MERGER AGREEMENT
AGREEMENT ("Agreement") dated as of December 2, 1996, by and among
HEALTHCARE CAPITAL CORP., a corporation organized under the laws of the Province
of Alberta, Canada ("HealthCare"), HEALTHCARE HEARING CLINICS, INC., a
Washington corporation which is a wholly owned subsidiary of HealthCare ("HC
Subsidiary"), and HEARING DYNAMICS, a California corporation (the "Company"),
and XXXXXXX LAW CROSS (the "Shareholder").
RECITALS
A. The Shareholder owns all the issued and outstanding capital stock of
the Company.
B. The Company operates audiology and hearing aid clinics in the
greater San Diego, California, metropolitan area which perform testing and
evaluation of patients' hearing, prescribe and fit hearing aids, and provide
related services and products.
C. HealthCare and the Shareholder desire that HealthCare acquire the
Company through a merger of the Company into HC Subsidiary. The parties intend
such merger to qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
AGREEMENT:
In consideration of the foregoing premises and of the mutual covenants,
representations, warranties and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
MERGER
1.1 AGREEMENT AND PLAN OF MERGER. The parties agree that the Company
shall be merged into HC Subsidiary pursuant to an Agreement and Plan of Merger
prepared in accordance with Section 1101 of the California General Corporation
Law and Section 23B.11.010 of the Washington Business Corporation Act which
shall be in the form of SCHEDULE 1.1 attached hereto (the "Agreement and Plan of
Merger"). The merger of the Company into HC Subsidiary (the "Merger") shall be
on the terms set forth in the Agreement and Plan of Merger and in this
Agreement.
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1.2 TERMS OF MERGER. Upon the consummation of the Merger:
(a) HC Subsidiary shall be the surviving corporation (the
"Surviving Corporation") and shall continue its existence as a
Washington corporation under the name "HealthCare Hearing Clinics,
Inc.";
(b) The separate corporate existence of the Company shall
terminate;
(c) The presently issued and outstanding stock of the Company
shall be converted into shares of the common stock of HealthCare as
provided in Section 1.4(a) hereof; and
(d) The presently issued and outstanding stock of HC
Subsidiary shall be converted into shares of the stock of Surviving
Corporation and cash as provided in Section 1.4(b) hereof.
1.3 CONSUMMATION. The consummation of the Merger shall take place at
Closing (as defined in Section 2.1 hereof). The Merger shall be consummated by
filing:
(a) A copy of the Agreement and Plan of Merger accompanied by
an appropriate officer's certificate with the Secretary of State of the
state of California; and
(b) Articles of Merger with the Secretary of State of the
state of Washington.
The term "Effective Time" shall mean the time when the second of the two filings
is completed and the Merger becomes effective.
1.4 CONVERSION OF SHARES. The basis for converting and exchanging the
issued and outstanding shares of the Company and HC Subsidiary upon the
consummation of the Merger will be as follows:
(a) The 1,100 issued and outstanding shares of the Company
which are owned by the Shareholder shall, as of the Effective Time by
virtue of the Merger and without any action on the part of the holders
thereof, be converted into and exchanged for (i) 408,000 shares of the
common stock of HealthCare (the "HealthCare Shares") and (ii) cash in
the amount of $102,600; and
(b) Each share of HC Subsidiary stock issued and outstanding
at the Effective Time shall, as of the Effective Time by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into and exchanged for one share of the stock of the
Surviving Corporation.
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1.5 RESTRICTIONS ON TRANSFER OF THE HEALTHCARE SHARES. Following the
Closing, the HealthCare Shares shall be subject to the provisions of Article VI
hereof and to the following provisions:
(a) 210,000 HealthCare Shares shall be subject to no
additional restrictions; a certificate for such shares shall be issued
to the Shareholder at Closing;
(b) 118,000 HealthCare Shares may not be sold, transferred, or
otherwise disposed of in any manner whatsoever until such shares are
released from such restrictions in the increments and on the dates (the
"Release Dates") set forth below:
Release Number of
DATES SHARES RELEASED
November 30, 1997 39,333
November 30, 1998 39,333
November 30, 1999 39,334
------
Total 118,000
The HealthCare Shares subject to the restrictions of this Subsection
1.5(b) shall be issued in three certificates-one for the number of
shares shown opposite each of the Release Dates which will be delivered
to the Shareholder at Closing. Each such certificate will be endorsed
with a counterpart of the following legend:
"The shares represented by this certificate are subject to
restrictions which do not permit their sale, transfer, or
other disposition prior to [insert appropriate Release Date]."
In addition, HealthCare shall issue appropriate stop transfer
instructions which shall remain applicable to such HealthCare Shares
until the applicable Release Date. Release from the restrictions
provided for in this Section 1.5(b) shall not affect any other transfer
restrictions placed on the HealthCare Shares pursuant to Article VI
hereof.
(c) 80,000 HealthCare Shares shall be held by HealthCare (the
"Retained Shares") and canceled or delivered as set forth in Section
1.6 below.
1.6 POST-CLOSING ADJUSTMENTS OF RETAINED SHARES.
The Retained Shares shall be subject to cancellation as
provided in Subsections (a), (b), and (c) below.
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(a) EARN-OUT. The income of the business being acquired from
Company hereunder (the "Business") shall be separately determined for
each of the three 12-month periods ending on the Release Dates (the
"Earned-Out Years"). Such income shall be determined in accordance with
generally accepted accounting principles applied on a basis consistent
with HC Subsidiary's accounting practices. If for any Earn-Out Year the
income of the Business before interest, taxes, depreciation and
amortization but after corporate overhead allocation falls below an
amount equal to 20% of the net revenues of the Business for such year,
then for each $1.72 of the shortfall one Retained Share shall be
canceled or alternately Shareholder shall pay HealthCare one dollar for
each one dollar of the shortfall. The corporate overhead allocation to
be charged against the Business shall equal 6% of its net revenues.
Within 60 days following the end of each Earn-Out Year, HealthCare
shall deliver to the Shareholder a certificate for a number of Retained
Shares equal to (i) 26,666 shares after year one and (ii) 26,667 shares
after years two and three less the number of shares (if any) canceled
as a result of the foregoing provision. Notwithstanding the foregoing,
the certificate issued to the Shareholder after the end of the first
Earn-Out Year shall also be reduced by the number of shares, if any,
canceled pursuant to the terms of Subsections 1.6(b) and (c) below. For
purposes of this Section 1.6(a), "net revenues" shall mean gross
revenues less returns and allowances. The HealthCare Shares represented
by the certificates delivered to the Shareholder pursuant to this
subsection shall remain subject to the provisions of Article VI hereof.
(b) ACCOUNTS RECEIVABLE. On the 200th day following the
Closing, one Retained Share shall be canceled for each $1.72 of net
accounts receivable as set forth on the Statement of Net Working
Capital (as defined in Section 1.7 below) which then remains
uncollected, provided, however, that the Shareholder may elect to
reimburse HealthCare one dollar for each dollar of such uncollected
accounts receivable in lieu of such cancellation of Retained Shares.
After such cancellation of Retained Shares or the payment by
Shareholder for such uncollected accounts receivable has been received
by HealthCare, the uncollected accounts receivable shall be assigned to
Shareholder. During the first 200 days following the Closing,
Shareholder and HC Subsidiary shall mutually participate in the
collection process of such accounts receivable.
(c) LONG-TERM DEBT. To the extent that the Company has any
long-term debt or any other noncurrent liabilities as of the Closing
date, Retained Shares shall be canceled in an aggregate amount equal to
one share for each $1.72 of long term debt or noncurrent liability or,
alternatively, the Shareholder shall pay HealthCare one dollar for each
dollar of long-term debt or noncurrent liability.
1.7 NET WORKING CAPITAL ADJUSTMENT.
(a) For purposes of this Agreement, "Net Working Capital"
shall equal (i) cash, money market accounts, accounts receivable (net
of reasonable provisions for doubtful accounts), inventory, prepaid
expenses (including for magazine advertising) and all other current
assets of the Company as of Closing less (ii) all current liabilities
of the
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Company as of Closing including but not limited to liabilities for
inventory, office supplies, ordinary compensation payables, employee
benefits and taxes (excluding accrued sick and vacation pay), bonuses
(including all related payroll taxes and employee benefits), personal
and real property taxes, water, gas, electric and other utility
charges, business and other license fees and taxes, merchants'
association dues, rental payments under any leases, any customer
refunds for hearing aids delivered prior to Closing, and all other
operating liabilities (including legal, accounting, and other
professional fees and expenses incurred in the ordinary course of
business), and vendor accounts payable. The parties anticipate that
computed on this basis Company will have a negative Net Working
Capital.
(b) As promptly as practicable following the Closing, but in
no event later than 45 days thereafter (the "45-Day Period"),
Shareholder and HealthCare shall cooperate in preparing a mutually
agreeable statement of the Net Working Capital which shall set forth
the computation and components thereof in reasonable detail (the
"Statement of Net Working Capital").
(c) On the fifteenth day after the date on which the Statement
of Net Working Capital is completed (or such earlier date as such
statement is mutually agreed upon by Shareholder and HealthCare in
writing), (i) in the event that the Net Working Capital exceeds a
negative $20,000, then HealthCare shall pay to Shareholder an amount
equal to the excess, or (ii) in the event that the Net Working Capital
is less than a negative $20,000, then Shareholder shall pay to
HealthCare the amount by which the Net Working Capital is less than a
negative $20,000.
1.8 SHAREHOLDER LOANS. As of the date hereof, the Company is indebted
to the Shareholder as set forth on SCHEDULE 1.8. Notwithstanding any other
provision of this Agreement, the Shareholder shall have the option, on or prior
to the Closing, to (i) contribute such indebtedness to the capital of the
Company or (ii) cause the Company to repay such indebtedness to the extent the
Company has funds available for such purpose.
ARTICLE II
CLOSING
2.1 CLOSING. The closing of the transaction provided for herein (the
"Closing") shall occur on December 2, 1996, or on such other date as the parties
may mutually agree. Notwithstanding the foregoing, HealthCare shall have the
right to postpone the Closing for up to 90 days if, in its judgment, it becomes
necessary to do so as a result of requirements of the securities laws,
regulations, or rules of the Province of Alberta, the Alberta Stock Exchange,
United States, state of Washington or state of California. The Closing shall
take place at the offices of HealthCare at 000 X.X. Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxx, Xxxxxx 00000, at such time as the parties shall mutually agree.
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2.2 CLOSING TRANSACTIONS. The following actions shall be taken at
Closing, each of which shall be conditional on completion of all the others and
all of which shall be deemed to have taken place simultaneously:
(a) DELIVERIES BY SHAREHOLDER. Shareholder shall deliver to
HealthCare:
(i) Certificates representing the shares of the
Company;
(ii) An opinion of counsel to Shareholder, dated as
of the Closing date, substantially in the form of SCHEDULE
2.2(A)(II);
(iii) Copies of resolutions adopted by the Company's
Board of Directors and shareholder, certified by its corporate
secretary, which resolutions shall be in full force and effect
on the Closing date, authorizing the execution, delivery and
performance of this Agreement and the other agreements and
transactions contemplated hereby; and
(iv) All consents required in connection with the
transactions contemplated hereunder.
(b) DELIVERIES BY HEALTHCARE. HealthCare shall deliver to
Shareholder:
(i) Certificates for HealthCare Shares as specified
in Section 1.5(a) and (b) hereof;
(ii) A certified or cashier's check for the cash
specified in Section 1.4(a) hereof;
(iii) An opinion of counsel to HealthCare, dated as
of the Closing date, substantially in the form of SCHEDULE
2.2(B)(III); and
(iv) Copies of the resolutions of the Boards of
Directors of HealthCare and HC Subsidiary and the shareholder
of HC Subsidiary, certified by their corporate secretaries,
which resolutions shall be in full force and effect on the
Closing date, authorizing the execution, delivery and
performance of this Agreement and the other agreements and
transactions contemplated hereby.
(c) JOINT DELIVERY. HC Subsidiary and Shareholder shall
deliver to each other counterparts of (i) Shareholder's Noncompetition
and Confidentiality Agreement provided for in Section 7.6(a) hereof,
(ii) Shareholder's Employment Agreement provided for in Section 7.6(b)
hereof and (iii) the Lease Amendment provided for in Section 7.6(c)
hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
Except as otherwise set forth in the Disclosure Statement attached
hereto as SCHEDULE III, Shareholder hereby represents and warrants to HealthCare
as follows:
3.1 CORPORATE.
(a) ORGANIZATION. The Company is a corporation duly organized
and existing under the laws of the state of California.
(b) CAPITALIZATION. The authorized capital stock of the
Company consists of 10,000 shares of a single class of common stock, of
which 1,100 shares are issued, and outstanding. All issued and
outstanding shares of the Company have been validly issued and are
fully paid and nonassessable. Shareholder is the owner (beneficially
and of record) of all the issued and outstanding shares of the common
stock of the Company hereof free and clear of all liens, claims, and
encumbrances whatsoever. No person has any agreement, option or other
right, present or future, to purchase or otherwise acquire any of the
shares of the Company.
(c) CORPORATE POWER. The Company has all requisite corporate
power and authority to own, operate and lease its properties and to
carry on its business as and where such is now being conducted, to
enter into this Agreement and the other documents and instruments to be
executed and delivered by it pursuant hereto and to carry out the
transactions contemplated hereby and thereby. This Agreement
constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by Company pursuant hereto
will constitute valid and binding agreements of Company enforceable in
accordance with their respective terms.
(d) NO SUBSIDIARIES. The Company does not own an interest in
any corporation, partnership or other entity.
(e) ARTICLES OF INCORPORATION; BYLAWS. The copies of the
Company's articles of incorporation and bylaws which have heretofore
been delivered to HealthCare are complete and correct as amended or
restated to the date hereof.
3.2 NO VIOLATION. Neither the execution and delivery of this Agreement
or the other documents and instruments to be executed and delivered by the
Company or the Shareholder pursuant hereto, nor the consummation by the Company
and Shareholder of the transactions contemplated hereby and thereby (a) will
violate any statute or law or any rule, regulation, order, writ, injunction or
decree of any court or governmental authority, (b) will require any
authorization, consent, approval, exemption or other action by or notice to any
court, administrative or governmental agency, instrumentality, commission,
authority, board or body or (c) will violate or conflict with, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or
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accelerate the performance required by, or result in the creation of any
material Lien (as defined in Section 3.18(b)) upon any of the assets of the
Company under, any term or provision of the articles of incorporation or bylaws
of the Company or of any material contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company or the Company's assets or properties
or the shares of the Company may be bound or affected.
3.3 FINANCIAL STATEMENTS. The Shareholder has heretofore delivered to
HealthCare the following financial statements of the Company including balance
sheets and statements of income (the "Financial Statements"):
(a) Financial statements for the Company's fiscal years ended
March 31, 1994, 1995, and 1996;
(b) Financial Statements for the interim period ended October
31, 1996.
The Financial Statements are correct and complete in all material respects and
fairly present the financial condition of the Company at the dates indicated and
results of its operations for the periods then ended in accordance with
generally accepted accounting principles consistently applied.
3.4 RECORDS. The books of account of the Company reflect all items of
income and expense and the assets, liabilities, and accruals of its business and
operations. The minute books and stock transfer records of the Company contain
records which are complete and accurate in all material respects of all minutes,
consents of shareholders and directors, all corporate actions, and all stock
transfers of the Company.
3.5 ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
balance sheet included in the Financial Statements, there has not been:
(a) ADVERSE CHANGE. Any material adverse change in the
financial condition, assets, liabilities, business, prospects or
operations of the Company;
(b) DAMAGE. Any material loss, damage or destruction, whether
covered by insurance or not, affecting the Company's businesses or
assets;
(c) INCREASE IN COMPENSATION. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other employee
benefit granted, made or accrued;
(d) LABOR DISPUTES. Any labor dispute or disturbance, other
than routine individual grievances which are not material to the
business, financial condition or results of operations of the Company;
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(e) COMMITMENTS. Any commitment or transaction by the Company
(including, without limitation, any capital expenditure) other than in
the ordinary course of business consistent with past practice;
(f) DIVIDENDS. Any declaration, setting aside, or payment of
any dividend or any other distribution in respect of the Company's
capital stock; any redemption, purchase or other acquisition by the
Company of any capital stock of the Company, or any security relating
thereto; or any other payment to Shareholder as a shareholder;
(g) DISPOSITION OF PROPERTY. Any sale, lease or other transfer
or disposition of any properties or assets of the Company except for
sales of inventory, consumption of supplies, and nonmaterial
dispositions of worn or broken parts and equipment all in the ordinary
course of business;
(h) INDEBTEDNESS. Any indebtedness for borrowed money
incurred, assumed or guaranteed by the Company other than changes in
the Company's lines of credit in the ordinary course of business,
except for loans to the Company by the Shareholder which loans shall be
treated as provided in Section 1.8 hereof;
(i) AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by the Company of any contract, or any waiver of material
rights thereunder, other than in the ordinary course of business;
(j) LOANS, ADVANCES, OR CREDIT. Any loan or advance or any
grant of credit by the Company; or
(k) UNUSUAL EVENTS. Any other event or condition specifically
related to the Company not in the ordinary course of business which
would have a material adverse effect on the assets or the business of
the Company.
3.6 ADVERSE CONDITIONS. There are no conditions known to Shareholder
with respect to the markets, products, facilities, or personnel of the Company
which might materially adversely affect its business or prospects other than
such conditions as may affect the industry in which the Company participates as
a whole.
3.7 NO LITIGATION. There is no action, suit, arbitration, proceeding,
investigation or inquiry pending or to the knowledge of the Shareholder
threatened against the Company, its directors (in such capacity), its business
or any of its assets. SCHEDULE 3.7 identifies all actions, suits, proceedings,
investigations and inquiries to which the Company or the Shareholder has been a
party since January 1, 1993. Neither the Company nor its business or assets are
subject to any judgment, order, writ or injunction of any court, arbitrator or
federal, state, foreign, municipal or other governmental department, commission,
board, bureau, agency or instrumentality.
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3.8 COMPLIANCE WITH LAWS.
(a) COMPLIANCE. Shareholder warrants (but expressly does not
represent) that the Company (including each and all of its operations,
practices, properties and assets) is in material compliance with all
applicable federal, state, local and foreign laws, ordinances, orders,
rules and regulations (collectively, "Laws"), including, without
limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, environmental
protection, competition and pricing, product warranties, zoning,
building and sanitation, employment, retirement and labor relations,
and product advertising except to the extent any noncompliance would
not have a material adverse effect upon the assets or the business of
the Company taken as a whole. The Company has not received notice of
any violation or alleged violation of, and are not subject to liability
for past or continuing violation of, any Laws. All reports and returns
required to be filed by the Company with any governmental authority
have been filed, and were accurate and complete when filed except to
the extent any deficiency would not have a material adverse effect upon
the assets or the business of the Company taken as whole.
(b) LICENSES AND PERMITS. The Company has obtained all
licenses, permits, approvals, authorizations and consents of all
governmental and regulatory authorities and all certification
organizations required for the conduct of its businesses (as presently
conducted) except to the extent failure to do so would not have a
material adverse effect upon the assets or the business of the Company
taken as a whole. All such licenses, permits, approvals, authorizations
and consents are described in SCHEDULE 3.8(B) and are in full force and
effect. The Company (including its operations, properties and assets)
is and has been in compliance with all such permits and licenses,
approvals, authorizations and consents, except to the extent any
noncompliance would not have a material adverse effect upon the assets
or the business of the Company taken as a whole.
3.9 ENVIRONMENTAL COMPLIANCE. Shareholder has delivered to HealthCare a
copy of every written communication given or received by the Company to or from
any environmental agency with respect to the Company, with respect to any
property which is now being used or which has heretofore been used by the
Company in the operation of its business, and has at all times thereafter
operated the Company, in compliance with all applicable federal, state and local
laws and regulations relating to pollution control and environmental
contamination including, without limitation, all laws and regulations governing
the generation, use, collection, treatment, storage, transportation, recovery,
removal, discharge or disposal of hazardous materials (as defined below) and all
laws and regulations with regard to record keeping, notification and reporting
requirements respecting Hazardous Materials (as defined below), except for such
noncompliance as would not cause a material adverse effect on Company's business
or assets. The Company has not received notice of any administrative or judicial
proceeding pursuant to such laws or regulations. There is no basis for the
assertion of a valid claim against the Company relating to environmental matters
including, without limitation, any claim arising from past or present
environmental practices, asserted under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time
("CERCLA",
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the Resource Conservation and Recovery Act, as amended from time to time
("RCRA") or any other federal, state, or local statute, code, rule, regulation,
ordinance, order, decree, or other governmental authority as now or at any time
hereafter in effect. For purposes of this Section 3.9, the term "Hazardous
Materials" means materials defined as "hazardous wastes" or "solid wastes" in
CERCLA, RCRA or in any similar federal, state, or local statute, code, rule,
regulation, ordinance, order, decree, or other governmental authority as now or
at any time hereafter in effect.
3.10 NO UNDISCLOSED LIABILITIES. Except (a) as described to HealthCare
on the Schedules attached hereto as an item which can be reasonably construed as
a liability or obligation or (b) items not required to be disclosed on the
Schedules by reason of exceptions, exclusions, or other qualifications contained
in the representations and warranties of this Agreement, the Company has no
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) which are not properly reflected or reserved against in the Financial
Statements (except for liabilities or obligations which have been incurred in
the ordinary course of business since the date of the most recent Financial
Statements) in a manner consistent with past practice; and the reserves
reflected in the Financial Statements are adequate, appropriate and reasonable.
3.11 TAX MATTERS.
(a) Except with respect to Taxes (as defined below) for which
adequate reserves are included in the Financial Statements, the Company
has timely paid all federal, state, county, local and foreign taxes,
including, without limitation, income taxes, excise taxes, sales taxes,
use taxes, gross receipts taxes, franchise taxes, employment and
payroll taxes, withholding taxes, property taxes, import duties, and
all other taxes of any nature whatsoever and however denominated
together with all penalties, additions to tax, interest, assessment or
other damages imposed thereon with respect to the Company
(collectively, "Tax" or "Taxes") required to be paid or deposited by
the Company through the Closing. For purposes of this Section 3.11(a),
timely payment shall include payment in accordance with any available
extensions and recording of balances due as a trade payable.
(b) The Company has filed on or before the applicable due date
(including extensions) all tax returns which it is required to have
filed through the date hereof and has timely paid all amounts shown as
payable thereon, as well as any deficiencies or other additional
amounts subsequently assessed by any taxing authority with respect to
each such tax return. All such returns are true, correct and complete
in all material respects.
(c) The Company has not waived any statute of limitations in
respect of Taxes of the Company or agreed to any extension of time with
respect to a Tax assessment or deficiency of the Company, and the
assessment of any additional Taxes of the Company with respect to
periods for which returns have been filed is not expected.
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(d) There are no proposed deficiencies or unresolved claims
concerning the Company's liability for Taxes.
(e) All federal and state income tax returns (including all
attachments and amendments thereto) of the Company for all taxable
years for which the limitation periods (including any extensions or
waivers thereof) applicable to deficiencies have not expired have been
made available to HealthCare.
(f) Complete and correct copies of the Company's federal and
California income tax returns for 1993, 1994, and 1995 have been
delivered by the Shareholder to HealthCare.
3.12 PRODUCT WARRANTY. Set forth in SCHEDULE 3.12 is a true,
correct and complete copy of the Company's standard warranty or
warranties for sales of its products.
3.13 PRODUCT LIABILITY. No action is pending or, to the knowledge of
Shareholder, threatened against or involving the Company relating to any product
alleged to have been sold by the Company and alleged to have been defective, or
improperly designed or manufactured, and there exists no design, manufacturing
or other defects (the "Defects") in products sold in the course of the Company's
business or held as inventory PROVIDED, HOWEVER, that in no event shall the
Company be responsible for a breach of the representation and warranty in this
sentence of Section 3.13 resulting from any Defects which satisfy the following
two conditions: (a) they are not within Shareholder's knowledge; and (b) they
relate to goods which are sold on or after the Closing.
3.14 INSURANCE. The Company maintains policies of fire, liability,
product liability, malpractice, workers compensation, health and other forms of
insurance with such coverage limits and deductible amounts as are reasonable and
prudent in light of the nature of its assets and the risks of its business. The
Company has received no notification of cancellation, modification or denial of
renewal of any material policies of fire, product liability, malpractice or
other forms of insurance.
3.15 SUPPLIERS. The Company has received no notice of
termination or an intention to terminate the relationship with the
Company, from any material supplier.
3.16 PATENTS, TRADEMARKS, ETC. Set forth in SCHEDULE 3.16 is a list of
all United States and foreign trademarks, service marks, trade names, brand
names, copyrights, including registrations and applications, patent and patent
applications, and employee covenants and agreements respecting intellectual
property ("Trade Rights") in which the Company now has any interest, specifying
the basis on which such Trade Rights are owned, controlled, used or held (under
license or otherwise) by the Company, and also indicating which of such Trade
Rights are registered. All Trade Rights shown as registered in SCHEDULE 3.16
have been properly registered, all pending registrations and applications have
been properly made and filed and all annuity, maintenance, renewal and other
fees relating to registrations or applications are current. In order to conduct
the business of the Company, as such is currently being conducted, the
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Company does not require any Trade Rights that they do not already have. The
Company is not infringing and has not infringed on any Trade Rights of another
in the operation of the business of the Company, nor to the knowledge of the
Shareholder is any other person infringing on the Trade Rights of the Company.
The Company has not granted any license or made any assignment of any Trade
Right and no other person has any right to use any Trade Right owned or held by
the Company. The Company does not pay any royalties or other consideration for
the right to use any Trade Rights of others. Except as set forth in SCHEDULE
3.16, to the knowledge of Shareholder, there are no inquiries, investigations or
claims or litigation challenging or threatening to challenge the Company's
right, title and interest with respect to its continued use and right to
preclude others from using any Trade Rights of the Company. To the knowledge of
Shareholder, all Trade Rights of the Company are valid, enforceable and in good
standing, and there are no equitable defenses to enforcement based on any act or
omission of the Company.
3.17 CONTRACTS AND COMMITMENTS.
(a) LEASES.
(i) Set forth in SCHEDULE 3.17(A) is a list of all
real and personal property leases (the "Leases") to which the
Company is party. Complete and correct copies of each lease
listed on the schedule, and all amendments thereto, have
heretofore been delivered to HealthCare. The Leases are
currently in full force and effect. Shareholder warrants that
Xxxxxxxx Law has conveyed to Shareholder the interest owned by
Xxxxxxxx Law in the real property referred to in Section
7.6(c) hereof.
(ii) Company is not in default under the Leases; to
the knowledge of Shareholder, there are no defaults by the
lessors under any of the Leases; and no event has occurred
which with the passage of time or the giving of notice would
constitute a default under any of the Leases. The Company has
not waived any rights under any of the Leases.
(b) PURCHASE COMMITMENTS. Set forth in SCHEDULE 3.17(B) is a
list of all agreements (written or oral) between the Company and third
parties for the purchase of goods and supplies by the Company which
individually call for the payment by the Company after the date hereof
of more than $5,000 or which obligate the Company for a period
extending over a period of more than 90 days. Complete and correct
copies of all such written agreements have heretofore been delivered to
HealthCare.
(c) SALES COMMITMENTS. Set forth in SCHEDULE 3.17(C) is a list
and description of all presently effective agreements (written or oral)
between the Company and third parties for the distribution and sale of
its products. Complete and correct copies of all such written contracts
have heretofore been delivered to HealthCare.
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(d) CONTRACTS WITH SHAREHOLDER AND CERTAIN OTHERS. Except for
the employment relationship which exists between the Shareholder and
the Company, the Company has no agreement, understanding, contract or
commitment (written or oral) with the Shareholder, or any relative of
the Shareholder.
(e) COLLECTIVE BARGAINING AGREEMENTS. The Company is not party
to any collective bargaining agreement with any union.
(f) LOAN AGREEMENTS. Except as set forth on SCHEDULE 3.17(F),
the Company is not obligated under any loan agreement, promissory note,
letter of credit, or other evidence of indebtedness as signatories,
guarantors or otherwise.
(g) GUARANTEES. The Company has not under any instrument which
is presently effective guaranteed the payment or performance of any
person, firm or corporation, agreed to indemnify any person or act as a
surety, or otherwise agreed to be contingently or secondarily liable
for the obligations of any person.
(h) RESTRICTIVE AGREEMENTS. The Company is not party to nor is
it bound by any agreement requiring it to assign any interest in any
trade secret or proprietary information, or prohibiting or restricting
it from competing in any business or geographical area or soliciting
customers or otherwise restricting them from carrying on its business
anywhere in the world.
(i) OTHER MATERIAL CONTRACTS. The Company is not party to any
lease, license, contract (including without limitation contracts with
health maintenance organizations) or commitment of any nature involving
consideration or other expenditure in excess of $5,000, or involving
performance over a period of more than 90 days, or which is otherwise
individually material to the operations of the Company, except as set
forth in SCHEDULE 3.17(I).
(j) NO DEFAULT. The Company is not in default under any lease,
agreement, contract or commitment, nor has any event or omission
occurred which through the passage of time or the giving of notice, or
both, would constitute a default thereunder or cause the acceleration
of any of the Company's obligations or result in the creation of any
Lien (as defined in Section 3.18(b) below) on any of the assets owned,
used or occupied by the Company. To the knowledge of the Shareholder,
no third party is in default under any lease, agreement, contract or
commitment to which the Company is a party, nor has any event or
omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to
an automatic termination, or the right of discretionary termination
thereof.
3.18 TITLE TO AND CONDITION OF PROPERTIES.
(a) REAL PROPERTY. The Company does not own any interest in
any real property other than the leases referred to in Section 3.17(a)
hereof.
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(b) PERSONAL PROPERTY. Except as set forth on SCHEDULE
3.18(B), the Company has good and marketable title to all its assets,
free and clear of all mortgages, liens (statutory or otherwise),
security interests, claims, pledges, equities, options, conditional
sales contracts, assessments, levies, easements, covenants,
reservations, restrictions, exceptions, limitations, charges or
encumbrances of any nature whatsoever (collectively, "Liens"). All the
Company's tangible assets are located at the business premises leased
by it and all tangible assets located at such premises are owned by the
Company except as otherwise set forth in SCHEDULE 3.17(A).
(c) CONDITION. All the Company's tangible assets are, taken as
a whole, in good operating condition and repair, normal wear and tear
excepted.
(d) LAND USE REGULATIONS. There are no condemnation,
environmental, zoning, land use, or other regulatory proceedings,
pending or, to the knowledge of the Shareholder, planned to be
instituted, that could detrimentally affect the ownership, use, or
occupancy of the real property presently occupied by the Company or the
continued operation of the Company's business as they are presently
being conducted.
3.19 EMPLOYEE BENEFIT PLANS. Set forth in SCHEDULE 3.19, is a
description of all pension, profit sharing, retirement, bonus, executive or
deferred compensation, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, and any employment or consulting
contracts, "golden parachutes", severance agreements or plans, vacation and sick
leave plans including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), all employee manuals, and all written or binding oral
statements of policies, practices or understandings relating to employment,
which are provided to, for the benefit of, or relate to, any persons employed by
the Company. The items described in the foregoing sentence are hereinafter
sometimes referred to collectively as "Employee Plans/Agreements." True and
correct copies of all written Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to HealthCare. The Company is
in compliance with and has made all payments due under all Employee
Plans/Agreements and with respect thereto the Company is in compliance with all
applicable federal and state laws and regulations. The Company is not
contributors to any multi-employer pension plan which has an unfunded liability
with respect to benefits due its participants.
3.20 EMPLOYMENT COMPENSATION. Set forth in SCHEDULE 3.20 is a true and
correct list of:
(a) All employees to whom the Company is paying compensation;
and in the case of salaried employees such list identifies the current
annual rate of compensation for each employee and in the case of hourly
or commission employees identifies certain reasonable ranges of rates
and the number of employees falling within each such range; and
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(b) All amounts owed to employees of the Company (including
the Shareholder) for accrued sick pay, vacation pay, and bonus pay.
3.21 KEY EMPLOYEES; BANK; ETC. Set forth in SCHEDULE 3.21 is a list
showing:
(a) The names of all the Company's officers and directors;
(b) The name of each bank at which the Company has (i) an
account and the numbers of all accounts, (ii) a line of credit, or
(iii) a safe deposit box and the name of each person authorized to draw
thereon or have access thereto; and
(c) The name of each person holding a power of attorney from
the Company and a summary of the terms thereof.
3.22 ACCOUNTS RECEIVABLE. Each of the accounts receivable of the
Company (a) arose from bona fide sales in the ordinary course of business, (b)
was entered into under circumstances and by methods usual and customary in the
Company's business in the applicable state and the collection practices used
with respect thereto have been in all respect legal and proper and (c) was
entered into, and credit granted pursuant thereto, consistent with the Company's
historical credit policies and practices. The books of the Company correctly
record the principal balance of all accounts receivable and each of the security
instruments securing any account receivable, if any, constitutes a valid lien in
favor of the Company upon the property which it describes, and is enforceable by
the Company and its transferees. The reserves for doubtful accounts shown or
reflected on the Financial Statements are adequate and were calculated
consistent with past practice.
3.23 INVENTORY. The inventories of the Company are of a quality and
quantity usable and salable in the ordinary course of business and have a
commercial value at least equal to the value shown on the Company's Financial
Statements.
3.24 BROKERS AND FINDERS. Neither the Shareholder, the Company nor any
of its officers, directors, or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
3.25 DISCLOSURE. No representation or warranty by the Shareholder in
this Agreement, nor any statement, certificate, schedule, or exhibit hereto
furnished or to be furnished by or on behalf of the Shareholder pursuant to this
Agreement, nor any document or certificate delivered to HealthCare pursuant to
this Agreement or in connection with transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HEALTHCARE
HealthCare hereby represents and warrants to the Shareholder as
follows:
4.1 CORPORATE.
(a) ORGANIZATION. HealthCare is a corporation duly organized
and validly existing under the laws of the Province of Alberta, Canada.
HC Subsidiary is a corporation duly authorized and validly existing
under the laws of the state of Washington.
(b) CORPORATE POWER. Each of HealthCare and HC Subsidiary has
all requisite corporate power and authority to own, operate and lease
its properties, to carry on its business as and where such is now being
conducted, to enter into this Agreement and the other documents and
instruments to be executed and delivered by them pursuant hereto and to
carry out the transactions contemplated hereby and thereby. This
Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by HealthCare
and HC Subsidiary pursuant hereto will constitute, valid and binding
agreements of HealthCare and HC Subsidiary, enforceable in accordance
with their respective terms.
(c) QUALIFICATION. HC Subsidiary is duly licensed or qualified
to do business as a foreign corporation, and is in good standing, in
each jurisdiction wherein the character of the properties owned or
leased by it, or the nature of its business, makes such licensing or
qualification necessary.
4.2 CAPITALIZATION. As of the date thereof, the authorized and issued
capital stock of HealthCare is set forth in the Offering Memorandum referred to
in Section 6.1(a)(ii). All of the issued and outstanding shares have been
validly issued and are fully paid and nonassessable. The HealthCare Shares to be
issued to the Shareholder pursuant to this Agreement will, upon issuance, be
validly issued, fully paid, and nonassessable and free and clear of any lien or
restriction except as set forth herein.
4.3 NO VIOLATION. Neither the execution and delivery of this Agreement
or the other documents and instruments to be executed and delivered by
HealthCare and HC Subsidiary pursuant hereto, nor the consummation by them of
the transactions contemplated hereby and thereby (a) will violate any statute or
law or any rule, regulation, order, writ, injunction or decree of any court or
governmental authority, (b) will require any authorization, consent, approval,
exemption or other action by or notice to any court, administrative or
governmental agency, instrumentality, commission, authority, board or body
(except the Alberta Stock Exchange), or (c) will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any
- 17 -
material Lien upon any of the assets of HealthCare or HC Subsidiary under, any
term or provision of their Articles of Incorporation or By-laws or of any
material contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which either is a party or by which they
or any of their assets or properties may be bound or affected.
4.4 TAX FREE REORGANIZATION.
(a) HealthCare controls HC Subsidiary within the meaning of
Section 368(c) of the Code;
(b) HealthCare has no plan or intention to reacquire any of
its stock issued in the transaction, except as provided in Section 1.6
hereof;
(c) HealthCare has no plan or intention to liquidate HC
Subsidiary; to merge HC Subsidiary with and into another corporation;
to sell or otherwise dispose of the stock of HC Subsidiary; or to cause
HC Subsidiary to sell or otherwise dispose of any of the assets of the
Company acquired in the transaction except for dispositions made in the
ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code;
(d) Neither HealthCare nor HC Subsidiary is an investment
company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code;
(e) The HealthCare Shares issued in exchange for the stock of
the Company hereunder, including all Retained Shares, constitutes less
than 50 percent of both the voting power and the value of all
HealthCare stock that will be outstanding immediately following the
transaction; and
(f) HealthCare has been engaged in the active conduct of a
trade or business that is substantial in comparison to the business of
the Company for the entire 36 month period immediately preceding the
Effective Time.
4.5 BROKERS AND FINDERS. Neither HealthCare, HC Subsidiary nor any of
their officers, directors, employees or shareholders has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated by this Agreement.
4.6 DISCLOSURE. To HealthCare's knowledge, no representation or
warranty by HealthCare in this Agreement nor any statement, certificate,
schedule, or exhibit hereto furnished or to be furnished by or on behalf of
HealthCare pursuant to this Agreement, nor any document or certificate delivered
to HealthCare pursuant to this Agreement or in connection with transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact or omits or shall omit a material fact necessary to make the statements
contained therein not misleading.
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ARTICLE V
COVENANTS
5.1 COVENANTS OF SHAREHOLDER.
(a) ACCESS TO INFORMATION AND RECORDS. The Shareholder agrees
that during the period prior to the Closing, HealthCare, its counsel,
accountants and other representatives shall be provided (i) reasonable
access during normal business hours to all of the properties, books,
records, contracts and documents of the Company for the purpose of such
inspection, investigation and testing as HealthCare deems appropriate
(and Shareholder shall furnish or cause to be furnished to HealthCare
and its representatives all information with respect to the business
and affairs of the Company as HealthCare may reasonably request); (ii)
reasonable access to employees and agents of the Company for such
meetings and communications as HealthCare reasonably desires; and (iii)
with the prior consent of the Company in each instance (which consent
shall not be unreasonably withheld), access to vendors, customers, and
others having business dealings with the Company.
(b) CONDUCT OF BUSINESS PENDING THE CLOSING. The Shareholder
agrees that from the date hereof until the Closing, except as otherwise
approved in writing by HealthCare:
(i) NO CHANGES. The Company will carry on its
business diligently and in the same manner as heretofore and
will not make or institute any changes in its methods of
purchase, sale, management, accounting or operation.
(ii) MAINTAIN ORGANIZATION. The Company will use its
best efforts to maintain, preserve, renew and keep in force
and effect the existence, rights and franchises of the Company
and to preserve the business organization of the Company
intact, to keep available to HealthCare the present officers
and employees of the Company, and to preserve for HealthCare
its present relationships with suppliers and customers and
others having business relationships with the Company.
(iii) NO BREACH. The Company will use its best
efforts to avoid any act, or any omission to act, which may
cause a breach of any material contract, commitment or
obligation, or any breach of any representation, warranty,
covenant or agreement made by the Shareholder.
(iv) NO MATERIAL CONTRACTS. No contract or commitment
will be entered into, and no purchase of assets (tangible or
intangible) will be made, by or on behalf of the Company,
except contracts, commitments, purchases or sales which are in
the ordinary course of business and consistent with past
practice.
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(v) NO CORPORATE CHANGES. The Company shall not amend
its Articles of Incorporation or Bylaws or make any changes in
its authorized or issued capital stock.
(vi) MAINTENANCE OF INSURANCE. The Company shall
maintain all of its insurance in effect as of the date hereof
or replace such insurance with comparable coverage and shall
procure such additional insurance as shall be reasonably
requested by HealthCare at HealthCare's expense.
(vii) MAINTENANCE OF PROPERTY. The Company shall use,
operate, maintain and repair all its assets and properties in
a normal business manner consistent with the Company's past
practices.
(viii) INTERIM FINANCIALS. The Company will provide
HealthCare with interim monthly financial statements and other
management reports as and when they are available.
(ix) NO DIVIDENDS. The Company shall not declare or
pay any dividend (whether in cash, stock or property) or make
any other distribution to the Shareholder, except for the
repayment of loans made by the Shareholder to the Company.
(x) COMPENSATION. The Company shall not increase the
compensation or benefits of any of its employees nor make any
other change in the terms of their employment.
(c) REIMBURSEMENT OF VACATION PAY. In consideration for
excluding accruals for vacation pay entitlements for employees of the
Company from the definition of Net Working Capital, the Shareholder
agrees to reimburse HC Subsidiary for any vacation pay payments HC
Subsidiary is required to make to former employees of the Company who
become employees of HC Subsidiary as of the Closing and whose
employment terminates for any reason within the first six months
following the Closing to the extent such payments relate to accruals of
vacation pay prior to the Closing.
(d) PRESERVATION OF TAX-FREE REORGANIZATION STATUS. The
Shareholder consents and agrees as follows:
(i) There is no plan or intention by the Shareholder
to sell, exchange or otherwise dispose of a number of
HealthCare Shares received in the Merger that would reduce the
Shareholder's ownership of HealthCare Shares to a number of
shares having a value, as of the date of the Merger, of less
than 50 percent of the value of all of the formerly
outstanding stock of the Company as of the same date.
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(ii) HC Subsidiary will acquire at least 90 percent
of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets held by
the Company immediately prior to the Merger.
(iii) The liabilities of the Company assumed by HC
Subsidiary and the liabilities to which the transferred assets
of the Company are subject were incurred by the Company in the
ordinary course of its business.
(iv) The Company, and the Shareholder will pay their
respective expenses, if any, incurred in connection with the
transaction.
(v) The Company is not an investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(vi) The Company is not 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.
(vii) The fair market value of the assets of the
Company transferred to HC Subsidiary will equal or exceed the
sum of the liabilities assumed by HC Subsidiary, plus the
amount of liabilities, if any, to which the transferred assets
are subject.
5.2 COVENANTS OF HEALTHCARE.
(a) Following the Merger, HC Subsidiary will not issue
additional shares of its stock that would result in HealthCare losing
control of HC Subsidiary within the meaning of Section 368(c) of the
Code.
(b) Following the Merger, HC Subsidiary will continue the
historic business of the Company or use a significant portion of the
Company's business assets in a business.
(c) HealthCare will comply, and will cause HC Subsidiary to
comply, with the reporting requirements set forth in ss.
1.367(a)-3T(c)(4) of the U.S. Treasury Regulations following
consummation of the Merger.
(d) HealthCare and HC Subsidiary will treat the Merger as a
tax-free reorganization of the Company for U.S. tax purposes on all tax
returns filed by them in the United States, and neither HealthCare nor
HC Subsidiary will take any action inconsistent with such treatment of
the Merger, or which would cause the Merger to fail to qualify as a
tax-free reorganization.
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(e) The Shareholder has provided personal guarantees or has
otherwise become individually liable with respect to certain leases,
line of credit agreements, purchase agreements with manufacturers, or
other agreements for the benefit for the Company, including, without
limitation, those described on SCHEDULE 5.2(E). Following the Merger,
HealthCare will use its best efforts to obtain the release of the
Shareholder from all such personal liabilities. To the extent that any
such release cannot be obtained, HealthCare will indemnify and hold the
Shareholder harmless with respect to any loss, cost, or expense the
Shareholder may incur as a result of not being released.
ARTICLE VI
SECURITIES LAWS
6.1 SECURITIES LAWS.
(a) INVESTMENT REPRESENTATIONS. The Shareholder represents to
HealthCare as follows:
(i) The HealthCare Shares are being acquired for her
own account and for investment only, and not with a view to
the distribution of all or any part of the HealthCare Shares,
and the acquisition of the HealthCare Shares by the
Shareholder and her continued holding thereof as may be
required by law and the terms hereof are consistent with her
financial position.
(ii) The Shareholder has had access to complete
information regarding the business and finances of HealthCare,
has met and discussed the business and finances of HealthCare
with its management employees to the extent she deems
necessary, has received, read, and understood the contents of
the Healthcare Capital Corp. Confidential Offering Memorandum
dated October 16, 1996 (the "Offering Memorandum"), and the
Shareholder believes she has received all the information she
considers necessary or appropriate for deciding whether to
receive the HealthCare Shares as consideration in the Merger.
(iii) The Shareholder can bear the economic risk of
receiving the HealthCare Shares as consideration in the
Merger, and has such knowledge and experience in financial or
business matters that she is capable of evaluating the merits
and risks of receiving such shares.
(iv) The Shareholder is an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated
by the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as a result of the following:
(A) The Shareholder has an individual net
worth, or joint worth with the Shareholder's spouse,
which exceeds $1,000,000; and/or
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(B) The Shareholder has an individual income
in excess of $200,000 in each of the two most recent
years or joint income with Shareholder's spouse in
excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income
level in the current year.
or, if not an accredited investor, then the Shareholder by
reason of her business or financial experience or the business
or financial experience of her professional advisers (who are
unaffiliated with and who are not compensated by HealthCare or
any affiliate or selling agent of HealthCare directly or
indirectly), has the capacity to protect her own interests in
connection with the receipt of the HealthCare Shares.
(b) LIMITATIONS ON TRANSFER. Except as expressly provided in
this Agreement, the Shareholder shall not, directly or indirectly,
offer or sell, pledge, transfer, or otherwise dispose of all or any
portion of the HealthCare Shares, or solicit any offer to buy,
purchase, or otherwise acquire or take a pledge of all or any portion
of the HealthCare Shares, except (A) in the manner and to the extent
described in (i) a registration statement in effect under the
Securities Act of 1933 (the "Act") covering the HealthCare Shares and
as to which a prospectus meeting the requirements of the Act is duly
delivered and filed as necessary with any state agency or (ii) an
opinion of counsel for the Shareholder reasonably acceptable to
HealthCare, which opinion is in form and substance satisfactory to
counsel for HealthCare, to the effect that such proposed offer, sale,
pledge, transfer, or other disposition of HealthCare Shares may
lawfully be made without such registration, delivery or state filing or
(B) pursuant to trades made on the Alberta Stock Exchange ("ASE") after
90 days following the Closing pursuant to Rule 904 of Regulation S
under the Act. The Shareholder acknowledges that she has consulted with
counsel concerning the limited availability of exemptions from
registration under the Act or exemptions from qualification under state
securities laws and she understands that she (i) may bear the economic
risk of investment in the HealthCare Shares for an indefinite period of
time because the HealthCare Shares have not been registered under the
Act or qualified under state securities laws and, therefore, cannot be
sold unless they are subsequently registered under the Act or qualified
under state securities laws or an exemption from such registration,
such as that contained in Rule 904, or from state qualification is
available, (ii) HealthCare is not obligated to register the HealthCare
Shares under the Act or qualify them under state securities laws, (iii)
that absent registration, the HealthCare Shares ordinarily may not be
sold in the United States for at least two years after the Closing and
then only in accordance with Rule 144 under the Act, and absent
qualification under state securities laws may be subject to similar
restrictions and (iv) the HealthCare Shares may not be sold,
transferred or otherwise disposed of in the province of Alberta,
Canada, or traded through the facilities of the ASE for a period of 90
days following the Closing.
(c) LEGENDS ON CERTIFICATES. Certificates representing the
HealthCare Shares shall be endorsed with legends, (i) substantially in
the form set forth in SCHEDULE 6.1(C)
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hereto, and (ii) to the effect that the HealthCare Shares may not be
traded in Canada for 90 days following the Closing. HealthCare need not
recognize any person other than the Shareholder as having any interest
in or to the HealthCare Shares unless the acquisition thereof shall
have been made in compliance with Subsection 6.1(b) above. HealthCare
may issue appropriate stop transfer instructions to the transfer agent
for the HealthCare Shares to prevent transfers in violation of
Subsection 6.1(b) hereof.
(d) REMOVAL OF LEGENDS.
(i) At any time while the HealthCare Shares are
registered under the Act, HealthCare shall, upon written
request, cause the certificates representing the HealthCare
Shares to be reissued free of all legends and withdraw all
stop transfer instructions. Upon the termination of any such
registration, if the Shareholder owns HealthCare Shares
represented by a certificate without such legends, the
Shareholder shall, upon written request, promptly return such
certificate to HealthCare for reissue for a certificate
endorsed with the legends specified in, and otherwise subject
to, the provisions of Subsection 6.1(c). Three years after the
Closing, HealthCare's right to request the return of
unlegended certificates for previously registered HealthCare
Shares shall terminate and HealthCare shall, upon written
request of the Shareholder, cause any certificates bearing one
or more legends to be reissued free of such legends and
withdraw all stop transfer instructions, provided that Rule
144(k) under the Act, or a comparable rule, is in effect in
substantially its present form and the Shareholder furnishes
to HealthCare evidence satisfactory to HealthCare and its
counsel that she meets the requirements of such rule.
(ii) HealthCare shall, upon written request, cause a
certificate representing all or a portion of the HealthCare
Shares to be reissued free of all legends (except as provided
in Section 1.5 hereof) and shall withdraw all stop transfer
instructions upon the provision by the Shareholder of a
declaration to The R-M Trust Company as transfer agent in
substantially the form set forth in SCHEDULE 6.1(D)(II)
hereto.
6.2 REGISTRATION UNDERTAKING.
(a) HealthCare agrees that, if at any time from and after the
Closing date and before the second anniversary of such date, the board
of directors of HealthCare shall authorize the filing of a registration
statement under the Act for sale of HealthCare shares by HealthCare in
the United States, HealthCare will (i) promptly notify Shareholder that
such registration statement will be filed and that the HealthCare
Shares which are then held by Shareholder will be included in such
registration statement at her request, (ii) subject to the last
sentence of this subsection (a), cause such registration statement to
cover all HealthCare Shares which it has been so requested to include
by Shareholder, provided such request is delivered to HealthCare not
later than 20 days after such notice is given to Shareholder and
specifies the number of HealthCare Shares to be included in
- 24 -
the proposed registration, (iii) use reasonable efforts subject to
market conditions to cause such registration statement to become
effective and remain effective and current for such period as may be
necessary to permit the underwriters to complete the distribution of
the securities covered by the registration statement, if such offering
is an underwritten offering, or, if not, for such period, not in excess
of 90 days, as may be necessary for Shareholder to effect a proposed
sale or other distribution, and (iv) take all other action necessary
under any federal or state law or regulation of any governmental
authority (other than the state securities or blue sky laws) to permit
the shares included in such registration statement to be sold or
otherwise disposed of and will maintain such compliance with each such
federal and state law and regulation of governmental authority for the
period necessary for the underwriters or Shareholder, as the case may
be, to effect the proposed sale or other disposition. Notwithstanding
the foregoing provisions, if the registration statement relates to an
underwritten offering of HealthCare Shares and the managing underwriter
shall inform in writing HealthCare and Shareholder and any other
holders of HealthCare Shares requesting such registration that the
managing underwriter believes that the number of shares requested to be
included in such registration would materially, adversely affect its
ability to effect such offering, then HealthCare will include in such
registration the number of HealthCare Shares which HealthCare is so
advised can be sold in (or during the time of) such offering as
follows: first, all shares proposed by HealthCare to be sold for its
own account, and, second, such HealthCare Shares requested to be
included in such registration, pro rata by Shareholder and other
holders of HealthCare Shares on the basis of the number of HealthCare
Shares so proposed to be sold and so requested to be included;
PROVIDED, HOWEVER, that HealthCare shall be obligated to register any
HealthCare Shares so excluded from the registration statement pursuant
to a registration statement filed 90 days after the effectiveness of
such initial registration statement or such greater number of days as
may be specified in "lock-up" agreements entered into with the managing
underwriter.
(b) Whenever HealthCare is required pursuant to the provisions
of this Section 6.2 to include HealthCare Shares in a registration
statement, HealthCare shall (i) furnish Shareholder and each
underwriter of such HealthCare Shares with such copies of a prospectus,
including the preliminary prospectus, conforming to the Act (and such
other documents as Shareholder and each such underwriter may reasonably
request) in order to facilitate the sale or distribution of HealthCare
Shares, (ii) use its best efforts to register or qualify such
HealthCare Shares under the blue sky laws (to the extent applicable) of
such jurisdiction or jurisdictions as Shareholder and each underwriter
of HealthCare Shares being sold shall reasonably request and (iii) take
such other actions as may be reasonably necessary or advisable to
enable the Shareholders and such underwriters to consummate the sale or
distribution in such jurisdiction or jurisdictions in which such
holders shall have reasonably requested that the HealthCare Shares be
sold. Shareholder shall furnish to HealthCare in writing such
information relating to herself as HealthCare may reasonably request in
connection with the preparation of such registration statement.
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(c) HealthCare shall pay all expenses incurred in connection
with any registration or other action pursuant to the provisions of
this Section 6.2, other than underwriting discounts and applicable
transfer taxes relating to the HealthCare Shares sold by Shareholder
and attorney fees and expenses of Shareholder.
(d) HealthCare agrees to indemnify and hold harmless
Shareholder from and against any and all losses, claims, damages,
liabilities or actions, joint or several, to which Shareholder may
become subject under the Act for any legal or other expenses (including
the cost of any investigation and preparation) incurred by her in
connection with any litigation or threatened litigation, whether or not
resulting in any liability, but only insofar as such losses, claims,
damages, liabilities or actions arise out of, or are based upon, (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement pursuant to which HealthCare
Shares were registered under the Act (hereinafter called a
"Registration Statement"), any preliminary prospectus, the final
prospectus or any amendment or supplement thereto (or in any
application or document filed in connection therewith) or any document
filed by HealthCare in any jurisdiction in order to register or qualify
the HealthCare Shares under the securities laws thereof or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or (ii) the employment by HealthCare of any device, scheme or artifice
to defraud, or the engaging by HealthCare in any act, practice or
course of business which operates or would operate as a fraud or
deceit, or any conspiracy with respect thereto, in which HealthCare
shall participate, in connection with the issuance and sale of any of
the HealthCare Shares; PROVIDED, HOWEVER that (i) the indemnity
agreement contained in this Subsection (d) shall not extend to
Shareholder in respect of any such losses, claims, damages, liabilities
or actions arising out of, or based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if
such statement or omission was based upon and made in conformity with
information furnished in writing to HealthCare by Shareholder
specifically for use in connection with the preparation of such
Registration Statement, any final prospectus, any preliminary
prospectus or any such amendment or supplement thereto (or in any
application or document filed in connection therewith) or document
filed in any jurisdiction in order to register or qualify the
HealthCare Shares under the securities laws thereof. HealthCare agrees
to pay any legal and other expenses for which it is liable under this
Subsection (d) from time to time (but not more frequently than monthly)
within 30 days after its receipt of a xxxx therefor.
(e) Shareholder will indemnify and hold harmless HealthCare,
its directors, its officers who shall have signed the Registration
Statement and each person, if any, who controls HealthCare within the
meaning of Section 15 of the
- 26 -
Act to the same extent as the foregoing indemnity from HealthCare, but
in each case to the extent, and only to the extent, that any statement
in or omission from or alleged omission from such Registration
Statement, any final prospectus, any preliminary prospectus or any
amendment or supplement thereto (or in any application or document
filed in connection therewith) or document filed in any jurisdiction in
order to register or qualify the HealthCare Shares under the securities
laws thereof was made in reliance upon information furnished in writing
to HealthCare by Shareholder specifically for use in connection with
the preparation of the Registration Statement, any final prospectus or
the preliminary prospectus or any such amendment or supplement thereto
(or in any application or document filed in connection therewith) or
document filed in any jurisdiction in order to register or qualify the
HealthCare Shares under the securities laws thereof; PROVIDED, HOWEVER,
that the obligation of Shareholder to indemnify HealthCare under the
provisions of this Subsection (e) shall be limited to the product of
the number of HealthCare Shares being sold by Shareholder and the
market price of HealthCare Shares on the date of the sale to the public
of these HealthCare Shares. Shareholder agrees to pay any legal and
other expenses for which she is liable under this Subsection (e) from
time to time (but not more frequently than monthly) within 30 days
after receipt of a xxxx therefor.
(f) If any action is brought against a person entitled to
indemnification pursuant to the foregoing Subsections (d) and (e) (an
"indemnified party") in respect of which indemnity may be sought
against a person granting indemnification (an "indemnifying party")
pursuant to such Subsections (d) and (e), such indemnified party shall
promptly notify such indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party of any
such action shall not release the indemnifying party from any liability
it or she may have to such indemnified party otherwise than on account
of the indemnity agreement contained in Subsections (d) and (e) of this
Section 6.2. In case any such action is brought against an indemnified
party and it or she notifies an indemnifying party of the commencement
thereof, the indemnifying party against which a claim is to be made
will be entitled to participate therein at its, his or her own expense
and, to the extent that it or she may wish, to assume at its or her own
expense the defense thereof, with counsel reasonably satisfactory to
such indemnified party; PROVIDED, HOWEVER, that (i) if the defendants
in any such action include both the indemnified party and the
indemnifying party and the indemnifying party shall have reasonably
concluded based upon advice of counsel that there may be legal defenses
available to it, she and/or other indemnified parties which are
different from or additional to those available to the indemnified
party, the indemnified party shall have the right to select separate
counsel to assume such legal defenses and otherwise to participate in
the defense of such action on behalf of such indemnified party or
parties and (ii) in any event, the indemnified party shall be entitled
to have counsel chosen by such indemnified party participate in, but
not conduct, the defense at the expense of the indemnifying party. Upon
receipt of notice from the indemnifying
- 27 -
party to such indemnified party of its or her election so to assume the
defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 6.2 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed
such counsel in connection with the assumption of legal defenses in
accordance with proviso (i) to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel), (ii) the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying
party. An indemnifying party shall not be liable for any settlement of
any action or proceeding effected without its written consent.
(g) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in
Subsections (d) and (e) of this Section 6.2 is unavailable to an
indemnified party in accordance with its terms, HealthCare and
Shareholder shall contribute to the aggregate losses, claims, damages
and liabilities, of the nature contemplated by said indemnity
agreement, incurred by HealthCare and Shareholder, in such proportions
as are appropriate to reflect the relative benefits received by
HealthCare and Shareholder from any offering of the HealthCare Shares;
PROVIDED, HOWEVER, that if such allocation is not permitted by
applicable law or if the indemnified party failed to give the notice
required under Subsection (f) of this Section 6.2, then the relative
fault of HealthCare and Shareholder in connection with the statements
or omissions which resulted in such losses, claims, damages and
liabilities and other relevant equitable considerations will be
considered together with such relative benefits.
(h) The respective indemnity and contribution agreements by
HealthCare and Shareholder in Subsections (d), (e), (f) and (g) of this
Section 6.2 shall remain operative and in full force and effect
regardless of (i) any investigation made by Shareholder or by
HealthCare or any controlling person of HealthCare or any director or
any officer of HealthCare, (ii) payment for any of the HealthCare
Shares or (iii) any termination of this Agreement, and shall survive
the delivery of the HealthCare Shares, and any successor of HealthCare,
or of Shareholder, or of any person who controls HealthCare, as the
case may be, shall be entitled to the benefit of such respective
indemnity and contribution agreements. The respective indemnity and
contribution agreements by HealthCare and Shareholder contained in
Subsections (d), (e), (f) and (g) of this Section 6.2 shall be in
addition to any liability which HealthCare and Shareholder may
otherwise have.
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ARTICLE VII
CONDITIONS PRECEDENT TO HEALTHCARE'S OBLIGATIONS
Each and every obligation of HealthCare to be performed at Closing
shall be subject to the satisfaction prior to or at the Closing (or the waiver
by HealthCare) of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties made by the Shareholder in this Agreement, or in
any instrument, schedule, list, certificate or writing delivered by Shareholder
pursuant to this Agreement, shall be true and correct when made and shall be
true and correct in all material respects at and as of the Closing as though
such representations and warranties were made as of the Closing.
7.2 COMPLIANCE WITH AGREEMENT. The Shareholder shall have in all
material respects performed and complied with all of her agreements and
obligations under this Agreement which are to be performed or complied with by
her prior to or on the Closing, including the delivery of the closing documents
specified in Section 2.2(a) hereof.
7.3 ABSENCE OF SUIT. No action, suit, investigation or proceeding
before any court or any governmental authority shall have been commenced or
threatened, against HealthCare, the Company or any of the affiliates, officers
or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions; provided that the obligations of HealthCare
shall not be affected unless there is a reasonable likelihood that as a result
of such action, suit, investigation, or proceeding HealthCare will be unable to
retain substantially all the practical benefits of the transaction to which it
is entitled under this Agreement.
7.4 APPROVALS; CONSENTS. All consents, permits, approvals, licenses or
orders from any governmental or regulatory body or other third party required to
be obtained by Shareholder for the lawful consummation of the transactions
contemplated by this Agreement shall have been obtained except where failure to
obtain such consents, permits, approvals, licenses or orders would not have a
material adverse effect (whether or not such effect is referred to or described
in any Schedule) on the business, prospects, financial conditions, assets,
reserves or operations of the Company taken as a whole.
7.5 NO MATERIAL ADVERSE CHANGE. From the date of the Financial
Statements to the Closing, the Company shall not have suffered any change which
has a material adverse effect (whether or not such effect is referred to or
described in any Schedule) on the business, prospects, financial condition,
assets, reserves or operations of the Company taken as a whole.
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7.6 AGREEMENTS.
(a) NONCOMPETITION AND CONFIDENTIALITY AGREEMENT. Shareholder
shall have executed and delivered to HealthCare a Noncompetition and
Confidentiality Agreement substantially in the form attached hereto as
SCHEDULE 7.6(A).
(b) EMPLOYMENT AGREEMENT. Shareholder shall have executed and
delivered to HC Subsidiary an Employment Agreement substantially in the
form of SCHEDULE 7.6(B) hereto.
(c) LEASE AMENDMENT. Shareholder shall have executed and
delivered to HC Subsidiary a Lease Amendment substantially in the form
of SCHEDULE 7.6(C) hereto.
7.7 ALBERTA STOCK EXCHANGE. The issuance of the HealthCare Shares to
the Shareholder shall have been conditionally approved by the ASE.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE SHAREHOLDER'S OBLIGATIONS
Each and every obligation of the Shareholder to be performed at Closing
shall be subject to the satisfaction prior to or at the Closing (or the waiver
by the Shareholder) of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties made by HealthCare in this Agreement, or in any
instrument, list, certificate or writing delivered by HealthCare pursuant to
this Agreement, shall be true and correct when made and shall be true and
correct at and as of the Closing as though such representations and warranties
were made as of the Closing.
8.2 COMPLIANCE WITH AGREEMENT. HealthCare shall have in all material
respects performed and complied with all of HealthCare's agreements and
obligations under this Agreement which are to be performed or complied with by
HealthCare prior to or on the Closing, including the delivery of the closing
documents specified in Section 2.2(b) hereof.
8.3 ABSENCE OF SUIT. No action, suit, investigation, or proceeding
before any court or any governmental authority shall have been commenced or
threatened against HealthCare, the Company or any of the affiliates, officers or
directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions; provided that the obligations of the
Shareholder shall not be affected unless there is a reasonable likelihood that
as a result of such action, suit, proceeding or investigation, the Shareholder
will be unable to retain substantially all the consideration to which she is
entitled under this Agreement.
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8.4 AGREEMENTS.
(a) EMPLOYMENT AGREEMENT. HC Subsidiary shall have executed
and delivered to Shareholder an Employment Agreement substantially in
the form of SCHEDULE 7.6(B) hereto.
(b) HC Subsidiary shall have executed and delivered to
Shareholder a Lease Amendment
ARTICLE IX
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
9.1 INDEMNIFICATION BY SHAREHOLDER. Shareholder hereby agrees to
indemnify, defend, and hold HealthCare harmless from and against all Claims (as
defined below) asserted against, resulting to, imposed upon, or incurred by
HealthCare directly or indirectly by reason of, arising out of, or resulting
from (a) the inaccuracy or breach of any representation or warranty of the
Shareholder contained in or made pursuant to this Agreement, or (b) the breach
of any covenant of the Shareholder contained in this Agreement. As used in this
Section 9.1, the term "Claim" shall include all losses, damages, judgments,
awards, settlements, costs, and expenses (including without limitation
penalties, court costs, and attorneys fees and expenses at trial and on appeal)
awarded by the arbitrator or arbitrators pursuant to Section 10.12 hereof.
9.2 INDEMNIFICATION BY HEALTHCARE. HealthCare hereby agrees to
indemnify, defend, and hold harmless the Shareholder from and against all Claims
(as defined in Section 9.1) asserted against, resulting to, imposed upon, or
incurred by the Shareholder directly or indirectly by reason of, arising out of,
or resulting from (a) the inaccuracy or breach of any representation or warranty
of HealthCare contained in or made pursuant to this Agreement, or (b) the breach
of any covenant of HealthCare contained in this Agreement.
9.3 NOTICE; DEFENSE OF CLAIMS. If a claim is to be made by a party
entitled to indemnification hereunder, the party entitled to such
indemnification shall give written notice to the indemnifying party immediately
after the party entitled to indemnification becomes aware of any fact, condition
or event which may give rise to a matter for which indemnification may be
sought; provided that the failure of any indemnified party to give timely notice
shall not affect the rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
If any lawsuit or enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, and if the indemnifying party shall acknowledge
in writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit, action or claim, then the indemnifying party shall be entitled, if it
or she so elects, to take control of the defense and investigation of such
lawsuit or action and to employ and engage attorneys of its or her own choice to
handle and defend the same, at the indemnifying party's cost, risk and expense
provided that the indemnifying party and its or her counsel shall proceed with
diligence and in good faith with respect thereto. The indemnified party shall
cooperate in all reasonable respects with the indemnifying party and such
attorneys in the investigation, trial and defense
- 31 -
of such lawsuit or action and any appeal arising therefrom; provided, however,
that the indemnified party may, at its or her own cost, participate in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom.
9.4 SURVIVAL OF REPRESENTATIONS. All representations and warranties
made by the parties in this Agreement are made only as of the date of this
Agreement but will survive the consummation of the transactions contemplated by
this Agreement for a period ending 90 days after the second fiscal year end
(July 31) of HC Subsidiary which occurs after the Closing (except for the
representations and warranties of the Shareholder set forth in Section 3.11
hereof which shall expire 90 days after the applicable statutes of limitation
shall have run with respect to all tax returns filed by the Company for all
periods ended on or before the Closing) after which all such representations and
warranties shall expire except with respect to claims asserted in writing prior
to such date.
ARTICLE X
MISCELLANEOUS
10.1 TERMINATION.
(a) RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be
terminated without further liability of any party at any time prior to
the Closing:
(i) By mutual written agreement of the parties, or
(ii) By either HealthCare or the Shareholder if the
Closing shall not have occurred on or before the 90th day
after the date hereof, provided the terminating party has not,
through breach of a representation, warranty or covenant,
prevented the Closing from occurring on or before such date.
(b) TERMINATION FOR BREACH.
(i) TERMINATION BY HEALTHCARE. If there has been a
material breach by the Shareholder of any of her agreements,
representations or warranties contained in this Agreement
which has not been waived in writing by HealthCare, then
HealthCare may, by written notice to Shareholder at any time
prior to the Closing that such breach is continuing, terminate
this Agreement with the effect set forth in Section
10.1(b)(iii) hereof.
(ii) TERMINATION BY SHAREHOLDER. If there has been a
material breach by HealthCare of any of its agreements,
representations or warranties contained in this Agreement
which has not been waived in writing by the Shareholder, then
the Shareholder may, by written notice to HealthCare at any
time prior to the Closing that such breach is continuing,
terminate this Agreement with the effect set forth in Section
10.1(b)(iii).
- 32 -
(iii) EFFECT OF TERMINATION. Termination of this
Agreement pursuant to this Section 10.1 shall not in any way
terminate, limit or restrict the rights and remedies of any
party hereto against any other party which has breached or
failed to perform any of the representations, warranties,
covenants, or agreements of this Agreement prior to
termination hereof.
10.2 WAIVER. Shareholder or HealthCare may (a) extend the time for the
performance of any of the obligations or other acts of the other, (b) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any
of the agreements of the other or satisfaction of any of the conditions to its
obligations contained herein. Any extension or waiver made pursuant to this
Section 10.2 must be by an instrument in writing signed on behalf of the party
granting the extension or waiver. A waiver by any party of any provision hereof
or breach hereof shall not operate or be construed as the waiver of any other
provision or any subsequent breach.
10.3 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
legal representatives. This Agreement is not assignable and any purported
assignment shall be null and void. Nothing contained in this Agreement shall be
deemed to confer any right or benefit upon any person other than the parties
hereto to the extent herein provided.
10.4 DOLLARS. "Dollars" and "$" mean lawful money of the United States
of America, which shall be legal tender on the date of payment for all public
and private debts.
10.5 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
10.6 HEADINGS; SEVERABILITY. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement. Each
and every provision of this Agreement shall be treated as separate and distinct
and, in the event of any provision hereof being declared invalid, such invalid
provision shall be deemed to be severable and all other provisions hereof shall
remain in full force and effect.
10.7 SCHEDULES. The Schedules are a part of this Agreement as if fully
set forth herein.
10.8 DISCLOSURES AND ANNOUNCEMENTS. Both the timing and the content of
all disclosures to third parties and public announcements concerning the
transactions provided for in this Agreement by either Shareholder or HealthCare
shall be subject to the approval of the other in all essential respects, except
that the Shareholder's approval shall not be required as to any announcements or
filings HealthCare may be required to make under applicable laws or regulations.
10.9 CONFIDENTIAL INFORMATION. Following the Closing, Shareholder shall
use her best efforts to cause all of her agents, officers, directors and
employees to treat and safeguard all
- 33 -
Confidential Information concerning the Business and, except as required by law,
agree not to disclose or reveal any Confidential Information to any third party
or otherwise use such Confidential Information. For purposes of this Agreement,
"Confidential Information" shall mean information of a valuable, proprietary and
confidential nature relating directly to the Business, asset lists and
valuations of any kind, customer lists, trade secrets, formulae, methods or
processes, channels of distribution, pricing policies and records. The term
"Confidential Information" does not include information that (a) is or becomes
generally available to the public or is a recognized standard industry practice;
or (b) becomes available subsequent to the date hereof to Shareholder on a
non-confidential basis from a source other than HealthCare or from records of
the business.
10.10 EXPENSES. Shareholder agrees that all fees and expenses incurred
by her in connection with this Agreement shall be borne by Shareholder
including, without limitation, all fees of counsel and accountants in excess of
the sum of $5,000 which may be paid by Company; and HealthCare agrees that all
fees and expenses incurred by it in connection with this Agreement shall be
borne by it, including, without limitation, all fees of counsel and accountants.
10.11 NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by private overnight courier service. The respective
addresses and telephone numbers to be used for all such notices, demands or
requests are as follows:
If to HealthCare HealthCare Capital Corp.
or HC Subsidiary: 000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: President
Personal & Confidential
Facsimile: (000) 000-0000
with a copy to: Miller, Nash, Wiener, Hager & Xxxxxxx
000 X.X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attn: G. Xxxx Xxxxxxx
Facsimile: (000) 000-0000
If to Shareholder: Xxxxxxx Law Cross
Hearing Dynamics
000 Xxxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
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with a copy to: Xxxxxxx X. Xxxxx
Imperial Bank Tower, Suite 1000
000 X Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile (000) 000-0000
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted, such communication shall be
deemed delivered the next business day after transmission (and the sender shall
bear the burden of proof of delivery); if sent by overnight courier pursuant to
this paragraph, such communication shall be deemed delivered upon receipt. Any
party to this Agreement may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this section.
10.12 RESOLUTION OF DISPUTES.
(a) ARBITRATION. Any dispute, controversy or claim arising out
of or relating to this Agreement or the performance by the parties of
its terms shall be settled by binding arbitration held in San Diego,
California, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Section 10.12. Notwithstanding the
foregoing, HealthCare, in its discretion, apply to a court of competent
jurisdiction for equitable relief from any violation or threatened
violation of the provisions of the Shareholder under any noncompetition
and confidentiality agreements executed pursuant to this Agreement.
(b) ARBITRATORS. Following thirty (30) days' written notice by
any party of intention to invoke arbitration, any dispute arising under
this Agreement which have not been mutually resolved shall be
determined by a single arbitrator upon whom the parties agree or, if
the parties cannot agree on a single arbitrator within five (5)
business days following such thirty (30) day period, then by a board of
three (3) arbitrators, which arbitrator(s) shall be selected for each
such controversy so arising hereunder. If three (3) arbitrators are
necessary, each party shall have the right to pick one arbitrator and
the two arbitrators so chosen shall have the right to select a third
arbitrator. Any party who is unable or unwilling to so select an
arbitrator in a timely manner, shall forfeit its right to participate
in the selection process. If a selected arbitrator is unable or
unwilling to act, or if for any other reason an appointment of the
requisite number or arbitrators cannot be made, then any party, on
behalf of all the parties, may request appointment of arbitrator(s) by
the presiding judge of the federal courts located in the
District of California.
(c) PROCEDURES; NO APPEAL. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as
practicable, and if reasonably practicable, within 120 days after the
selection of the arbitrator(s). The arbitrator(s) shall give the
parties written notice of the decision, with the reasons therefor set
out, and shall have thirty (30) days
- 35 -
thereafter to reconsider and modify such decision if any party so
requests within ten (10) days after the decision. Thereafter, the
decision of the arbitrator(s) shall be final, binding, and
nonappealable with respect to all persons, including (without
limitation) persons who have failed or refused to participate in the
arbitration process.
(d) AUTHORITY. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or
preliminary relief, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorney fees and expenses in such
manner as is determined to be appropriate by the arbitrator(s).
(e) ENTRY OF JUDGMENT. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and
subject matter jurisdiction. The Shareholder and HealthCare hereby
submit to the in personam jurisdiction of the federal and state courts
in California for the purpose of confirming any such award and entering
judgment thereon.
(f) CONFIDENTIALITY. All proceedings under this Section 10.12,
and all evidence given or discovered pursuant hereto, shall be
maintained in confidence by all parties.
(g) CONTINUED PERFORMANCE. The fact that the dispute
resolution procedures specified in this Section 10.12 shall have been
or may be invoked shall not excuse any party from performing its
obligations under this Agreement, and during the pendency of any such
procedure all parties shall continue to perform their respective
obligations in good faith, subject to any rights to terminate this
Agreement that may be available to any party.
10.13 GOVERNING LAW. This Agreement may not be modified or terminated
orally, and shall be construed and interpreted according to the internal law of
the state of California, excluding any choice of law rules that may direct the
application of the laws of another jurisdiction.
10.14 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
10.15 ENTIRE AGREEMENT. This Agreement (including the Schedules) and
the agreements, certificates and other documents delivered pursuant hereto
contain the entire agreement between the parties hereto. All parties
collaborated in the preparation of this Agreement and it has been reviewed by
attorneys for each party. No one party should be considered the author of any
specific language for purposes of legal presumptions.
10.16 FURTHER ASSURANCES. Both before and after the Closing, each party
will cooperate in good faith with the others and will take all appropriate
action and execute any documents,
- 36 -
instruments, or conveyances of any kind that may be reasonable necessary or
desirable to carry out any of the transactions contemplated hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective as of the date first above written.
COMPANY: HEALTHCARE:
HEARING DYNAMICS, HEALTHCARE CAPITAL CORP.,
a California corporation an Alberta, Canada, corporation
By /S/ XXXXXXX LAW CROSS By /S/ XXXXX X. KAWASAKI
Xxxxxxx Law Cross, President Xxxxx X. Kawasaki, Vice President
SHAREHOLDER: HC SUBSIDIARY:
HEALTHCARE HEARING CLINICS, INC.
/S/ XXXXXXX LAW CROSS By /S/ XXXXX X. KAWASAKI
Xxxxxxx Law Cross Xxxxx X. Kawasaki, Vice President
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SCHEDULES TO MERGER AGREEMENT
Schedule 1.1 Agreement and Plan of Merger
Schedule 1.8 Shareholder Loans
Schedule 2.2(a)(ii) Opinion of Shareholder's Counsel
Schedule 2.2(b)(iii) Opinion of HealthCare's Counsel
Schedule III Disclosure Statement
Schedule 3.7 No Litigation
Schedule 3.8(b) Licenses and Permits
Schedule 3.12 Product Warranty
Schedule 3.16 Patents, Trademarks, etc.
Schedule 3.17(a) Real Property and Personal Property Leases
Schedule 3.17(b) Purchase Commitments
Schedule 3.17(c) Sales Commitments
Schedule 3.17(f) Loan Agreements
Schedule 3.17(i) Other Material Contracts
Schedule 3.18(a) Real Property
Schedule 3.18(b) Personal Property
Schedule 3.19 Employee Benefit Plans
Schedule 3.20 Employment Compensation
Schedule 3.21 Key Employees, Bank, Etc.
Schedule 5.2(e) Shareholder's Personal Liability
Schedule 6.1(c) Legends on Certificates
Schedule 6.1(d)(ii) Declaration for Removal of Legends
Schedule 7.6(a) Noncompetition and Confidentiality Agreement
Schedule 7.6(b) Employment Agreement
Schedule 7.6(c) Lease Amendment
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