American Oxygen and Medical
Equipment, Inc. and Arcadia Home Oxygen and Medical
Equipment, Inc.
Arcadia Products, Inc., RKDA,
Inc., and Arcadia Resources, Inc.
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Page
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ARTICLE I — PURCHASE AND SALE OF
ASSETS
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1
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1
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2
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1.3. Assignment of Third Party Real Property
Leases; Subletting
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3
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ARTICLE II — NON-ASSUMPTION OF
LIABILITIES
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3
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2.1. Non-Assumption of
Liabilities
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3
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3
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2.3. Excluded Liabilities
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3
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ARTICLE III — PURCHASE
PRICE
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3
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3
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3.2. Adjustment to Purchase
Price
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4
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3.3. Disputes Regarding Final Purchase
Price
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8
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3.4. Allocation of Consideration
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8
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9
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ARTICLE IV — REPRESENTATIONS AND
WARRANTIES OF THE SELLERS
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9
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4.1. Organization and
Qualification
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9
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9
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4.3. Authority Relative to this
Agreement
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9
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4.4. Compliance of Transaction With Laws and
Other Instruments
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10
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4.5. Title to Purchased Assets;
Liens
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11
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11
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4.7. Absence of Undisclosed
Liabilities
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12
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12
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12
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4.10. Contracts, Real Property Leases, and
Commitments
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12
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13
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4.12. Permits; Governmental
Agreements
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14
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4.13. Environmental Matters
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14
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4.14. Health Care Compliance
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14
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4.15. Compliance with Applicable Law; Adverse
Restriction
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15
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16
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17
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17
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4.19. No Material Adverse Change
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17
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ARTICLE V — REPRESENTATIONS AND
WARRANTIES OF BRADEN
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17
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5.1. Organization; and
Qualification
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17
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5.2. Authority Relative to this
Agreement
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17
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5.3. Compliance of Transaction With Laws and
Other Instruments
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18
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18
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i
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Page
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ARTICLE VI — CERTAIN UNDERSTANDINGS AND
AGREEMENTS
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18
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18
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18
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19
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19
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19
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6.6. Reimbursement of Funds
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20
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20
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20
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6.9. Patient Relationships
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21
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ARTICLE VII — CONDITIONS TO
CLOSING
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21
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7.1. Conditions to Braden’s Obligations
to Close
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21
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7.2. Conditions to the Sellers’
Obligations to Close
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21
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ARTICLE VIII — CLOSING
DELIVERIES
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22
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22
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22
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24
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ARTICLE IX — SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
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24
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9.1. Representations, etc.
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24
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24
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9.3. Payment of Claims for Damages; Right of
Setoff by Braden
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26
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9.4. Limitations on
Indemnification
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26
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9.5. Notice; Defense of Claims
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26
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27
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27
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27
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10.2. Binding Effect of
Arbitration
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28
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ARTICLE XI — MISCELLANEOUS
PROVISIONS
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28
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11.1. Entire Agreement:
Amendment
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28
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11.2. Assignment and Binding
Effect
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28
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28
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28
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29
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11.6. No Third Party
Beneficiaries
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29
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11.7. Counterparts; Execution
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29
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29
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30
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11.10. Construction; Complete
Agreement
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30
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11.11. Certain Definitions
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30
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11.12. Schedules and Exhibits
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31
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ii
4.1
Organization and Qualification
4.4 Compliance of Transaction With Laws and Other Instruments
4.5(a) Title to Purchased Assets; Liens
4.5(c) Title to Purchased Assets; Liens
4.6 Tax Matters
4.8 Inventory
4.10 Contracts, Real Property Leases, and Commitments
4.11(a) All Active Rental Patients
4.11(b) All Qualified Files
4.12 Permits; Governmental Agreements
4.14 Healthcare Compliance
4.16 Litigation
4.17 Finder’s Fee
iii
Exhibit A Form of Non-Compete
Agreement
Exhibit B Form of Bill of Sale
Exhbit C Form of Sublease Agreement
iv
This ASSET
PURCHASE AGREEMENT (this “ Agreement ”) is made
as of this 19 th day of May, 2009 by and among Braden Partners,
L.P., a California limited partnership (“ Braden
”), American Oxygen and Medical Equipment, Inc., an Illinois
corporation, also doing business as Remedy Therapeutics; and
Arcadia Home Oxygen and Medical Equipment, Inc., a Michigan
corporation, also doing business as Arcadia H.O.M.E, (collectively,
the “ Seller Entity ”), and Arcadia Products,
Inc., a Delaware corporation; RKDA, Inc, a Michigan corporation,
and Arcadia Resources, Inc., a Nevada corporation, as shareholders
of Seller Entity (the “ Shareholders ”). The
Shareholders and the Seller Entity are referred to collectively
herein as the “ Sellers .”
Certain terms used
herein and not defined shall have the meaning set forth in
Section 11.11 hereof.
WHEREAS, the
Seller Entity has been and is currently in the business of
providing oxygen, oxygen equipment, compressed oxygen products,
nebulizers, sleep therapy equipment, and respiratory and sleep
therapy related products, supplies and services in and around
Illinois, Indiana and Kentucky (such business shall be referred to
herein as the “ Business ”);
WHEREAS, Braden
desires to purchase, and the Sellers desire to sell, substantially
all of the assets relating to the Business of the Seller Entity,
upon the terms and conditions hereof.
NOW, THEREFORE, in
consideration of the mutual promises herein made, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged,
ARTICLE I — PURCHASE AND
SALE OF ASSETS
Subject to and
upon the terms and conditions hereof, and in reliance upon the
representations, warranties, covenants and agreements made herein
by each party to the other, on the Closing Date (as defined in
Article VIII), the Sellers hereby agree to sell, transfer,
assign, convey and deliver to Braden, and Braden hereby agrees to
purchase and acquire from the Sellers, wherever located, free and
clear of all liens, claims, encumbrances, charges, liabilities or
obligations of every kind and nature whatsoever (collectively,
“ Liens ”), all right, title and interest to and
in all of the assets, properties and rights of the Seller Entity of
every nature, kind and description, tangible and intangible, and
any such assets of the Shareholders used in or directly related to
the Business, including confidentiality and non-compete agreements
for the benefit of Seller Entity, except to the extent that any
such assets form a part of the Excluded Assets as defined in
Section 1.2 below, (collectively, the “ Purchased
Assets ”).
1
Anything contained
in this Agreement to the contrary notwithstanding, the following
rights, properties and assets (the “ Excluded Assets
”), shall be retained by the Seller Entity and shall not be
included in the Purchased Assets:
(a)
Cash . Cash or cash equivalents of the Seller Entity and all
rights of the Seller Entity to deposits, prepaid expenses, security
deposits, prepaid insurance, claims for refunds and rights to
offset in respect thereof.
(b)
Bank Accounts . Bank accounts of the Seller
Entity.
(c)
Accounts and Accounts Receivable . The accounts, accounts
receivable or notes receivable, whether or not current, arising out
of the Business for services provided prior to the Closing Date
(the “Accounts Receivable”).
(d)
Tax Refunds . All refunds and deposits of all federal,
state, local and foreign taxes due to any of the Sellers with
respect to the Business for any period.
(e)
Corporate Records . The Seller Entity’s corporate
stock record books, corporate record books containing minutes of
meetings of the directors and stockholders of the Seller Entity,
and all other records related to the Seller Entity’s
corporate organization and capitalization, tax records and returns,
schedules of depreciation and financial statements ;
provided that , the Seller Entity will retain all
such records in accordance with its current record keeping policies
and shall, upon the request of Braden (which request shall include,
in reasonable detail, the reasons for requiring such information)
and upon reasonable advance notice, make such records available for
Braden’s inspection and copying during normal business
hours.
(f)
Insurance . All insurance policies owned by Sellers and
rights to collect insurance proceeds under policies owned by
Sellers.
(g)
Provider Numbers and Agreements . Medicare, Medicaid and all
other third party provider numbers and agreements.
(h)
Personnel Records . All personnel records that the Seller
Entity is required to retain in its possession and all rights in
connection with the assets of any employee benefit
plans.
(i)
Written Materials . All stationery, purchase orders and sale
order forms, invoices, brochures, advertising materials and similar
items.
(j)
Permits and Licenses. All permits and licenses of the
Business.
(k)
Inactive Patients and Patient Files. Any patient or patient
file not listed on Schedule 4.11(a).
2
1.3.
Assignment of Third Party Real Property Leases;
Subletting
Sellers will
assign all rights and interests in the real property leases in
Peoria, Illinois and Jackson, Kentucky, as specified in
Schedule 4.10, together with office space, appurtances,
fixtures and improvements on the leased property, and will sublet
the Business locations in Crystal Lake, Illinois and Jacksonville,
Illinois to Braden on a month-to-month basis at Seller’s cost
for a period not to exceed Seller’s present lease obligations
on those locations. Braden will not assume any other real property
leases or obligations of Sellers; provided however, Braden will be
permitted access to Sellers’ Crown Point, Indiana facility
for the purpose of removing the Purchased Assets from the premises
through and including May 31, 2009.
ARTICLE II —
NON-ASSUMPTION OF LIABILITIES
2.1.
Non-Assumption of Liabilities
Other than with
respect to the Assumed Liabilities (as defined in Section 2.2
below), on the Closing Date Braden will not assume, agree to
perform, discharge or indemnify the Sellers against or otherwise
have any liability or obligation with respect to, any liability,
debt, contract or obligation of the Seller Entity.
Upon the sale and
purchase of the Purchased Assets, Braden will assume only the
liabilities, responsibilities and obligations arising out of,
resulting from, or relating to the use and ownership of the
Purchased Assets by Braden after the Closing or the conduct of the
Business by Braden after the Closing (collectively, the “
Assumed Liabilities ”). The Assumed Liabilities shall
specifically not include any severance obligations of the Seller
Entity or the Shareholders with respect to any officers or
employees of the Seller Entity terminated in connection with the
transactions contemplated hereby.
2.3.
Excluded Liabilities
For purposes
hereof the term “ Excluded Liabilities ” means
any and all liabilities, responsibilities and obligations not
listed in Section 2.2.
ARTICLE III — PURCHASE
PRICE
In reliance on the
representations and warranties of the Sellers contained herein, and
in consideration of the aforesaid sale, assignment, transfer and
delivery of the Purchased Assets, Braden shall pay to the Seller
Entity in full payment for the Purchased Assets and in full payment
for the agreements of Sellers herein and in the attached Exhibits,
and subject to the provisions of Sections 3.1 and 3.2, the
amount of Four Million Dollars and No Cents ($4,000,000) (the
“ Purchase Price ”). The Purchase Price is
payable by Braden (subject to Section 9.2 hereof) as
follows:
3
(a) On
the Closing Date, Braden will pay an amount equal to seventy-five
percent (75%) of the Purchase Price as the same may be adjusted
pursuant to Section 3.2 (a) (the “ Closing
Payment ”) to the Seller Entity (or directly to the
Shareholders if so directed by the Seller Entity) by wire transfer
to an account or accounts designated by the Seller
Entity.
(b) Subject
to any further adjustment made pursuant to the provisions of
Section 3.2 hereof, on the fifteenth (15
th ) day following the date that is six
(6) months after the Closing Date, (such day being the “
Deferred Disbursement Date ”), Braden shall pay to the
Seller Entity an additional amount (“Adjusted
Payment”) such that the total received by the Seller
Entity, including both the Adjusted Payment and the Closing
Payment, shall equal ninety percent (90%) of the Purchase Price
subject to any adjustment(s) pursuant to the provisions of
Section 3.2(b).
(c) On
the fifteenth (15 th )
day following the date that is twelve (12) months following
the Closing Date (the “ Final Disbursement Date
”), Braden shall pay to the Seller Entity by wire transfer an
additional amount (“ Final Disbursement ”) such
that the total received by the Seller Entity shall be equal to one
hundred percent (100%) of the Purchase Price, subject to any
adjustment(s) pursuant to the provisions of Section 3.1(d) and
3.2 (b).
(d) Notwithstanding
anything herein to the contrary, Braden shall have a right of
setoff against any or all amounts owed by Braden to the Seller
Entity pursuant to this Section 3.1 with respect to any unpaid
indemnity claims made pursuant to Section 9.2 and subject to
Section 9.3 hereof. In the event that Braden shall have
asserted against Sellers any claim(s) for indemnification pursuant
to Section 9.2 or 9.3 hereof and such claim(s) shall not have
been resolved prior to the Final Disbursement Date, then
Braden’s obligation to make such payment shall be deferred
until resolution under Article X with respect to such claims
is reached, in an amount equal to the aggregate amount of all such
claims. Braden shall not be required to pay any interest on
deferred payments. Upon resolution under Article X of such
claims, Braden shall pay to the Seller Entity such amount of the
deferred Purchase Price, as reduced by the indemnification amount
resolved to be due to Braden, if any, as a result of such
claims.
(e) Braden
and certain of the Sellers are parties to a Purchase and Sale
Agreement dated as of January 6, 2009 relating to
Braden’s purchase of assets of a separate business owned by
certain of the Sellers and their Affiliates (the “O2
Agreement”). Braden has asserted claims for indemnification
and adjustments to the purchase price under the O2 Agreement, which
claims certain of the Sellers and their Affiliates dispute. Braden
agrees that it shall not withhold or adjust amounts due to Sellers
under this Agreement for claims under the O2 Agreement.
Notwithstanding the foregoing, Sellers agree that Braden shall be
entitled to withhold or adjust amounts due to Sellers under this
Agreement (i) for any binding and finally resolved or
adjudicated claims arising from the O2 Agreement, and
(ii) subject to the limitations on claims set forth in the O2
Agreement, including but not limited to the provisions of
Section 9.4 thereof.
3.2.
Adjustment to Purchase Price
(a) Adjustments
to Closing Payment at Closing Date. The Closing Payment shall be
(i) reduced by the total of all amounts billed by Seller
Entity during the fifteen (15) days
4
prior to the
Closing Date in the ordinary course, representing payment to Braden
to render services on and after the Closing Date that have been
billed in advance by the Seller Entity; and (ii) increased by
the total of any agreed amounts representing payment to the Seller
Entity for rendering services after the Closing Date, but before
Braden assumes operating responsibility. The Seller Entity shall
not bill for any Billing Cycles that commence on or after the
Closing Date. The adjustment referenced in Section 3.2(a)(i)
above shall include only amounts billed for recurring rental
equipment during the current Billing Cycle and shall not include
any billings for prior services provided by Sellers. In addition,
the adjustment shall exclude any purchase conversions billed during
the fifteen (15) days prior to the Closing Date unless the
patient is shown as actively renting the purchased item on
Schedules 4.11(a) or 4.11(b).
(b) Adjustments
at Deferred Disbursement Date. On the Deferred Disbursement Date,
the Purchase Price may, at Braden’s election, be adjusted if
the number of Oxygen Qualified Files and Sleep Qualified Files are
fewer than the number listed on Schedule 4.11(b).
(i)
Except as provided in Section 3.2(b)(iii), if the number of
Qualified Files meeting the standards included in their respective
definitions at Section 3.2 (c) as of the Deferred
Disbursement Date is fewer than the number of Qualified Files
scheduled by Sellers in Schedule 4.11(b), the Purchase Price
shall be reduced by an amount equal to the total of: (i) the
difference between the number of Oxygen Qualified Files scheduled
in 4.11(b) and the number of actual Oxygen Qualified Files as of
the Deferred Disbursement Date multiplied by Two Thousand Five
Hundred Dollars ($2500.00), plus (ii) the difference between
the number of Sleep Qualified Files in Schedule 4.11(b) and
the number of actual Sleep Qualified Files as of the Deferred
Disbursement Date multiplied by Five Hundred Dollars ($500.00);
provided however that the Purchase Price will not be adjusted
unless the cumulative total amount of the adjustments relating to
Qualified Files in this Section 3.2(b)(i) and the adjustments
relating to equipment in Section 3.2 (b)(iv) is greater than
One Hundred Thousand Dollars ($100,000) ( “The
Threshold” ). In the event that the cumulative total
amount of adjustments relating to Qualified Files exceeds the
Threshold, then the Purchase Price will be reduced under this
Section 3.2(b)(i) by the amount that such adjustment relating
to Qualified Files exceeds the Threshold.
(ii)
A Qualified File that is listed on Schedule 4.11(b) as both an
active Qualified Oxygen File and an active Qualified Sleep File
will result in a total adjustment of Three Thousand Dollars
($3,000) if the file fails to qualify under the criteria for both
oxygen and sleep rental services.
(iii)
In the event that Braden gives notice that the provisions of
Section 3.2(h) for an Enhanced Purchase Price Adjustment have
been met, then the Purchase Price adjustment reduction shall be
calculated at the amounts of Five Thousand Dollars ($5,000) for
every Oxygen Qualified File transferred or discontinued from
service and One Thousand Dollars ($1,000) for each Sleep Qualified
File transferred or discontinued from service. Braden shall be
entitled to claim this “Enhanced Purchase Price
Adjustment” reduction for each transferred or discontinued
Qualified File listed on Schedule 4.11(b) and for each file
listed on Schedule 4.11(a) that subsequently meets the
criteria in Section 3.2(c) after the Closing Date through the
efforts of Braden.
5
(iv)
Braden shall be entitled to reduce the Purchase Price for oxygen
concentrators and home fill systems that fail to conform to
manufacturers’ specifications by the amounts of One Thousand
Dollars ($1,000.00) for each non-conforming home fill system and
Four Hundred Dollars ($400.00) for each non-conforming
concentrator. A concentrator shall be deemed non-conforming only if
the non-conformity is such that Braden takes the unit out of
service and disposes of it. If Braden elects to reduce the Purchase
Price for non-conforming assets, Braden will document the make,
model, and serial number of each non-conforming home fill system or
concentrator, describe the substandard operating condition
(including but not limited to accurate liter flow readings, minimum
purity, working alarms, warning lights and indicators operative and
at a reasonable decibel level, and breakage) and provide same to
the Seller Entity on a monthly basis. This Section 3.2(a)(iv)
shall not apply to units on hand that have been taken out of
service and are properly tagged at the Closing Date as awaiting
disposal.
(c)
Certain Definitions . For the purposes of this
Section 3.2, a patient file included in the Purchased Assets
is defined as a “Qualified File” only if all of
following conditions are met: (i) The patient file as and when
transferred by Seller Entity has complete paperwork necessary at
the Closing Date, including accurate patient contact and insurance
information, valid orders and prescriptions, valid
pre-authorizations, wet ink initial and recertification CMNs (if
required), proof of physician visits, all relevant qualifying
tests, proof of patient adherence and other medical records
necessary to support billing to Medicare or the appropriate
insurer, as determined by written guidance from insurers; provided,
however, such paperwork must be in the file or available to Braden
only if the paperwork is required by the applicable payor in order
to prove medical necessity for the equipment or services billed;
(ii) on the Closing Date the patient is actively served by the
Seller Entity and is using the equipment provided; and
(iii) the patient is insurance-eligible and executes a valid
assignment of benefits in favor of Braden within three
(3) months of the Closing Date; and, (iv) the patient
files, which meet all of the above three requirements, must
represent a patient that is on active and billable service with
Braden for at least three (3) Billing Cycles following the
Closing Date; provided however, that any patient file meeting all
of the above requirements that is billed by Braden, and for which
Braden receives at least one (1) Billing Cycle, but
subsequently becomes ineligible due to death or residence in a long
term care facility or hospital, is a Qualified File. In determining
whether a patient file is a Qualified File, Braden is entitled to
rely upon its billing experience from the Closing Date to the
Deferred Disbursement Date; provided however, that Braden will
submit only those claims to insurers that are, in Braden’s
sole discretion, adequately supported by medical necessity and
required documentation and for which the beneficiary has agreed to
an assignment of insurance benefits to Braden. With respect to
qualifying tests referenced in Subsection 3.2(c)(i), a patient file
will be considered “Qualified” unless Braden determines
that the qualifying tests are not contained in the file, the
qualifying test (or other similar information in the patient notes)
cannot be obtained from the physician or testing entity after
reasonable diligence to obtain such information, and the patient
fails to qualify after subsequent retesting. A patient shall be
deemed to have failed to qualify if, after exercising commercially
reasonable efforts, Braden is unable to perform retesting for any
reason, including a physician’s refusal to order the test, a
patient’s refusal to be tested, a patient’s relocation,
or death. With respect to valid order and prescriptions referenced
in Subsection 3.2(c)(i), a patient file will be
considered
6
“Qualified” provided the necessary
information is set forth in an appropriate document within the
file, including a valid CMN. “Wet ink” CMNs are
required only where the applicable payor does not accept facsimile
CMNs as a basis for billing patient services.
(d) For
purposes of the Purchase Price Adjustment only, a patient file
being served by the Seller Entity or by Braden is defined as an
“Oxygen Qualified File” only if all of the
requirements of 3.2(c) are met, and the file represents a medically
necessary and appropriate presently active rental of an oxygen
concentrator or liquid oxygen system and related oxygen equipment
and supplies listed on Schedule 4.11(b) as producing
insurance-paid reimbursement at a monthly allowable rental rate in
an amount equal to no less than One Hundred and Forty Five Dollars
($145.00) per month at rental rates for each Billing Cycle
specified in 3.2(c)(iv).
(e) For
purposes of the Purchase Price Adjustment only, a patient file
being served by the Seller Entity or by Braden is defined as a
“Sleep Qualified File” only if all of the
requirements of 3.2(c) are met, and the file represents a medically
necessary and appropriately documented presently active rental of a
sleep blower unit device for each Billing Cycle specified in
3.2(c)(iv).
(f) On
or before the date that is Ninety (90) days after the Closing
Date, Braden shall provide a report of Qualified Files listed on
Schedule 4.11(b) that have not conformed to the requirements
of Section 3.2(c), together with a brief identification of the
deficient paperwork. Braden agrees to provide Sellers with an
updated report on a monthly basis thereafter until Braden elects to
provide notice of a claim to adjust the Purchase Price under this
Section 3.2, which claim may be made at any time before the
Final Disbursement Date. For each such claimed adjustment, Braden
shall provide a specific reason or reasons it has determined that
such file fails to conform to the requirements of Section 3.2
(c).
(g) Notwithstanding
the foregoing, if Braden establishes that the failure of a file to
meet the requirements of Section 3.2 (c) is the result of
a separate and independent breach of a specific representation or
warranty in this Agreement, Braden may pursue its remedies for that
file under the indemnification provisions of Article IX upon
proof of actual losses, which shall not be determined by reference
to or limted by the agreed adjustments to Purchase Price for Oxygen
Qualified Files and Sleep Qualified Files. For any file that Braden
determines it will not accept a Purchase Price adjustment as the
sole recourse for such failure, Braden shall notify Sellers to that
effect no later than sixty (60) days after determining that
the patient file is not an “Oxygen Qualified File” or a
“Sleep Qualified File” or on the Deferred Disbursement
Date, whichever is later. Braden shall be bound by that election
and shall not be entitled to any Purchase Price adjustment for that
file. If Braden agrees to accept an adjustment of the Purchase
Price pursuant to this Section 3.2 and Seller agrees to the
adjustment, such adjustment shall be the sole recourse under this
Agreement for losses suffered as the result of the failure of any
patient file to meet the definitions of a Qualified File under
Section 3.2(c).
(h) Braden
is entitled to the enhanced Purchase Price adjustments for
Qualified Files as set forth in Section 3.2 (b)(iii) or for
any file that meets the criteria in Section 3.2(c) at any time
after the Closing Date through the efforts of Braden if:
(i) any employee who was actively employed by Seller Entity as
of May 1, 2009 fails to continue employment with Braden
following the Closing Date, and (ii) the employee enters into
any direct or indirect
7
relationship
with a competitor of Braden’s following the Closing Date and
before the applicable disbursement date, and (iii) active
rentals scheduled by Seller Entity on Schedule 4.11
(a) are transferred from service with Braden to service with
such competitor of Braden. A direct or indirect relationship shall
include, but is not limited to, any relationship defined as a
financial relationship under the Stark Law. For purposes of
establishing a causal connection between the acts of the employee
and the transfer of active rentals to a competitor, Braden may
proffer evidence of: (i) specific acts by the employee or
persons associated with the employee, or (ii) a pattern of
patients who transfer service as the result of physician orders,
physician recommendations, or patient requests that are
unexplained, inadequately explained, or commercially unusual, or
(iii) patient-verified affidavits concerning the reason for
the transfer, or (iv) other reliable evidence, or (v) a
combination of any of the above. The Enhanced Purchase Price
Adjustment shall apply only to those files that are transferred or
discontinued as the result of the pattern of activity addressed in
this Section 3.2(h); provided however, that if Braden provides
credible evidence of a relationship and a pattern of transferral of
patient files, then the Enhanced Purchase Price Adjustment shall
apply to all similarly discontinued or transferred
files.
3.3.
Disputes Regarding Final Purchase Price
If Seller disputes
the calculation of the Purchase Price, Sellers shall give timely
written notice to Braden no later than thirty (30) calendar
days following the Final Disbursement Date (the “Dispute
Notice”), which Dispute Notice shall specify the reasons for
such disagreement, the amount of any adjustments that are necessary
in Sellers’ judgment for the computation of the Purchase
Price and the basis for Sellers’ suggested adjustment. If the
parties resolve their differences over the disputed items in
accordance with the foregoing procedures, the final determination
of the Purchase Price as determined by the preceding sentence shall
be the amount agreed upon. If Sellers and Braden are unable to
resolve the disputed matters outstanding within the thirty
(30) day period following Braden’s receipt of the
Dispute Notice, all disputed matters not so resolved shall be
submitted to arbitration in accordance with the provisions of
Article X of this Agreement.
3.4.
Allocation of Consideration
Braden shall
allocate the Purchase Price (and all other capital costs) among the
Purchased Assets applying the Purchase Price to goodwill to the
extent allowable consistent with generally accepted accounting
principles and deliver a written copy thereof to Sellers within
ninety-five (95) days of the Closing Date. Such allocation
shall be made in accordance with the provisions of
Section 1060 of the Internal Revenue Code of 1986, as amended
(the “ Code ”), and shall be binding upon Braden
and Sellers for all purposes (including financial accounting
purposes, financial and regulatory reporting purposes and Tax
purposes). Each of the parties agrees to file appropriate documents
with the IRS under Section 1060 of the Code reflecting the
foregoing. Notwithstanding any allocation of the Purchase Price
made by the parties hereto pursuant to this Agreement or any other
agreement delivered pursuant hereto, Braden shall be entitled to
recover the full amount of any damages incurred from any breach of
the non-compete agreement by and among Braden and the Sellers (the
“Non-Compete Agreement”) attached hereto as
Exhibit A in
8
accordance with
the terms therein without reference to the amount allocated thereto
by the parties.
Braden hereby
waives compliance by the Sellers with the bulk sales laws of any
country or state, it being expressly understood and agreed that
this Section 3.5 shall not be deemed an admission or
acknowledgment that any such law is applicable to the transactions
contemplated by this Agreement. Sellers shall be solely responsible
for payment of any bulk sales taxes, if any, that are assessed
against Sellers or Braden, in addition to any California State
taxes due as the result of sales and operations prior to the
Closing Date. The parties shall cooperate with each other to the
extent reasonably requested and legally permitted to minimize any
such Sales Tax.
ARTICLE IV —
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
In order to induce
Braden to enter into this Agreement, the Sellers jointly and
severally make the following representations and warranties to
Braden, which will be true and complete as written on the Closing
Date, subject to the exceptions as are specifically disclosed in
the disclosure schedules delivered by the Sellers on or before the
Closing Date:
4.1.
Organization and Qualification
The Seller
Entity is a corporation duly organized, validly existing and,
except as set forth in Schedule 4.1, in good standing under
the laws of the jurisdiction of its incorporation. The Seller
Entity has all requisite corporate power and corporate authority to
own, lease and operate its properties and to carry on its business
as now being conducted . The Seller Entity is duly qualified to
conduct its affairs in each jurisdiction in which it operates,
except where such nonqualification would not reasonably be expected
to have a material adverse effect. The Seller Entity has delivered
to Braden complete and correct copies of its Articles of
Incorporation and Bylaws, or applicable governing documents, in
each case as amended to the date hereof.
With the
exception of the subsidiary or Affiliate relationship between any
corporations constituting the Seller Entity, the Seller Entity does
not hold, directly or indirectly, any equity, partnership, joint
venture, membership or other interest in or control over any Person
or legally cognizable entity.
4.3.
Authority Relative to this Agreement
(a) The
Seller Entity has all requisite right, corporate power and
corporate authority to execute, enter into and deliver this
Agreement and any agreement or document contemplated hereby, and to
consummate the transactions contemplated hereby. The Shareholders
have full right, legal authority, and legal power to enter into
this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of him or her pursuant to
this Agreement and to carry out the transactions contemplated
hereby and thereby.
9
(b) The
execution, delivery and performance by the Seller Entity of this
Agreement and each agreement, document and instrument contemplated
hereby have been duly authorized by all necessary action of the
Seller Entity and the Shareholders.
(c) This
Agreement, and all agreements or documents contemplated hereby,
have been duly executed and delivered by the Seller Entity and the
Shareholders and the obligations imposed on the Seller Entity and
the Shareholders by this Agreement, or by any agreement or document
contemplated hereby, constitute the valid and binding obligations
and agreements of the Seller Entity and the Shareholders,
respectively, enforceable against the Seller Entity or the
Shareholders, as the case may be, in accordance with its terms,
except: (i) that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors rights; and
(ii) that the remedy of specific performance, and injunctive
and other forms of equitable relief, may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefore may be brought.
(d) None
of the Shareholders has exercised or has the right to exercise any
shareholder dissenter rights as provided under applicable state law
and none of the Shareholders has any claim against Braden in
connection with the transactions contemplated by this Agreement and
the Exhibits hereto.
4.4.
Compliance of Transaction With Laws and Other
Instruments
The execution,
delivery and performance by Sellers of this Agreement, and the
other agreements and documents contemplated hereby and the
performance and consummation of the transactions contemplated
hereby by Sellers:
(a) do
not require on behalf of the Seller Entity or the Shareholders any
approval, consent, order or authorization of or registration,
declaration or filing with, any governmental agency, court, or
other authority federal, state, local or otherwise (a “
Governmental Authority ”) which has not been obtained
and which is not in full force and effect as of the date
hereof;
(b) does
not and will not conflict with, or result in a breach or violation
of any provision of the Articles of Incorporation or Bylaws, or any
applicable governing documents, of the Sellers;
(c) does
not and will not result in a violation of any law, regulation,
statute, ordinance, rule, judgment, writ, injunction, license,
permit, order or decree of any Governmental Authority to which the
Seller Entity, the Shareholders or the Purchased Assets are
subject, the effect of which would be adverse to the Purchased
Assets or require the Sellers to obtain any approval, consent or
waiver of, or make any filing with, any Person (governmental or
otherwise) that has not been obtained or made;
(d) does
not and will not result in the creation or imposition of any Lien
on any of the Purchased Assets; and
10
(e) except
as indicated on Schedule 4.4 , does not and will not
require the approval, consent or waiver of, or filing with any
party to, violate or conflict with or result in a breach of, or
constitute a default or acceleration of or give rise to a right of
termination (or an event which with notice or lapse of time or both
would become a default) under, any provision of any contract,
indenture, mortgage, lease, agreement or other instrument directly
or indirectly associated with or related to the Purchased Assets
and to which the Seller Entity or the Shareholders are a party or
by which the Purchased Assets or the Seller Entity is
subject.
4.5. Title
to Purchased Assets; Liens
(a) Except
as specifically disclosed in Schedule 4.5(a), the Sellers have
good and (if applicable) marketable title to all of the Purchased
Assets. The Sellers will sell and transfer the Purchased Assets to
Braden free and clear of all Liens, including, without limitation,
Liens for Taxes. Except as set forth on Schedule 4.5(a), none
of the Purchased Assets is subject to any Liens except for
(i) Liens for Taxes not yet due and payable and
(ii) Liens arising by operation of law which could not be
expected to materially affect the value or use of the Purchased
Assets. Except as set forth on Schedule 4.5(a) , the
Purchased Assets are subject to no restrictions with respect to the
transferability thereof and the Purchased Assets may be lawfully
transferred to Braden without the consent of any third
party.
(b)
Condition of Purchased Assets . The Purchased Assets are in
good and lawful working condition, excepting ordinary wear and
tear.
(c)
Customer Information . Except as disclosed on
Schedule 4.5(c) , the Seller Entity has not sold or
otherwise released for distribution any of its customer files and
other customer information relating to any of the current customers
of the Seller Entity including, but not limited to, patient lists,
marketing and pricing information and customer and referral source
information (the “ Customer Information ”), and
transfer of the Customer Information by Seller Entity to Braden
does not constitute a violation of the Seller Entity’s
obligations to any Person. To the Seller’s Knowledge, and
except as set forth on Schedule 4.5(c), no Person other than
the Seller Entity possesses any claims or rights with respect to
use of the Customer Information, as it has been maintained in
confidence and in accordance with applicable state laws and the
Health Insurance Portability and Accountability Act of 1996 or
regulations thereunder, (known as “ HIPAA
”).
(a) All
Taxes owed by Seller Entity (whether or not shown on any Return)
have been paid in full when due and all amounts required to be
withheld by Seller Entity as of the Closing Date for Taxes or
otherwise, have been withheld and paid when due or will be paid
when due to the appropriate agency or authority or which are not
yet delinquent or are being contested in good faith.
(b) Except
as set forth on Schedule 4.6, neither the Internal Revenue
Service nor any other governmental authority is now asserting or,
to the Knowledge of Sellers, threatening to assert against the
Seller Entity any deficiency or claim for additional Taxes. No
claim has ever been made by an authority in a jurisdiction where
the Seller Entity does not file
11
reports and
returns that the Seller Entity is or may be subject to taxation by
that jurisdictio
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