Item 1.01 Entry into a Material Definitive Agreement
Securities Purchase Agreement
On November 21, 2019, AdaptHealth LLC,
a Delaware limited liability company (“Buyer”) and a wholly-owned indirect subsidiary of AdaptHealth Corp., a Delaware
corporation (the “Company”), McKesson Medical-Surgical, Inc., a Virginia corporation (“Seller”), NRE Holding
Corporation, a Delaware corporation (“NRE”), and McKesson Patient Care Solutions, Inc., a Pennsylvania corporation
(“PCS”), entered into a Securities Purchase
Agreement (the “Agreement”), pursuant to which Seller agreed to sell to Buyer, and Buyer agreed to purchase from the
Seller, all of the issued and outstanding equity interests of NRE (the “Transaction”).
The base purchase price for the Transaction
is $14,000,000, payable in full in cash at the closing, subject to customary adjustments for cash, indebtedness, transaction expenses
and net working capital (as compared to an agreed target net working capital amount). In addition, Buyer may be required to make
an additional payment of $1,500,000 to Seller after the closing of the Transaction pursuant to the terms and conditions of a Transition
Services Agreement to be entered into in connection with the closing of the Transaction (the “TSA”).
The consummation of the Transaction
is subject to the satisfaction or waiver of, among other customary closing conditions, the accuracy of the representations and
warranties in the Agreement, the compliance by the parties with the covenants in the Agreement, the absence of any legal order
barring the Transaction, and the delivery of the TSA and other ancillary agreements relating to the temporary use and occupancy
of a portion of certain of Seller’s facilities by Buyer. The parties are also provided with customary termination rights, including
the right of either party to terminate the Agreement if the consummation of the Transaction has not occurred by January 31, 2020
(unless the failure of the Transaction to be consummated was principally caused by such party’s failure to perform any material
covenant, agreement or obligation under the Agreement). The Transaction is expected to close on or around December 31, 2019.
Under the Agreement, PCS and NRE made
customary representations and warranties with respect to the business of PCS and NRE, including with respect to organization and
qualification, subsidiaries, authorization, capitalization, non-contravention, financial statements, the absence of undisclosed
liabilities, the non-occurence of certain events from the date of the latest consolidated balance sheet of NRE and PCS, compliance
with laws, taxes, real property, personal property, intellectual property, contracts, litigation, employee benefits, environmental
matters, labor matters, insurance policies, transactions with affiliates, material customers, material suppliers, brokers’
fees, healthcare compliance, compliance with privacy laws, and the absence of fraud. In addition, Seller made customary representations
and warranties, including with respect to authorization, no conflicts, required filings and consents, title to the equity interests
of NRE and brokers’ fees. Certain representations of NRE and PCS are qualified in whole or in part by a material adverse
effect standard for purposes of determining whether a breach of such representations and warranties has occurred.
Under the Agreement, Buyer made customary
representations with respect to its organization and qualification, authorization, non-contravention, brokers’ fees, absence
of litigation, having sufficient funds to consummate the transactions, and its solvency.
The representations and warranties
by Seller, NRE and PCS are qualified by information in the accompanying disclosure schedules, which contain information
that modifies, qualifies and creates exceptions to the representations and warranties of Seller, NRE and PCS set forth in the
Agreement. Moreover, certain representations and warranties in the Agreement were used for the purpose of allocating risk
among the parties, rather than establishing matters as facts. Accordingly, investors and securityholders should not rely on
the representations and warranties in the Agreement as characterizations of the actual state of facts about the Seller,
Buyer, NRE or PCS.
PCS, NRE and Seller made certain covenants under the Agreement,
including, among others, the following:
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subject
to limited exceptions, during the period between the signing of the Agreement and the
closing of the Transaction, Seller shall cause each of PCS and NRE to continue to conduct
their business in the ordinary course and use commercially reasonable efforts to carry
on and preserve intact their current business organizations, keep available the services
of their current officers and employees, and preserve their relationships with customers,
licensors, licensees and others with whom NRE and PCS have contractual or other commercial
relations in substantially the same manner as such relationships existed immediately
prior to the date of the Agreement;
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subject
to limited exceptions, during the period between the signing of the Agreement and the
closing of the Transaction, NRE and PCS shall not, unless otherwise consented to by Buyer
in writing (which consent shall not be unreasonably withheld, conditioned or delated),
enter into or amend material contracts; split, combine or reclassify, or issue, equity
interests of NRE or PCS; issue, grant, deliver or sell, or purchase, redeem or acquire,
equity interests of NRE or PCS; amend their respective organizational documents; make
acquisitions; sell or otherwise dispose of assets; incur certain indebtedness; make loans
or acquisitions of debt securities; revalue material assets; make or change material
tax elections, adopt or change material accounting methods with respect to taxes, or
settle any material tax claims;
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subject
to certain conditions, during the period between the signing of the Agreement and the
closing of the Transaction, Seller, NRE and PCS are required to provide reasonable access upon reasonable
prior notice to Buyer and its representatives to the directors, officers, employees,
agents, properties, offices, facilities, books and records of NRE and PCS and to furnish
Buyer and its representatives with information with respect to NRE and PCS; and
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during the period between the signing of the Agreement and the closing of the Transaction, Seller is required not to,
and to cause its representatives not to, directly or indirectly, initiate, solicit, encourage
or otherwise facilitate any inquiry, proposal, offer or discussion with any person concerning
any
proposal from a third party relating to any merger or other business combination, issuance
of a majority of the capital stock of, or an acquisition of all or substantially all
of the assets of NRE and PCS; furnish any information concerning the business,
properties or assets of NRE or PCS in connection with an inquiry, proposal or offer for
such an acquisition proposal, or engage in discussions or negotiations with any third
party concerning any such inquiry, proposal or offer for such an acquisition proposal.
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Buyer made certain covenants under the Agreement,
including, among others, the following:
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for a period of one (1) year following the closing of the Transaction, to provide to each employee who is employed
by NRE and PCS immediately prior to the closing of the Transaction (a) compensation and severance compensation, in each case,
that is substantially comparable in the aggregate to the compensation and severance compensation such employee was entitled
to receive immediately prior to the closing and (b) employee benefits that are substantially comparable in the aggregate to
the employee benefits that are offered to similarly qualified employees of Buyer; and
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to change the name of PCS to remove any reference to “McKesson” and to cease using any and all references
to “McKesson” and any trademarks, service marks, logos or trade names of McKesson Corporation.
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Each
party made certain mutual covenants under the Agreement, including, among others, to cooperate with each other and use commercially
reasonable efforts to take, or to cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under the Agreement, applicable law or otherwise to consummate and make effective the Transaction, to obtain from
any governmental authorities any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained
and to make any filings with or notifications or submissions to any governmental authority required to be made by such person
in connection with the authorization, execution and delivery of the Agreement and the consummation of the Transaction, and to
make all necessary filings, make such notices, and make any other required submissions, with respect to the Agreement, that are
necessary, proper or advisable under applicable law or otherwise are reasonably required to obtain any consent, license, permit,
approval, waiver or authorization or order of, filing with or notification to, any third person or governmental authority required
as a result of the Transaction.
Each of Seller and Buyer has agreed
to indemnify the other party and its affiliates with respect to certain losses as a result of or in connection with breaches of
its respective representations and warranties, as well as, in the case of Seller, certain taxes and, in the case of Buyer, breaches
of its covenants under the Agreement. The indemnification obligations of the Seller are subject to certain customary limitations, including (i) survival periods applicable to representations and warranties of Seller, NRE and PCS, (ii) a deductible which
damages must exceed prior to Seller incurring any indemnification obligation and (iii) limits on the amount of damages that may
be recovered by Buyer.