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EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of January __, 1997, this
"Agreement") among Stone Treatment Center of New England, Inc., a Rhode Island
corporation ("Seller"), Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxxxx, M.D.,
Xxxxxxxxx Xxxxxxx, M.D., Xxxxxx Xxxxxxxx, M.D. and Xxxxxx X. Xxxxxx, M.D. (each
a "Stockholder" and collectively, the "Stockholders"), and Medical Alliance,
Inc., a Texas corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, the Stockholders are the owners of all of the stock of Seller;
and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase,
substantially all of the assets of Seller;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "Allowed Equipment" shall mean equipment purchased for the New
England Territory (as defined herein) with the prior written consent and
agreement of the Purchaser and a majority of the Stockholders. Provided the
New England Territory Budget, as listed on Schedule 1.1(a), is being met or
exceeded, such consent shall not be unreasonably withheld by any party.
(b) "Allowed E.S.W.L. EBITDA" shall mean earnings before interest,
taxes, depreciation and amortization attributable to E.S.W.L. services
performed outside of the New England Territory during the fiscal year ended
December 31, 1997 that result from the contract anticipated to be entered into
between Purchaser and MedStone, Inc. Such EBITDA will be less the cost of
Allowed Equipment acquired after the date hereof for the provision of E.S.W.L.
services performed outside of the New England Territory. The cost of such
Allowed Equipment shall be the total of: (i) an amount calculated by dividing
the total capitalizable cost of such equipment by 36 and multiplied by the
number of months such equipment is in service during 1997; (ii) any revenue
sharing or rental fees associated with such equipment; and (iii) an amount
equal to the interest portion of a 36 month amortization of the capitalizable
cost of such equipment, at an interest rate equal to the highest current
interest rate charged to Purchaser under any agreement to which Purchaser is a
party during 1997, regardless of the actual manner of payment for such
equipment.
(c) "Allowed New Services" shall mean the offering of the Coherent
Versapulse for the treatment of pigmented and vascular lesions, tattoos, and
the offering of a laser, such as the Coherent Versapulse or the Laserscope
AURA, to treat cutaneous leg veins within the states of Connecticut, Maine,
Massachusetts, New Hampshire, Rhode Island and Vermont.
(d) "Assets" shall mean, with respect to Seller, all of the business,
properties and assets (real and personal, tangible and intangible) of Seller of
every kind and wherever situated that are owned by Seller or in which it has
any right or interest (including without limitation and to the extent owned,
its business as a going concern, its goodwill, franchises and all right, title
and interest in and to the use of its corporate name and any derivatives or
combinations thereof; its trade-names, trade-marks, trade-xxxx registrations
and trade-xxxx applications, service marks, service xxxx registrations and
service xxxx applications, copyrights, copyright registrations and copyright
applications, patents, patent registrations and patent applications, processes,
formulae, proprietary and technical information, computer software, know-how,
permits, licenses, trade secrets, inventions and royalties (including all
rights to xxx for past infringement of any of the foregoing); its lands,
leaseholds and other interests in land; its
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inventory of finished goods, work-in-process and raw materials, backlog,
equipment and supplies; its cash, money on deposit with banks and others,
certificates of deposit, commercial paper, stocks, bonds and other investments;
its accounts receivable as listed in Schedule 3.26 (the "Accounts Receivable");
rights under its insurance policies and warranties; its causes of action,
judgments, claims and demands of whatever nature; its deferred charges, advance
payments, prepaid items, claims for refunds, rights of offset and credits of
all kinds; all credit balances of or inuring to Seller under any state
unemployment compensation plan or fund; its rights under restrictive covenants
and obligations of present and former officers and employees and of individuals
and corporations; its rights under partnership or joint venture agreements or
arrangements; its rights under all agreements assumed by Purchaser; and its
files, papers and records relating to the aforesaid business, properties and
assets) other than the Excluded Assets.
(e) "Assumed Accounts Payable" shall mean those accounts payable of
Seller listed on Schedule 1.1(e).
(f) "Assumed Liabilities" shall mean those fixed and determinable
liabilities of Seller listed in Schedule 1.1(f) and the Assumed Accounts
Payable. Except for the Assumed Liabilities, Purchaser shall not assume or
agree to pay, perform or discharge any liabilities or obligations of Seller,
whether accrued, absolute, contingent or otherwise, including without
limitation, liabilities based on or arising out of or in connection with (a)
any defects in products manufactured, rented or sold by Seller, (b) any implied
or express warranties relating to such products or (c) any pension or other
benefit liability relating to Seller's employees.
(g) "Closing" shall mean the closing of the transactions contemplated
by this Agreement.
(h) "Closing Date" shall mean the date hereof.
(i) "Code" shall have the meaning set forth in Section 2.2(b).
(j) "Excluded Assets" shall mean the following assets and properties:
(i) The consideration delivered to Seller pursuant to this
Agreement for the Assets sold, transferred, assigned, conveyed and
delivered pursuant hereto;
(ii) Seller's right to enforce Purchaser's representations,
warranties and covenants hereunder and the obligations of Purchaser to
pay, perform or discharge the liabilities of Seller assumed by Purchaser
pursuant to this Agreement and all other rights, including rights of
indemnification, of Seller under this Agreement or any instrument
executed pursuant hereto;
(iii) Seller's Articles of Incorporation and all amendments
thereto, Bylaws, corporate seal, minute books, stock books and other
corporate records having exclusively to do with the corporate
organization and capitalization of Seller;
(iv) Seller's books of account, but Seller agrees that Purchaser
shall have the right at Purchaser's request to inspect such books and
make copies thereof;
(v) Seller's rights to claims for refunds of taxes which cannot
be assigned by law;
(vi) Shares of the capital stock of Seller;
(vii) Unclaimed dividends and other money and property that are
held in trust by Seller or subject to escheat;
(viii) Any accounts payable of Seller not listed on Schedule
1.1(e);
(ix) Seller's option to obtain an equity position in that
certain Freestanding Ambulatory Surgery Center, as such option was
purchased from Xxxxxxx Xxxxxxx, M.D.; and
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(x) Those shares of Common Stock of Purchaser purchased by
Seller pursuant to Purchaser's initial public offering of the same.
(k) "Modified Working Capital" shall equal the difference between the
Total Assets (as determined using the component accounts listed on Schedule
1.1(k) attached hereto) and the Total Liabilities (as determined using the
component accounts listed on Schedule 1.1(k) attached hereto) of the Seller.
Total Assets and Total Liabilities shall be determined on the date hereof in a
manner acceptable to Buyer and Seller. Seller agrees that if, on the date
hereof, the Modified Working Capital is less than the amount specified in
Section 3.37, the Cash Compensation shall be decreased by the amount that the
Modified Working Capital is less than that amount specified in Section 3.37.
(l) "New England Territory" shall mean the service area covered by
Seller as of December 31, 1996, in the states of Connecticut, Maine,
Massachusetts, New Hampshire, Rhode Island and Vermont.
(m) "1997 EBITDA" shall mean the combination of (i) the 1997 Existing
Services EBITDA, (ii) the 1997 New Services EBITDA and (iii) the Allowed
E.S.W.L. EBITDA for all such services performed through December 31, 1997,
provided, however, that if (i) the 1997 Existing Services EBITDA is less than
$538,312 and (ii) the 1997 New Services EBITDA is a positive number, the 1997
EBITDA shall not include the 1997 New Services EBITDA.
(n) "1997 Existing Services EBITDA" shall mean the earnings before
interest, taxes, depreciation and amortization of the New England Territory for
the fiscal year ended December 31, 1997, attributable to those services offered
by Seller in the New England Territory as of the date hereof, including laser
lithotripsy, E.S.W.L. laser prostatectomy, laser arthroscopy, C.U.S.A. skin
resurfacing and incisioral surgery utilizing the Ultrapulse laser, and less the
cost of Allowed Equipment acquired after the date hereof for the provision of
those services offered by Seller as of the date hereof. The cost of such
equipment shall be the total of: (i) an amount calculated by dividing the total
capitalizable cost of such equipment by 36 and multiplied by the number of
months such equipment is in service during 1997; (ii) any revenue sharing or
rental fees associated with such equipment; and (iii) an amount equal to the
interest portion of a 36 month amortization of the capitalizable cost of such
equipment, at an interest rate equal to the highest current interest rate
charged to Purchaser under any agreement to which Purchaser is a party during
1997, regardless of the actual manner of payment for such equipment.
(o) "1997 New Services EBITDA" shall mean the earnings before
interest, taxes, depreciation and amortization of Seller for the fiscal year
ended December 31, 1997, attributable solely to the Allowed New Services, and
less the cost of any Allowed Equipment acquired after the date hereof for the
provision of Allowed New Services. The cost of such equipment shall be the
total of: (i) an amount calculated by dividing the total capitalizable cost of
such equipment by 36 and multiplied by the number of months such equipment is
in service during 1997; (ii) any revenue sharing or rental fees associated with
such equipment; and (iii) an amount equal to the interest portion of a 36 month
amortization of the capitalizable cost of such equipment, at an interest rate
equal to the highest current interest rate charged to Purchaser under any
agreement to which Purchaser is a party during 1997, regardless of the actual
manner of payment for such equipment.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1. PURCHASE AND SALE OF ASSETS. Subject to and upon the
terms and conditions contained herein, on the date hereof, Seller hereby sells,
transfers, assigns, conveys and delivers to Purchaser, free and clear of all
security interests, liens, claims, restrictions and encumbrances (except as
provided for in the Assumed Liabilities) and Purchaser hereby purchases,
accepts and acquires from Seller, the Assets.
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SECTION 2.2. PURCHASE PRICE.
(a) TOTAL PURCHASE PRICE. The total purchase price for the Assets
(the "Purchase Price") shall be: (i) $245,000 in cash ("Cash Consideration");
(ii) a contingent one time income earnout in an amount to be determined
pursuant to Section 2.2(c) (the "Income Earnout"); (iii) 22,174 shares of
common stock of Purchaser (the "Common Stock"); and (iv) the assumption of
Assumed Liabilities; and (v) Purchaser's assumption of the Assumed Accounts
Payable.
(b) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets as set forth in Schedule 2.2(b), such allocation to
be made as provided in Section 1060 of the Internal Revenue Code of 1986 (the
"Code"). Purchaser and Seller shall each file Form 8594 (Asset Acquisition
Statement Under Section 1060) on a timely basis reporting the allocation of the
Purchase Price consistent with the allocation in Schedule 2.2(b). Schedule
2.2(b) also reflects the aggregate fair market values for each of Class I
assets, Class II assets and Class III assets, as such terms are defined in
regulations promulgated pursuant to Section 1060 of the Code. Purchaser and
Seller shall file on a timely basis any amendments required to such Form 8594
as a result of a subsequent increase or decrease of the Purchase Price.
Purchaser and Seller shall not take any position on their respective income tax
returns that is inconsistent with the allocation of the Purchase Price as
agreed to in Schedule 2.2(b) or as adjusted as a result of a subsequent
increase or decrease in the Purchase Price.
(c) INCOME EARNOUT. By March 31, 1998, the parties shall determine,
via an accounting performed by Coopers & Xxxxxxx, LLP ("Coopers & Xxxxxxx"),
the 1997 EBITDA. The cost of such accounting shall be shared equally by Seller
and Purchaser. If the 1997 EBITDA is greater than or equal to $778,000, the
Income Earnout shall equal $1,250,000. If the 1997 EBITDA is greater than or
equal to $667,000, but less than $778,000, the Income Earnout shall equal
$1,000,000. If the 1997 EBITDA is greater than or equal to $538,312, but less
than $667,000, the Income Earnout shall equal $750,000. If the 1997 EBITDA is
greater than or equal to $515,449, but less than $538,312, the Income Earnout
shall equal $625,000. If the 1997 EBITDA is greater than or equal to $492,585,
but less than $515,449, the Income Earnout shall equal $500,000. If the 1997
EBITDA is greater than or equal to $469,710, but less than $492,585, the Income
Earnout shall equal $375,000. If the 1997 EBITDA is greater than or equal to
$446,835, but less than $469,710 the Income Earnout shall equal $250,000. If
the 1997 EBITDA is less than $446,835, the Income Earnout shall equal $0. The
Income Earnout, if any, shall be paid by Purchaser as follows: (i) up to the
first $75,000 of the Income Earnout shall consist of that number of shares of
Common Stock equal to $75,000 based upon the closing price of Purchaser Common
Stock on December 31, 1997; (ii) any additional amounts to be paid to Seller in
respect of the Income Earnout shall be paid in cash by April 30, 1998.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants that the following are true and correct
as of the date hereof:
SECTION 3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. Seller is
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Seller is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, which jurisdictions are listed in
Schedule 3.1, except where the failure to be qualified or licensed would not
have a material adverse effect on the business of Seller. Seller does not have
any assets, employees or offices in any state other than the states listed in
Schedule 3.1. Seller does not own, directly or indirectly, any of the capital
stock of any other corporation or any equity, profit sharing, participation or
other interest in any corporation, partnership, joint venture or other entity.
SECTION 3.2. CORPORATE RECORDS. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of Seller that have
been delivered to Purchaser are true, correct and complete copies thereof, as
in effect on the date hereof. The minute books of Seller, copies of which have
been delivered to Purchaser,
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contain accurate minutes of all meetings of, and accurate consents to all
actions taken without meetings by, the Board of Directors (and any committees
thereof) and the shareholders of Seller since the formation of Seller.
SECTION 3.3. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Seller of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Seller. This Agreement and each other
agreement contemplated hereby have been duly executed and delivered by Seller
and constitute legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
SECTION 3.4. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Seller or any agreement, indenture or other instrument under which
Seller is bound or to which any of the Assets are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of the Assets or (ii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Seller or the Assets.
Seller has complied with all laws, regulations and licensing requirements and
has filed with the proper authorities all necessary statements and reports.
SECTION 3.5. CONSENTS. Except as set forth in Schedule 3.5, no
consent, authorization, approval, permit or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of Seller.
SECTION 3.6. FINANCIAL STATEMENTS. Seller has furnished to Purchaser
Seller's unaudited balance sheet and related unaudited statements of income,
retained earnings and cash flows for the twelve-month period ended December 31,
1995, including the notes thereto, as well as unaudited balance sheets and
related unaudited statements of income, retained earnings and cash flows for
the eleven-month period ended November 30, 1996 (collectively, the "Financial
Statements"). The Financial Statements are true, correct and complete, are in
accordance with the books and records of Seller, fairly present the financial
condition and results of operations of Seller as of the dates and for the
periods indicated and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis with prior periods.
SECTION 3.7. LIABILITIES AND OBLIGATIONS. Except as set forth in
Schedule 3.7, the Financial Statements reflect all liabilities of Seller,
accrued, contingent or otherwise (known or unknown and asserted or unasserted),
arising out of transactions effected or events occurring on or prior to the
date hereof. All reserves shown in the Financial Statements are appropriate,
reasonable and sufficient to provide for losses thereby contemplated. Except
as set forth in the Financial Statements, Seller is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and Seller knows of no basis for the assertion of any other claims or
liabilities of any nature or in any amount.
SECTION 3.8. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Schedule 3.8(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of Seller. In
addition, Schedule 3.8(a) contains a complete and accurate description of (i)
all increases in Cash Compensation of employees of Seller during the current
and immediately preceding fiscal years of Seller and (ii) any promised
increases in Cash Compensation of employees of Seller that have not yet been
effected.
(b) COMPENSATION PLANS. Schedule 3.8(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Seller or to which Seller contributes on
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behalf of its employees, other than Employee Benefit Plans listed in Schedule
3.9(a). The Compensation Plans include without limitation plans, arrangements
or practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards, and stock ownership or stock options. Seller has
provided Purchaser a copy of each written Compensation Plan and a written
description of each unwritten Compensation Plan. Each of the Compensation
Plans can be terminated or amended at will by Seller.
(c) EMPLOYMENT AGREEMENTS. Schedule 3.8(c) contains a complete and
accurate list of all employment agreements (the "Employment Agreements") to
which Seller is a party with respect to its employees. The Employment
Agreements include without limitation employee leasing agreements, employee
services agreements and noncompetition agreements. Seller has provided
Purchaser a copy of each written Employment Agreement and a written description
of each unwritten Employment Agreement.
(d) EMPLOYEE POLICIES AND PROCEDURES. Schedule 3.8(d) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of Seller. Seller has provided Purchaser a copy of all written
Employee Policies and Procedures and a written description of all unwritten
Employee Policies and Procedures. Each of the Employee Policies and Procedures
can be amended or terminated at will by Seller.
(e) UNWRITTEN AMENDMENTS. No unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans, Employment Agreements or Employee Policies and
Procedures.
(f) LABOR COMPLIANCE. Except as set forth in Schedule 3.8(f), Seller
(i) has been and is in compliance with all laws, rules, regulations and
ordinances respecting employment and employment practices, terms and conditions
of employment and wages and hours, and (ii) is not liable for any arrears of
wages or penalties for failure to comply with any of the foregoing. Seller has
not engaged in any unfair labor practice or discriminated on the basis of race,
color, religion, sex, national origin, age or handicap in its employment
conditions or practices.
There are no (i) unfair labor practice charges or complaints or
racial, color, religious, sex, national origin, age or handicap discrimination
charges or complaints pending or threatened against Seller before any federal,
state or local court, board, department, commission or agency nor does any
basis therefor exist or (ii) existing or threatened labor strikes, disputes,
grievances, controversies or other labor troubles affecting Seller, nor does
any basis therefor exist.
(g) UNIONS AND EMPLOYEES. Seller has never been a party to any
agreement with any union, labor organization or collective bargaining unit. No
employees of Seller are represented by any union, labor organization or
collective bargaining unit. To the best knowledge of Seller, the employees of
Seller have no intention to and have not threatened to organize or join a
union, labor organization or collective bargaining unit. All employees of
Seller are citizens of, or are authorized to be employed in, the United States.
SECTION 3.9. EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION. Schedule 3.9(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by Seller or to which Seller contributes on
behalf of its employees and all Employee Benefit Plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof. Seller has provided Purchaser with copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. In
addition, Seller has provided Purchaser a written description of all existing
practices engaged in by Seller that constitute Employee Benefit Plans. Each of
the Employee Benefit Plans can be terminated or amended at will by Seller. No
unwritten amendment exists with respect to any Employee Benefit Plan.
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(b) ADMINISTRATION. Each Employee Benefit Plan has been administered
and maintained in compliance with all laws, rules and regulations. No Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency.
No prohibited transactions (within the meaning of Section 4975 of the Code)
have occurred with respect to any Employee Benefit Plan.
(c) CLAIMS AND LITIGATION. No threatened or pending claims, suits or
other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
(d) QUALIFICATION. Seller has received a favorable determination
letter or ruling from the Internal Revenue Service for each Employee Benefit
Plan intended to be qualified within the meaning of Section 401(a) of the Code
and/or tax-exempt within the meaning of Section 501(a) of the Code. No
proceedings exist or have been threatened that could result in the revocation
of any such favorable determination letter or ruling.
(e) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Purchaser by the Pension Benefit Guaranty
Corporation as a result of any act or omission by Seller or any member of a
Controlled Group. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) FUNDING STATUS. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning of Section 412(n)(6)(B) of the Code) in
which Seller is a member (a "Controlled Group"). With respect to each Employee
Benefit Plan subject to Title IV of ERISA, the assets of each such plan are at
least equal in value to the present value of accrued benefits determined on an
ongoing basis as of the date hereof. With respect to each Employee Benefit
Plan described in Section 501(c)(9) of the Code, the assets of each such plan
are at least equal in value to the present value of accrued benefits as of the
date hereof. Schedule 3.9(f) contains a complete and accurate statement of all
actuarial assumptions applied to determine the present value of accrued
benefits under all Employee Benefit Plans subject to actuarial assumptions.
(g) EXCISE TAXES. Neither Seller nor any member of a Controlled
Group has any liability to pay excise taxes with respect to any Employee
Benefit Plan under applicable provisions of the Code or ERISA. Neither Seller
nor any member of a Controlled Group is or ever has been obligated to
contribute to a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(h) MEDICAL AND DENTAL CARE CLAIMS; RETIREES. Schedule 3.9(h)
contains a complete and accurate list of all claims made (without identifying
specific individuals) under any medical or dental care plan or commitment
offered by Seller to its employees involving hospitalization, medical or dental
care claims that have exceeded $2,000 per year for an individual during
Seller's current fiscal year or any of the three fiscal years preceding the
date hereof. Seller has no obligation or commitment to provide medical, dental
or life insurance benefits to or on behalf of any of its employees who may
retire or any of its former employees who have retired from employment with
Seller.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 3.10, since November 1, 1996, Seller has not
(a) suffered any material adverse change, whether or not caused by
any deliberate act or omission of Seller, in its condition (financial or
otherwise), operations, assets, liabilities, business or prospects;
(b) contracted for the purchase of any capital assets having a cost
in excess of $5,000 or paid any capital expenditures in excess of $5,000;
(c) incurred any indebtedness for borrowed money or issued or sold
any debt securities;
(d) incurred or discharged any liabilities or obligations except in
the ordinary course of business;
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(e) paid any amount on any indebtedness prior to the due date,
forgiven or cancelled any debts or claims or released or waived any rights or
claims;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(g) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could materially and adversely affect, its business;
(h) acquired or disposed of any assets except in the ordinary course
of business;
(i) written up or written down the carrying value of any of its
assets;
(j) changed the costing system or depreciation methods of accounting
for its assets;
(k) waived any material rights or forgiven any material claims;
(l) lost or terminated any employee, customer or supplier, the loss
or termination of which has materially and adversely affected, or could
materially and adversely affect, its business or assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the ordinary
course of business;
(o) made any payments to or loaned any money to any person or entity
referred to in Section 3.32;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
to change the terms and conditions of any such rights;
(r) entered into any agreement with any person or group, or modified
or amended in any material respect the terms of any such existing agreement
except in the ordinary course of business;
(s) entered into, adopted or amended any Employee Benefit Plan;
(t) operated its business in any manner other than the ordinary
course of business or introduced any new method of management or operation; or
(u) entered into any other commitment or transaction or experienced
any other event that is material to this Agreement or to any of the other
agreements and documents executed or to be executed pursuant to this Agreement
or to the transactions contemplated hereby or thereby, or that has materially
and adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or
prospects of Seller.
SECTION 3.11. TITLE; LEASED ASSETS.
(a) REAL PROPERTY. A description of all interests in real property
owned by Seller (collectively, the "Real Property") is set forth in Schedule
3.11(a). Except as set forth in Schedule 3.11(a), Seller has good, valid and
indefeasible title to all the Real Property. The Real Property and the leased
real property referred to in Section 3.11(c) constitute the only real property
used in the conduct of Seller's business. Upon consummation of the
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transactions contemplated hereby, Purchaser shall receive good, valid and
marketable title to the Real Property free and clear of all liens, claims and
encumbrances other than those described in Schedule 3.11(a).
(b) PERSONAL PROPERTY. A description of all tangible and intangible
personal property owned by Seller (collectively, the "Personal Property") is
set forth in Schedule 3.11(b). Except as set forth in Schedule 3.11(b), Seller
has good, valid and marketable title to all the Personal Property. The
Personal Property and the leased personal property referred to in Section
3.11(c) constitute the only personal property used in the conduct of Seller's
business. Upon consummation of the transactions contemplated hereby, Purchaser
shall receive good, valid and marketable title to the Personal Property free
and clear of all security interests, liens, claims and encumbrances other than
those described in Schedule 3.11(b).
(c) LEASES. A list and brief description of all leases of real and
personal property to which Seller is a party, either as lessor or lessee, are
set forth in Schedule 3.11(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
(d) RIGHT TO USE ASSETS. Except for those assets acquired since
November 30, 1996, which are listed in Schedule 3.11(d), all tangible assets
used in the conduct of Seller's business are reflected in the Financial
Statements in a manner that is in conformity with generally accepted accounting
principles applied on a consistent basis with prior periods. Seller owns,
leases or otherwise possesses a transferable right to use all assets used in
the conduct of its business, and except for the Excluded Assets, has hereby
transferred all of such rights to Purchaser.
SECTION 3.12. COMMITMENTS.
(a) COMMITMENTS; DEFAULTS. Except as set forth in Schedule 3.12,
Seller has not entered into, nor are the Assets or the business of Seller bound
by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent
to another;
(vii) deed or other document evidencing an interest in or
contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys;
(ix) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee;
(x) agreement between Seller and any affiliate of Seller;
(xi) agreement relating to any material matter or transaction in
which an interest is held by a person or entity that is an affiliate of
Seller;
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(xii) any agreement for the acquisition of services, supplies,
equipment or other personal property and involving more than $5,000 in
the aggregate;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) agreement providing for the purchase from a supplier of all
or substantially all of the requirements of Seller of a particular
product or service; or
(xvi) any other contract or arrangement that involves either an
unperformed commitment in excess of $5,000 or that terminates more than
30 days after the date here of any other agreement or commitment not
made in the ordinary course of business or that is material to the
business or financial condition of Seller.
All of the foregoing are hereinafter collectively referred to as the
"Commitments." True, correct and complete copies of the written Commitments,
and true, correct and complete written descriptions of the oral Commitments,
have heretofore been delivered or made available to Purchaser. There are no
existing defaults, events of default or events, occurrences, acts or omissions
that, with the giving of notice or lapse of time or both, would constitute
defaults by Seller, and no penalties have been incurred nor are amendments
pending, with respect to the Commitments, except as described in Schedule 3.12.
The Commitments are in full force and effect and are valid and enforceable
obligations of the parties thereto in accordance with their respective terms,
and no defenses, off-sets or counterclaims have been asserted or, to the best
knowledge of Seller, may be made by any party thereto, nor has Seller waived
any rights thereunder, except as described in Schedule 3.12. Seller has not
received notice of any default with respect to any Commitment.
(b) NO CANCELLATION OR TERMINATION OF COMMITMENT. Except as
contemplated hereby, Seller has not received notice of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any Commitment or agreement, and Seller knows of no fact that would justify the
exercise of such a right. Seller does not currently contemplate, or have
reason to believe any other person or entity currently contemplates, any
amendment or change to any Commitment. Except as listed in Schedule 3.12, none
of the customers or suppliers of Seller has refused, or communicated that it
will or may refuse, to purchase or supply goods or services, as the case may
be, or has communicated that it will or may substantially reduce the amounts of
goods or services that it is willing to purchase from, or sell to, Seller.
SECTION 3.13. ADVERSE AGREEMENTS. Seller is not a party to any
agreement or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects, or so far as Seller can now
foresee, may in the future materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or
prospects of Seller.
SECTION 3.14. INSURANCE. Seller carries property, liability, workers'
compensation and such other types of insurance as is customary in Seller's
industry. A list and brief description of all insurance policies of Seller are
set forth in Schedule 3.14. All of such policies are valid and enforceable
policies, issued by insurers of recognized responsibility in amounts and
against such risks and losses as is customary in Seller's industry. Such
insurance shall be outstanding and duly in force without interruption up to and
including the Closing Date. True, complete and correct copies of all such
policies have been provided to Purchaser on or prior to the date hereof.
SECTION 3.15. PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS.
(a) OWNERSHIP. Seller owns all patents, trade-marks, service marks
and copyrights, if any, necessary to conduct its business, or possesses
adequate licenses or other rights, if any, therefor, without conflict with the
rights of others. Set forth in Schedule 3.15 is a true and correct description
of the following ("Proprietary Rights"): (i) all trade-marks, trade-names,
service marks and other trade designations, including common law rights,
registrations and applications therefor, and all patents, copyrights and
applications currently owned, in whole or in part, by Seller with
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respect to the Assets and Seller's business, and all licenses, royalties,
assignments and other similar agreements relating to the foregoing to which
Seller is a party (including expiration date if applicable) and (ii) all
agreements relating to technology, know-how or processes that Seller is
licensed or authorized to use by others, or which it licenses or authorizes
others to use.
(b) CONFLICTING RIGHTS OF THIRD PARTIES. Seller has the sole and
exclusive right to use the Proprietary Rights without infringing or violating
the rights of any third parties. No consent of third parties will be required
for the transfer thereof to Purchaser or the use thereof by Purchaser upon
consummation of the transactions contemplated hereby and the Proprietary Rights
are freely transferable. No claim has been asserted by any person to the
ownership of or right to use any Proprietary Right or challenging or
questioning the validity or effectiveness of any license or agreement
constituting a part of any Proprietary Right, and Seller knows of no valid
basis for any such claim. Each of the Proprietary Rights is valid and
subsisting, has not been cancelled, abandoned or otherwise terminated and, if
applicable, has been duly issued or filed.
(c) CLAIMS OF OTHER PERSONS. Seller has no knowledge of any claim
that, or inquiry as to whether, any product, activity or operation of Seller
infringes upon or involves, or has resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened that challenge
the rights of Seller with respect thereto. Seller has not given and is not
bound by any agreement of indemnification for any Proprietary Right as to any
property manufactured, used or sold by Seller.
SECTION 3.16. TRADE SECRETS AND CUSTOMER LISTS. Seller has the right to
use, free and clear of any claims or rights of others except claims or rights
specifically set forth in Schedule 3.16, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by Seller. Seller is not using
or in any way making use of any confidential information or trade secrets of
any third party, including without limitation any past or present employee of
Seller.
SECTION 3.17. TAXES.
(a) FILING OF TAX RETURNS. Seller has duly and timely filed with the
appropriate governmental agencies all income, excise, corporate, franchise,
property, sales, use, payroll, withholding and other tax returns (including
information returns) and reports required to be filed by the United States or
any state or any political subdivision thereof or any foreign jurisdiction.
All such tax returns or reports are complete and accurate and properly reflect
the taxes of Seller for the periods covered thereby. Seller has paid or
accrued all taxes, penalties and interest that have become due with respect to
any returns that it has filed and any assessments of which it is aware. Seller
is not delinquent in the payment of any tax, assessment or governmental charge.
(b) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS.
No tax deficiency or delinquency has been asserted against Seller. There is no
unpaid assessment, proposal for additional taxes, deficiency or delinquency in
the payment of any of the taxes of Seller that could be asserted by any taxing
authority. Seller has not violated any federal, state, local or foreign tax
law.
(c) NO EXTENSION OF LIMITATION PERIOD. Seller has not granted an
extension to any taxing authority of the limitation period during which any tax
liability may be assessed or collected.
(d) ALL WITHHOLDING REQUIREMENTS SATISFIED. All monies required to
be withheld by Seller and paid to governmental agencies for all income, social
security, unemployment insurance, sales, excise, use, and other taxes have been
(i) collected or withheld and either paid to the respective governmental
agencies or set aside in accounts for such purpose or (ii) properly reflected
in the Financial Statements.
(e) STATE UNEMPLOYMENT TAXES. In respect of its most recently
completed reporting period, Seller has paid state unemployment taxes in the
appropriate amounts to the appropriate authorities. Seller does not know or
have reason to know of any increase or proposed increase, or facts that would
lead to an increase, in the rate of such state unemployment tax for any period
in the future.
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(f) TAX LIABILITY IN FINANCIAL STATEMENTS. The liabilities
(including deferred taxes) shown in the Financial Statements as of November 30,
1996 and to be accrued on the books and records of the Seller as of the date
hereof for taxes, interest and penalties are adequate accruals and have been
accrued in a manner consistent with the practices utilized for accruing tax
liabilities in the tax year ended December 31, 1996 and take into account net
operating losses, investment credits and other carryovers for periods ended
prior to the date hereof.
(g) FOREIGN PERSON. Seller is not a foreign person, as such term is
referred to in Section 1445(b)(2) of the Code.
(h) TAX EXEMPT ENTITY. None of the Assets are or will be subject to
a lease to a "tax exempt entity" as such term is defined in Section 168(h)(2)
of the Code.
SECTION 3.18. COMPLIANCE WITH LAWS. Seller has complied with all laws,
regulations and licensing requirements and has filed with the proper
authorities all necessary statements and reports. There are no existing
violations by Seller of any federal, state or local law or regulation that
could affect the property or business of Seller. Seller possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted, all of which are listed in Schedule
3.18.
SECTION 3.19. FINDER'S FEE. Seller has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
SECTION 3.20. LITIGATION. Except as described in Schedule 3.20, there
are no legal actions or administrative proceedings or investigations
instituted, or to the best knowledge of Seller threatened, against or
affecting, or that could affect, Seller, any of the Assets, or the business of
Seller. Seller is not (i) subject to any continuing court or administrative
order, writ, injunction or decree applicable specifically to Seller or to its
business, assets, operations or employees or (ii) in default with respect to
any such order, writ, injunction or decree. Seller does not know of any basis
for any such action, proceeding or investigation.
SECTION 3.21. ACCURACY OF INFORMATION FURNISHED. All information
furnished to Purchaser by Seller hereby or in connection with the transactions
contemplated hereby is true, correct and complete in all respects. Such
information states all facts required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements are made, true, correct and complete.
SECTION 3.22. CONDITION OF FIXED ASSETS. All of the plants, structures
and equipment (the "Fixed Assets") included in the Assets are in good condition
and repair for their intended use in the ordinary course of business and
conform in all material respects with all applicable ordinances, regulations
and other laws and there are no known latent defects therein.
SECTION 3.23. INVENTORY. All of the inventory included in the Assets is
in good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. Seller has the types and quantities of inventories appropriate, taken
as a whole, to conduct its business consistently with past practices.
SECTION 3.24. BOOKS OF ACCOUNT. The books of account of Seller have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Seller have been properly recorded in such books.
SECTION 3.25. NAME. There are no actions, suits or proceedings pending,
or to the best knowledge of Seller threatened, against or affecting Seller that
could result in any impairment of the right of Seller to use the name "Stone
Treatment Center." The use of the name "Stone Treatment Center" does not
infringe the rights of any third party nor is it confusingly similar with the
corporate name of any third party. After the date hereof, no person or
business entity other than Purchaser will be authorized, directly or
indirectly, to use the name "Stone Treatment Center" or any name confusingly
similar thereto.
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SECTION 3.26. ACCOUNTS RECEIVABLE. Schedule 3.26 sets forth the
accounts receivable of Seller's business from sales made as of the date hereof
and the payments and rights to receive payments related thereto, is complete
and accurate. All such accounts receivable have arisen from bona fide
transactions in the ordinary course of business and are valid and enforceable
claims subject to no right of set-off or counterclaim.
SECTION 3.27. CUSTOMERS. Set forth in Schedule 3.27 is a complete and
accurate list of the ten largest customers of Seller in terms of sales for each
of the last three fiscal years and the current fiscal year to date, showing,
with respect to each, the name, address and pricing and sales records relating
to such customer.
SECTION 3.28. SUPPLIERS. Set forth in Schedule 3.28 is a complete and
accurate list of the four largest suppliers of Seller in terms of dollar volume
of transactions of Seller for each of the last three fiscal years and the
current fiscal year to date, showing, with respect to each, the name, address
and aggregate dollar volume of purchases from such supplier.
SECTION 3.29. PRICING. Set forth in Schedule 3.29 is a complete and
accurate list of Seller's standard prices and any applicable discounts by
customer name.
SECTION 3.30. PRODUCT WARRANTIES. There is no claim against or
liability of Seller on account of product warranties or with respect to the
manufacture, sale or rental of defective products and there is no basis for any
such claim on account of defective products heretofore manufactured, sold or
rented that is not fully covered by insurance.
SECTION 3.31. BANKING RELATIONS. Set forth in Schedule 3.31 is a
complete and accurate list of all arrangements that Seller has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
SECTION 3.32. OWNERSHIP INTERESTS OF INTERESTED PERSONS. Except as set
forth in Schedule 3.32, no officer, supervisory employee, director or
shareholder of Seller, or their respective spouses or children, owns directly
or indirectly, on an individual or joint basis, any material interest in, or
serves as an officer or director of, any customer or supplier of Seller, or any
organization that has a material contract or arrangement with Seller.
SECTION 3.33. ENVIRONMENTAL MATTERS.
(a) ENVIRONMENTAL LAWS. Neither Seller nor any of the Assets are
currently in violation of, or subject to any existing, pending or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
and this representation and warranty would continue to be true and correct
following disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Assets.
(b) USE OF ASSETS. To the best knowledge of Seller, the Assets have
never been used in a manner that would be in violation of any of the
Environmental Laws.
(c) PERMITS. Seller has not obtained and is not required to obtain,
and Seller has no knowledge of any reason Purchaser will be required to obtain,
any permits, licenses or similar authorizations to construct, occupy, operate
or use any buildings, improvements, fixtures and equipment owned or leased by
Seller by reason of any Environmental Laws.
SECTION 3.34. CERTAIN PAYMENTS. To the best knowledge of Seller,
neither Seller nor any director, officer or employee of Seller has paid or
caused to be paid, directly or indirectly, in connection with the business of
Seller: (i) to any government or agency thereof or any agent of any supplier or
customer any bribe, kick-back or other similar payment.
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SECTION 3.35. ACCREDITED INVESTOR STATUS. The Seller and each
Stockholder is an "accredited investor" as defined in Rule 501(a) under the
Securities Act of 1933, as amended.
SECTION 3.36. BUSINESS OPERATIONS. Since November 1, 1996, the Seller
has operated its business only in the ordinary course of business, and has not
introduced any new method of management of operation. The Seller, since
November 1, 1996, has used its best efforts to preserve the business of Seller
intact and to retain its present customers and suppliers so that they will be
available to Purchaser after the date hereof.
SECTION 3.37. MODIFIED WORKING CAPITAL. The Modified Working Capital of
the Seller is greater than or equal to $417,757.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that the following are true and
correct as of the date hereof:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the
properties it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
SECTION 4.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Purchaser of this Agreement, the Note and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Purchaser. This Agreement and
each other agreement contemplated hereby have been duly executed and delivered
by Purchaser and constitute or will constitute legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with
their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
SECTION 4.3. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Purchaser or any agreement, indenture or other instrument under which
Purchaser is bound or (ii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Purchaser or the properties
or assets of Purchaser.
SECTION 4.4. FINDER'S FEE. Purchaser has not incurred any obligation
for any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
ARTICLE V
CLOSING DELIVERIES
SECTION 5.1. DELIVERIES OF SELLER. At the Closing, Seller shall
deliver to Purchaser the following, all of which shall be in a form
satisfactory to counsel to Purchaser:
(a) a xxxx of sale and assignment conveying the Personal Property to
Purchaser;
(b) an assignment of each lease under which Seller is lessee or
lessor assigning the interest of Seller therein to Purchaser, together with, in
the case of an assignment of a lessee's interest, an owner's policy of title
insurance showing the lessee's interest under the lease to be vested in
Purchaser;
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(c) a deed, in a form satisfactory to counsel for Purchaser,
conveying each item of Real Property to Purchaser, together with the standard
form owner's title insurance policy for each item of Real Property insuring
Purchaser that good, valid and indefeasible title to such item of Real Property
is vested in Purchaser, subject only to standard form exclusions;
(d) cash in an amount equal to all funds of Seller on deposit with
banks or other persons (other than Excluded Assets) less those funds necessary
to cover drafts outstanding as of the date hereof;
(e) an Assignment Agreement in the form attached as Exhibit 5.2(c)
with respect to all of Seller's rights and obligations under the Assumed
Liabilities.
(f) a copy of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by the Secretary of that
corporation as being true and correct copies of the originals thereof subject
to no modifications or amendments;
(g) a certificate of the President of Seller, dated the Closing Date,
as to the truth and correctness of the representations and warranties of Seller
contained herein on and as of the Closing Date;
(h) a certificate of the President of Seller, dated the Closing Date,
(i) as to the performance of and compliance by Seller with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of Seller to the Closing have been satisfied;
(i) a certificate of the Secretary of Seller certifying as to the
incumbency of the directors and officers of Seller and as to the signatures of
such directors and officers who have executed documents delivered at the
Closing on behalf of Seller;
(j) a certificate, dated within 10 days of the Closing Date, of the
Secretary of State of the state of incorporation of Seller establishing that
Seller is in existence, has paid all franchise taxes and otherwise is in good
standing to transact business in its state of incorporation;
(k) certificates, dated within 10 days of the Closing Date, of the
Secretaries of State of the states in which Seller is qualified to do business,
to the effect that Seller is qualified to do business and is in good standing
as a foreign corporation in each of such states;
(l) an opinion of counsel to Seller, dated as of the date hereof, in
form and substance satisfactory to Purchaser, to the effect set forth in
Exhibit 5.1(l);
(m) all authorizations, consents, approvals, permits and licenses
referenced in Section 3.5;
(n) an executed Employment Agreement between Purchaser and Xxxxxxx X.
Xxxxxxxx, Xx., Xxxx Xxxx and Xxxx Xxxxxx-Eymand in the form attached as Exhibit
5.1(n);
(o) an executed Confidentiality and Noncompetition Agreement between
Purchaser and the Stockholders in the form attached as Exhibit 9.1(o);
(p) all required documents, including any UCC-3s (Financing Statement
Change of Modification), terminating any security interests, liens, claims or
encumbrances which may exist against the Assets and not assumed by Purchaser;
and
(q) such other instrument or instruments of transfer as shall be
necessary or appropriate, as Purchaser or its counsel shall reasonably request,
to vest in Purchaser good and marketable title to the Assets that are personal
property and good and indefeasible title to the Assets that are real property.
SECTION 5.2. DELIVERIES OF PURCHASER. At the Closing, Purchaser shall
deliver to Seller:
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(a) the Cash Consideration via wire transfer;
(b) the Common Stock;
(c) an Assumption and Assignment Agreement in the form attached as
Exhibit 5.2(c) pursuant to which Purchaser assumes the Assumed Liabilities and
Seller transfers all of Seller's rights and obligations thereunder;
(d) a copy of the resolutions of the Board of Directors of Purchaser
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by Purchaser's Secretary as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
(e) a certificate of the President of Purchaser, dated the Closing
Date, as to the truth and correctness of the representations and warranties of
Purchaser contained herein on and as of the Closing Date;
(f) a certificate of the President of Purchaser, dated the Closing
Date, (i) as to the performance and compliance by Purchaser with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of Purchaser to the Closing have been satisfied;
(g) a certificate of the Secretary of Purchaser certifying as to the
incumbency of the directors and officers of Purchaser and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Purchaser; and
(h) a certificate, dated within 10 days of the Closing Date, of the
Secretary of State of Purchaser's state of incorporation, establishing that
Purchaser is in existence, has paid all state taxes and otherwise is in good
standing to transact business in such state.
(i) an opinion of Counsel to Purchaser, dated as of the date hereof,
in form and substance satisfactory to Seller, to the effect set forth in
Exhibit 5.2(j).
ARTICLE VI
POST CLOSING MATTERS
SECTION 6.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing,
at the request of Purchaser, Seller shall deliver any further instruments of
transfer and take all reasonable action as may be necessary or appropriate to
(i) vest in Purchaser good and marketable title to Assets that are personal
property and good and indefeasible title to Assets that are real property, (ii)
transfer to Purchaser all licenses and permits necessary for the operation of
the Assets and (iii) secure all necessary approvals and consents to the
consummation of the transactions contemplated hereby. With regard to the
obtaining of the consent of any lessor of any lease listed on Schedule 3.11(c),
Purchaser shall use its best efforts to cooperate with Seller to obtain an
appropriate release by such lessor of post-Closing liability of the
Shareholders.
SECTION 6.2. EMPLOYEE BENEFIT PLAN CLAIMS INCURRED. After the Closing
Date, Seller shall remain liable under its medical and dental plans and
commitments for any claims incurred by its employees or their spouses and
dependents prior to the Closing Date. A claim shall be deemed to have been
incurred upon the occurrence of an injury or the diagnosis of an illness. An
incurred claim shall include any claim or series of claims related to a claim
incurred prior to the Closing Date. Seller shall retain all liability for
continuation coverage under Section 162(k) of the Code.
SECTION 6.3. EMPLOYEE BENEFIT PLAN TERMINATION. Within 60 days after
the Closing Date, Seller shall terminate any Employee Benefit Plan intended to
be a qualified plan within the meaning of Section 401(a) of the Code. Upon
termination, the rights of each participant in any such plan shall be fully
vested and nonforfeitable. In connection with the termination, Seller shall
undertake to obtain a favorable determination letter from the Internal
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Revenue Service with respect to each terminated plan. Seller shall offer to
distribute the accrued benefit and/or account balance of each participant
within 60 days after receipt of a favorable determination letter.
SECTION 6.4. SALES TAXES APPLICABLE TO SALES PRIOR TO OR ON THE CLOSING
DATE. Seller shall timely file all sales tax returns with respect to sales
occurring in connection with Seller's business prior to or on the Closing Date.
SECTION 6.5. SALES AND TRANSFER TAXES. Seller shall timely pay all
sales taxes applicable to the sales reported on the tax returns referred to in
Section 6.4. Seller shall be liable for and shall indemnify Purchaser against
all sales, transfer, use, excise, registration or other taxes assessed or
payable in connection with the transfer of the Assets from Seller to Purchaser.
Seller and Purchaser shall sign, and otherwise shall cooperate in the
preparation and filing with the appropriate governmental agencies of, any
affidavits or other transfer documents that are required in connection with the
transfer of vehicles or trailers that constitute part of the Assets.
ARTICLE VII
REMEDIES
SECTION 7.1. INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this Article, Seller agrees to indemnify, defend and hold
Purchaser and its directors, officers, agents, attorneys and affiliates
harmless from and against all losses, claims, obligations, demands,
assessments, penalties, liabilities, costs, damages, attorneys' fees and
expenses (collectively, "Damages"), asserted against or incurred by such
indemnities by reason of or resulting from:
(a) a breach of any representation, warranty or covenant of Seller
contained herein, in any exhibit, schedule, certificate or financial statement
delivered hereunder, or in any agreement executed in connection with the
transactions contemplated hereby;
(b) any product liability or breach of warranty claims relating to
products sold by Seller prior to or on the Closing Date, and all general
liability claims arising out of or relating to occurrences of any nature
relating to Seller's business prior to the Closing Date, whether any such
claims are asserted prior to, on or after the Closing Date;
(c) any obligation or liability under or related to any Employee
Benefit Plan or the termination thereof;
(d) any tax filing or return or payment made, or position taken, by
Seller that any governmental authority challenges and that results in an
assertion of Damages against Purchaser;
(e) any failure to comply with all applicable bulk transfer laws; or
(f) any liability related to Seller that has not been expressly
assumed by Purchaser.
The foregoing indemnification applies, without limitation, to the
violation on or before the Closing Date of any Environmental Law in effect on
or before the Closing Date and any and all matters arising out of any act,
omission, event or circumstance existing or occurring on or prior to the
Closing Date (including without limitation the presence on the Real Property or
release from the Real Property of hazardous substances or solid waste disposed
of or otherwise released prior to the Closing Date), regardless of whether the
act, omission, event or circumstance constituted a violation of any
Environmental Law at the time of its existence or occurrence; provided that
such indemnity shall not apply with respect to matters caused by or arising out
of the gross negligence or willful misconduct of Purchaser. The terms
"hazardous substance" and "release" shall have the meanings specified in
CERCLA, and the terms "solid waste" and "disposed" shall have the meanings
specified in RCRA; provided that to the extent the laws of the applicable state
establish a meaning for "hazardous substance," "release," "solid waste" or
"disposed" that is broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply. The
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provisions of this paragraph shall survive the Closing and shall continue
indefinitely thereafter in full force and effect.
SECTION 7.2. INDEMNIFICATION BY PURCHASER. Subject to the terms and
conditions of this Article, Purchaser hereby agrees to indemnify, defend and
hold Seller and its respective directors, officers, agents, attorneys and
affiliates harmless from and against all Damages asserted against or incurred
by any of such indemnitees by reason of or resulting from:
(a) a breach by Purchaser of any representation, warranty or covenant
of Purchaser contained herein or in any exhibit, schedule or certificate
delivered hereunder, or in any agreement executed in connection with the
transactions contemplated hereby; or
(b) the failure of Purchaser to pay, perform and discharge when due
any of the Assumed Liabilities.
SECTION 7.3. CONDITIONS OF INDEMNIFICATION. The respective obligations
and liabilities of Seller and Purchaser (the "indemnifying party") to the other
(the "party to be indemnified") under Sections 7.1 and 7.2 with respect to
claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required to
avoid prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to be indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume
the defense of such action or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnifying party and the
party to be indemnified and the party to be indemnified has been advised by
counsel that there may be one or more legal defenses available to it that are
different from or additional to those available to the indemnifying party (in
which case, if the party to be indemnified informs the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of the party to be indemnified, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for the party to be indemnified, which
firm shall be designated in writing by the party to be indemnified).
(b) In the event that the indemnifying party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the 10th day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not
elect to defend against such claim, the party to be indemnified will (upon
further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying party and at the indemnifying party's
expense, subject to the right of the indemnifying party to assume the defense
of such claims at any time prior to settlement, compromise or final
determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party shall not
settle any claim without the consent of the party to be indemnified unless such
settlement involves only the payment of money and the claimant provides to the
party to be indemnified a release from all liability in respect of such claim.
If the settlement of the claim involves more than the payment of money, the
indemnifying party shall not settle the claim without the prior consent of the
party to be indemnified.
(d) The party to be indemnified and the indemnifying party will each
cooperate with all reasonable requests of the other.
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SECTION 7.4. WAIVER. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any
subsequent default or breach by such party of the same or any other
representation, warranty, covenant or condition. No act, delay, omission or
course of dealing on the part of any party in exercising any right, power or
remedy under this Agreement or at law or in equity shall operate as a waiver
thereof or otherwise prejudice any of such party's rights, powers and remedies.
All remedies, whether at law or in equity, shall be cumulative and the election
of any one or more shall not constitute a waiver of the right to pursue other
available remedies.
SECTION 7.5. REMEDIES NOT EXCLUSIVE. The remedies provided in this
Article shall not be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity.
SECTION 7.6. OFFSET. Any and all amounts owing or to be paid by
Purchaser to Seller, hereunder or otherwise, shall be subject to offset and
reduction pro tanto by any amounts that may be owing at any time by Seller to
Purchaser in respect of any failure or breach of any representation, warranty
or covenant of Seller under or in connection with this Agreement or any other
agreement with Purchaser or any transaction contemplated hereby or thereby, as
reasonably determined by Purchaser. If Purchaser determines that such offset
is appropriate, notice shall be given to Seller of such determination at least
10 days prior to the due date of the payment to be reduced. If the conditions
upon which the reduction is based are cured by Seller prior to such due date,
as determined by Purchaser, the amount of such payment shall not be so reduced.
SECTION 7.7. COSTS, EXPENSES AND LEGAL FEES. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees), except that each party
hereto agrees to pay the costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the other parties in successfully (i) enforcing
any of the terms of this Agreement or (ii) proving that another party breached
any of the terms of this Agreement.
SECTION 7.8. SPECIFIC PERFORMANCE. Seller acknowledges that a refusal
by Seller to consummate the transactions contemplated hereby will cause
irreparable harm to Purchaser, for which there may be no adequate remedy at law
and for which the ascertainment of damages would be difficult. Therefore,
Purchaser shall be entitled, in addition to, and without having to prove the
inadequacy of, other remedies at law, to specific performance of this
Agreement, as well as injunctive relief (without being required to post bond or
other security).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
SECTION 8.2. ASSIGNMENT. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by
Purchaser to an affiliate of Purchaser.
SECTION 8.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
SECTION 8.4. ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding
the subject matter hereof, and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
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SECTION 8.5. SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 8.6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants contained herein shall survive
the Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of Seller or Purchaser pursuant to this
Agreement shall be deemed to have been representations and warranties by Seller
or Purchaser, as the case may be, and, notwithstanding any provision in this
Agreement to the contrary, shall survive the Closing for a period of two years,
except for (i) representations and warranties with respect to any tax or
tax-related matters or any ERISA matters, which shall survive the Closing until
the running of any applicable statutes of limitation and (ii) indemnification
provisions for the violation of any Environmental Law, which shall survive the
Closing and shall continue indefinitely, as provided in Section 7.1.
SECTION 8.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF TEXAS. THE PARTIES AGREE THAT THIS
AGREEMENT SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
SECTION 8.8. CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.
SECTION 8.9. GENDER AND NUMBER. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
SECTION 8.10. REFERENCE TO AGREEMENT. Use of the words "herein",
"hereof", "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
SECTION 8.11. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the
transactions contemplated by this Agreement without the prior knowledge and
consent of the other parties hereto; provided that the foregoing shall not
prohibit any disclosure (i) by press release, filing or otherwise that is
required by federal securities laws or the rules of the Nasdaq National Market
System, (ii) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement and (iii) by Purchaser in connection with
obtaining financing for the transactions contemplated by this Agreement and
conducting an examination of the operations and assets of Seller. In the event
that the transactions contemplated hereby are not consummated for any reason
whatsoever, the parties hereto agree not to disclose [or use] any confidential
information they may have concerning the affairs of the other parties, except
for information that is required by law to be disclosed. Confidential
information includes, but is not limited to: financial records, surveys,
reports, plans, proposals, financial information, information relating to
personnel, contracts, stock ownership, liabilities and litigation; provided
that should the transactions contemplated hereby not be consummated, nothing
contained in this Section shall be construed to prohibit the parties hereto
from operating businesses in competition with each other.
SECTION 8.12. NOTICE. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return
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receipt requested, or by delivering the same in person. Such notice shall be
deemed received on the date on which it is hand-delivered or on the third
business day following the date on which it is so mailed. For purposes of
notice, the addresses of the parties shall be:
If to Purchaser:
Medical Alliance, Inc.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
with a copy to:
Xxxxxxx & Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
If to Seller:
Stone Treatment Center of New England, Inc.
0 Xxxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx Xx.
with a copy to:
Xxxxx, Greenfield & Page
Xxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Any party may change its address for notice by written notice given to the
other parties in accordance with this Section.
SECTION 8.13. CHOICE OF FORUM. The parties hereto agree that should any
suit, action or proceeding arising out of this Agreement be instituted by any
party hereto (other than a suit, action or proceeding to enforce or realize
upon any final court judgment arising out of this Agreement), such suit, action
or proceeding shall be instituted only in a state or federal court in Dallas
County, Texas. Each of the parties hereto consents to the in personam
jurisdiction of any state or federal court in Dallas County, Texas and waives
any objection to the venue of any such suit, action or proceeding. The parties
hereto recognize that courts outside Dallas County, Texas may also have
jurisdiction over suits, actions or proceedings arising out of this Agreement,
and in the event that any party hereto shall institute a proceeding involving
this Agreement in a jurisdiction outside Dallas County, Texas, the party
instituting such proceeding shall indemnify any other party hereto for any
losses and expenses that may result from the breach of the foregoing covenant
to institute such proceeding only in a state or federal court in Dallas County,
Texas, including without limitation any additional expenses incurred as a
result of litigating in another jurisdiction, such as reasonable fees and
expenses of local counsel and travel and lodging expenses for parties,
witnesses, experts and support personnel.
SECTION 8.14. SERVICE OF PROCESS. Service of any and all process that
may be served on any party hereto in any suit, action or proceeding arising out
of this Agreement may be made in the manner and to the address set forth in
Section 8.12 and service thus made shall be taken and held to be valid personal
service upon such party by any party hereto on whose behalf such service is
made.
SECTION 8.15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
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PURCHASER
MEDICAL ALLIANCE, INC.
By: /s/ XXXX X. XXXXXXXX
---------------------
Its: President & CEO
SELLER
STONE TREATMENT CENTER OF
NEW ENGLAND, INC.
By: /s/ XXXXXXX X. XXXXXXXXXX
--------------------------
Its: President
STOCKHOLDERS
/s/ XXXXXXX X. XXXXXXXX, XX.
-----------------------------
Xxxxxxx X. Xxxxxxxx, Xx.
/s/ XXXXXXX X. XXXXXXXXXX
-----------------------------
Xxxxxxx X. Xxxxxxxxxx, M.D.
/s/ XXXXXXXXX XXXXXXX
-----------------------
Xxxxxxxxx Xxxxxxx, M.D.
/s/ XXXXXX XXXXXXXX, M.D.
---------------------------
Xxxxxx Xxxxxxxx, M.D.
/s/ XXXXXX XXXXXX, M.D.
----------------------------
Xxxxxx X. Xxxxxx, M.D.