectively to
Arcadia and any subsidiaries listed on Schedule 5.23):
5.1 ORGANIZATION AND STANDING OF ARCADIA. Arcadia is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan. Copies of Arcadia's Articles of Incorporation and By-Laws, and all
amendments thereof to date, have been delivered to Buyer and are complete and
correct. Arcadia has the power and authority to own the properties and assets
now owned by it and to conduct the businesses presently being conducted by it.
Arcadia is qualified to do business as a foreign corporation in each state where
the ownership of its assets or the conduct of its businesses make such
qualification necessary.
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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 Principal Sellers and Arcadia, nor the performance
by Principal Sellers and Arcadia 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 Arcadia; 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) 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 Arcadia is now a party or
by which any of the assets of Arcadia 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 Principal Sellers or Arcadia.
5.4 ARCADIA STOCK. Schedule 5.4 sets forth a complete list and description
of the authorized capital stock of Arcadia, the number of shares issued and
outstanding of each class or series of such capital stock, and the identity of
each Shareholder of Arcadia, in each case indicating the class and number of
shares held. No shares of Arcadia Stock are held in the treasury of Arcadia. The
Shareholders are the record owners of all of Arcadia Stock and all of such stock
is duly authorized, validly issued, and fully paid and non-assessable. Arcadia
will, as of the Closing Date, be the sole shareholder of Grayrose. On the
Closing Date, there will be no preemptive or first refusal rights to purchase or
otherwise acquire shares of capital stock of Arcadia pursuant to any provision
of law or the Articles of Incorporation or By-Laws of Arcadia 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 Arcadia any shares of
capital stock of Arcadia, 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 Arcadia will
include all of the tangible and intangible assets necessary to operate the
businesses of Arcadia as presently constituted, including, without limitation,
cash and accounts receivable; provided, however, that Assets shall not include
inventory, supplies and other assets disposed of in the ordinary course of
business, consistent with the prior practice of Arcadia's businesses. The
quantities of inventory items included in the Assets are reasonable in light of
the present and anticipated volume of Arcadia's businesses and the inventory is
good, usable, merchantable, and salable in the ordinary course of Arcadia's
businesses, in each case, as determined by Arcadia in good faith and consistent
with past practice. The accounts receivable of Arcadia are reflected properly on
their books and records in accordance with GAAP, and have been billed or
invoiced in the ordinary course of business consistent with past practice. The
Assets are not subject to any liens or encumbrances, except as set forth on
Schedule 5.5.
14
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
Arcadia. There are no claims or proceedings pending or, to the knowledge of
Arcadia, overtly threatened against Arcadia 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 Principal Sellers and Arcadia, Arcadia 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 Arcadia is
a party or by which Arcadia or any of Arcadia's assets is bound and as to which
Arcadia 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 Arcadia;
(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 sale of Arcadia's assets,
properties or rights outside the ordinary course of business (by sale of assets,
sale of stock, merger or otherwise) which is currently in effect;
(D) each contract currently in effect which contains any provisions
requiring Arcadia to indemnify or act for, or guarantee the obligation of, any
other person or entity;
(E) each agreement restricting Arcadia 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 Arcadia's businesses 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 Arcadia performs home health care services,
medical staffing or clerical staffing services which involves consideration of
at least $15,000;
15
(I) each contract under which Grayrose performs clerical and light
industrial staffing services which involves consideration of at least $15,000;
or
(J) any other agreement not made in the ordinary and normal course of
business which involves consideration of more than $50,000.
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. Arcadia is not in material default under any Contract and there has
not been asserted, either by or against Arcadia under any Contract, any written
notice of default, set-off or claim of default. To the knowledge of Arcadia, the
parties to the Contracts other than Arcadia 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 or properly accrued for on the Estimated Closing Date Balance Sheet in
accordance with GAAP.
Notwithstanding the foregoing, Buyer acknowledges that it has been informed
by Arcadia that Arcadia has agreements with certain of its affiliates in
geographic areas in which Buyer already is conducting business. Buyer agrees to
assume any and all liability and be responsible for any claim or loss which may
occur as a result of the violation after the Closing Date by Buyer or Arcadia,
or any of their respective subsidiaries, of any exclusive territorial rights
contained in any such affiliate agreements, and that Arcadia shall have no
obligation to Buyer nor be deemed in breach or violation of any representation,
warranty or covenant hereunder or otherwise under this Agreement as a direct
result of such marketplace overlap.
5.8 FINANCIAL STATEMENTS.
(A) The audited consolidated balance sheet of Arcadia and Grayrose as of
June 30, 1995 and the draft audited consolidated balance sheet of Arcadia and
Grayrose as of June 30, 1996, and the related statements of operations for the
years then ended, annexed hereto as Schedule 5.8(a) (the "Audited Financial
Statements"), present fairly in all material respects the financial condition
and results of operations of Arcadia and Grayrose at and for the period therein
specified and were prepared in accordance with GAAP.
(B) The unaudited consolidated monthly balance sheets of Arcadia and
Grayrose for each calendar month since June 30, 1996 and the related statements
of operations for the periods then ended, annexed hereto as Schedule 5.8(b),
present fairly in all material respects the financial condition and results of
operations of Arcadia and Grayrose at and for the periods therein specified and
were prepared in accordance with GAAP.
(C) The unaudited consolidated balance sheets of Arcadia and Grayrose as
of March 31, 1997 (the "March 31 Balance Sheets"), and the related statements of
operations for the nine-month period then ended, annexed hereto as Schedule
5.8(c), present fairly in all material respects the financial condition and
results of operations of Arcadia and Grayrose at and for the periods therein
specified and were prepared in accordance with GAAP.
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(D) Except as set forth on Schedule 5.8(d) or as expressly set forth on
the March 31 Balance Sheets, Arcadia and Grayrose have 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.
5.9 MATERIAL CHANGES. Except as noted on Schedule 5.9, between the date of
the March 31 Balance Sheets and the date of this Agreement, there has not been
any material adverse change in the condition (financial or otherwise) of the
assets, properties or operations of Arcadia or any damage or destruction of any
of Arcadia's Assets or their places of business by fire or other casualty,
whether or not covered by insurance, and during such period of time Arcadia has
conducted its businesses only in the ordinary and normal course. Principal
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 Arcadia.
5.10 LICENSES; PERMITS; CERTIFICATES OF NEED. Schedule 5.10 sets forth a
description of (a) all licenses and other governmental or other regulatory
permits, authorizations or approvals required for the operation of Arcadia's
businesses that are now in effect, including all certificates of occupancy
issued with respect to Arcadia's businesses; (b) all Certificates of Need issued
with respect to Arcadia's and its subsidiaries that are now in effect; and (c)
each other license, permit, or other authorization that is necessary for the
operation of Arcadia's businesses (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 Arcadia and its subsidiaries as they are operated on the
date hereof. Arcadia has delivered to Buyer copies of all of the Licenses.
Arcadia 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. Arcadia is not in material default under
any such License, and Arcadia 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 Arcadia
nor any of its subsidiaries has received written notice of any proceeding to
terminate or suspend any License or of any condition or event (other than survey
deficiencies which singly or in the aggregate would not be material to any home
health agency that Arcadia or any of its subsidiaries operates) 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 conditions not
generally applicable to home health agencies requiring changes in the operation
of Arcadia or any of its subsidiaries have been imposed, formally or informally,
by any License issuer during the past twenty-four (24) months.
17
No Principal Seller, director or officer, employee or former employee of
Arcadia, or any person, firm or corporation other than Arcadia 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), Arcadia has good and marketable title to, or valid and subsisting
leasehold interests in, all of the personal property located at their places of
business or used in connection with the operation of their businesses, subject
to no mortgage, security interest, pledge, lien, claim, encumbrance or charge,
or restraint on transfer whatsoever other than Permitted Liens (as defined
below). 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 filed under the Uniform Commercial Code in any jurisdiction, and
Arcadia 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 Arcadia, whether owned or leased, is
in good operating condition and repair, subject to normal wear and tear, and is
sufficient to enable Arcadia to operate its businesses in a manner consistent
with their operation during the immediately preceding twelve (12) months.
(B) Except as set forth on Schedule 5.11(b), no tangible personal
property used by Arcadia in connection with the operation of its businesses is
subject to a lease, conditional sale, security interest or similar arrangement.
Arcadia 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. Arcadia is not in material default under
such leases and there has not been asserted, either by or against Arcadia under
any of such leases, any written notice of default, set-off, or claim of default.
To the best knowledge of Principal Sellers and Arcadia, the parties to such
leases other than Arcadia 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;
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(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; and
(V) rights of creditors pursuant to Schedule 5.5.
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 Arcadia, overtly threatened
against or affecting Arcadia, or Arcadia'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.
5.13 EMPLOYEES. Arcadia has previously furnished Buyer with a payroll
listing dated May 31, 1997 indicating the names, positions, and compensation of
each of their employees. All of such information is materially correct as of
such date and there has been no material change since May 31, 1997. To the
knowledge of Principal Sellers and Arcadia, none of the employees, while in the
employ of Arcadia, 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 Arcadia, and there is no proceeding
pending, or threatened, pursuant to which any of the foregoing may occur.
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 Arcadia and its employees or
affiliates nor any strike or material labor disturbance by such employees
affecting Arcadia's businesses and, to the knowledge of Arcadia, there is no
indication that such a change, strike or labor disturbance is likely. Arcadia's
employees or affiliates are not represented by any labor union or similar
organization and Arcadia 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 Arcadia's employees or affiliates. Except as
set forth on Schedule 5.7 or Schedule 5.15(b), Arcadia 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 their
employees. Arcadia 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
19
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
there are no threatened or 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 Arcadia, Arcadia will not, after the Closing, pursuant to any
agreement with any Shareholder or Arcadia or by reason of any representation
made or plan adopted by any Shareholder or Arcadia prior to the Closing, be
liable to any employee of Arcadia for so-called "severance pay", parachute
payments or any other similar payments or benefits, 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.
5.15 ERISA.
(A) Arcadia 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. Arcadia 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 Arcadia for any employees of Arcadia, or with respect to
which Arcadia has liability with respect to any employees of Arcadia, or make or
have an obligation to make contributions on behalf of employees of Arcadia
("Plans").
(C) Schedule 5.15(c) identifies all employees of Arcadia 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 Arcadia on
leave of absence entitled thereto, and all persons electing such coverage are
being (or have been, if applicable) provided such coverage.
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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 Arcadia (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 Arcadia, including a brief description of the
character of the bond or agreement and the name of the surety or indemnifying
party. 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 the nature of insurance included under
each such policy and of any claims made thereunder during the past two years.
Such policies are owned by and payable solely to Arcadia, 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, Arcadia 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 Arcadia has
received a commitment for a replacement policy, nor has Arcadia 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 controlling Principal Seller, 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 Arcadia or its businesses.
5.18 ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 5.18, since
the date of the March 31 Balance Sheets, Arcadia has not, and from the date of
this Agreement through the Closing Date Arcadia will not have:
(A) except for the sale of its joint venture interest in C.R.K. Computer
Services ("C.R.K.") (provided, in such event, the proceeds of such sale of
C.R.K. will be included in the working capital of Arcadia), 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 Arcadia's assets;
(C) made or suffered any termination of any home health care services
contract or any medical, clerical and light industrial staffing services
contract;
(D) made or suffered any amendment or termination of any other contract,
commitment, instrument or agreement involving consideration or liability in
excess of $25,000;
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(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 their 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 Arcadia;
(G) changed any of the accounting principles followed by Arcadia or the
methods of applying such principles;
(H) except for the acquisition of two agencies located in Grand Rapids,
Michigan and Lansing, Michigan, entered into any transaction other than in the
ordinary course of business involving consideration in excess of $50,000;
(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;
(L) failed to maintain its 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;
(M) failed to maintain in full force and effect all Licenses currently in
effect with respect to its businesses unless such License is no longer necessary
for the operation of Arcadia;
(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
Arcadia; failed to keep available the services of Arcadia's present employees,
affiliates and agents necessary to the proper functioning of the businesses of
Arcadia; and failed to maintain Arcadia's relations and goodwill with suppliers,
employees, affiliates, affiliated medical personnel and any others having
business relating to Arcadia and where such relationships are necessary to the
proper functioning of the businesses of Arcadia;
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(P) failed to maintain all of the books and records in accordance with
their past practices;
(Q) failed to comply in all respects with all provisions of the Contracts
listed in Schedule 5.7 and with any other material agreements that Arcadia has
entered into in the ordinary course of business since the March 31 Balance
Sheets, and failed to comply in all respects with the provisions of all material
laws, rules and regulations applicable to Arcadia's businesses;
(R) failed to pay when due, all taxes, assessments and charges or levies
imposed upon them or on any of their properties for which they have been
required to be withheld or paid over;
(S) failed to promptly advise Buyer in writing of the threat or
commencement against Arcadia 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 Arcadia; and
(T) failed to notify the Buyer in writing of any event involving Arcadia
which has had or may be reasonably expected to have a material adverse effect on
the business or financial condition of Arcadia or may involve the loss of
contracts with any of Arcadia's customers.
5.19 COMPLIANCE WITH LAWS. Arcadia is in compliance with all Governmental
Requirements (as defined herein). Except for notices of non-compliance as to
which Arcadia has taken corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule 5.19, Arcadia has not, within
the period of twenty-four months preceding the date of this Agreement, received
any written notice that Arcadia or the Assets fail to comply in any material
respect with any applicable Federal, state, local 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 their businesses
("Governmental Requirements"). Arcadia shall report to Buyer, within five (5)
business days after receipt thereof, any written notices that Arcadia is not in
compliance in any material respect with any of the foregoing.
5.20 FINDERS. No broker or finder has acted for the Shareholders or Arcadia
in connection with the transactions contemplated by this Agreement, and no other
broker or finder is entitled to any 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 Arcadia.
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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
Arcadia (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) Arcadia has timely paid all Taxes
payable by them.
(B) For purposes of this Agreement, "Tax" means any net income, gross
income, sales, use, franchise, personal, employment, or real property tax.
5.22 ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and delivery of
this Agreement, or any of Arcadia'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 Arcadia'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 Arcadia 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 Arcadia 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 MEDICARE AND MEDICAID PROGRAMS. Arcadia is qualified for participation
in the Medicare and Medicaid programs. Except as reflected on Schedule 5.25, (a)
no Principal Seller nor Arcadia has received any notice of recoupment with
respect to Arcadia's operations from the Medicare or Medicaid programs, or any
other third party reimbursement source, (b) there is no basis for the assertion
after the Closing Date of any such recoupment claim against Buyer which arose
out of any transactions on the part of Arcadia prior to the Closing or against
any Principal Seller for which Buyer will be liable, and (c) to the knowledge of
Principal Sellers and Arcadia, no Medicare and Medicaid investigation, survey or
audit is pending, threatened or imminent with respect to the operation of
Arcadia prior to the Closing.
5.26 LEASEHOLD INTERESTS. Schedule 5.26 hereto sets forth a complete and
correct list of all leases pursuant to which Arcadia or any of its subsidiaries
leases real property. Each of Arcadia 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. Arcadia has
provided access to the Buyer to complete and correct copies of the leases
identified in Schedule 5.26.
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5.27 POWER AND AUTHORITY. Arcadia and Principal Sellers have all requisite
power and authority to execute, deliver and perform this Agreement, and as of
the Closing, Arcadia and Principal 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.
5.28 BINDING EFFECT. This Agreement and all Transaction Documents executed
by Arcadia and Principal Sellers constitute the legal, valid and binding
obligations of such party, enforceable against such party in accordance with
their respective terms.
5.29 QUESTIONNAIRES. The health care law questionnaire heretofore delivered
to Arcadia by Buyer (the "Questionnaire") will be attached hereto as Exhibit
5.29 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.
5.30 QUESTIONABLE PAYMENTS. Arcadia nor any shareholder, director, officer,
controlling person or employee of Arcadia, and no affiliate of Arcadia, (a) has
used any corporate funds of Arcadia 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)
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 Arcadia's
businesses.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SELLERS
Each of the Principal Sellers, each as to himself, hereby severally
represents and warrants to Buyer and Newco as follows:
6.1 AUTHORITY. Such Principal 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
Principal Sellers, and any necessary consents of holders of indebtedness of such
Principal Seller have been obtained.
6.2 BINDING EFFECT. This Agreement and all Transaction Documents executed
by such Principal Seller constitute the legal, valid and binding obligations of
such party, enforceable against such Principal 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 Principal Seller nor
the performance by such Principal Seller of the transactions contemplated hereby
and thereby conflicts with, or
25
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
Principal Seller, or (ii) any rule or regulation of any administrative agency or
other governmental authority currently in effect applicable to such Principal
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 Principal 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 Principal Seller.
6.5 OWNERSHIP OF ARCADIA STOCK. Shareholders are the lawful record and
beneficial owners of all of Arcadia 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 Arcadia
Stock in accordance with this Agreement, and delivery of such Arcadia 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 Arcadia 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 Arcadia. On the Closing Date there shall not be outstanding any
warrants, options, or other rights to subscribe for or purchase from Arcadia any
shares of capital stock of Arcadia, 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 Arcadia and
the Principal 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
Principal 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.
26
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, provided that the consents set forth in Schedule 7.5 are
obtained prior to the Closing, 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.
7.5 CONSENTS. Except as set forth on Schedule 7.5, 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 Principal 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, 1996 (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, 1996. 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.
7.7 CAPITAL STOCK. Buyer's Form 10-Q filed with the Commission with respect
to the fiscal quarter ended March 31, 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.
27
ARTICLE VIII: INFORMATION AND RECORDS CONCERNING ARCADIA 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 Arcadia's (it
being understood that, for the purpose of this Article VIII, "Arcadia" shall be
deemed to refer collectively to Arcadia and its subsidiaries listed on Schedule
5.23) financial and legal condition as Buyer deems necessary or advisable to
familiarize itself with Arcadia and/or matters relating to its history or
operations. Arcadia shall permit Buyer and its authorized representatives
(including legal counsel and accountants), to have full access to Arcadia's
books and records upon reasonable notice and during normal business hours, and
Arcadia will furnish, or cause to be furnished, to Buyer such financial and
operating data and other information and copies of documents with respect to
Arcadia'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, Arcadia's tax returns and related work papers
since their inception; and Arcadia 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 Arcadia and
the accuracy of the representations and warranties made in this Agreement.
Arcadia shall cause its accountants to cooperate with Buyer and to disclose the
results of audits relating to Arcadia 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 Arcadia.
ARTICLE IX: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
9.1 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this Agreement
and the Closing, Arcadia 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 ARCADIA AND ITS SUBSIDIARIES. Without the prior
written approval of Buyer, neither Arcadia 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;
28
(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, Arcadia
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;
(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 Arcadia 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 preserve intact the present
business organization of Arcadia and its subsidiaries; keep available the
services of Arcadia's and its subsidiaries' present employees, affiliates and
agents; and maintain Arcadia's and its subsidiaries' relations and goodwill with
suppliers, employees, affiliates, affiliated medical personnel and any others
having business relating to Arcadia and its subsidiaries;
(E) maintain all of the books and records in accordance with their past
practices;
(F) comply in all respects with all provisions of the Contracts listed in
Schedule 5.7 and with any other material agreements that Arcadia 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 Arcadia'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 the threat or commencement
against Arcadia 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
Arcadia or its subsidiaries or affiliates;
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(I) notify the Buyer in writing of any event involving Arcadia 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 Arcadia or its
subsidiaries or affiliates or may involve the loss of contracts with Arcadia's
or its subsidiaries' customers; and
(J) provide monthly financial statements of Arcadia and its subsidiaries
within twenty (20) days of the month end prepared in accordance with GAAP and
consistent with past practices.
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
Arcadia's and its subsidiaries' businesses by Buyer in accordance herewith
("Required Approvals"). Arcadia and its subsidiaries shall cooperate with and
use their reasonable efforts to assist Buyer in obtaining all such approvals.
9.5 EXCLUSIVITY. Until the earlier of Closing or the termination of this
Agreement pursuant to Section 13.1, neither Arcadia 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 Arcadia.
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
Arcadia and Principal Sellers made pursuant to this Agreement shall be true and
correct in all material respects at and as of the Closing Date, as though such
representations and warranties were made at and as of such time except to the
extent affected by the transactions herein contemplated.
10.2 PERFORMANCE OF COVENANTS. Each of the Principal Sellers and Arcadia
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.
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10.3 DELIVERY OF CLOSING CERTIFICATE. Each of the Principal Sellers and
Arcadia 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 Principal Seller and Arcadia 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 Arcadia certifying as of the Closing Date a
copy of resolutions of the Shareholders and of Arcadia's board of directors
authorizing Arcadia's execution and full performance of the Transaction
Documents and the incumbency of Arcadia's respective officers.
10.7 MATERIAL CHANGE. Since the date of the March 31 Balance Sheets there
shall not have been any material adverse change in the condition (financial or
otherwise) of the assets, properties or operations of Arcadia 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 Arcadia'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
Arcadia'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 2.6, where such consent
is required by reason of the change of control of Arcadia and its subsidiaries
contemplated under this Agreement.
10.10 ESTIMATED CLOSING DATE BALANCE SHEET. Principal Sellers and Arcadia
shall have delivered the Estimated Closing Date Balance Sheet to Buyer.
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10.11 REAL PROPERTY CONSENTS. Arcadia and the Principal Sellers shall have
used their best efforts to obtain the written consent to assignment of each
landlord with whom Arcadia 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 Arcadia, and the written consent of such landlords shall have been
received by the Buyer. Alternatively, Arcadia and Principal 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 Principal
Sellers by the Closing Date, identifying any landlord that has not given any
necessary consent as of such date.
10.12 ARCADIA'S SUBSIDIARIES AND OPTIONS. Each of the subsidiaries of
Arcadia as of the Closing Date will be one hundred (100%) percent owned by
Arcadia and there shall not be outstanding as of the Closing Date any options,
warrants or rights for the purchase of any capital stock of Arcadia or its
subsidiaries or any obligations to grant or issue any options, warrants or
rights for the purchase of any capital stock of Arcadia or its subsidiaries.
10.13 BOARD APPROVALS. The Buyer will have received all necessary Board of
Director approvals.
10.14 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. All applicable filings ("H-S-R Filings") shall
have been made and all applicable waiting periods shall have expired or been
terminated under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976 (the
"H-S-R Act").
10.15 EMPLOYMENT AGREEMENTS. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall have terminated their
existing employment agreements and any ongoing obligations thereunder. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ shall have executed and delivered to Buyer his employment agreement
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall have executed and delivered to Buyer her amended
employment agreement, upon such terms and conditions as shall be mutually
acceptable to the parties in the form of Exhibit 10.15 hereto (the "Employment
Agreements").
10.16 REQUIRED TRANSACTIONS. Arcadia shall have consummated the acquisition
of two agencies located in Grand Rapids, Michigan and Lansing, Michigan. Also,
Arcadia will have transferred to a liquidating trust for the benefit of the
Shareholders its joint venture interest in C.R.K. and such liquidating trust
shall have assumed all of Arcadia's liabilities in connection with Arcadia's
joint venture interest in C.R.K.
10.17 TERMINATION OF NON-RETAINED AGREEMENTS. All Contracts, other than the
Retained Contracts, shall have been terminated, as well as any ongoing
obligations thereunder.
10.18 ESCROW AGREEMENTS. The Principal Sellers, on behalf of the
Shareholders, shall have executed and delivered each of the Escrow Agreements in
the form of Exhibits 2.3 and 2.4.
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10.19 TERMINATION OF CERTAIN CONTRACTS. All plans, agreements and
arrangements set forth on Schedule 5.7(b), except the Longevity Award Program,
shall have been terminated.
10.20 GRAYROSE. Grayrose shall be a wholly-owned subsidiary of Arcadia.
10.21 STOCK CERTIFICATES. Shareholders shall have delivered to Buyer all
stock certificates representing Arcadia Stock duly endorsed in blank.
10.22 DISSENTER'S RIGHTS. All dissenting shares of Arcadia Stock, if any,
shall not constitute in the aggregate more than one (1%) percent of the total
issued and outstanding shares of Arcadia Stock.
10.23 CAPTIVE INSURANCE. Shareholders shall have used their best efforts to
sell to an A-rated insurance carrier all liabilities and obligations, including
but not limited to Incurred But Not Recorded liabilities in connection with
worker's compensation claims that are processed through the Captive Insurance.
In the event the Shareholders are unable to sell said liabilities in connection
with the Capture Insurance to an A-rated insurance carrier by the Closing Date,
Shareholders shall increase the Escrow Deposit referenced in Section 2.3 to such
amount that is mutually satisfactory to Buyer and Principal Sellers.
10.24 OTHER DOCUMENTS. The Principal Sellers and Arcadia shall have
furnished Buyer and Newco with all other documents, certificates and other
instruments required to be furnished to Buyer and Newco by the Principal Sellers
and Arcadia pursuant to the terms hereof.
ARTICLE XI: CONDITIONS PRECEDENT TO PRINCIPAL SELLERS'
OBLIGATIONS
Principal 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 Principal Sellers in writing. Upon
failure of any of the following conditions, Principal 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 at and as of the Closing Date as
though such representations and warranties were made at and as of such time,
except to the extent affected by the transactions herein contemplated.
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.
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11.3 DELIVERY OF CLOSING CERTIFICATE. Buyer and Newco shall have delivered
to Principal Sellers a certificate of an executive or senior vice president of
Buyer and Newco dated the Closing Date upon which Principal 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 Principal
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. Principal 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 H-S-R FILINGS. The H-S-R Filing shall have been made and all
applicable waiting periods shall have expired or been terminated under the H-S-R
Act.
11.8 EMPLOYMENT AGREEMENTS. The Buyer shall have entered into the
Employment Agreements with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
11.9 ESCROW AGREEMENTS. Buyer shall have executed and delivered each of the
Escrow Agreements in the form of Exhibits 2.3 and 2.4.
11.10 OTHER DOCUMENTS. Buyer and Newco shall have furnished Principal
Sellers with all documents, certificates and other instruments required to be
furnished to Principal 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 each Schedule and
Transaction Document 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 the representations and warranties
contained in Section 5.25 (Medicare and Medicaid) and Section 5.21 (Tax), 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.
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12.2 INDEMNIFICATION BY SHAREHOLDERS AND/OR PRINCIPAL SELLERS. The
Shareholders and/or Principal Sellers (as set forth herein) 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 Principal Sellers or Arcadia pursuant to this
Agreement; or
(B) the breach of any covenant or undertaking by any of the Principal
Sellers or Arcadia contained in this Agreement which survives the Closing and is
not waived by Buyer at or prior to the Closing; or
(C) the ownership or operation of Arcadia or its subsidiaries or their
business or assets prior to the Closing Date, including, without limitation, (i)
any Excess Reimbursement Liabilities (as defined in Section 2.6); (ii) any Taxes
resulting from the operation of the businesses of Arcadia 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 Arcadia with COBRA or any like statute; (iv)
any Loss arising out of the failure to receive the refund claim within nine (9)
months following the Closing Date (the "Nine-Month Period") and/or any
recoupment of any part of the refund claim associated with the income tax carry
back provision through the period set forth in Section 12.4, below; provided in
the event Arcadia receives any part of the refund claim after the Nine-Month
Period, Buyer shall reimburse Shareholders for such portion of the refund claim
received by Arcadia to the extent Shareholders had indemnified Buyer for any
Loss pursuant to this Section 12.2(c)(iv); (v) any Loss arising out of the sale
of Arcadia's ownership interest in Arcadia Hospice, Inc. to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Hospital; (vi) any Loss arising out of the transfer of Arcadia's joint venture
interest in C.R.K. to a liquidating trust for the benefit of the Shareholders;
(vii) any Loss arising out of the Captive Insurance; (viii) 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 Arcadia's businesses 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; and (ix) any and all
actions, suits, proceedings, demands, assessments, judgments, settlements (to
the extent approved by Arcadia, such approval not to be unreasonably withheld,
delayed or conditioned), costs and legal expenses incident to any of the
foregoing; but excluding current liabilities and long-term liabilities that are
reflected on the Estimated Closing Date Balance Sheet or that otherwise are
taken into account in any adjustment to the Merger Consideration under Section
2.2; or
(D) any prepayment penalty, premium, or other fees which may become
payable by Arcadia by reason of the termination by Arcadia after the Closing
Date of its factoring lines with NPFII-W, Inc.
35
Any claim for indemnification sought against the Shareholders shall be
expressly limited to the Escrow Deposit. If the amount of Loss is equal to or
less than $1,500,000, Buyer shall first offset such amount from the Escrow
Deposit. If the Escrow Deposit is insufficient to cover such Loss, then the
Principal Sellers, jointly and severally, will indemnify and hold harmless Buyer
for the remaining amount of the Loss subject to the indemnity cap referred to in
Section 12.5.
(E) To the extent not otherwise satisfied by the General Indemnification
Fund, the Principal Sellers will each personally indemnify Buyer for any Loss in
an amount up to $200,000 (in an aggregate amount up to $400,000) in connection
with the ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ matters listed on Schedule 5.12 (the
"Litigation Matters"). Such indemnification by Principal Sellers pursuant to
this Section 12.2(e) shall only apply to Loss arising from punitive damages not
otherwise covered by insurance. Furthermore, such indemnification pursuant to
this Section 12.2(e) shall not be subject to the indemnity basket and cap
referenced in Section 12.5, below. Additionally, Buyer's right to
indemnification under this Section 12.2(e) shall survive until thirty (30) days
after the applicable statute of limitations for commencing any legal proceedings
arising out of the applicable Litigation Matter shall have lapsed. The total
aggregate obligations of the Principal Sellers shall not exceed $400,000
pursuant to this Section 12.2(e).
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 which survives the
Closing and is not waived by Principal Sellers or Arcadia at or prior to the
Closing; or
(C) the ownership or operation of Arcadia or its subsidiaries or their
business or assets on or after the Closing Date.
12.4 ASSERTION OF CLAIMS. Any claims for indemnification under Sections
12.2(a) or 12.3(a) must be asserted by written notice by a date which is no
later than one (1) year following the Closing Date, except that any claim based
upon a breach of the representations and warranties contained in Section 5.25
(Medicare and Medicaid) or Section 5.21 (Tax) may be asserted 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.
12.5 INDEMNITY BASKET AND CAP. Notwithstanding any other provision of this
Article XII, no claim for indemnification made under Sections 12.2(a) or 12.3(a)
shall be made unless and until Buyer or Shareholders/Principal Sellers, as the
case may be, have incurred Loss in excess of One Hundred Thousand ($100,000)
Dollars in the aggregate, in which case, the party seeking indemnification shall
be entitled to assert claims including such initial One Hundred Thousand
($100,000) Dollars. The maximum aggregate liability for any Loss arising from
claims for indemnification pursuant to Sections 12.2(a) or 12.3(a) (excluding
any Loss arising from
36
fraud, Tax liability, and Excess Reimbursement Liabilities) of the Principal
Sellers or Buyer, respectively, for indemnification hereunder shall not exceed
an amount equal to Fourteen Million Two Hundred Fifty Thousand ($14,250,000)
Dollars.
12.6 CONTROL OF DEFENSE OF INDEMNIFIABLE CLAIMS. Any party seeking
indemnification under this Agreement (an "Indemnitee") shall give each party
from whom indemnification is sought (an "Indemnitor") prompt written notice of
the claim for which it seeks indemnification. Failure of the Indemnitee to give
such prompt notice shall not relieve an Indemnitor of its indemnification
obligation, provided that such indemnification obligation shall be reduced by
any damages suffered by the Indemnitor resulting from a failure to give prompt
notice hereunder. All Indemnitors 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 under this Agreement, it shall have the
right to assume total control of the defense of such claim (other than claims in
connection with Excess Reimbursement Liabilities or Section 5.25 which it shall
not control but be entitled to participate in) at its own expense. If all
Indemnitors do not assume total control of the defense of any such claim (or in
the case of claims in connection with Excess Reimbursement Liabilities or
Section 5.25), the Indemnitee agrees not to settle such claim without the
written consent of all Indemnitors which consent shall not be unreasonably
withheld. Nothing contained in this Section 12.6 shall prevent either party from
assuming total control of the defense and/or settling any claim against it for
which indemnification is not sought under this Agreement.
12.7 RESTRICTIONS.
(A) From and after the Closing Date, none of the Principal 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
Arcadia and its subsidiaries, any proprietary data or trade secrets owned by
Arcadia and its subsidiaries or any financial or other information about Arcadia
and its subsidiaries not then in the public domain; provided, however, that
Principal 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 Principal 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
Arcadia and its subsidiaries to cease doing business, or their association or
employment, with Arcadia and its subsidiaries.
(C) No Principal Seller shall, for a period of five (5) years after the
Closing Date, 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 or otherwise associate
with, in a business fashion, any person, enterprise, partnership, association,
corporation, joint venture or other entity which is directly or indirectly in
the business of owning, operating
37
or managing any entity of any type, licensed or unlicensed, which is engaged in
or provides home health care and medical, clerical and light industrial staffing
services or in any way competes with Arcadia or its subsidiaries anywhere within
the counties where Arcadia or its subsidiaries currently operate.
(D) The Principal Sellers acknowledge that the restrictions contained in
this Section 12.7 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, Principal Sellers agree that
upon the violation by any of them of any of the restrictions contained in this
Section 12.7, 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.
Notwithstanding the foregoing, for purposes of this Section 12.7, any
advertisement prepared for and disseminated to the public in general, which
advertises the services of the Principal Sellers not otherwise in violation of
this Section 12.7 or advertises the need for services to be supplied to the
Principal Sellers, shall not be deemed to be an inducement or solicitation with
respect to any such patients, physicians, suppliers, employees, affiliates or
independent contractors.
12.8 RECORDS. On the Closing Date, Principal Sellers and Arcadia shall
deliver, or cause to be delivered, to Buyer all records and files not then in
Buyer's possession relating to the operations of Arcadia and its subsidiaries.
12.9 BUYER'S AFFIRMATIVE COVENANTS.
(A) Buyer agrees to pay an amount up to $100,000 (which amount will be
accrued for on the Estimated Closing Date Balance Sheet) for attorney's fees,
costs and expenses in connection with the Arizona Litigation.
(B) Buyer agrees to retain ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in its employ for a minimum
period of one (1) year following the Closing Date at his current salary level.
12.10 DISSENTERS' RIGHTS. In the event that any holder of Arcadia Stock
asserts dissenter's rights with respect to the Merger under the Michigan
Business Corporation Act, the Shareholders, jointly and severally, shall
indemnify and hold harmless Buyer from and against (i) any amount which becomes
payable to such holder by Arcadia 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 Arcadia in investigating or litigating such dissenters' rights;
provided, however, that as a condition to the recovery of
38
attorneys fees and expenses, Buyer shall provide prompt notice to the Principal
Sellers of any exercise of dissenters' rights and will permit Shareholders a
reasonable opportunity to select and direct counsel for Arcadia in respect of
the investigation and litigation of such rights. The provisions of Section 12.5
shall not apply to any claim for indemnification under this Section 12.10.
12.11 SPECIAL PROVISIONS WITH REGARD TO INDEMNIFICATION OF REPRESENTATIONS
AND WARRANTIES. Buyer hereby acknowledges that in connection with the
indemnification by the Principal Sellers of representations and warranties
contained in this Agreement, that their ability to provide such indemnification
is dependent in part upon the availability of the books and records maintained
by Arcadia up and through the Closing Date. It is therefore a condition to the
indemnification obligations of the Principal Sellers with respect to
representations and warranties contained herein, that Buyer preserve and make
available through the entire indemnification period, all records maintained by
Arcadia up to the Closing Date. In addition, it is hereby acknowledged that
certain Medicare and Medicaid cost reports for the year ended June 30, 1997, and
for the stub period from June 30, 1997 through the Closing Date will be prepared
and filed subsequent to the Closing Date (the "Cost Reports"). The
indemnification obligations of the Principal Sellers pursuant to this Agreement
necessarily include matters set forth in the Cost Reports. Buyer hereby agrees
that it is necessary and appropriate that the Principal Sellers be permitted to
examine and provide consultation on the Cost Reports in a timely manner prior to
the time they are submitted to the respective agencies. It is therefore agreed
that as a condition to providing indemnification to Buyer for the period covered
by the Cost Reports, that the Principal Sellers consent to the contents of the
Cost Reports which consent will not be unreasonably withheld or delayed.
ARTICLE XIII: TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time at or prior
to the Closing by:
(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) Principal Sellers, if any condition precedent to the obligations of
any Principal Seller or Arcadia 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 Principal Sellers.
39
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 Arcadia and Principal
Sellers at Closing hereunder.
ARTICLE XIV: CASUALTY, RISK OF LOSS
14.1 CASUALTY, RISK OF LOSS. Arcadia and Principal 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, Arcadia and Principal 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 Principal Seller or Arcadia 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 Principal Seller or
Arcadia 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 for Buyer bearing all of the fees for the
H-S-R Filings and as expressly otherwise provided in this Agreement, Buyer,
Newco and Principal Sellers shall bear their own costs and expenses in
connection with this Agreement and the transactions contemplated hereby;
provided, however, that no such costs and expenses shall be charged to Arcadia
and its subsidiaries.
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.
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15.3 BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the benefit
of each party hereto and its successors 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 Principal 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 Arcadia: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Principal Sellers
and the Committee: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Jackier, Gould, Bean, Upfal, Eizelman & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Newco: Integrated AG Acquisition, 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.
15.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, disregarding any rules
relating to the choice or conflict of laws.
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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 12.7 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.
[SIGNATURES ON THE FOLLOWING PAGE]
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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.
ARCADIA:
WITNESS: ARCADIA SERVICES, INC.
By:/s/ By:/s/
---------------------------- ---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President
WITNESS: PRINCIPAL SELLERS:
By:/s/ /s/
------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
WITNESS:
By:/s/ /s/
------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
WITNESS: COMMITTEE
(on behalf of Shareholders):
By:/s/ /s/
------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
WITNESS:
By:/s/ /s/
------------------------- ------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
BUYER:
INTEGRATED HEALTH SERVICES, INC.
By:/s/
---------------------------------
Executive Vice President
Corporate Development
NEWCO:
INTEGRATED AG ACQUISITION, INC.
By:/s/
---------------------------------
Executive Vice President
44