[WINDERWEEDLE, XXXXXX, XXXX & XXXXXXX, P.A. LETTERHEAD]
September 17, 1997
RoTech Medical Corporation
4506 L.B. XxXxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Ladies and Gentlemen:
This opinion is being delivered in connection with the Agreement and Plan
of Merger ("Merger Agreement"), dated as of July 6, 1997, by and among
Integrated Health Services, Inc. ("IHS"), IHS Acquisition XXIV, Inc. ("IHS
Sub"), and RoTech Medical Corporation ("RoTech"). Pursuant to the Merger
Agreement, IHS Sub will merge with and into RoTech (the "Merger"), and RoTech
will be the surviving corporation. This opinion is issued with respect to
certain federal income tax consequences of the Merger. Reference to such opinion
is made in the Proxy Statement/Prospectus of IHS and RoTech dated September 17,
1997.
All capitalized terms not otherwise defined herein have the meaning
assigned to them in the Merger Agreement or the Proxy Statement/Prospectus of
IHS and RoTech. All section references, unless otherwise indicated, are to the
Internal Revenue Code of 1986, as amended (the "Code").
We have acted as legal counsel to RoTech in connection with the Merger. As
such, and for the purpose of rendering this opinion, we have examined (or will
examine on or prior to the Effective Time of the Merger) and with your
permission are relying (or will rely) upon (without any independent
investigation or review thereof) the truth and accuracy, at all relevant times,
of the statements, covenants, representations and warranties contained in the
following documents:
1. The Merger Agreement;
2. The Proxy Statement/Prospectus of IHS and RoTech dated September 17,
1997;
RoTech Medical Corporation
September 17, 1997
Page 2
3. Representations made to us by IHS and IHS Sub in a letter reproduced as
Attachment A hereto;
4. Representations made to us by RoTech in a letter reproduced as
Attachment B hereto;
5. Such other documents, records and matters of law as in our judgment were
necessary or appropriate.
We have relied, with your permission, solely on the representations of IHS,
IHS Sub and RoTech contained in the letters referenced at paragraphs 3 and 4
above as to the matters set forth therein.
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that original documents (including
signatures) are authentic, that documents submitted to us as copies conform to
the original documents, and that there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to the effectiveness thereof.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes:
1. The Merger will qualify as a reorganization pursuant to Section 368(a)
of the Code;
2. No gain or loss will be recognized by RoTech as the result of the
consummation of the Merger;
3. No gain or loss will be recognized by a RoTech stockholder upon the
exchange of the shares of RoTech Stock for shares of IHS Common Stock pursuant
to the Merger, except on the receipt of cash in lieu of a fractional share
interest in IHS Common Stock; and
4. A RoTech stockholder who receives cash in lieu of a fractional interest
in shares of IHS Common Stock will be treated as if the fractional share were
distributed as part of the exchange and then as having received a cash
distribution in redemption of such fractional share, which would be taxed as
provided in Section 302 of the Code.
RoTech Medical Corporation
September 17, 1997
Page 3
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and we cannot provide assurance that the Internal Revenue Service will
not assert a contrary position. Furthermore, we cannot provide assurance that
future legislative, judicial or administrative changes would not, on either a
prospective or retroactive basis, adversely affect the accuracy of the
conclusions stated herein. Moveover, we undertake no responsibility to advise
you of any new developments in the application or interpretation of the federal
income tax laws as they might relate to this opinion.
2. This opinion addresses only whether the Merger will qualify as a
reorganization under Section 368(a) of the Code and the tax consequences listed
above. The opinion does not address any other federal, state, local or foreign
tax consequences that may result from the Merger or any other transaction.
3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement. Moreover, we have assumed that all the
transactions described in the Merger Agreement have been or will be consummated
in accordance with the terms of such Merger Agreement and without waiver or
breach of any material provision thereof and that all of the representations,
warranties, statements and assumptions upon which we have relied remain true and
accurate at all relevant times. Any change after the date hereof in the facts
and circumstances surrounding the Merger, or any inaccuracy in the
representations, warranties, statements and assumptions upon which we have
relied may affect the continuing validity of the opinions set forth herein. We
assume no responsibility to inform you of any such change or inaccuracy that may
occur or come to our attention.
4. This opinion has been delivered to you for the purpose of satisfying the
conditions set forth in Section 7.18 of the Merger Agreement and is intended
solely for your benefit. It may not be relied upon for any other purpose or by
any other person or entity, and may not be made available to any other person or
entity, without our prior written consent Notwithstanding the preceding
sentence, we hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the registration statement on Form S-4
of IHS, of which the Proxy
RoTech Medical Corporation
September 17, 1997
Page 4
Statement/Prospectus is also a part, and further consent to the use of our name
whenever appearing in such registration statement, and any amendments thereto.
Very truly yours,
WINDERWEEDLE, XXXXXX, XXXX
& XXXXXXX, P.A.
By:/s/ X. Xxxxxx Xxxxx
---------------------------
X. Xxxxxx Xxxxx
ATTACHMENT A
INTEGRATED HEALTH SERVICES, INC.
00000 XXX XXX XXXXXXXXX
XXXXXX XXXXX, XX 00000
September 17, 1997
Xxxxxxxxx & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Winderweedle, Xxxxxx, Xxxx
& Xxxxxxx, P.A.
Post Office Box 880
Winter Park, Florida 32790-0880
Re: Merger of IHS Acquisition XXIV, Inc., a wholly-owned subsidiary of
Integrated Health Services, Inc., into Rotech Medical Corporation
Gentlemen:
You have requested that we represent certain matters to you in connection
with the opinion that you are rendering with respect to certain federal income
tax consequences of the merger (the "Merger") of IHS Acquisition XXIV, Inc.
("IHS Sub"), a wholly-owned subsidiary of Integrated Health Services, Inc.
("IHS") with and into Rotech Medical Corporation ("Rotech"). We recognize that
you will rely on this certificate in rendering your opinion pursuant to section
7.18 of the Agreement and Plan of Merger, dated as of July 6, 1997 by and among
IHS, IHS Sub, and Rotech (the "Merger Agreement") and in connection with your
description of certain federal income tax consequences of the Merger in the
Proxy Statement/Prospectus of IHS and Rotech. Unless otherwise specified, the
capitalized terms used herein are defined in the Merger Agreement or the Proxy
Statement/Prospectus of IHS and Rotech.
In accordance with your request, we hereby represent to you that
the following facts are now true and will continue to be true as of the
Effective Time of the Merger:
1. The Merger is being undertaken to enhance the business of the
IHS and the IHS Sub and for other good business purposes of the IHS.
2. At the Effective Time of the Merger, the fair market value of
the IHS stock plus cash in lieu of fractional shares received by each Rotech
stockholder will be approximately equal to the fair market value of the Rotech
stock surrendered in exchange therefor.
3. Prior to the Merger, IHS will be in "Control" of IHS Sub. As
used in this letter, "Control" means the direct ownership of stock possessing at
least eighty percent (80%) of the total combined voting power of all classes of
stock entitled to vote and at least eighty percent (80%) of the total number of
shares of each other class of stock of the corporation. For purposes of
determining Control, a person or entity shall not be considered to own voting
stock if rights to vote such stock (or to restrict or otherwise control the
voting of such stock) are held by a third party (including a voting trust) other
than an agent of such person or entity.
4. IHS has no plan or intention to redeem or otherwise reacquire
any of its stock issued pursuant to the Merger.
5. Following the Merger, Rotech will hold at least ninety percent
(90%) of the fair market value of IHS Sub's net assets and at least seventy
percent (70%) of the fair market value of IHS Sub's gross assets held
immediately prior to the Merger (other than stock of IHS distributed in the
Merger). For the purpose of determining the percentages of the net and gross
assets held immediately before the Merger, assets transferred from IHS to IHS
Sub in pursuance of the plan of reorganization are not taken into account. Thus,
the money transferred from IHS to IHS Sub to be used for the following purposes
is not taken into account: (i) to pay additional consideration to the
stockholders of Rotech; (ii) to pay creditors of Rotech; (iii) to pay
reorganization expenses; or (iv) to enable IHS Sub to satisfy state minimum
capitalization requirements (where the money is returned to the controlling
corporation as part of the transaction).
6. Except for transfers described in Section 368(a)(2)(C) of the
Code, IHS has no plan or intention to liquidate Rotech; to merge Rotech with or
into another corporation including IHS or any of its affiliates; to sell,
distribute or otherwise dispose of the capital stock of Rotech; or to cause
Rotech to sell or otherwise dispose of any of its assets or of any of the assets
acquired from IHS Sub, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation Controlled by Rotech.
7. IHS Sub will have no liabilities assumed by Rotech and will not
transfer to Rotech any assets subject to liabilities in the Merger.
8. Following the Merger, IHS will cause Rotech to continue the
historic business Rotech was conducting immediately before the Merger or cause
Rotech to use a significant portion of the historic business assets of Rotech in
a business, within the meaning of Treasury Regulation Section 1.368-1(d).
9. IHS and IHS Sub will pay their expenses, if any, incurred in
connection with the Merger, and neither IHS nor IHS Sub will pay the expenses,
if any, incurred in connection with the Merger by Rotech or the stockholders of
Rotech.
-2-
10. IHS has no plan or intention to cause Rotech to issue
additional shares of Rotech stock after the Merger that would result in IHS
losing Control of Rotech.
11. Neither IHS, IHS Sub nor any affiliate of IHS or IHS Sub owns,
or has owned during the past five (5) years, directly or indirectly, any shares
of Rotech stock or the right to acquire or vote any such stock.
12. Neither IHS nor IHS Sub is, and will not be at the Effective
Time of the Merger, an "investment company" within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Code.
13. No stockholder of Rotech is acting (or has acted) as agent for
IHS or IHS Sub in connection with the Merger or the approval thereof; and
neither IHS nor IHS Sub will reimburse (or has reimbursed) any Rotech
stockholder for Rotech stock such stockholder may have purchased or for other
obligations such stockholder may have incurred as agent for IHS or IHS Sub.
14. In the Merger, shares of Rotech stock representing Control of
Rotech will be exchanged for voting stock of IHS. For purposes of this
representation, shares of Rotech stock exchanged for cash or other property
originating with IHS or a direct or indirect subsidiary of IHS will be treated
as outstanding Rotech stock on the Effective Date of the Merger.
15. No shares of IHS Sub have been or will be used as consideration
for or issued to stockholders of Rotech pursuant to the Merger.
16. There is no intercorporate indebtedness existing between IHS
and Rotech or between IHS Sub and Rotech that was issued, acquired, or will be
settled at a discount as a result of the Merger.
17. The payment of cash in lieu of fractional shares of IHS stock
is solely for the purpose of avoiding the expense and inconvenience to IHS of
issuing fractional shares and does not represent separately bargained-for
consideration.
18. The terms of the Merger Agreement and all other agreements
entered into in connection therewith were the product of arm's-length
negotiations.
19. None of the shares of IHS stock received by any shareholder of
Rotech who is (or was) a service provider to Rotech will be separate
consideration for, or allocable to, past or future services (including any
employment agreement or any covenants not to compete).
20. The Merger Agreement represents the full and complete agreement
between IHS, IHS Sub and Rotech regarding the Merger, and there are no other
agreements regarding the Merger.
-3-
21. The Merger will be consummated in accordance with the material
terms of the Merger Agreement and none of the material terms and conditions
therein have been waived or modified and neither IHS nor IHS Sub has any plan or
intention to waive or modify any such material condition.
22. Each of the representations made by IHS and IHS Sub in the
Merger Agreement, the Proxy Statement/Prospectus, and any other documents
associated therewith is true and accurate, and the facts relating to the Merger,
as such facts are described in the Proxy Statement/Prospectus, are, insofar as
such facts pertain to IHS and IHS Sub, true, correct and complete in all
material respects.
23. IHS and IHS Sub are authorized to make all of the
representations set forth herein.
24. IHS is, and at the Effective Time of the Merger will be, a
corporation duly organized under the laws of the State of Delaware. IHS Sub is,
and at the Effective Time of the Merger will be, a corporation duly organized
under the laws of the State of Florida.
IHS and IHS Sub will promptly and timely notify Fulbright &
Xxxxxxxx L.L.P. and Rotech if, after signing this letter, IHS or IHS Sub has
reason to believe that (i) any of the facts described herein or in the Proxy
Statement/Prospectus or (ii) any of the representations made in this letter are
untrue, incorrect or incomplete in any respect.
In rendering your opinion, you have our permission to attach a copy
of this letter to your written opinion.
Very truly yours,
INTEGRATED HEALTH SERVICES, INC.,
a Delaware corporation
By:/s/ Xxxx Xxxxxxxx
------------------------------
Title:Vice President - Tax
---------------------------
IHS ACQUISITION XXIV, INC.,
a Florida corporation
By:/s/ Xxxx Xxxxxxxx
------------------------------
Title:Vice President - Tax
---------------------------
-4-
ATTACHMENT B
RoTech Medical Corporation
4506 LB. Xxxxxxx Road, Suite F
Orlando, FL 32811
September 17, 1997
Winderweedle, Xxxxxx, Xxxx
& Xxxxxxx, P.A.
Post Office Box 880
Winter Park, Florida 32790-0880
Xxxxxxxxx & Xxxxxxxx, L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Agreement and Plan of Merger by and among Integrated
Health Services, Inc., IHS Acquisition XXIV, Inc., and
RoTech Medical Corporation
Gentlemen:
You have requested that we represent certain matters to you in connection
with the opinion that you are rendering with respect to certain federal income
tax consequences of the merger (the "Merger") of IHS Acquisition XXIV, Inc.
("IHS Sub"), a wholly-owned subsidiary of Integrated Health Services, Inc.
("IHS") with and into RoTech Medical Corporation ("RoTech"). We recognize that
you will rely on this certificate in rendering your opinion pursuant to Section
7.18 of the Agreement and Plan of Merger, dated as of July 6, 1997, by and among
IHS, IHS Sub, and RoTech (the "Merger Agreement") and in connection with your
description of certain federal income tax consequences of the Merger in the
Proxy Statement/Prospectus of IHS and RoTech. Unless otherwise specified, the
capitalized terms used herein are defined in the Merger Agreement or the Proxy
Statement/Prospectus of IHS and RoTech.
In accordance with your request, we hereby represent to you that the
following facts are now true and will continue to be true as of the Effective
Time of the Merger:
1. The Merger is being undertaken to enhance the business of RoTech and for
other good business purposes of RoTech.
2. After due inquiry (except that no inquiry was made with respect to
Xxxxxx Investments, Inc.), there is no plan or intention on the part of the
stockholders of RoTech who own five percent (5%)
September 17, 1997
Page -2-
or more of the RoTech stock, and to the best of the knowledge of the management
of RoTech, there is no plan or intention on the part of the remaining
stockholders of RoTech to sell, exchange, or otherwise dispose of a number of
shares of IHS stock received in the Merger that would reduce the RoTech
stockholders' ownership of the IHS stock to a number of shares having a value,
as of the Effective Time of the Merger, of less than fifty percent (50%) of the
aggregate fair market value, immediately prior to the Merger, of all outstanding
shares of RoTech stock. For purposes of this paragraph, fractional shares of
RoTech stock that are deemed to be received in the Merger in exchange for cash
will be treated as outstanding RoTech stock exchanged for IHS stock in the
Merger and then disposed of pursuant to a plan. Additionally, for purposes of
this paragraph, shares of RoTech stock and shares of IHS stock held by RoTech
stockholders and otherwise sold, redeemed or disposed of prior to and in
contemplation of the Merger or subsequent to the Merger shall be considered
shares of RoTech stock exchange for IHS stock in the Merger and then disposed of
pursuant to a plan.
3. The Merger will be consummated in compliance with the material terms of
the Merger Agreement and none of the material terms and conditions therein have
been waived or modified and RoTech has no plan or intention to waive or modify
further any such material condition.
4. At the Effective Time of the Merger, the fair market value of the IHS
common stock and other consideration to be received by RoTech stockholders in
the Merger will be approximately equal to the fair market value of the RoTech
stock surrendered by such stockholders in exchange therefor.
5. Immediately after the Merger, RoTech will hold at least ninety percent
(90%) of the fair market value of its net assets and at least seventy percent
(70%) of the fair market value of its gross assets held immediately prior to the
Merger. For the purpose of determining the percentages of the net and gross
assets held immediately before the Merger, the following assets will be treated
as property held immediately prior to the Merger but not held by RoTech
following the Merger: (i) assets disposed of prior to the Merger and in
contemplation thereof (including without limitation any asset disposed of, other
than in the ordinary course of business, pursuant to a plan or intent existing
during the period ending on the Effective Time of the Merger and beginning with
the commencement of negotiations (whether formal or informal) with IHS regarding
the Merger (the "Pre-Merger Period")), (ii) assets used to pay expenses or
liabilities incurred by RoTech or its shareholders in connection with the Merger
and (iii) assets used to
September 17, 1997
Page -3-
make distributions, redemptions or other payments in respect to stock or rights
to acquire such stock (including payments treated as such for tax purposes) that
are made in contemplation of the Merger or during the Pre-Merger Period or that
are related thereto (other than regular, normal dividends).
6. The business conducted by RoTech immediately prior to the Merger will be
its historic business.
7. In the Merger, shares of RoTech common stock representing Control of
RoTech will be exchanged solely for voting common stock of IHS. As used in this
letter, "Control" means the direct ownership of stock possessing at least eighty
percent (80%) of the total combined voting power of all classes of stock
entitled to vote and at least eighty percent (80%) of the total number of shares
of each other class of stock of the corporation. For purposes of determining
Control, a person or entity shall not be considered to own voting stock if
rights to vote such stock (or to restrict or otherwise control the voting of
such stock) are held by a third party (including a voting trust) other than an
agent of such person or entity. For purposes of this representation, shares of
RoTech common stock exchanged for cash or other property originating with IHS
will be treated as outstanding RoTech stock on the Effective Date of the Merger.
8. RoTech has no plan or intention to issue additional shares of its stock
that would result in IHS losing Control of RoTech.
9. RoTech and the stockholders of RoTech will pay their respective
expenses, if any, incurred in connection with the Merger. RoTech will not pay
any of the expenses, if any, of IHS, IHS Sub or the stockholders of RoTech
incurred in connection with the Merger.
10. There is no intercorporate indebtedness existing between IHS and RoTech
or between IHS Sub and RoTech that was issued, acquired, or will be settled at a
discount as a result of the Merger.
11. At the Effective Time of the Merger, the fair market value of the
assets of RoTech will exceed the sum of its liabilities (including any
liabilities to which its assets are subject).
12. No stock of IHS Sub will be issued in the Merger.
September 17, 1997
Page -4-
13. RoTech is not and will not be at the Effective Time of the Merger, an
"investment company" as defined in Section 368(a)(2)(F)(iii) and (iv) of the
Code.
14. RoTech is not, and will not be at the Effective Time of the Merger,
under the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
15. RoTech is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida.
16. The payment of cash in lieu of fractional shares of stock of RoTech was
not separately bargained for consideration and is being made for the purpose of
saving IHS the expense and inconvenience of issuing fractional shares.
17. At the Effective Time of the Merger, RoTech will not have outstanding
any warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in RoTech that, if exercised or
converted, would affect IHS's acquisition or retention of Control of RoTech.
18. None of the compensation received by any stockholder of RoTech who is
(or was) a service provider to RoTech will be separate consideration for, or
allocable to, any of his or her shares of RoTech stock, and the compensation
paid to any such person will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arms-length for
similar services. None of the shares of IHS stock received by any shareholder of
RoTech who is (or was) a service provider to RoTech will be separate
consideration for, or allocable to, past or future services (including any
employment agreement or any covenants not to compete).
19. The terms of the Merger Agreement and all other agreements entered into
in connection therewith were the product of arms-length negotiations.
20. No issuance of RoTech stock or rights to acquire RoTech stock have
occurred or will occur during the Pre-Merger Period other than pursuant to
options, warrants, or agreements outstanding prior to the Pre-Merger Period.
21. Attached hereto as Schedule A is a list containing the names of all
persons that, to the knowledge of RoTech, owned at any time during the
Pre-Merger Period five percent (5%) or more of the total number of outstanding
shares of RoTech stock.
September 17, 1997
Page -5-
22. The Merger Agreement represents the full and complete agreement between
IHS, IHS Sub and RoTech regarding the Merger, and there are no other agreements
regarding the Merger.
23. Each of the representations made by RoTech in the Merger Agreement, the
Proxy Statement/Prospectus and any other documents associated therewith is true
and accurate, and the facts relating to the Merger, as such facts are described
in the Proxy Statement/ Prospectus, are, insofar as such facts pertain to
RoTech, true, correct and complete in all material respects.
24. RoTech is authorized to make all of the representations set forth
herein.
RoTech will promptly and timely notify IHS if, after signing this letter,
RoTech has reason to believe that (i) any of the facts described herein or in
the Proxy Statement/Prospectus or (ii) any of the representations made in this
letter are untrue, incorrect or incomplete in any respect.
You have our permission to attach a copy of this letter to your written
opinion.
Very truly yours,
RoTech Medical Corporation, a
Florida corporation
By:/s/ Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx,President
SCHEDULE A
Owners of five percent (5%) or more
of the total number of outstanding
shares of RoTech stock as of 7/31/97
Xxxxxx Investments, Inc. 7.6%
One Post Office Square
Xxxxxx, Xxxxxxxxxxxxx 00000
Thayers Colonial Pharmacy, Inc. 5.7%
000 Xxxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxx 00000
