EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") dated April 24, 1998,
between PROXYMED, INC., a Florida corporation ("Buyer"), with its principal
business address at 0000 Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000,
and WPJ, INC., a California corporation (the "Company"), with its principal
business address at 0000 X. Xxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000, and
XXXXXX XXXXXXXXXX and XXXX XXXX, the sole Shareholders of the Company (the
"Shareholders"). The Company and Shareholders are sometimes collectively
referred to in this Agreement as "Selling Parties".
WHEREAS, Shareholders own all of the issued and outstanding capital
stock of the Company; and
WHEREAS, upon the terms and conditions of this Agreement, Buyer desires
to purchase from Selling Parties, and Selling Parties desire to sell to Buyer,
all of the issued and outstanding capital stock of the Company; and
WHEREAS, it is the intention of the Company, the Shareholders and Buyer
that the acquisition by Buyer of the Company pursuant to the terms and
conditions of this Stock Purchase Agreement be a "qualified stock purchase" for
purposes of Section 338(h)(10) of the Internal Revenue Code and that both Buyer
and the Company and its Shareholders will timely elect to make an election
pursuant to Section 338(h)(10);
THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE 1. PURCHASE AND SALE OF STOCK
1.1 Subject to and under the terms and conditions set forth in this
Agreement, Shareholders shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall purchase, at the Closing provided for in Article 3
hereof, all (and not less than all) of the shares of capital stock of the
Company set forth and described on SCHEDULE 1.1 hereto (the "Shares" or the
"Stock").
ARTICLE 2. PURCHASE PRICE
2.1 PAYMENT OF PURCHASE PRICE. In consideration for the transfer and
assignment by the Shareholders and in consideration of the representations,
warranties and covenants of Selling Parties set forth herein, Buyer on the
conditions set forth herein:
(a) shall pay to the Shareholders or their assignee(s) at the
Closing (as hereinafter defined) Twenty Million Six Hundred Twenty Thousand
Dollars ($20,620,000) in cash described in Section 3.2 hereof; and
(b) shall deliver to the Shareholders or their designee(s) at
the Closing that number of shares of Common Stock of Buyer described in Section
3.2 hereof which equals
$6,750,000 of ProxyMed's Common Stock, $.001 par value, at its fair market value
defined as the average of the closing price of the Common Stock as reported to
have traded on the Nasdaq National Market System at the close of business on the
three (3) trading days prior to, the day of, and the three (3) trading days
after the date of the public announcement of this Agreement which announcement
shall be effected at the following date and time: Monday, April 27, 1998, at
approximately between 7:30 and 9:30 a.m. EDT, or at such other date as the
parties mutually agree.
(c) In addition to the foregoing, Buyer shall pay to
Shareholders a sum equal to the aggregate amount of federal and state income and
franchise taxes (less estimated payments made prior to the Closing Date) payable
by the Shareholders with respect to all taxable income arising from their
ownership of the Shares from the period beginning January 1, 1998, and ending on
the Closing Date (the "Short Tax Year"). Such amount shall be paid by Buyer to
the Shareholders within at least fifteen (15) days prior to the taxes being due
. The obligations of Buyer described in this subsection (c) are absolute and
unconditional in all respects, and shall be valid and enforceable irrespective
of any other agreements or circumstances which might otherwise constitute a
defense to such obligations including, without limitation, any liabilities of
Shareholders to Buyer pursuant to Section 12.4 of this Agreement. Buyer
absolutely, unconditionally and irrevocably waives any and all right to assert
any defense, set-off, counterclaim or cross-claim of any nature whatsoever with
respect to such obligations in any action or proceeding brought by Shareholders
to collect the indebtedness described in this Section.
2.2 ALLOCATION OF PURCHASE PRICE. The parties agree that the Purchase
Price (defined as the sum of the amounts specified in Sections 2.1(a) and (b)
above) shall be allocated as set forth on SCHEDULE 2.2 and that such allocations
will be used by the parties in reporting the transaction contemplated by this
Agreement for federal and state tax purposes.
ARTICLE 3. THE CLOSING
The closing of the purchase and sale of the Stock by the Shareholders
to Buyer (the "Closing") shall take place by facsimile or at the offices of the
Company at 10:00 a.m. local time, on May 15, 1998, or at such other place and/or
time as the parties may agree in writing (the "Closing Date"), time being
expressly of the essence. In the event that the conditions specified in this
Agreement have not been fulfilled by such date, Buyer (if such failure is a
failure of Section 9 conditions other than Section 9.2) or Shareholders (if such
failure is a failure of Section 10 conditions other than Section 10.1) may
extend the Closing Date for a specified period or periods not exceeding an
additional thirty (30) days by written notice to the other party(ies) and the no
shop period described in Section 8.3 shall likewise be automatically extended to
such Closing Date. In no event may Buyer extend the Closing Date for failure to
obtain the fairness opinion.
3.1 SELLING PARTIES' OBLIGATIONS AT THE CLOSING. At the Closing,
Selling Parties shall deliver or cause to be delivered to Buyer the stock
certificates representing the Shares, with stock powers attached, and such other
good and sufficient instruments of conveyance, assignment and transfer, in form
and substance reasonably satisfactory to Buyer's counsel, effective to vest in
Buyer good title to the Shares, and all documents, books and records of Company.
2
Selling Parties, at any time before or after the Closing Date,
shall execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by Buyer and shall take any other action consistent with
the terms of this Agreement that may reasonably be requested by Buyer for the
purpose of assigning, transferring, granting, conveying and confirming to Buyer,
or reducing to possession, the stock of the Company. If requested by Buyer,
Selling Parties agree to prosecute or otherwise enforce in their own names for
the benefit of Buyer any claims, rights, or benefits that are transferred to
Buyer by this Agreement and that require prosecution or enforcement in either of
the Selling Parties' name. Any prosecution or enforcement of claims, rights, or
benefits under this Section shall be solely at Buyer's expense, unless the
prosecution or enforcement is made necessary by a breach of this Agreement by
Selling Parties.
3.2 BUYER'S OBLIGATIONS AT THE CLOSING. At the Closing, Buyer shall
deliver to Shareholders against delivery of the items specified in Section 3.1 a
certified or bank cashier's check or a wire transfer of immediately available
funds in the amount of $20,620,000 payable to the Shareholders or their nominee,
and issuance to the Shareholders or their nominee of that number of shares of
Common Stock of the Buyer more fully described in Section 2.1(b) hereof. The
Common Stock issued shall be Rule 144 restricted stock with restricted legend
and stop transfer instructions as described in Section 6.18. Shareholders shall
not be granted any registration rights. Such Shares shall be issued to the
Shareholders in the relative proportions and in accordance with written
instructions of the Shareholders to Buyer at least ten (10) business days prior
to the Closing.
ARTICLE 4. [INTENTIONALLY OMITTED]
ARTICLE 5. SECTION 338(H)(10) OF THE INTERNAL REVENUE CODE
The Company, Shareholders and Buyer hereby agree to do all things
reasonable and necessary to qualify this acquisition pursuant to this Stock
Purchase Agreement as a "qualified stock purchase" within the meaning of Section
338(h)(10) of the Internal Revenue Code ("Code"), and the Company, Shareholders
and Buyer agree to timely make such elections and file such returns as may be
required thereby.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Subject to Section 16.4, Shareholders, jointly and severally, hereby
represent and warrant to Buyer that the following facts and circumstances are
and, except as contemplated hereby, at all times up to the Closing Date will be
true and correct, and hereby acknowledge that such facts and circumstances
constitute the basis upon which Buyer is induced to enter into and perform this
Agreement:
6.1 DUE INCORPORATION; AUTHORITY RELATIVE TO THIS AGREEMENT. The
Company is duly incorporated, validly existing and in good standing under the
laws of the State of California, and has full corporate power and corporate
authority to carry on its business as presently conducted and to own and operate
the properties and assets now owned and operated by it. The Company is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction in
3
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in those
jurisdictions where the failure to be so qualified and in good standing would
not have a material adverse effect on the business, operations or financial
condition of the Company. The states in which the Company is qualified to do
business are California and Washington. Each Shareholder and the Company have
full power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by each Shareholder and the Company, enforceable in
accordance with its terms except as limited by bankruptcy and insolvency laws
and by other laws affecting the rights of creditors generally. This Agreement
has been duly and validly executed and delivered by each Shareholder and the
Company and constitutes the legal, valid and binding agreement of each
Shareholder and the Company except as limited by bankruptcy and insolvency laws
and by other laws affecting the rights of creditors generally.
6.2 FINANCIAL STATEMENTS. SCHEDULE 6.2(a) to this Agreement sets forth
the consolidated balance sheets of the Company as of December 31, 1997 (the
"Last Fiscal Year End") and as of December 31, 1996 (the "Prior Fiscal Year
End"), and the related statement of income and retained earnings for such years,
and as of December 31, 1995. SCHEDULE 6.2(b) to this Agreement sets forth
unaudited consolidated balance sheet of the Company as of March 31, 1998 (the
"Stub Period Date"), together with related unaudited statements of income and
retained earnings for the three (3) month period then ending, certified by the
Shareholders and reviewed by the Company's independent auditors. The financial
statements in SCHEDULE 6.2(a) are sometimes referred to herein as the "Audited
Statements"; the financial statements referred to in SCHEDULE 6.2(b) are
sometimes referred to herein as the "Stub Period Statements"; and the Audited
Statements and Stub Period Statements are sometimes collectively referred to
herein as the "Financial Statements".
(a) The Audited Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently followed by
the Company throughout the periods indicated, and fairly present in all material
respects (i) the financial position of the Company as of the respective dates of
the balance sheets included in the Audited Statements, and (ii) the results of
its operations for the respective periods indicated.
(b) To the knowledge of the Shareholders after reasonable
investigation: (i) the Stub Period Statements fairly present in all material
respects (A) the financial position of the Company as of the Stub Period Date,
and (B) the results of its operations for the period indicated; (ii) there are
no material modifications and no changes in the Company's accounting policies
and procedures that have been made to the Stub Period Statements in order for
them to be in conformity with GAAP; and (iii) the Stub Period Statements have
been reviewed by the Company's independent auditors.
(c) To the knowledge of the Shareholders after reasonable
investigation, as of the Last Fiscal Year End, the Prior Fiscal Year End and the
Stub Period Date, the Company had no liabilities or obligations of any nature
(whether absolute, accrued, contingent or otherwise) of the type required to be
reflected or disclosed in a balance sheet as of such date (or the notes
4
thereto) prepared in accordance with GAAP that were not fully reflected or
reserved against in the Financial Statements.
6.3 ABSENCE OF SPECIFIED CHANGES. Except as set forth on the Stub
Period Statements and SCHEDULE 6.3 hereof, since the Last Fiscal Year End and up
to and through the Closing Date, there has not been any:
(a) Transactions by the Company except in the ordinary course
of business. As used throughout this Agreement, the term "in the ordinary course
of business" shall be deemed to mean the Company's commercial transactions of
financial medical claims with its providers, payors and claim-traders
(regardless of volume or duration) and the support services relating thereto;
(b) Capital expenditure or purchase commitments by the Company
exceeding $5,000 which are not for resale;
(c) Material adverse change in the financial condition,
liabilities, assets, business or prospects of the Company, or any other acts,
omissions, incidents, events, circumstances or conditions generally affecting
the economy or any segment thereof, including, without limitation, the business
segment in which the Company does business currently actually known by
Shareholders, but unknown to the Buyer after reasonable inquiry ("General
Conditions");
(d) Destruction, damage to, or loss of any assets of the
Company (whether or not covered by insurance) that materially adversely affects
the financial condition, business or prospects of the Company;
(e) To the knowledge of the Shareholders after reasonable
investigation, labor trouble or other employment related event or condition
adversely affecting the financial condition, business, assets or prospects of
the Company;
(f) Change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) by the Company;
(g) Revaluation by the Company of any of its Assets;
(h) Increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees, or
consultants or the declaration, payment or commitment or obligation of any kind
for the payment by the Company of a bonus or other additional salary or
compensation to any such person;
(i) Sale or transfer of any material asset of the Company,
except in the ordinary course of business;
(j) Execution, creation, amendment or termination of any
contract, agreement or license to which the Company is a party, except in the
ordinary course of business;
5
(k) Loan by the Company to any person or entity, or guaranty
by the Company of any loan;
(l) Voluntary waiver or release of any material right or claim
of the Company;
(m) Mortgage, pledge or other encumbrance of any asset of the
Company, except for those items listed in Section 6.14 (i) - (iii);
(n) To the knowledge of the Shareholders after reasonable
investigation (or to the current actual knowledge of the Shareholders, if such
matter is of a nature warranted by any other provision of this Agreement to be
true only to such current actual knowledge), other event or condition of any
character that has or might reasonably have a material adverse effect on the
financial condition, business, Stock or prospects of the Company;
(o) Loss of significant providers, third party payors or
claim-traders resulting in a material adverse change in number of transactions
or revenue to the Company. As used in this subsection (o) only, the term
"significant" shall mean, if a provider-group, a loss of a group comprised of
more than ten (10) physicians or users; or if an individual provider, the
cumulative loss of more than ten (10) physicians in a five (5) day work week;
and if a payor or a claim-trader, the loss of one (1) or more;
(p) Distributions to any Shareholders; or
(q) Agreement by the Company to do any of the things described
in the preceding clauses (a) through (p).
6.4 TAX MATTERS.
(a) Shareholders, from its inception, validly elected to have
the Company be taxed as an S Corporation pursuant to Section 1361, ET SEQ., of
the Internal Revenue Code (the "Code"). No such elections have been revoked, and
nothing has occurred that would cause the Company to fail to qualify as an S
Corporation.
(b) All federal, state and local tax returns for all periods
ending on or before the Closing Date that are or were required to be filed by or
with respect to the Company have been filed on a timely basis, and in accordance
with the laws, regulations and administrative requirements of any applicable
taxing authority. All such tax returns that have been filed on or before the
Closing Date were, when filed, and continue to be, true, correct and complete in
all material respects.
(c) The Selling Parties have made available to Buyer all
reports of and communications for all open years from Internal Revenue Service
agents and the corresponding agents of other state, local and foreign
governmental agencies who have examined the respective books and records
applicable to the Company. SCHEDULE 6.4(c) describes all adjustments in respect
of the Company to income tax returns filed by, or on behalf of, the Company for
all open taxable years, that have been proposed by any representative of any
taxing authority, and
6
SCHEDULE 6.4(c) describes the resulting taxes, if any, proposed to be assessed.
All deficiencies proposed (plus interest, penalties and additions to tax that
were or are proposed to be assessed thereon, if any) as a result of such
examinations have been paid, reserved against, settled, or, as described in
SCHEDULE 6.4(c) are being contested in good faith by appropriate proceedings.
Except as set forth in SCHEDULE 6.4(c), the Selling Parties have not given nor
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other entity) of any statue of limitations
relating to the payment of taxes for which the Company may be liable.
(d) Except as set forth on SCHEDULE 6.4(d), the Selling
Parties have paid, or made provision for the payment of, all taxes that have or
may become due for all periods ending on or before the Closing Date, including,
without limitation, all taxes reflected on the tax returns referred to in this
Section 6.4, or in any assessment, proposed assessment, or notice, received by
the Company, except such taxes, if any, as are set forth in SCHEDULE 6.4(d) that
are being contested in good faith and as to which adequate reserves (determined
in accordance with GAAP consistently applied) have been provided. The charges,
accruals and reserves with respect to taxes on the books of the Company are
determined in accordance with GAAP consistently applied. In all material
respects, all taxes that the Selling Parties are or were required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the appropriate taxing authority. There are no liens
with respect to taxes upon any of the properties or assets, real or personal,
tangible or intangible, of the Company (except for taxes not yet due).
(e) There are no closing agreements, requests for rulings or
requests for technical advice, in respect of any taxes, pending between the
Company and any taxing authority.
(f) All material elections with respect to taxes affecting
the Company as of the date hereof are set forth in SCHEDULE 6.4(f).
(g) There is no existing tax sharing agreement that may or
will require that any payment be made by or to the Company on or after the
Closing Date except as disclosed on SCHEDULE 6.4(g).
(h) [INTENTIONALLY OMITTED]
(i) There is no contract, agreement, plan or arrangement not
contemplated by this Agreement covering any person that, individually or
collectively, as a consequence of this transaction could give rise to the
payment of any amount that would not be deductible by Buyer or the Company by
reason of Section 280G of the Internal Revenue Code.
(j) Except as provided for in SCHEDULE 6.4(j), the Company
does not own an interest in any (i) domestic international sales corporation;
(ii) foreign sales corporation, (iii) controlled foreign corporation; or (iv)
passive foreign investment company.
7
The Shareholders acknowledge that as a result of the consummation
of the transactions contemplated by this Agreement, the Company's S Corporation
status will terminate as of the Closing Date. The Shareholders agree that they
will file any required S Corporation federal and state tax returns for the
Company for all relevant periods through the Closing Date and will timely pay
all applicable taxes for such periods, subject to Section 2.1(c).
6.5 LEASES. SCHEDULE 6.5 to this Agreement contains a true, correct and
complete copy of all the Company's real property leases, together with any and
all addenda, riders, exhibits, schedules, and amendments or modifications
thereto. All of such leases are valid and in full force, and there does not
exist any material default or event that with notice or lapse of time, or both,
would constitute a material default under any of these leases by the Selling
Parties. Prior to Closing the Selling Parties will provide Buyer with copies of
any and all notices of any default and all other communications to the Selling
Parties by the landlords of the premises covered by such leases (the "Leased
Premises").
6.6 ZONING. To the current and actual knowledge of the Selling Parties,
the zoning of each Leased Premises permits the presently existing improvements
and the continuation of the business presently being conducted on such parcel.
6.7 [INTENTIONALLY OMITTED.]
6.8 CONTRACTS, ETC. The contracts described in SCHEDULE 6.8 (the
"Scheduled Contracts") consist of all written and oral contracts, licenses and
agreements, and any other commitments, or understandings entered into by the
Company with third parties, other than the following: (i) those specifically
referred to elsewhere in this Agreement; and (ii) those entered into in the
ordinary course of business (except for contracts with claim payors and
claim-traders, all of which are included within Scheduled Contracts) which
require the performance by the Company of any obligation for a period of time
extending less than one year from Closing Date, or which require either party to
expend less than $5,000. True, correct and complete copies of the Scheduled
Contracts, to the extent same are in writing, have been made available for
inspection to Buyer. Unless specified on SCHEDULE 6.8, all Scheduled Contracts
are valid and in full force, and there does not exist, to the knowledge of the
Shareholders after reasonable investigation, any material default on the part of
the Company or any event caused by the Company that with notice or lapse of
time, or both, would constitute a material default by the Company under any of
the Scheduled Contracts.
Except as set forth in SCHEDULE 6.8, the Company is not a
party to, nor are the Shares bound by, any other agreement not entered into in
the ordinary course of business, any indenture, mortgage, deed of trust, lease
or any other agreement that requires the performance by the Company of any
obligation for a period of time extending beyond one year from Closing Date, or
requires either party to expend more than $5,000.
Notwithstanding any provision hereof to the contrary, except
to the extent (if any) set forth in the Scheduled Contracts, Selling Parties
make no representation or warranty as to the duration, terms or conditions of
unwritten (except for enrollment applications) arrangements with
8
providers to whom electronic claims transmission services are supplied without
per transaction charge by the Company to the provider.
6.9 OTHER TANGIBLE PERSONAL PROPERTY. The tangible personal property
described in SCHEDULE 6.9 of this Agreement constitutes all the items of
depreciable tangible personal property acquired by the Company on or before
December 31, 1997. Such Schedule was derived from invoices paid by the Company.
No warranty or representation is made as to whether any or all specific items
set forth in SCHEDULE 6.9 remain in the possession of the Company as of the date
hereof, or will remain in the possession of the Company as of the Closing Date,
except that no disposition of any such items will be made after the date of this
Agreement except in accordance with the provisions hereof. The Company will
exercise reasonable security procedures to ensure that whatever tangible
personal property exists will not be removed from the Company, damaged or
destroyed. Except as stated in SCHEDULE 6.9, no tangible personal property used
by the Company in connection with its business is held under any lease, security
agreement, conditional sales contract, or other title retention or security
arrangement, or is in the possession of anyone other than an employee of the
Company.
6.10 TRADE NAMES, TRADEMARKS, ETC. The Company uses in its business the
service marks, trade names, telephone numbers, facsimile numbers and domain name
set forth in SCHEDULE 6.10. There is no service xxxx, trademark, trade name,
telephone number, facsimile number or domain name used by the Company in its
business which is not set forth in SCHEDULE 6.10.
The Company does not require the use of any service xxxx,
trademark, trade name or domain name, other than those set forth on SCHEDULE
6.10, in order to perform its obligations under any contract to which the
Company is a party. To the current actual knowledge of the Shareholders, the
Company has the right and authority to use the telephone numbers and facsimile
numbers set forth in SCHEDULE 6.10 as necessary for it to conduct, and to
continue to conduct, its business.
Selling Parties make no representations or warranties, express
or implied, to the effect that the Company's use of any of the service marks,
trade names or domain name set forth in SCHEDULE 6.10 has not infringed, or is
presently not infringing, any registered or common law trademark, service xxxx,
trade name or domain name, or any other intellectual property right, belonging
to another person, firm or corporation. However, the Selling Parties can and do
represent and warrant that except as set forth on SCHEDULE 6.10, they have not
received notice from any other person, firm or corporation claiming that the
Company's use of the service marks, trade names or domain name set forth in
SCHEDULE 6.10 is in conflict with, infringes or violates any intellectual
property right of the person, firm or corporation giving such notice. It is
acknowledged by both Buyer and Selling Parties that (i) none of the service
marks, trade names or domain names set forth on SCHEDULE 6.10 have been
registered by the Company as a trademark or service xxxx with the U.S. Patent
and Trademark Office or with any state or other jurisdiction except as set forth
in SCHEDULE 6.10, and (ii) certain other persons and entities have used and
currently do use service marks, trade names and domain names the same as or
similar to those set forth in SCHEDULE 6.10 in connection with businesses and
activities that may be the same as or similar to those engaged in by the
Company.
9
6.11 PATENTS AND PATENT RIGHTS. The Company does not own any United
States or foreign patents or pending applications for patents claiming any
invented devices, processes, designs, computer programs, formulas,
methodologies, compositions of matter or any other subject matter which may be
patentable under the patent laws of the United States or any other country of
the world ("Inventions").
The Company has never been, nor is it presently, licensed
under any patent belonging to another person, firm or corporation to make, use
or sell, or otherwise practice, any Invention, including computer software,
claims in any such patent (except, possibly Commercially Available Vendor
Software which may be protected by patents owned by the vendors thereof).
To the current actual knowledge of the Shareholders, there is
nothing that the Company makes, uses, sells or does, or which the Company has
heretofore made, used, sold or done, in the conduct of its business, which has
heretofore infringed, or which presently infringes, any patent or other
proprietary right of another person, firm or corporation relating to an
Invention. Selling Parties further represent and warrant that they have received
no notice from any other person, firm or corporation claiming that something
which the Company is making, using, selling or doing in the conduct of its
business is in conflict with, infringes or violates any patent or other
proprietary right relating to an Invention of the person, firm or corporation
giving such notice.
6.12 CONFIDENTIAL INFORMATION. SCHEDULE 6.12 hereto is a true and
complete list identifying, but not disclosing, certain confidential information
beneficially used by the Company in the conduct of its business ("Section 6.12
Confidential Information"). The Section 6.12 Confidential Information is
generally documented in some form and is (i) current, (ii) accurate and (iii)
sufficient in detail and content to enable its beneficial use by Buyer without
reliance on the special knowledge or memory of others.
To the current actual knowledge of the Shareholders, the
Company: (i) has the right and authority to use the Section 6.12 Confidential
Information as necessary for it to conduct, and to continue to conduct, its
business; and (ii) does not require the use of any confidential information or
trade secrets which are owned by another person, firm or corporation in order to
perform its obligation under any contract to which the Company is a party other
than confidential information of the other contracting party thereto.
The Company has taken certain measures to protect the
confidentiality and value of the Section 6.12 Confidential Information, and to
prevent the unauthorized use thereof by employees or any other persons who,
either alone or in concert with Company employees, contributed to the generation
and/or compilation of the Section 6.12 Confidential Information, or who have
knowledge of or access thereto ("Other Persons"). However, Selling Parties make
no representation or warranty to the effect (i) that the Company's security
measures in this regard are and have consistently been adequate; or (ii) that
the Company's employees and Other Persons have been placed on notice regarding
the confidential and proprietary nature of the Section 6.12 Confidential
Information; or (iii) that Employees or Other Persons have entered into
appropriate agreements committing themselves to safeguard the confidentiality of
the Section 6.12 Confidential Information and to make no use or disclosure
thereof which is adverse or detrimental to the business interests of the
Company.
10
Shareholders do not represent or warrant that the Section 6.12
Confidential Information (i) is protectable as trade secrets or as any other
form of intellectual property; or (ii) is not readily accessible, in whole or in
part, from publicly available sources, databases, libraries or trade literature.
In the latter connection, however, Shareholders can and do hereby represent and
warrant that except as set forth on SCHEDULE 6.12, they are not aware of any
unauthorized disclosure or use of any of the Section 6.12 Confidential
Information (i) for the benefit of any past or present employees of the Company
or Other Persons; and/or (ii) to the detriment of the Company. Moreover,
Shareholders have received no notice from any other person, firm or corporation
claiming that the Company's use of any identified information is in conflict
with, or violates any trade secret right or other proprietary right in such
information owned by the person, firm or corporation giving such notice.
6.13 COPYRIGHTS; SOFTWARE PROGRAMS AND RELATED CONTRACTS.
(a) COPYRIGHTS. The Company uses in its business certain
computer programs (i.e., software), documents and other tangible things which
contain the expression of ideas, including compilations of data ("Works"), which
Works were either created (i) by its employees as "works made for hire" as that
term is defined and used in the United States Copyright Act (Title 17 of the
United States Code) or (ii) by independent contractors. The Works which are in
the nature of software (i.e., excluding those which are advertisements,
promotional materials and internal documents) are described in SCHEDULE 6.13(a)
hereto.
The Company owns, or on the Closing Date will own,
the copyrights in each of the Works set forth in SCHEDULE 6.13(a) by virtue of
such Works (i) having been works made for hire or (ii) having been acquired by
assignment. To the current actual knowledge of the Shareholders, there are no
copyrighted Works in the nature of software used by the Company in its business
which are not set forth in SCHEDULE 6.13(a) or 6.13(b), except for certain
commercially available software products licensed to the Company by the vendors
thereof for the Company's use ("Commercially Available Vendor Software").
To the current actual knowledge of the Shareholders:
(i) the Company will not on the Closing Date require the use of any copyrighted
(or patented) item of software which is owned by another person, firm or
corporation in order to perform its obligations under any contract to which the
Company is a party, except for Commercially Available Vendor Software; (ii) the
Company has, or on the Closing Date will have, the right and authority to use
the copyrighted Works set forth in SCHEDULE 6.13(a) as necessary for it to
conduct, and to continue to conduct, its business; and (iii) the Company's use
of the Works has not infringed, and is presently not infringing, any copyright
or any other proprietary right of another person, firm or corporation. Selling
Parties further represent and warrant that they have received no notice from any
other person, firm or corporation claiming that the Company's use of the Works
set forth in SCHEDULE 6.13(a) is in conflict with, infringes or violates any
copyright or other intellectual property right of the person, firm or
corporation giving such notice.
(b) SOFTWARE PROGRAMS AND RELATED CONTRACTS. SCHEDULE 6.13(b)
to this Agreement is a true and complete list of any and all (i) software,
including databases (other than
11
Commercially Available Vendor Software); (ii) other intangible assets relating
to software other than Commercially Available Vendor Software; and (iii)
contracts to which the Company is a party and which relate to software other
than Commercially Available Vendor Software, which software, intangible assets
and/or contracts are not set forth or otherwise identified in any of the other
SCHEDULES to this Agreement. The foregoing reference to "contracts" includes
agreements and commitments with any person, firm or corporation, written or
oral, relating to (i) the ownership, license, use, acquisition, design,
development, distribution, marketing or maintenance of software; (ii) the source
and object codes of software; or (iii) technical documentation and/or user
manuals relating to software (excluding Commercially Available Vendor Software).
(c) MILLENNIUM COMPLIANCE. Shareholders make the following
representations and warranties regarding the capability of the Company's
proprietary software to process data pertaining to claims submitted by service
providers on or after January 1, 2000, in a manner substantially the same as the
manner in which it processes such claims data prior to January 1, 2000
(hereinafter the term "Millennium Compliant" shall be understood to mean that
the Company's proprietary software has the foregoing capability) :
(1) The Company's proprietary software will be
Millennium Compliant with respect to its
ability (i) to accept from service providers
who provide the same a four (4) digit
representation of the year of a claimant's
birth; and (ii) to store, sort and otherwise
process the same;
(2) The Company presently intends not to accept
for processing on and after January 1, 2000,
service provider data which contains a two
(2) digit representation of a claimant's
year of birth;
(3) The Company's proprietary software will be
Millennium Compliant with respect to its
ability to accept either a two (2) digit or
a four (4) digit representation of the year
in which the service was provided, if and as
either of the foregoing representations of
said year of service are provided to it by
service providers;
(4) The Company's proprietary software will be
Millennium Compliant with respect to its
ability to retrieve, sort, compile, process
and output to payors of claims, a four (4)
digit representation of the year of a
claimant's birth, when the formats specified
by such payors require such a four (4) digit
representation ; and
(5) The Company's proprietary software will be
Millennium Compliant with respect to its
ability to retrieve, sort, compile, process
and output to payors of claims, a two (2)
digit representation of the year of a
claimant's birth, when the formats specified
by such payors require such a two (2) digit
representation. However, the Company makes
no representation or warranty, express or
implied, with respect to the ability of any
payor who specifies a two (2) digit
12
representation of a claimant's year of birth
to properly resolve the ambiguity as to the
century in which such claimant was born.
6.14 TITLE TO ASSETS. As used in this Section 6.14 the term "Asset" or
"Assets" shall mean those assets listed or described in the Company's Financial
Statements and/or used in the ordinary course of the Company's business. The
Company has good and unencumbered title to all the Assets and its interest in
the Assets to be conveyed to Buyer hereunder, whether real or personal, mixed,
tangible, and intangible, which constitute all the Assets and interest in
Assets. All the Assets are free and clear of mortgages, liens, pledges, charges,
encumbrances and third-party claims, except for (i) those disclosed in the
Financial Statements, or in the Schedules to this Agreement; (ii) the lien of
current taxes not yet due and payable; and (iii) possible minor matters that, in
the aggregate, are not substantial in amount and do not materially detract from
or interfere with the present or intended use of any of these Assets, nor
materially impair business operations. Buyer is accepting the Assets (not the
Stock) "AS IS, WHERE IS". Except as set forth on the Schedules, neither any
Shareholder, officer, director nor, to the current actual knowledge of the
Shareholders, any employee of the Company or any spouse, child or other relative
of any of the foregoing persons, owns, or has any interest, directly or
indirectly, in any of the real or personal property owned by or leased to the
Company or any copyrights, patents, trademarks, trade names or trade secrets
licensed by the Company.
6.15 CUSTOMERS AND TRANSACTIONS. SCHEDULE 6.15 to this Agreement
describes a correct and current list of all customers and clients of the Company
together with summaries of the sales made to each customer or client during the
most recent fiscal year. Except as indicated in SCHEDULE 6.15, the Shareholders
have no information and are not aware of any facts indicating that any of these
customers and clients intend to cease doing business with the Company or
materially alter the amount of the business that they are presently doing with
the Company.
6.16 EXISTING EMPLOYMENT ARRANGEMENTS. SCHEDULE 6.16 to this Agreement
is a list of all employment contracts and collective bargaining agreements, and
all pension, bonus, profit-sharing, deferred compensation, stock option, or
other agreements or arrangements providing for employee or outside consultant
remuneration or benefits (other than hourly arrangements with outside
consultants terminable immediately upon notice at will) to which the Company is
a party or by which the Company is obligated, whether formally or by informal
understanding. All these contracts and arrangements are in full force and
effect. Selling Parties have receive no notice of defaults by the Company and,
to the current actual knowledge of the Shareholders, there are no facts or
conditions which if continued, or on notice, will result in a default by the
Company under these contracts or arrangements. There is no pending or, to the
current actual knowledge of the Shareholders, threatened labor dispute, strike
or work stoppage affecting the Company's business.
6.17 [INTENTIONALLY OMITTED]
6.18 UNREGISTERED SECURITIES. The Shareholders (i) understand that the
Common Stock issued or to be issued pursuant to Section 2.1(b) of the Agreement
has not been, and will not be registered under the Securities Act of 1933, as
amended, (the "Act") or under any state securities laws, and that they are being
offered and sold in reliance upon federal and state exemptions for transactions
not involving any public offering, (ii) are acquiring the Common Stock solely
for their
13
own account for investment purposes and not with a view to the "distribution"
thereof (as such term is defined in judicial and administrative interpretations
under Section 2(11) of the Act), (iii) have received certain information
concerning Buyer, including without limitation the Reports referred to in
Section 7.2 and have had the opportunity to obtain additional information as
desired in order to evaluate the merits of purchasing and holding said Common
Stock, (iv) are able to bear the economic risk and lack of liquidity inherit in
holding the Common Stock until such time as the Common Stock may be sold
pursuant to Rule 144, (v) have sufficient knowledge and experience in financial
and business matters that they are capable of evaluating the merits and risk of
an investment in Buyer, and (vi) understand that the certificates representing
said Common Stock will be stamped or otherwise imprinted with the legend in
substantially the following form:
The Shares of Stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any other jurisdiction, including without
limitation California and Washington, and may not be sold
transferred, pledged, hypothecated, or otherwise disposed of in
any manner unless they are registered under such Act and any
securities laws of any applicable jurisdiction, or unless
exemptions from such registrations are available, and that an
opinion of counsel, satisfactory to ProxyMed, Inc. to that effect
is delivered to ProxyMed, Inc.
6.19 COMPLIANCE WITH LAWS. As relates to statutes, laws and regulations
directly regulating the industry in which the Company conducts business, the
Selling Parties, to the knowledge of the Shareholders after reasonable
investigation, have complied with and are not in material violation of,
applicable federal, State of California or local statutes, laws and regulations
affecting the operation of the Company's business. As relates to generally
applicable statutes, law and regulations, the Selling Parties have received no
notice and the Shareholders have no current actual knowledge of any material
violation of applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable tax, environmental, health,
building, zoning or other law, ordinance or regulation) affecting the Company,
its properties (including the Lease Premises) or the operation of its business.
6.20 LITIGATION. Except as set forth in SCHEDULE 6.20, there is no
suit, action, arbitration or legal, administrative or other proceeding, or
governmental investigation pending or, to the current actual knowledge of the
Shareholders, threatened against or affecting the Company, or ownership of or
title to the Stock. The matters set forth in SCHEDULE 6.20 if decided adversely
to the Company will not result in a material adverse change in the business,
Stock or financial condition of the Company. Selling Parties have furnished or
made available to Buyer copies of all relevant court papers and other documents
relating to the matters set forth in SCHEDULE 6.20. The Company is not in
default with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality. Except as
set forth in SCHEDULE 6.20, the Company is not presently engaged in any legal
action to recover moneys due to it or damages sustained by it.
6.21 [INTENTIONALLY OMITTED]
14
6.22 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Except as set forth
in SCHEDULE 6.22, neither the entry into this Agreement nor the consummation of
the transactions contemplated hereby will result in or constitute any of the
following: (i) a default or an event that, with notice or lapse of time or both,
would be a default, breach or violation of the Articles of Incorporation or
Bylaws of the Company, or a material default, breach or violation of any lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust or other agreement, instrument or arrangement to which
the Company is a party or by which the Company or the Stock are bound; (ii) an
event that would permit any party to terminate any agreement or to accelerate
the maturity of any indebtedness or other obligation; (iii) the creation or
imposition of any lien, charge or encumbrance on any of the Stock; or (iv) the
violation of any law, regulation, ordinance, judgment, order or decree
applicable to or affecting the Company or the Stock.
6.23 AUTHORITY AND CONSENTS. Except as set forth in SCHEDULE 6.23, the
Company has the right, power, legal capacity and authority to enter into, and
perform its obligations under this Agreement, and no approvals, consents or
permits of any persons or governmental agency other than Selling Parties are
necessary in connection with it. The execution and delivery of this Agreement
and the consummation of this transaction by the Shareholders has been, or prior
to the Closing will have been, duly authorized by all necessary corporate action
of the Company. This Agreement constitutes a legal, valid and binding obligation
of the Shareholders enforceable in accordance with its terms except as limited
by bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally.
6.24 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as set
forth in SCHEDULE 6.24, neither the Selling Parties nor any officer, director
or, to the current actual knowledge of the Shareholders, any employee of the
Company or any spouse or child of any of the foregoing, has any direct or
indirect ownership interest in any competitor, supplier, customer or client of
the Company or in any person with whom the Company is doing business.
6.25 PERSONNEL IDENTIFICATION AND COMPENSATION. SCHEDULE 6.25 is a list
of the names and addresses of all officers, directors, employees, agents and
consultants of the Company, stating (with respect to employees) the rates of
compensation payable to each and setting forth all vacation time, sick leave and
other paid time off accrued or to be accrued (other than sick leave which will
be provided by Closing) for each of them through the scheduled Closing Date and
the date and amounts of each person's last salary increase. No other person,
except accountants, auditors and attorneys regularly performs compensable
services for the Company in any material respect.
6.26 BANK ACCOUNTS, ETC. SCHEDULE 6.26 lists (i) the names and
addresses of all persons holding a power of attorney on behalf of the Company,
and (ii) the names and addresses of all banks or other financial institutions in
which the Company has cash or cash equivalent account, investment, deposit or
safe-deposit box, with the names of all persons authorized to draw on these
accounts, investments and deposits or who have access to these boxes and their
respective account numbers.
6.27 [INTENTIONALLY OMITTED]
15
6.28 ENVIRONMENTAL MATTERS.
(a) To the current actual knowledge of the Shareholders,
except as set forth in SCHEDULE 6.28, the Company has obtained all permits,
licenses and other authorizations which are required in connection with the
conduct of the business under regulations relating to pollution or protection of
the environment, including regulations relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
hazardous substances or wastes into the environment (including without
limitation ambient air, surface water, groundwater, or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals,
hazardous substances or wastes ("Environmental Laws").
(b) To the current actual knowledge of the Shareholders,
except as set forth in SCHEDULE 6.28, the Company is in full compliance in the
conduct of the business with all terms and conditions of the required permits,
licenses and authorizations required by Environmental Laws, and is also in full
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
Environmental Laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.
(c) Except as set forth in SCHEDULE 6.28, to the current
actual knowledge of the Shareholders, there has been no, and the Selling Parties
have not received notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent compliance or continued compliance with Environmental
Laws or any regulations, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder, or which
may give rise to any common law or legal liability, or otherwise form the basis
of any claim, action, demand, suit, proceeding, hearing, study or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, chemical, or hazardous substance or waste.
(d) Except as set forth in SCHEDULE 6.28, to the current
actual knowledge of the Shareholders, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice or demand letter,
notice of violation, investigation, or proceeding pending or threatened against
the Company in connection with the conduct of the business relating in any way
to Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
6.29 LABOR MATTERS. The Selling Parties have received no notice that,
and the Shareholders have no current actual knowledge that, the Company is in
violation in any material respect with currently applicable federal, state and
local laws and regulations respecting employing, discrimination, discrimination
in employment, disability, terms and conditions of employment, wages and hours,
occupational safety and health and employment practices except for such failures
to comply as would not reasonably be expected to have a material adverse effect,
either individually or in the aggregate, on the Company. As of the date hereof,
the Company has received no notice
16
from any governmental entity and, as of the date hereof to the current actual
knowledge of the Shareholders, there has not been asserted before any
governmental entity any claim, action or proceeding to which the Company is a
party and there is not any investigation or hearing pending or threatened from
any employee of the Company or any third party concerning the Company, arising
out of or based upon any such laws, regulations or practices.
6.30 DOCUMENTS DELIVERED. Each copy or original of any agreement,
contract or other instrument which is identified in any exhibit to this
Agreement delivered by Selling Parties or their counsel to Buyer (or its counsel
or representatives), whether before or after the execution hereof, is in fact
what is purported to be by Selling Parties and has not been amended, canceled or
otherwise modified.
6.31 FULL DISCLOSURE. Subject to provisions hereof qualified by the
words "to the knowledge of the Shareholder after reasonable investigation" or
"to the current actual knowledge of the Shareholders" or similar words, none of
the representations and warranties made by Selling Parties in this Agreement
contains any untrue statement of a material fact, or omits any material fact the
omission of which would make the statements made herein, in light of the
circumstances under which they were made, not misleading. Except for those
matters which are warranted as to the current actual knowledge on the part of
the Shareholders, there are no facts known to the Shareholders, after reasonable
investigation, and within the Selling Parties' reasonable control, which
materially adversely affects, or in the future may (so far as Selling Parties
can now reasonably foresee) materially adversely affect the condition, Stock,
liabilities, business, operations or prospects of the Company that has not been
set forth herein or heretofore communicated to Buyer in writing.
6.32 CAPITALIZATION OF THE COMPANY AND OWNERSHIP OF CAPITAL STOCK.
(a) The authorized capital stock of the Company consists
solely of One Hundred Thousand (100,000) shares of common stock, no par value,
of which Fifty Thousand (50,000) Shares are issued and outstanding. No Shares
are or will be held in the Company's treasury now or on the Closing Date. There
are no outstanding subscriptions, options, warrants, preemptive or preferential
rights, shareholder agreements (other than agreements between the Shareholders
that will be terminated concurrently with the Closing), convertible securities
or other agreements or contracts of any character (contractual or otherwise) for
the issuance, sale or transfer to any person or entity of shares of capital
stock of the Company, and none of the Shares of stock has been issued in
violation of any preemptive rights.
(b) Shareholders are the sole and exclusive lawful record and
beneficial owners of all of the capital stock of the Company and all of the
number of shares of the Stock of the Company as set forth opposite Shareholders'
names on SCHEDULE 1.1 hereto. On the Closing Date, the Stock will be free and
clear of any claims, pledges, security interest, liens or encumbrances or other
restrictions of limitations of any kind. Shares of Stock of the Company are
validly issued, fully paid and non-assessable and upon consummation of the
transaction contemplated hereby, Buyer will acquire good and valid title to the
Stock, free and clear of all pledges, security interest, liens, claims,
encumbrances, agreements and options of any nature whatsoever.
17
6.33 ABSENCE OF UNDISCLOSED LIABILITIES. To the knowledge of the
Shareholders after reasonable investigation, the Company does not have and will
not have as of the Closing, except as set forth on SCHEDULE 6.33 or to the
extent reflected or reserved against on the face of its Financial Statements
reflected in SCHEDULES 6.2(a) and 6.2(b) hereto or arising after the Stub Period
Date in the ordinary course of business, any material debts, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) including,
without limitation, any liabilities for environmental pollution, any foreign or
domestic tax liabilities or deferred tax liabilities incurred in respect of or
measured by the Company's income, or any other material debts, liabilities or
obligations relating to or arising out of any act, omission, transaction,
circumstance, sale of goods or services, stated facts or other condition.
ARTICLE 7. BUYER'S REPRESENTATIONS AND WARRANTIES
Subject to Section 16.4, Buyer hereby represents and warrants to
Shareholders that the following representations are true and correct and, except
as contemplated hereby, at all times up to the Closing Date will be true and
correct, and hereby acknowledges that such representations constitute the basis
upon which the Shareholders are induced to enter into and perform this
Agreement.
7.1 AUTHORITY AND CONSENTS. Buyer represents and warrants that Buyer is
a corporation duly organized, existing and in good standing under the laws of
Florida, Buyer has the right, power, legal capacity and authority to enter into,
and perform its obligations under this Agreement, and no approvals or consents
of any persons other than its Board of Directors (which approval and consent has
been obtained, subject only to obtaining a "fairness opinion" prior to Closing
from Commonwealth Associates stating that the consideration paid by Buyer to the
Shareholders pursuant to this Agreement is fair, from a financial point of view,
to the shareholders of Buyer). The execution and delivery of this Agreement and
the consummation of this transaction by Buyer have been, or prior to the Closing
will have been, duly authorized by all necessary corporate action of Buyer. This
Agreement constitutes a legal, valid and binding obligation of Buyer enforceable
in accordance with its terms, except as limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors generally.
7.2 REPORTS. Buyer has delivered to the Company and Shareholders copies
of its reports on Forms 10-K, 10-KSB, 10-QSB, 8-K, and amendments thereto,
containing financial exhibits, filed since December 31, 1995 (the "Reports").
The Reports, and all other reports required to be filed by Buyer with the
Securities and Exchange Commission ("SEC") since December 15, 1995, were timely
filed with the SEC and did not, at the time they were filed, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. There has not been any
material or adverse change in the business, stock, assets or liabilities of
Buyer which has occurred since the date of the last report filed with the SEC.
There is no fact currently, actually known to Buyer which materially adversely
affects its condition, assets, liabilities, business, operations or prospects
that has not been set forth in its Reports.
18
7.3 SHARES OF COMMON STOCK. The Shares of Buyer's Common Stock
delivered to the Shareholders at the Closing and those that will be issued
pursuant to Section 2.1(b) will be Rule 144 restricted stock. The Stock will be
free and clear of any claims, pledges, security interest, liens or encumbrances
or other restrictions of limitations of any kind. Shares of Stock of Buyer are
validly issued, fully paid and non-assessable and upon consummation of the
transaction contemplated hereby, Shareholders will acquire good and valid title
to the Stock, free and clear of all pledges, security interest, liens, claims,
encumbrances, agreements and options of any nature whatsoever.
7.4 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the entry
into this Agreement nor the consummation of the transactions contemplated hereby
will result in or constitute any of the following: (i) a default or an event
that, with notice or lapse of time or both, would be a default, breach or
violation of the Articles of Incorporation or Bylaws of, or a material default,
breach or violation of any lease, license, promissory note, conditional sales
contract, commitment, indenture, mortgage, deed of trust or other agreement,
instrument or arrangement to which Buyer is a party or by which Buyer is bound;
(ii) an event that would permit any party to terminate any agreement or to
accelerate the maturity of any indebtedness or other obligation; and (iii) a
violation of any law, regulation, ordinance, judgment, order or decree
applicable to or affecting Buyer.
7.5 UNREGISTERED SECURITIES. Buyer (i) understands that the Stock to be
transferred to it hereunder has not been, and will not be registered under the
Securities Act of 1933, as amended, (the "Act") or under any state securities
laws, and that they are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (ii) is
acquiring the Stock solely for Buyer's own account for investment purposes and
not with a view to the "distribution" thereof (as such term is defined in
judicial and administrative interpretations under Section 2(11) of the Act),
(iii) has received certain information concerning the Company and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits of purchasing and holding said Stock, (iv) is able to bear the economic
risk and lack of liquidity inherit in holding the Stock until such time as the
Stock may be sold pursuant to applicable securities laws, (v) has sufficient
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risk of an investment in the Company, and (vi)
understands that the certificates representing said Stock will be stamped or
otherwise imprinted with the legend in substantially the following form:
THE OFFER AND SALE OF THE SHARES OF COMMON STOCK REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED OR REGISTERED
UNDER ANY APPLICABLE STATE SECURITIES LAWS.
7.6 LITIGATION. There is no action, suit, proceeding, or investigation
pending or threatened against the Buyer that questions or may affect the
validity of this Agreement, the contemplated transactions, or the right of the
Buyer to enter into this Agreement or to consummate the transactions
contemplated hereby.
19
7.7 INACCURACIES. Buyer represents and warrants that this Agreement
does not contain any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.
ARTICLE 8. SELLING PARTIES' OBLIGATIONS BEFORE CLOSING
Selling Parties covenant that, except as otherwise agreed in writing by
Buyer, from the date of this Agreement until the Closing:
8.1 BUYER'S ACCESS TO PREMISES AND INFORMATION. Subject to the
confidentiality provisions of Section 20.2, Buyer and its counsel, accountants
and other representatives shall be entitled to have full access during normal
business hours to all the Company's properties, books, accounts, records,
contracts and documents of or relating to the Stock, but shall not unreasonably
disrupt, interfere with nor inhibit the Company's normal business operations.
Selling Parties shall furnish or cause to be furnished to Buyer and its
representatives all data and information concerning the business, finances and
properties of the Company that may reasonably be requested.
8.2 CONDUCT OF BUSINESS IN NORMAL COURSE. The Company shall carry on
its business and activities diligently and in substantially the same manner as
they previously have been carried on, and shall not make or institute any
unusual or novel methods of management, accounting or operation that will vary
materially from the methods used by the Company as of the date of this
Agreement. The Company shall use its best reasonable efforts, without making any
commitments on behalf of Buyer or being under any obligation to expend moneys
other than as normally required in the ordinary course of business, to preserve
its business organization intact, to keep available to the Company its present
officers and employees, and to preserve its present relationships with
suppliers, customers and others having business relationships with it.
8.3 NO SOLICITATION. From the date of this Agreement to May 15, 1998
(the "Exclusivity Period"), the Company and the Shareholders will not, directly
or indirectly, through any officer, director, stockholder or agent of the
Company, or otherwise (i) solicit, initiate or encourage the submission of
inquiries, takeover proposals or offers from any corporation, partnership,
person or other entity or group relating to any acquisition or purchase of all
or substantially all of the assets of, or equity interest in the Company or any
merger, consolidation or business combination involving the Company; (ii) enter
into negotiations regarding the foregoing or furnish to any person or entity
information concerning the Company for any of the foregoing purposes; or (iii)
otherwise cooperate with or assist, to participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek any of the foregoing.
For purposes of this Agreement, "takeover proposal" means any inquiry, proposal
or offer from the interested party relating to any direct or indirect
acquisition or purchase of a substantial amount of assets of the Company or over
20% of any class of equity securities of the Company or any offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company, or any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company other than
the transactions contemplated by this Agreement, or
20
any other transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the closing of this
Agreement or which would reasonably be expected to dilute materially the
benefits to Buyer of the transactions contemplated herein.
8.4 MAINTENANCE OF INSURANCE. The Company shall continue to carry its
existing insurance, subject to variations in amounts required by the ordinary
operations of its business. At the request of Buyer and at Buyer's sole expense,
the amount of insurance against fire and other casualties which, at the date of
this Agreement, the Company carries on any of the assets or in respect of its
operations shall be increased by such amount or amounts as Buyer shall specify.
8.5 EMPLOYEES AND COMPENSATION. Except as set forth in SCHEDULE 8.5,
the Company shall not do, or agree to do, any of the following acts: (i) grant
any increase in salaries payable or to become payable to any officer, employee,
sales agent or representative, or consultant; or (ii) increase benefits payable
to any officer, employee, sales agent or representative or consultant under any
bonus or pension plan or other contract or commitment.
8.6 NEW TRANSACTIONS. The Company shall not do or agree to do any of
the following acts without the Buyer's prior written consent, which consent
shall not be unreasonably withheld and shall be deemed given if not denied or
withheld by Buyer within one business day after receipt by Buyer of the
Company's written request for any such consent.
(a) Enter into any contract, commitment or transaction not in
the usual and ordinary course of its business; or
(b) Make any capital expenditures or commitments, not already
made and disclosed on the Company's Financial Statements, in excess of $5,000
for any single item or $25,000 in the aggregate, or enter into any leases of
capital equipment or property under which the annual lease charge is in excess
of $5,000; or
(c) Sell or dispose of any capital assets with a net book
value in excess of $5,000 individually, or $25,000 in the aggregate;
(d) Declare any dividends or make any distributions to
Shareholders, except that prior to or at the Closing the Company may distribute
to the Shareholders such amounts as are determined pursuant to SCHEDULE 8.6(d);
(e) Pay any material obligation or liability, fixed or
contingent, other than current liabilities;
(f) Waive or compromise any material right or claim, or
cancel, without full payment, any material note, loan or other obligation owing
to the Company; or
(g) Voluntarily modify, amend, cancel or terminate any of its
existing contracts or agreements, or agree to do so, except in the ordinary
course of business (in which case the Company shall promptly notify Buyer of
such action).
21
8.7 ESTOPPEL CERTIFICATES. Selling Parties shall use their best
reasonable efforts to obtain, from the lessors of the Leased Premises, written
estoppel certificates, in customary form satisfactory to Buyer's counsel.
8.8 [INTENTIONALLY OMITTED]
8.9 [INTENTIONALLY OMITTED]
8.10 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Selling Parties
shall use all reasonable efforts to assure that all representations and
warranties of Selling Parties set forth in this Agreement and in any written
statements delivered to Buyer by Selling Parties under this Agreement will also
be true and correct as of the Closing Date as if made on that date and that all
conditions precedent to the Closing shall have been met, provided however,
Company shall be under no obligation to expend any moneys except as normally
required in the ordinary course of business, provided that the Company has so
informed Buyer, and Buyer is given the opportunity to assist the Company,
financially or otherwise, as may be necessary. The Company shall promptly
disclose to Buyer any information contained in the Schedules to this Agreement
which, because of an event occurring after the date hereof, is incomplete or is
no longer correct as of all times after the date hereof until the Closing Date.
Unless Buyer exercises its termination rights as provided in Section 16.4, such
disclosures shall be deemed to modify, amend or supplement the representations
and warranties of the Company or the Schedules hereto for the purposes of
Article 9 hereof.
8.11 [INTENTIONALLY OMITTED]
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer to purchase the Stock under this Agreement are
subject to the satisfaction, at or before the Closing, of all the conditions set
out below in this Article 9. Buyer may waive any or all of these conditions in
accordance with Section 14.2 hereof; provided, however, that subject to Section
16.4, no such waiver of a condition shall constitute a waiver by Buyer of any of
its other rights or remedies, at law or in equity, if Selling Parties shall be
in default of any of their representations, warranties or covenants under this
Agreement.
9.1 STOCK CERTIFICATES. The Shareholders shall have delivered to Buyer
at or prior to Closing (a) certificates evidencing the Stock, together with
stock powers and instruments of conveyance and transfer; (b) written resignation
of all directors and officers of the Company; and (c) corporate minute books,
corporate seal, and stock ledger and transfer books of the Company.
9.2 ACCURACIES OF SELLING PARTIES' REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Selling Parties in this Agreement or in any
written statement that shall be delivered to Buyer by Selling Parties under this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though made at that time.
9.3 ABSENCE OF LIENS. At or prior to the Closing, Buyer shall have
received a UCC search report dated as of a date not more than forty-five (45)
days before the Closing Date issued by the California and Washington Secretaries
of State or by a title company or other company
22
reasonably satisfactory to counsel for Buyer indicating that there are no
filings under the Uniform Commercial Code on file with such Secretary of State
which name the Company or any of the Selling Parties as debtor or otherwise
indicating any lien on the Stock or Assets, except for the liens otherwise
disclosed in Schedules hereto.
9.4 SELLING PARTIES' PERFORMANCE. Selling Parties shall have performed,
satisfied, and complied in all material respects with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with by
Selling Parties on or before the Closing Date.
9.5 CERTIFICATION BY THE COMPANY. Buyer shall have received a
certificate, dated the Closing Date, signed by the Selling Parties certifying,
in such detail as Buyer and its counsel may reasonably request, that the
conditions specified in Sections 9.2 and 9.4 have been fulfilled.
9.6 OPINION OF SELLING PARTIES' COUNSEL. Buyer shall have received from
Levinson, Miller, Xxxxxx & Xxxxxxxx counsel for Selling Parties, an opinion
dated the Closing Date, in form and substance satisfactory to Buyer and its
counsel, that:
(a) The authorized capital stock of the Company consists of
100,000 shares of common stock, no par value, of which 50,000 shares of the
authorized stock have been issued, (the "IMS Stock"). The IMS Stock constitutes
all outstanding and issued capital stock of the Company and all such shares are
validly issued, fully paid and non-assessable. To counsel's actual knowledge
after inquiry of the Shareholders and review of the corporate minute book and
stock records, Messrs. Xxxxxx Xxxxxxxxxx and Xxxx Xxxx are the sole and
exclusive legal and beneficial owners of all the issued and outstanding IMS
Stock, and there are no outstanding subscriptions, options, warrants, preemptive
or preferential rights, convertible securities, shareholder agreements or other
agreements or contracts of any character (contractual of otherwise) for the
issuance, sale and transfer to any person or entity of shares of capital stock
of the Company, and none of the shares has been issued in violation of any
preemptive rights;
(b) The Company is a corporation duly organized, validly
existing and in good standing under the laws of California and has all necessary
corporate power to own its properties as now owned and operate its business as
now operated;
(c) The execution and delivery of this Agreement has been duly
and validly authorized by the Selling Parties, and this Agreement is valid and
binding on Selling Parties and enforceable in accordance with its terms, except
as limited by bankruptcy and insolvency laws and by other laws affecting the
rights of creditors generally;
(d) To the best of counsel's knowledge and belief and without
independent inquiry and except as set forth in SCHEDULE 6.20 to this Agreement,
such counsel does not know of any suit, action, arbitration or legal,
administrative or other proceeding or governmental investigation pending or
threatened against or affecting the Company or its business or any of its
properties, or financial or other condition;
(e) To the best of counsel's knowledge and belief and without
independent inquiry, neither the execution nor delivery of this Agreement nor
the consummation of the
23
transaction contemplated in this Agreement will constitute (i) a default, or an
event that would with notice or lapse of time or both constitute a default
under, or violation or breach of (A) the Company's Articles of Incorporation and
Bylaws; or (B) to such counsel's knowledge without independent inquiry any
indenture, license, lease, franchise, mortgage, instrument or other agreement
(other than those in the ordinary course of the Company's business) or statute,
rule, regulation, judgment, order or decree to which the Company is a party, or
by which the Company or the Stock may be bound, or (ii) an event that would
permit any party to any agreement or instrument (other than those executed in
the ordinary course of the Company's business) to terminate it or to accelerate
the maturity of any indebtedness or other obligation of the Company, or (iii) to
such counsel's knowledge without independent inquiry, an event that would result
in the creation or imposition of any lien, charge or encumbrance on any of the
IMS Stock; and
(f) To such counsel's knowledge and belief without independent
inquiry, every consent, approval, authorization or order of any court or
governmental agency or body that is required for the consummation by the Selling
Parties of the transactions contemplated by this Agreement has been obtained or
has been waived by Buyer, and such counsel has not been informed that any such
consent, approval, authorization or order has been rescinded or is no longer in
effect as of the Closing Date.
(g) The opinion letter shall be governed by, and shall be
interpreted in accordance with the Legal Opinion Accord (the "Accord") of the
ABA Section of Business Law (1991), and the "California Provisions" and the
"California Generic Exception" as defined in the BUSINESS LAW SECTION OF THE
CALIFORNIA STATE BAR REPORT ON THE THIRD-PARTY LEGAL OPINION REPORT OF THE ABA
SECTION OF BUSINESS LAW (DATED MAY 1992) (the "California Report").
9.7 ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
9.8 CORPORATE APPROVAL. The execution and delivery of this Agreement by
the Company, and the performance of its covenants and obligations under it,
shall have been duly authorized by all necessary corporate action, including
approval by its Board of Directors, and Buyer shall have received copies of all
resolutions pertaining to that authorization, certified by the secretary of the
Company.
9.9 [INTENTIONALLY OMITTED]
9.10 BOOKS AND RECORDS. The Company shall have delivered to Buyer all
of the Company's books and records, including, without limitation, its minute
books of the meetings of its Board of Director and any committees, together with
its Articles of Incorporation and Bylaws, together with any amendments thereto.
The Company will also provide Buyer with a recent Certificate of Good Standing
from each state within which it is qualified to do business.
9.11 CONSENTS. All necessary agreements and consents which the Company
is obligated to obtain so as to consummate transaction contemplated by this
Agreement, or otherwise pertaining
24
to the matters covered by it, shall have been obtained by the Company and
delivered to Buyer, except for those set forth on SCHEDULE 9.11.
9.12 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered to Buyer under
this Agreement shall be satisfactory in all reasonable respects, to Buyer and
its counsel.
9.13 EMPLOYMENT AGREEMENT. Buyer and the Shareholders shall have
entered into employment agreements substantially in the form of SCHEDULE 9.13
hereto.
9.14 [INTENTIONALLY OMITTED]
9.15 [INTENTIONALLY OMITTED]
9.16 [INTENTIONALLY OMITTED]
9.17 CONDITION OF ASSETS. The Assets shall not have been materially and
adversely affected in any way as a result of any fire, accident, storm or other
casualty or labor or civil disturbance or act of God or the public enemy.
ARTICLE 10. CONDITIONS PRECEDENT TO SHAREHOLDERS' PERFORMANCE
The obligations of the Shareholders to sell and transfer the Stock
under this Agreement are subject to the satisfaction, at or before the Closing,
of all the following conditions. Shareholders may waive any or all of these
conditions in accordance with Section 14.2 hereof; provided, however, that
subject to Section 16.4, no such waiver of a condition shall constitute a waiver
by Shareholders of any of their other rights or remedies at law or in equity, if
Buyer shall be in default of any of its representations, warranties or covenants
under this Agreement.
10.1 ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Buyer contained in this Agreement or in any
written statement delivered by Buyer under this Agreement, including but not
limited to the Reports delivered to Selling Parties pursuant to Section 7.2
hereof, shall be true on and as of the Closing as though such representations
and warranties were made on and as of that date.
10.2 BUYER'S PERFORMANCE. Buyer shall have performed and complied with
all covenants and agreements, and satisfied all conditions that it is required
by this Agreement to perform, comply with, or satisfy, before or at the Closing.
10.3 OPINION OF BUYER'S COUNSEL. Buyer shall have furnished the
Shareholders with an opinion, dated the Closing Date, of Macaulay, Zorrilla &
Xxxxx, P.A., counsel for Buyer, in form and substance satisfactory to the
Shareholders and their counsel, to the effect that:
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has all
requisite corporate power to perform its obligations under this Agreement;
25
(b) All corporate proceedings required by law or by the
provisions of this Agreement to be taken by Buyer on or before the Closing Date,
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, have been duly
and validly taken;
(c) Buyer has the corporate power and authority to acquire the
Stock for the consideration set forth herein;
(d) To such counsel's knowledge without independent inquiry,
every consent, approval, authorization or order of any court or governmental
agency or body that is required for the consummation by Buyer of the
transactions contemplated by this Agreement has been obtained or has been waived
by the Company and will be in effect on the Closing Date;
(e) The consummation of the transaction contemplated by this
Agreement does not violate or contravene any of the provisions of the Articles
of Incorporation or Bylaws of Buyer, or to the best of such counsel's knowledge
without independent inquiry, any indenture, agreement, statute, judgment or
order to which Buyer is a party or by which Buyer is bound;
(f) The execution and delivery of this Agreement has been duly
and validly authorized, and this Agreement is valid and binding on Buyer and
enforceable in accordance with its terms, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(g) The Shares of Buyer's Common Stock delivered to the
Shareholders at Closing will upon delivery hereunder be validly and legally
issued and will be fully paid and not assessable. To counsel's actual knowledge
after inquiry, the Shares of Common Stock of Buyer are free and clear of all
pledges, security interests, liens, claims, encumbrances, agreements and options
of any nature whatsoever, and none of such Shares have been issued in violation
of any preemptive rights.
10.4 BUYER'S CORPORATE APPROVAL. The execution and delivery of this
Agreement by Buyer, and the performance of Buyer's covenants and obligations
under it, shall have been duly authorized by all necessary corporate action
(INCLUDING DELIVERY OF THE FAIRNESS OPINION), and the Shareholders shall have
received copies of all resolutions pertaining to that authorization, certified
by the secretary of Buyer.
10.5 CERTIFICATION BY BUYER. Shareholders shall have received a
certificate, dated the Closing Date, signed by an executive officer of Buyer
certifying, in such detail as Shareholders and their counsel may reasonably
request, that the conditions specified in Sections 10.1, 10.2 and 10.11 have
been fulfilled.
26
10.6 ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
10.7 CONSENTS. All necessary agreements and consents of any parties to
the consummation of the transaction contemplated by this Agreement, or otherwise
pertaining to the matters covered by it, INCLUDING WITHOUT LIMITATION ANY
ASSIGNMENTS OR OTHER DOCUMENTS REQUIRED IN ORDER TO MAKE THE WARRANTIES SET
FORTH IN SECTION 6.13(A) TRUE AS OF THE CLOSING DATE, shall have been obtained
on or before the Closing Date.
10.8 APPROVAL OF DOCUMENTATION. The form and substance of all
certificates, instruments, opinions and other documents delivered to Selling
Parties under this Agreement shall be satisfactory in all reasonable respects,
to Shareholders and their counsel.
10.9 EMPLOYMENT AGREEMENT. Buyer shall have entered into employment
agreements with Shareholders substantially in the form of SCHEDULE 9.13 hereto.
10.10 PAYMENT OF PURCHASE PRICE. The Buyer shall have paid the purchase
price of the Stock to be paid at Closing as specified in Sections 2.1(a) and
(b).
10.11 NASDAQ TRADING. The Buyer's Stock will be trading on the Nasdaq
National Market, and Buyer will have no current actual knowledge that it is in
breach of any of Nasdaq's rules and regulations or of the existence of any other
circumstance or fact which might cause it to be de-listed.
ARTICLE 11. EMPLOYEE PLANS
Buyer is undertaking only those obligations (but is under no obligation
to continue any such Employee Plan except as set forth in Section 12.11) of the
Company relating to any Employee Plan as defined in Section 11.1(a) below, which
are listed on SCHEDULE 4. As to such obligations which Buyer agrees to
undertake, the following provisions shall apply:
11.1 DEFINITIONS.
(a) EMPLOYEE PLAN. For purposes of this Agreement, the term
"Employee Plan" includes all pension, retirement, disability, medical, dental or
other health insurance plans, life insurance or other death benefit plans,
profit sharing, deferred compensation, stock option, bonus or other incentive
plans, vacation benefit plans, severance plans or other employee benefit plans
or arrangements including, without limitation, any pension plan as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA")
and any welfare plan as defined in Section 3(1) of ERISA, whether or not funded,
covering any Subject Employee (as hereinafter defined) or to which the Company
is a party or bound or makes or has made any contribution or by which the
Company may have any liability to any Subject Employee (including any such plan
formerly maintained by or in connection with which the Company may have any
liability to any Subject Employee, and any such plan which is a multi-employer
plan as defined in Section 3(37)(A) of ERISA).
27
(b) SUBJECT EMPLOYEE. For purposes of this Agreement the term
"Subject Employee" includes all current or former officers, directors, employees
or consultants who are or were employed or otherwise compensated in connection
with activities involving the Stock being purchased.
11.2 PLAN OPERATIONS. The Company hereby represents and warrants
that:
(a) PLANS LISTED. Except as listed on SCHEDULE 6.16, the
Company does not maintain, is not a party to, does not contribute and is not
obligated to contribute to any Employee Plan as defined in Section 11.1(a).
(b) PLAN DOCUMENTS. With respect to any Employee Plans of the
Company, the Company has, or prior to Closing will, to the extent material
provided to Buyer complete, accurate and current copies of each of the
following:
(i) The text (including amendments) of each of the
Employee Plans, to the extent reduced to writing:
(ii) A description of all material elements of each
of the Employee Plans, to the extent not previously reduced to writing;
(iii) With respect to each Employee Plan that is an
employee benefit plan (as defined in Section 3(3) of ERISA), the following:
(A) The most recent summary plan
description, as described in Section
102 of ERISA;
(B) Any summary of material
modifications that has been
distributed to participants or filed
with the U.S. Department of Labor
but that has not been incorporated
in an updated summary plan
description furnished under
Subparagraph (A) above, and
(C) The annual reports, as described in
Section 103 of ERISA, for the most
recent three plan years for which an
annual report has been prepared
(including all schedules and
attachments).
(iv) With respect to each Employee Plan that is
intended to qualify under Section 401(a) of the Internal Revenue Code, the most
recent determination letter concerning the plan's qualification under Section
401(a) of the Code, as issued by the Internal Revenue Service, and
(v) Any handbook, manual, policy statement or similar
written guidelines furnished to employees of the Company, excluding any such
items that has been
28
superseded by any subsequent handbook, manual, policy statement or similar
written guidelines.
(c) OPERATIONS IN GENERAL. To the knowledge of the
Shareholders after reasonable inquiry, each Employee Plan and the Administrators
and Fiduciaries of each Employee Plan and the Company have at all times complied
in all material respects with all applicable requirements of ERISA and of any
other applicable law (including regulations and rulings thereunder) governing
each Employee Plan, and each Employee Plan has at all times been properly
administered in accordance with all such requirements of law and in accordance
with its terms to the extent consistent with all such requirements of law.
(d) PBGC, ETC. To the knowledge of the Shareholders after
reasonable inquiry, no "reportable event" (as defined in ERISA) has occurred
with respect to any Employee Plan. No liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred, or is expected by the Company to be
incurred, by the Company with respect to any Employee Plan. To the knowledge of
the Shareholders after reasonable inquiry, there has been no event or condition
which presents a risk of termination of any Employee Plan by the PBGC. No
Employee Plan is a multi-employer plan as defined in ERISA or a multiple
employer plan except as shown on SCHEDULE 6.16. To the knowledge of the
Shareholders after reasonable inquiry, with respect to any such multi-employer
plan or multiple employer plan, there has been no withdrawal of a "substantial
employer" as defined by ERISA and the Company does not expect such a withdrawal
to occur.
(e) EXCISE TAXES, ETC. To the knowledge of the Shareholders
after reasonable inquiry, no Employee Plan, administrator or fiduciary of any
Employee Plan or the Company has taken any action, or failed to take any action,
that could subject it or any other person to any liability for any excise tax or
for breach of fiduciary duty with respect to or in connection with any Employee
Plan.
(f) COMMUNICATION, ETC. To the knowledge of the Shareholders
after reasonable inquiry, no Employee Plan, administrator or fiduciary of any
Employee Plan or the Company has any liability under any provision of ERISA or
any other applicable law by reason of any communication with any Employee Plan,
or any filing or failure to file with any government entity.
(g) PAYMENTS, ETC. To the knowledge of the Shareholders after
reasonable inquiry, no Employee Plan, administrator or fiduciary of any Employee
Plan or the Company has any liability to any plan participant, beneficiary or
other person under any provision of ERISA or any other applicable law by reason
of any payment of benefits or other amounts or failure to pay benefits with
respect to or in connection with any Employee Plan. The Company is not
delinquent or in arrears on other amounts owed to or with respect to any
contributions under any Employee Plan.
11.3 PLAN LIABILITIES AND COSTS. The Company represents and
warrants that:
(a) DEFINED BENEFIT PLANS. As of the Closing Date (a) all
liabilities (being the present value of accrued benefits), (b) the portion of
such liabilities that is then unfunded, (c) all vested liabilities, (d) the
portion of such vested liabilities that is then unfunded, (e) the annual
contribution required under a 30-year amortization of unfunded past service
liabilities, and (f) the
29
current service costs of each Employee Plan that is a defined benefit plan (as
defined by ERISA) do not exceed the amount set forth in SCHEDULE 6.16 with
respect to each such plan. In each case, plan liabilities, plan costs and the
value of plan assets shall be determined in accordance with such actuarial
method or methods and assumptions and methods of asset valuation as are
acceptable to actuaries designated by Buyer.
(b) PREVIOUS YEARS' COSTS. The aggregate annual cost for the
year ending the Last Fiscal Year End of each Employee Plan is set forth in
SCHEDULE 6.2(a).
(c) NO UNFUNDED DEFINED BENEFIT PLANS. The Company does not
maintain any "pension plan" as defined in Section 3(2) of ERISA which is
unfunded, unless such pension plan is permitted to be maintained on an unfunded
basis by ERISA and is designated in SCHEDULE 6.16 as an unfunded pension plan.
11.4 TAXES AND TRUSTS. The Company represents and warrants that:
(a) TAXES. To the knowledge of the Shareholders after
reasonable inquiry, each funded Employee Plan that is a "pension plan" as
defined in Section 3(2) of ERISA is qualified under Section 401(a) of the
Internal Revenue Code of 1954 and the trust maintained in connection with such
Employee Plan is exempt from tax under Section 501(a) of the Internal Revenue
Code of 1954.
(b) SEPARATE TRUSTS. The assets of each Employee Plan are
invested in a separate trust or under a trust with one or more other such plans
where the assets of each plan are separately accounted for and available only to
provide benefits to employees and beneficiaries covered under that Plan and to
pay allocable administrative expenses. Each Employee Plan is maintained by the
Company under a plan document which does not provide for other participating
employers. No Employee Plan provides credit with respect to service other than
with the Company, and neither the Company nor any such Employee Plan have
liability or responsibility with respect to any such credit. This Section
11.4(b) does not apply to any plan which is a multi-employer plan (as defined in
ERISA) as set forth in SCHEDULE 6.16.
11.5 [INTENTIONALLY OMITTED]
11.6 PAYMENT OF CONTRIBUTIONS. No Employee Plan or other person has
sought, or will seek prior to the Closing Date, a waiver of any funding
requirements with respect to any Employee Plan.
11.7 OTHER LIABILITIES. To the knowledge of the Shareholders after
reasonable inquiry, the Company hereby represents that no liability to any
employee, beneficiary or other person or entity has been incurred prior to and
including the Closing Date in connection with any Employee Plan, by reason of
any action or inaction by the Company or any person affiliated with the Company,
or any plan administrator or fiduciary, or any other person other than
liabilities undertaken by them under the terms of the Employee Plan. To the
knowledge of the Shareholders after reasonable inquiry, the Company hereby
agrees that no liability to any employee, beneficiary or other person or entity
shall be incurred following the Closing Date in connection with any
30
Employee Plan, by reason of any action or inaction by the Company or any person
affiliated with the Company, or any plan administrator or fiduciary, or any
other person other than liabilities undertaken by them under the terms of the
Employee Plan.
11.8 INFORMATION. All Subject Employees and their beneficiaries and
dependents, and all other participants and beneficiaries of any Employee Plan,
all available data and benefits applicable to each of them under the terms of
each Employee Plan (including, without limitation, complete pertinent pay
history and all administrative records), shall be correctly identified and set
forth in records delivered, at the election of Buyer, on or prior to the Closing
Date by the Company to Buyer. Any such records not delivered by the Closing Date
and requested by Buyer shall be delivered as promptly as practicable thereafter.
The Company shall provide Buyer with all administrative forms, employee
booklets, summary plan descriptions, and other employee communication materials
used in connection with each Employee Plan, to the extent requested by Buyer.
The Company shall deliver to Buyer at or prior to the Closing Date copies of all
available prior plans and of all determination letters and applications for
determination letters (including all correspondence with respect thereto)
relating to the qualification of any Employee Plan under Section 401(a) of the
Internal Revenue Code of 1954.
ARTICLE 12. PARTIES' OBLIGATIONS AFTER THE CLOSING
A. SELLING PARTIES' OBLIGATIONS.
12.1 [INTENTIONALLY OMITTED]
12.2 CHANGE OF NAME. If requested by Buyer, Selling Parties agree that
after the Closing Date they shall not use or employ in any manner directly or
indirectly the name of WPJ, Inc. d/b/a Integrated Medical Systems or any
variation thereof.
12.3 MINIMUM FINANCIAL CRITERIA. Notwithstanding anything to the
contrary, including Section 12.4(g), in the event that on the Closing Date the
Company does not have (i) an excess of total current assets to total current
liabilities of at least $225,000; and (ii) shareholder equity of at least
$640,000, then Shareholders shall pay Buyer within ten (10) days after the
delivery of the Final Report (as defined herein) any amounts necessary so that
the tests described in clauses (i) and (ii) of this sentence are met. The
determination of the Company's current assets, current liabilities and
shareholder equity shall be made pursuant to a balance sheet as of the Closing
Date reviewed (under practices, procedures and standards consistent with those
used in the Stub Period Statements) by Coopers & Xxxxxxx, Orange County office
(the "CPA") as promptly as practicable after the Closing, which balance sheet
shall be delivered to the parties by the CPA in the form of a "Draft Report".
For a period of ten (10) days after receipt of the Draft Report, each party
shall have the right to discuss the Draft Report with the CPA. Upon expiration
of said 10-day period, subject to any extensions that the CPA may request in its
sole discretion, the CPA shall issue its "Final Report", which shall be
conclusive and binding upon the parties for the purposes of this Section 12.3
only. All costs incurred by the CPA pursuant to this Section shall be equally
borne by the parties. The obligations of Shareholders described in this Section
12.3 are absolute and unconditional in all respects, and shall be valid and
enforceable irrespective of any other agreements or circumstances which might
otherwise constitute a defense to such obligations
31
including, without limitation, any liabilities of Shareholders to Buyer pursuant
to Section 12.4 of this Agreement. Shareholders absolutely, unconditionally and
irrevocably waive any and all right to assert any defense, set-off, counterclaim
or cross-claim of any nature whatsoever with respect to such obligations in any
action or proceeding brought by Buyer to collect the indebtedness described in
this Section.
12.4 SHAREHOLDERS' INDEMNITIES. From and after the Closing,
Shareholders shall indemnify, defend and hold harmless Buyer against and in
respect of any and all claims, counterclaims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees ("Losses"), that Buyer may
incur or suffer, which arise or result from any breach of or failure by
Shareholders to perform any of their representations, warranties, covenants or
agreements in this Agreement, subject to the following limitations and on the
following terms and conditions:
(a) The representations and warranties made by the
Shareholders in Section 6.13(a), together with any and all recourse against any
of the Shareholders by Buyer with respect to a breach or failure by Shareholders
to perform same, shall terminate and be of no further force and effect from and
after the date which is five (5) years from the Closing Date.
(b) The representations and warranties made by the
Shareholders in Section 6.4, together with any and all recourse against any of
the Shareholders by Buyer with respect to a breach or failure by Shareholders to
perform same, shall terminate and be of no further force and effect from and
after the date on which the statute of limitations (for claims brought by the
taxing authority) expires with respect to the tax year for which such warranty
or representation is made; provided, that (i) in the event the statute of
limitations applicable to a tax year is extended as a result of an amendment to
tax returns or other conduct of Buyer in violation of the provisions of Section
12.12, then for purposes of this paragraph, the expiration date of the
applicable statute of limitations shall be deemed to be the expiration date
thereof as same existed as of the Closing Date, and (ii) the limitation set
forth in this Section 12.4(b) shall not apply to the extent the breach of
representation or warranty is a result of fraud or willful neglect as determined
by a court of competent jurisdiction in an action brought by the taxing
authority, in which case the representation and warranty and the right of Buyer
to be indemnified for a breach or failure thereof pursuant to this Section 12.4
shall continue in perpetuity;
(c) The representations and warranties made by the
Shareholders in Section 6.32, together with the right of Buyer to be indemnified
for a breach or failure thereof pursuant to this Section 12.4, shall survive the
Closing Date in perpetuity.
(d) Except as set forth in Sections 12.4(a), 12.4(b) and
12.4(c), all representations, warranties, covenants and agreements made by any
of the Shareholders hereunder, together with any and all recourse against any of
the Shareholders by Buyer with respect to a breach or failure by any of the
Shareholders to perform same, shall terminate and be of no further force and
effect from and after the date which is two (2) years from the Closing Date.
(e) In the event of a misrepresentation or breach of warranty
or covenant by any of the Shareholders, the remedy of Buyer shall be limited to
indemnification pursuant to this
32
Section 12.4, and neither Buyer nor any other such person shall be entitled to a
rescission of this Agreement, except in the case of actual fraud that
substantially deprives Buyer of the benefits contemplated by this Agreement.
(f) Shareholders shall not be liable under this Section 12.4
for any loss resulting from an event relating to a breach of warranty or
representation if Shareholders can establish that Buyer had actual knowledge on
or before the Closing Date of such event. The burden of proving any such actual
knowledge is on the Shareholders.
(g) Shareholders shall not be liable to Buyer pursuant to this
Section 12.4 unless and until the aggregate amount of Losses for which
indemnification is sought hereunder exceeds $250,000; provided, however, that
when the aggregate amount of such Losses exceeds $250,000, Buyer's right of
indemnification hereunder shall include the first $250,000 of Losses, subject to
the other limitations contained in this Section 12.4.
(h) To the extent that notwithstanding the foregoing
limitations, any of the Shareholders shall become liable to Buyer pursuant to
the provisions of this Section 12.4 and/or Section 17(b) below:
(i) The Shareholders shall be entitled to a credit or
offset against any such liability of an amount equal to the sum of (A) the value
of any net tax benefit realized (by reason of a tax deduction, basis reduction,
shifting of income, credits and/or deductions or otherwise) by Buyer in
connection with the loss or damaged suffered by Buyer which forms the basis of
Seller's liability hereunder and (B) any proceeds received from any insurance
policies with respect to the applicable claim; and
(ii) The aggregate amount of such liability of all
Shareholders (inclusive of any and all costs and attorneys' fees incurred in
connection with the defense and indemnification obligations set forth herein),
shall in no event exceed the sum of Ten Million Dollars ($10,000,000).
12.5 [INTENTIONALLY OMITTED]
12.6 [INTENTIONALLY OMITTED]
12.7 DEPOSIT OF CHECKS. Selling Parties shall cooperate with Buyer in
making all necessary or desirable arrangements so that checks and other payments
on accounts receivable purchased by Buyer pursuant to this Agreement may be
deposited into Buyer's bank accounts without endorsement by the Company.
12.8 [INTENTIONALLY OMITTED]
12.9 QUALIFIED STOCK PURCHASES. The Shareholders agree that they and
the Company will cooperate with Buyer to timely make an election to qualify this
transaction as a "qualified stock purchase" for purposes of Section 338(h)(10)
of the Code.
33
12.10 SUBCHAPTER S RETURN. The Shareholders agree that they will timely
prepare and file any required S Corporation federal and state tax returns for
the Company for any required periods through the Closing Date and, subject to
Section 2.1(c), will timely and fully pay all applicable taxes for that period
as more particularly described in Section 6.4.
B. BUYER'S OBLIGATIONS.
12.11 POST-CLOSING OBLIGATIONS REGARDING CERTAIN EMPLOYEES. Buyer
agrees to offer employment to Messrs. Xxxxx Xxxxxxx, Xxxx Xxxxxxx and Xxxxxxx
Xxxxxxx on terms better than they had with IMS prior to the Closing.
12.12 POST-CLOSING TAX RETURNS. With respect to the Company's federal
and state tax returns for all earlier periods ending on or before the Closing
Date, Buyer shall not cause any such return to be amended in any manner which
may directly or indirectly result in additional tax liability to the
Shareholders, or in any other manner take any position inconsistent with the
Company's treatment of any item of income, deduction or credit as reflected on
such tax returns, except with the prior written consent of the Shareholders,
which consent shall not be unreasonably withheld.
12.13 ACCESS TO RECORDS. Buyer shall retain any and all records
provided under this Agreement for a period of five (5) years. From and after the
Closing, Buyer shall allow Selling Parties, and their counsel, accountants and
other representatives, such access to such records as Selling Parties reasonably
require in order to comply with their respective obligations under the law or
under contracts assumed by Buyer pursuant to this Agreement or for any other
lawful purpose.
12.14 BUYER'S INDEMNITIES. From and after the Closing, Buyer shall
fully and forever indemnify, defend and hold harmless the Shareholders against
and in respect of any and all Losses (as such term is defined in Section 12.4
hereof) that the Shareholders shall incur or suffer, which arise out of or
result from any one or more of the following: (i) the breach of, or failure by
Buyer to perform any of Buyer's representations, warranties, covenants and
agreements in this Agreement; (ii) the failure of the Company, after the Closing
Date, to pay, satisfy and discharge any liability appearing on the Stub Period
Statements or arising after the Stub Period Date, except for (A) liabilities
appearing on the Stub Period Statements that arose after December 31, 1997,
outside of the ordinary course of the Company's business, as specifically set
forth on SCHEDULE 12.14-1 hereto, and (B) liabilities arising after the Stub
Period Date and prior to the Closing Date outside of the ordinary course of the
Company's business, as specifically set forth in SCHEDULE 12.14-2 hereto; (iii)
any personal guaranty executed by the Shareholders or either of them prior to
the date hereto with respect to the obligations of the Company, including,
without limitation, those set forth on SCHEDULE 12.14-3 hereto; or (iv)
liabilities, contracts, agreements, debts, obligations, claims, demands, losses
or damages incurred or sustained as a result of the ownership or operation of
the Stock or Assets or business of the Company from and after the Closing Date.
The obligations of Buyer pursuant to this Section 12.14 are subject to the
following limitations and the following terms and conditions:
(a) In the event of a misrepresentation or breach of warranty
or covenant by Buyer, the remedy of the Shareholders shall be limited to
indemnification pursuant to this Section
34
12.14, and the Shareholders shall not be entitled to a rescission of this
Agreement, except in the case of actual fraud that substantially deprives the
Shareholders of the benefits contemplated by this Agreement.
(b) Buyer shall not be liable under this Section 12.14 for any
loss resulting from an event relating to a breach of warranty or representation
if Buyer can establish that the Shareholders had actual knowledge on or before
the Closing Date of such event. The burden of proving any such actual knowledge
is on Buyer.
(c) Except with respect to the guaranteed obligations set
forth on SCHEDULE 12.14-3, Buyer shall not be liable to the Shareholders
pursuant to this Section 12.14 unless and until the aggregate amount of Losses
for which indemnification is sought hereunder exceeds $250,000; provided,
however, that when the aggregate amount of such Losses exceeds $250,000, the
Shareholders' right of indemnification hereunder shall include the first
$250,000 of Losses, subject to the other limitations contained in this Section
12.14.
C. ASSERTION OF CLAIMS.
12.15 ASSERTION OF CLAIMS. All claims for indemnification by any of the
Selling Parties pursuant to Section 12.14 hereof or the Buyer pursuant to
Section 12.4 hereof, or any other provision of this Agreement, including Article
17, shall be asserted and resolved as follows:
(a) Any person claiming indemnification hereunder is
hereinafter referred to as the "Indemnified Party" and any person against whom
such claims are asserted hereunder is hereinafter referred to as the
"Indemnifying Party." In the event that any Losses are asserted against or
sought to be collected from an Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify the Indemnifying Party
of the Losses, specifying the nature and specific basis for such Losses and the
indemnity claim and the amount or the estimated amount thereof to the extent
then feasible and enclosing a copy of all papers (if any) served with respect to
the claim (the "Claim Notice"). The Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to any such Losses if the
Indemnified Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement in reasonably sufficient time so that the
Indemnifying Party's ability to defend against the Losses is not prejudiced, but
only to the extent such notification within such time period is practicable. The
Indemnifying Party shall have 30 days from the date the Claim Notice is given in
accordance with the notice provisions hereof (the "Notice Period") to notify the
Indemnified Party (x) whether it disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such Losses, and (y)
whether its desires, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against such Losses; which election to defend may
be made without prejudicing the Indemnifying Party as to its liability
hereunder, other than with respect to the costs of defense. Notwithstanding the
foregoing, Indemnified Party is hereby authorized prior to and during the Notice
Period to file any motion, answer or other pleading that it shall deem necessary
or appropriate to protect its interests or those of the Indemnifying Party (and
of which it shall have given notice and opportunity to comment to the
Indemnifying Party) and that is not prejudicial to the Indemnifying Party.
35
(A) In the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such Losses and except as hereinafter provided, the
Indemnifying Party shall have the right to defend by all appropriate
proceedings, and with counsel of its own choosing, which proceedings shall be
promptly settled or prosecuted by them to a final conclusion. If the Indemnified
Party desires to participate in, but not control, any such defense or
settlement, it may do so at its sole cost and expense. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses that the
Indemnifying Party elects to contest, or, if appropriate and related to the
claim in question, in making any counterclaim against the person asserting the
third party Losses, or any cross-complaint against any person. No claim with
respect to which the Indemnifying Party has admitted its liability may be
settled or otherwise compromised without the prior written consent of the
Indemnified Party. Any party settling or compromising a claim in violation of
the preceding sentence shall be solely liable for the amount of the settlement
or compromise.
(B) If the Indemnifying Party does not notify the
Indemnified Party within 30 days after the receipt of a Claim Notice that it
elects to undertake the defense thereof, the Indemnified Party shall have the
right to defend at the expense of the Indemnifying Party the claim with counsel
of its choosing reasonably satisfactory to the Indemnifying Party, subject to
the right of the Indemnifying Party to assume the defense of any claim at any
time prior to settlement or final determination thereof. Any such defense shall
be prosecuted promptly and vigorously by the Indemnified Party.
In the case of either (A) or (B), if the Indemnifying
Party has not admitted its liability for a claim, the Indemnified Party shall
send a written notice to the Indemnifying Party of any proposed settlement of
any claim received by the Indemnified Party. The Indemnifying Party shall have
an option for 30 days following receipt of such notice to (i) admit liability
for the claim if it has not already done so and (ii) if liability has been
admitted, reject, in its reasonably judgment, the proposed settlement. Failure
to reject such settlement within such 30 day period shall be deemed an
acceptance of such settlement. If the Indemnified Party settles any such claim
over the objection of the Indemnifying Party, the Indemnified Party shall
thereby waive any right to indemnify therefor, unless the Indemnifying Party has
prior to the time of settlement admitted liability for such claim.
Notwithstanding any provisions hereof to the contrary, the Indemnifying Party
may defend any claim in the manner described herein under a reservation of
rights as to liability for such claim.
(b) In the event any Indemnified Party should have a claim for
Losses against any Indemnifying Party hereunder that does not involve a Loss
being asserted against or sought to be collected from it by a third party (for
example, but without limitation, a Loss resulting from a breach of a
representation, warranty or covenant), the Indemnified Party shall send a Claim
Notice (including an explanation, in reasonable detail, of the basis for such
claim, the particular representation, warranty or covenant claimed to be
breached by the Indemnifying Party, and the manner in which the amount claimed
to be due was computed, together with all documents in the possession of the
Indemnified Party relating to such claim for Losses) with respect to such claim
to the Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within 30
36
days from the date the Claim Notice is given that it disputes such claim for
Losses, the amount of such Losses shall be conclusively deemed a liability of
the Indemnifying Party hereunder.
12.16 GUARANTEE OF TRADE ACCOUNTS RECEIVABLE. The Shareholders
guarantee to Buyer that the unpaid balance of all Trade Accounts Receivable
identified in the Financial Statements as "Accounts Receivable" (those goods and
services sold in the ordinary course of business less allowances for bad debts)
of the Company on hand at the Closing Date will be paid within one hundred
eighty (180) days of the date of Closing. Within ten (10) days after delivery to
the Shareholders of written notice of any Accounts Receivable unpaid within such
one hundred eighty (180) day period, the Shareholders will pay to Buyer the full
amount of such unpaid receivables in cash. In addition, Shareholders guarantee
to Buyer an account receivable of approximately $21,000 due the Company from
EDSS. Buyer shall provide full access and all reasonable assistance to collect
such receivables. Any receivables not collected shall be assigned to the
Shareholders. The obligations of Shareholders described in this Section 12.16
are absolute and unconditional in all respects, and shall be valid and
enforceable irrespective of any other agreements or circumstances which might
otherwise constitute a defense to such obligations including, without
limitation, any liabilities of Buyer to Shareholders pursuant to Section 12.4 of
this Agreement. Shareholders absolutely, unconditionally and irrevocably waive
any and all right to assert any defense, set-off, counterclaim or cross-claim of
any nature whatsoever with respect to such obligations in any action or
proceeding brought by Buyer to collect the indebtedness described in this
Section.
ARTICLE 13. COSTS
13.1 FINDER'S OR BROKER'S FEES. Each of the parties represents and
warrants that it has dealt with no broker or finder in connection with any of
the transactions contemplated by this Agreement, and, insofar as it knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
13.2 EXPENSES. Each of the parties shall pay all costs and expenses,
including, but not limited to attorneys' accounting fees, incurred or to be
incurred by it in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this Agreement, except that Buyer
has agreed to reimburse the Company for its legal, accounting and other
professional fees not to exceed $50,000 in the event this transaction does not
close for any reason.
ARTICLE 14. FORM OF AGREEMENT
14.1 HEADINGS. The subject headings of the Articles and Sections of
this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
14.2 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations, warranties and understandings of the parties. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all the parties. No waiver of any of the provisions of this Agreement
shall
37
be deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
ARTICLE 15. PARTIES
15.1 PARTIES IN INTEREST. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
15.2 ASSIGNMENT; INUREMENT. Neither party may assign or delegate any of
its rights or obligations under this Agreement or any part hereof without the
prior written consent of the other party. This Agreement shall be binding on and
shall inure to the benefit of the parties to it and their respective heirs,
legal representatives, successors and assigns.
ARTICLE 16. REMEDIES
16.1 RECOVERY OF LITIGATION COSTS. Subject to Section 12.4(h)(ii), if
any legal action is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
16.2 CONDITIONS PERMITTING TERMINATION. Subject to the provisions of
Article 3 relating to the postponement of the Closing Date, either party may on
the Closing Date terminate this Agreement by written notice to the other,
without liability to the other, if (i) any condition to the obligations of such
party as described in Article 9 or Article 10 hereof, as the case may be, has
not been satisfied as of the Closing Date, or (ii) any bona fide action or
proceeding shall be pending against either party on the Closing Date that could
result in an unfavorable judgment, decree or order that would prevent or make
unlawful the carrying out of this Agreement.
16.3 DEFAULTS PERMITTING TERMINATION. If either Buyer or a Selling
Party materially defaults in the due and timely performance of any of its
representations, warranties, covenants or agreements under this Agreement, the
non-defaulting party or parties may on the Closing Date give notice of
termination of this Agreement, in the manner provided in Article 18. The notice
shall specify with particularity the default or defaults on which the notice is
based. The termination shall be effective three (3) business days after the
Closing Date, unless the specified default or defaults have been cured on or
before this effective date for termination. Subject to Section 16.4, such
termination shall not waive, release or discharge the non-defaulting parties'
rights to seek legal and equitable relief.
38
16.4 BREACH OF WARRANTIES. Notwithstanding any provision of this
Agreement to the contrary, if upon execution of this Agreement and upon the
Closing Date, the warranties and representations made by either party pursuant
to Sections 6, 7 or 11 of this Agreement are not true and correct, and either
party notifies the other party of such fact in writing, then the rights and
obligations of the parties shall be as follows:
(a) If the applicable warranty and/or representation was
untrue as of the date made, then except in cases of actual fraud, the sole and
exclusive remedy of the non-warranting party shall be either of the following,
as the non-warranting party may elect in writing:
(i) To waive the breach in writing and continue with
the Closing, in which case the non-warranting party shall have no further
recourse with respect to such breach or falsity pursuant to Section 12.4 or
12.14 or otherwise; or
(ii) To terminate this Agreement by written notice,
in which case neither party shall have any further obligations hereunder except
as set forth in Section 18.
(b) If the applicable warranty or representation was true when
made, but became untrue thereafter for reasons other than a breach by the
warranting party of its other covenants and obligations under this Agreement,
then:
(i) If the breach or falsity would adversely and
materially affect the non-breaching party's rights and obligations under this
Agreement, the remedies of the non-warranting party shall be as elected under
Section 18(a) above; and
(ii) If the breach or falsity would NOT adversely and
materially affect the non-breaching party's rights and obligations under this
Agreement, the sole and exclusive remedy of the non-warranting party shall be
limited to that set forth in Section 18(a)(i) above, and the non-warranting
party shall have no right to terminate this Agreement on account of such breach
or falsity.
ARTICLE 17. INDEMNIFICATION PROVISIONS RELATING TO OFFER AND SALE OF SECURITIES
The following provisions shall be applicable with respect to any and
all registration statements, offering circulars or other documentation relating
to the public offering or private placement of securities of Buyer or any of its
affiliated companies (including, from and after the Closing Date, the Company)
filed, delivered or circulated after the date of this Agreement ("Offering
Documents"):
(a) Buyer hereby agrees to indemnify and hold harmless each
Shareholder from and against any and all losses, claims, damages or liabilities
("Losses"), joint or several, to which such Shareholder may become subject
insofar as such Losses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Documents or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
any material fact required to be
39
stated therein or necessary to make the statements therein not misleading,
PROVIDED, HOWEVER, that Buyer will not be liable to indemnify a Shareholder to
the extent that any such Loss arises out of or is based upon any untrue
statement or omission made in reliance upon and in conformity with written
information furnished to Buyer by such a Shareholder specifically for use
therein. Buyer further agrees to reimburse each Shareholder for all fees, costs
and expenses reasonably incurred in connection with investigating or defending
any Losses or actions in respect thereof ("Legal Expense"). This indemnity
agreement shall be in addition to any liability which Buyer may otherwise have
pursuant to this Agreement or otherwise.
(b) Each Shareholder severally agrees to indemnify and hold
harmless Buyer and each person who controls Buyer within the meaning of the
Securities Act of 1933, as amended, against any Losses to which Buyer or any
such controlling person may become subject, insofar as such Losses (or actions
in respect thereof) arise out of or are based upon any untrue statement of
material fact contained in the Offering Documents, or any amendment or any
supplement thereto, or arise out of or are based upon the omission to state
therein any material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in reliance upon and in
conformity with written information furnished to Buyer by such Shareholder
specifically for use therein, and each Shareholder further severally agrees to
reimburse Buyer and any such controlling person for Legal Expenses. This
indemnity agreement shall be in addition to any liability which each Shareholder
may otherwise have pursuant to this Agreement or otherwise; provided, however,
that the liability of the Shareholders pursuant to this Section 17(b), when
added to any liability incurred by the Shareholders pursuant to Section 12.4 of
this Agreement, shall in no event exceed the amount stated in Section
12.4(h)(ii) of this Agreement.
(c) Notwithstanding the foregoing, in the case of subsection
(a) above, Buyer shall be required to indemnify each Shareholder and to
reimburse Legal Expenses unless, and in the case of subsection (b) above,
neither Shareholder shall be required to indemnify Buyer or any controlling
person or to reimburse Legal Expenses until, there has been a finding of
liability for a material misstatement or omission by such Shareholder pursuant
to a final non-appealable judgment by a court of competent jurisdiction. In such
event, the amount of indemnifiable Losses for which such Shareholder shall be
liable shall be determined in accordance with the provisions of Section 21D(g)
of the Securities Exchange Act of 1934, as amended ("Section 21D"), whether or
not Section 21D would apply to the underlying action.
(d) Except with the Shareholders' prior written consent, which
consent shall not be unreasonably withheld or delayed, Buyer shall not include,
in any Offering Documents filed, delivered or circulated prior to the Closing,
the Financial Statements or any other Confidential Information (as defined in
Section 21.2).
ARTICLE 18. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Except as set forth to the contrary in Section 12.4, all
representations, warranties, covenants and agreements in this Agreement shall
survive the Closing. In the event the Closing does not occur and this Agreement
terminates pursuant to Article 16 or otherwise, the obligations of the
40
parties under the following provisions hereof shall nevertheless survive such
termination: Sections 13.2, 16.1, 16.3, Article 17 and Section 21.2.
ARTICLE 19. NOTICES
Except as otherwise specifically provided herein, any notice required
or permitted to be sent by this Agreement will be in writing and will be (i)
delivered by hand; (ii) sent by fax (if the receiving machine confirms receipt
through answerback and the sending machine prints a paper copy of the answerback
message); or (iii) mailed by registered, certified or other prepaid, receipted
delivery service, return receipt requested, to the address or fax number
provided by this Agreement. Complying notices will be effective (a) when
delivered by hand; (b) the next business day after sent by fax; (c) three (3)
business days after deposited in the mail in the manner required above, with
proper postage prepaid; or (d) one (1) business day after deposited with the
delivery service. Notices will be addressed as follows or as from time to time
directed in writing by either party by notice given hereunder:
COMPANY: WPJ, Inc. d/b/a Integrated Medical Systems
0000 X. Xxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
Attn: Xxxxxx Xxxxxxxxxx, President
with copy to: Levinson, Miller, Xxxxxx & Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esquire
SHAREHOLDERS: Xxxxxx Xxxxxxxxxx
(AS ABOVE)
Xxxx Xxxx
(AS ABOVE)
BUYER: ProxyMed, Inc.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Blue
Chairman and Chief Executive
Officer
with copy to: ProxyMed, Inc.
0000 Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Exec. V.P. and Chief Legal
Officer
41
Any party may change its address for purposes of this Article by giving the
other parties written notice of the new address in the manner set forth above.
ARTICLE 20. GOVERNING LAW; VENUE
This Agreement shall be construed in accordance with, and governed by,
the laws of the State of California, without regard to its conflict of laws
provisions. In the event of any litigation between the parties arising out of
this Agreement, the parties agree to submit the matter to the appropriate
municipal, state or federal court sitting in Orange County, California, and the
parties agree to submit to the jurisdiction of such courts.
ARTICLE 21. MISCELLANEOUS
21.1 ANNOUNCEMENTS. Except as and to the extent required by any
applicable law, regulation or order, including Securities and Exchange
Commission regulations, no party to this Agreement shall, and each shall direct
its representatives not to, directly or indirectly, make any public comment,
statement or communication with respect to, or otherwise disclose or permit the
disclosure of the existence of negotiations regarding a proposed transaction
between the parties or any of the terms, conditions or other aspects of a
proposed transaction without prior written consent of the other party. In the
event any party is required by applicable law, regulation or order to make any
such disclosure, such party shall provide prior notice of such required
disclosure to the other party. Buyer agrees to deliver to the Shareholders a
copy of the proposed public announcement relating to this transaction and to
obtain Shareholders' written approval of same prior to the publication thereof.
21.2 CONFIDENTIALITY. Buyer hereby agrees that until the Closing (or,
if the Closing fails to occur, until the expiration of four years from the date
hereof):
(a) To treat all Confidential Information as confidential and
preserve its confidentiality during the time in which such information is in its
possession or under its control and thereafter until such time, if any, that the
Confidential Information shall become part of the public domain through no fault
of Buyer;
(b) To disclose the Confidential Information only to those
employees and agents (including its investment brokers, independent auditors,
counsel and other professional advisors) who require access to such information.
Buyer will advise each of the persons to whom it provides access to Confidential
Information that such persons are strictly prohibited from making use of,
duplicating, publishing or otherwise disclosing to others, or permitting others
to use for their benefit or to the detriment of the Company any of the
Confidential Information;
42
(c) If Buyer is required to produce the Confidential
Information pursuant to a court order, legal process or governmental action, to
first give the Company notice thereof and an opportunity to consider whether
there is appropriate grounds to object to such production and, if so, appear
before the requesting entity to object to its production;
(d) Upon the earlier of the request of the Company or the
termination of this Agreement, to promptly return, (or if requested certify to
the destruction) of all Confidential Information, including any copies thereof,
to the Company; and
(e) Not to use, or permit others to use, the Confidential
Information for any purpose other than the evaluation of the feasibility of
Buyer's consummating an acquisition of substantially all of the Company's
assets, or an acquisition of 100% of Company's capital stock, or a merger or
similar form of taxable transaction with the Company (a "Contemplated
Transaction").
As used herein, "Confidential Information" includes, without
limitation, the following confidential and proprietary information of the
Company as evidenced by its then existing written records, regardless of whether
same was disclosed by the Company to Buyer prior to the date of this Agreement
or is disclosed thereafter: (i) all concepts and ideas, whether or not
patentable or copyrightable, relating to the Company's existing and proposed
lines of business and services; (ii) all information relating to processes,
procedures, marketing plans, and methods of exploiting Company's existing and
proposed lines of business, products and services; (iii) all information which
could aid others to commit fraud, sabotage or otherwise misuse Company's
products or services or damage its business; (iv) all books, data, statements
and compilations of information, in whatever form, relating to the sales,
assets, liabilities, profits, losses and other financial matters of the Company
or its providers, customers or suppliers; (v) all customer lists, provider lists
and other information relating to the Company existing and prospective
providers, customers and suppliers; and (vi) all other information, matters or
things which constitute trade secrets of the Company under applicable law or
Section 6.12 Confidential Information hereunder.
Information disclosed by Company to Buyer shall not be deemed
to be Confidential Information if (i) as evidenced by its then existing written
records, it was in Buyer's lawful possession at the time of disclosure to Buyer;
(ii) at the time of disclosure, it is in the public domain; (iii) after
disclosure, it becomes, through no act or omission on Buyer's part, in the
public domain; or (iv) it is or was lawfully and independently developed by
Buyer or obtained from a third party who is or was not under an obligation of
confidentiality to Buyer or any of its affiliates either by law or under an
express agreement.
It is further understood that by disclosing the Confidential
Information, Selling Parties make no representations or warranties as to the
accuracy or completeness of such Confidential Information. All representations
and warranties of the Selling Parties with respect to the business and property
of Company or any other matter or thing are expressly set forth in this
Agreement. The Company and Buyer acknowledge and affirm that the Confidentiality
and No
43
Shop Agreement dated March 12, 1998, is superseded by the execution and delivery
of this Agreement by the parties.
21.3 COVENANT NOT TO COMPETE. As a material inducement for Buyer to
enter into this Agreement, Shareholders each agree that for a period of seven
(7) years following the Closing of this transaction that they will not, within
the States of Washington or California, directly or indirectly, engage, assist
or participate in, whether as a director, officer, executive, agent, manager,
consultant, partner, owner or independent contractor or other participant, in
any business which is the same as the Company is engaged in as of the Closing
Date without the written consent of the Buyer. Shareholders acknowledge and
agree that this clause is to protect the interests of the Buyer and without
which Buyer would not have entered into this Agreement. Nothing contained herein
shall prevent Shareholders individually from each acquiring less than 1% of any
class of securities of any company that competes with the Buyer that has any of
its securities listed on a national securities exchange or traded in the
over-the-counter market, provided Shareholder remains a passive investor.
21.4 FURTHER ACTIONS. Each party shall execute and deliver such other
certificates, agreements and other documents and take such other actions as may
reasonably be requested by the other parties in order to consummate or implement
the transactions contemplated by this Agreement.
21.5 SEVERABLE COVENANTS. In the event that any provision contained
herein is declared invalid or illegal, the other provisions hereof shall not be
affected or impaired thereby and shall remain valid and enforceable.
21.6 SPECIFIC PERFORMANCE. In the event of a breach or threatened
breach by any party hereto of the provisions of this Agreement prior to the
Closing, any other party hereto shall be entitled to specific performance.
Subject to Section 16.4, nothing herein shall be construed as prohibiting any
party hereto from pursuing any other remedies available for such breach or
threatened breach, including the recovery of damages.
21.7 [INTENTIONALLY OMITTED]
21.8 CROSS-REFERENCE OF SCHEDULE MATTERS. All matters set forth under
any one Schedule to this Agreement (or in any agreement, instrument or other
document specifically referenced in such Schedule to the extent a copy of same
has been delivered to the Buyer) are deemed to have been fully disclosed and set
forth under all other Schedules hereto to the extent relevant. The Schedules
shall in all respects modify all warranties and representations made by the
Shareholders in Sections 6 and 11 hereof, and such Schedules are expressly made
part of this Agreement.
21.9 COUNTERPARTS. This Agreement and the Schedules attached hereto may
be signed in two or more counterparts, any one of which need not contain the
signatures of more that one party, but all such counterparts taken together will
constitute one and the same instrument. In addition, execution of this Agreement
and the Schedules attached hereto may be transmitted by one party to the other
via facsimile.
44
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it
as of the day and year first above written.
BUYER: PROXYMED, INC.
Attest:
By: /S/ XXXXXX XXXXX
--------------------------------
By: /S/ XXXXX X. XXXXXXX Xxxxxxx Xxxxx, Exec. V.P.-Finance
----------------------------- and Chief Financial Officer
Xxxxx X. Xxxxxxx, Secretary
COMPANY: WPJ, INC. d/b/a INTEGRATED
MEDICAL SYSTEMS
Attest:
By: /S/ XXXX XXXX
--------------------------------
By: /S/ XXXXXX WEINERGER Xxxx Xxxx, President
-----------------------------
Xxxxxx Xxxxxxxxxx, Secretary
BEING ALL THE
SHAREHOLDERS: By: /S/ XXXXXX XXXXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxxxx, Shareholder
By: /S/ XXXX XXXX
--------------------------------
Xxxx Xxxx, Shareholder
