EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
among
HEALTH MANAGEMENT SYSTEMS, INC.,
AVEGA PARTNERS, INC.,
XXXXXX X. XXXXXXXXX
and
XXXXXX XXXXXXX
Dated as of December 11, 2001
TABLE OF CONTENTS
Page
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ARTICLE I SALE AND TRANSFER OF SHARES; CLOSING; PURCHASE PRICE AND ADJUSTMENTS...................1
SECTION 1.01. Sale and Transfer of Shares; Purchase Price...............................................1
SECTION 1.02. Delivery of Shares and Payment of Purchase Price..........................................1
SECTION 1.03. Closing...................................................................................2
SECTION 1.04. Interim Period Payment....................................................................2
SECTION 1.05. HCA Earnout...............................................................................3
SECTION 1.06. Resolution of Differences.................................................................5
SECTION 1.07. Cooperation of the Parties................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES AS TO THE SELLER, THE COMPANY AND THE SHARES............6
SECTION 2.01. Organization, Qualifications and Corporate Power; Subsidiaries............................6
SECTION 2.02. Authorization of Agreements, Etc..........................................................6
SECTION 2.03. Validity..................................................................................7
SECTION 2.04. Capitalization of the Company.............................................................7
SECTION 2.05. Financial Statements......................................................................8
SECTION 2.06. Absence of Undisclosed Liabilities........................................................8
SECTION 2.07. Absence of Certain Changes or Events......................................................8
SECTION 2.08. Governmental Approvals...................................................................10
SECTION 2.09. Title to Properties, Absence of Liens and Encumbrances...................................10
SECTION 2.10. List of Properties, Contracts and Other Data.............................................11
SECTION 2.11. Intangible Rights........................................................................11
SECTION 2.12. Software.................................................................................12
SECTION 2.13. Litigation, Etc..........................................................................12
SECTION 2.14. Taxes....................................................................................13
SECTION 2.15. Governmental Authorizations and Regulations..............................................14
SECTION 2.16. Labor Matters............................................................................15
SECTION 2.17. Insurance................................................................................15
SECTION 2.18. Use of Real Property.....................................................................15
SECTION 2.19. Condition of Assets......................................................................15
SECTION 2.20. Accounts Receivable......................................................................16
SECTION 2.21. Books and Records; Bank Accounts; Proxies................................................16
SECTION 2.22. Employee Benefit Plans...................................................................16
SECTION 2.23. Related Party Transactions...............................................................16
SECTION 2.24. Environmental Matters....................................................................17
SECTION 2.25. Absence of Certain Business Practices....................................................17
SECTION 2.26. Brokers' or Finders' Fees................................................................18
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER PARTIES...............................18
SECTION 3.01. Power and Authority......................................................................18
SECTION 3.02. Authorization of Agreements, Etc.........................................................18
SECTION 3.03. Validity.................................................................................19
SECTION 3.04. Governmental Approvals...................................................................19
SECTION 3.05. Litigation Relating to the Transactions Contemplated Hereby..............................19
SECTION 3.06. Acknowledgment by Xxxxxxxxx and Xxxxxxx..................................................19
SECTION 3.07. Availability of Funds....................................................................19
SECTION 3.08. Brokers' or Finders' Fees................................................................19
ARTICLE IV PRE-CLOSING COVENANTS AND AGREEMENTS..................................................20
SECTION 4.01. Certain Covenants of the Seller..........................................................20
SECTION 4.02. Certain Covenants of Xxxxxxxxx, Xxxxxxx and the Purchaser................................21
SECTION 4.03. Settlement of Intercompany Accounts; Retention of Cash Balances..........................22
SECTION 4.04. Transfer of Certain Assets...............................................................22
SECTION 4.05. Books and Records........................................................................23
SECTION 4.06. Publicity................................................................................23
ARTICLE V CONDITIONS PRECEDENT..................................................................23
SECTION 5.01. Conditions Precedent to the Obligations of the Purchaser.................................23
SECTION 5.02. Conditions Precedent to the Obligations of the Seller....................................27
ARTICLE VI POST-CLOSING COVENANTS AND AGREEMENTS.................................................29
SECTION 6.01. Covenant Not to Compete..................................................................29
SECTION 6.02. Certain Tax Matters......................................................................30
SECTION 6.03. Names....................................................................................31
SECTION 6.04. Receivables..............................................................................31
SECTION 6.05. Cooperation..............................................................................31
SECTION 6.06. Foreign Jurisdiction Filings.............................................................32
SECTION 6.07. Survival.................................................................................32
ARTICLE VII INDEMNIFICATION.......................................................................32
SECTION 7.01. Survival of Representations, Warranties and Covenants....................................32
SECTION 7.02. Indemnity................................................................................32
SECTION 7.03. Limitations on Indemnity.................................................................34
SECTION 7.04. Conditions of Indemnification............................................................34
SECTION 7.05. Other Claims.............................................................................35
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SECTION 7.06. Certain Pending Causes of Action.........................................................36
SECTION 7.07. Remedies Cumulative......................................................................36
ARTICLE VIII TERMINATION OF AGREEMENT..............................................................36
SECTION 8.01. Termination of Agreement Prior to Closing................................................36
SECTION 8.02. Method and Effect of Termination.........................................................37
ARTICLE IX MISCELLANEOUS.........................................................................37
SECTION 9.01. Specific Performance.....................................................................37
SECTION 9.02. Expenses, Etc............................................................................37
SECTION 9.03. Execution in Counterparts................................................................38
SECTION 9.04. Notices..................................................................................38
SECTION 9.05. Waivers..................................................................................39
SECTION 9.06. Amendments, Supplements, Etc.............................................................39
SECTION 9.07. Entire Agreement.........................................................................39
SECTION 9.08. Applicable Law...........................................................................40
SECTION 9.09. Further Assurances.......................................................................40
SECTION 9.10. Interpretation...........................................................................40
SECTION 9.11. Binding Effect; Benefits.................................................................40
SECTION 9.12. Assignability............................................................................41
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INDEX TO EXHIBITS AND SCHEDULES
Exhibit Description
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A Form of Xxxx of Sale
B Form of Stay-in-Place Assignment and Assumption Agreement
C Form of Transition Agreement
D Form of Mutual Release
E Form of El Segundo Office Agreement
Schedule Description
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2.01 Exceptions to Foreign Qualifications and Good Standing
2.02 No Violation
2.05 September 30, 2001 Balance Sheet
2.06 Undisclosed Liabilities
2.07 Changes Since the Balance Sheet Date
2.10 List of Contracts and Other Data
2.10A Exceptions to Contracts
2.11 Intangible Rights
2.12 Software
2.13 Litigation
2.14 Tax Matters
2.17 Insurance
2.20 Accounts Receivable
2.21 Bank Accounts; Proxies
2.22 Employee Benefit Matters
2.23 Related Party Transactions
4.04(a) Transferred Assets
4.04(b) Stay-In-Place/Separation Agreements
4.04(c) Assigned Agreements
6.01 Competing Products
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INDEX TO DEFINED TERMS
THIS INDEX IS INCLUDED FOR CONVENIENCE ONLY
AND DOES NOT CONSTITUTE A PART OF THE AGREEMENT
Term Reference
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Amendment Recitals
Ancillary Agreements 2.02(a)
Asset Transfer 4.04(a)
Assignment and Assumption Agreements 4.04(c)
Assigned Agreements 4.04(c)
Balance Sheet Date 2.05
Xxxx of Sale 4.04(a)
Closing 1.03
Closing Date 1.03
Code 2.14(a)
Company Recitals
Company Common Stock Recitals
Confidentiality Agreement 4.02(d)
Damages 7.02(a)
Effective Date 1.03
El Segundo Office Agreement 5.01(n)
Environmental Law 2.24(b)
Environmental Permit 2.24(b)
ERISA 2.22
Existing HCA Contracts 1.05(a)
Expenses 9.02(a)
Event Notice 1.05(c)
Fairness Opinion 6.01(i)
Financial Statements 2.05
Financing 3.07
GAAP 2.05
Governmental Permits 2.15(a)
HCA 1.05(a)
HCA Recurring Revenue 1.05(b)
HCA Earnout Amount 1.05(b)
HCA Notification 1.05(a)
HCA Revenue Statement 1.05(c)
Intangible Rights 2.10(c)(i)
Interim Period 1.04(a)
Interim Period Disbursements 1.04(a)
Interim Period Receipts 1.04(a)
Interim Period Statement 1.04(a)
Kazamek Recitals
Liens 2.02(b)
Material Adverse Effect 2.05
Measuring Period 1.05(b)(ii)
Term Reference
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Xxxxxxxxx Recitals
New HCA Agreement 1.05(b)(i)
Non-HCA Revenue 1.05(b)
Permitted Liens 2.09
Plan 2.22
Purchase Price 1.01(b)
Purchaser Recitals
Purchaser Indemnified Group 7.02(a)
Purchaser Parties Recitals
Real Property 2.24(a)
Related Party 2.23
Release 5.01(m)
Returns 2.14(a)
Seller Recitals
Seller Indemnified Group 7.02(b)
Shares Recitals
Software 2.12(a)
Stay-In-Place Agreements 4.04(b)
Taxes 2.14(a)
Taxing Authorities 2.14(a)
Third Party Claim 7.04(a)
Total HCA Revenue 1.05(b)
Transferred Assets 4.04(a)
Transition Agreement 5.01(l)
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of December 11, 2001 between
HEALTH MANAGEMENT SYSTEMS, INC., a New York corporation (the "Seller"), AVEGA
PARTNERS, INC., a California corporation (the "Purchaser"), XXXXXX X. XXXXXXXXX
("Xxxxxxxxx") and XXXXXX XXXXXXX ("Xxxxxxx"; and, together with the Purchaser
and Xxxxxxxxx, the "Purchaser Parties").
W I T N E S S E T H:
WHEREAS, the Seller owns all of the issued and outstanding
shares of capital stock of Health Care microsystems, Inc., a California
corporation (the "Company"), consisting of 1,000 shares (the "Shares") of Common
Stock, no par value per share ("Company Common Stock");
WHEREAS, on the terms and subject to the conditions
hereinafter set forth, the Seller desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller, all of the Shares;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
SALE AND TRANSFER OF SHARES; CLOSING;
PURCHASE PRICE AND ADJUSTMENTS
SECTION 1.1. Sale and Transfer of Shares; Purchase Price. (a)
On the Closing Date, subject to the terms and conditions set forth herein, the
Seller shall sell and transfer to the Purchaser, and the Purchaser shall
purchase from the Seller, all of the Shares free and clear of all Liens.
(b) The purchase price for the Shares (the "Purchase Price")
shall be $9,785,000, adjusted in accordance with Section 1.04 after the Closing
Date. The Purchase Price payable at Closing shall consist of (i) a cash payment
to the Seller in the amount of $9,195,500, (ii) the assumption by the Company of
an aggregate $564,500 in retention bonus obligations of the Seller pursuant to
the Stay-In-Place Assignment Agreement and (iii) the retention of $25,000 by the
Purchaser in satisfaction of the Seller's obligation to reimburse the Purchaser
for a portion of certain fees and expenses pursuant to Section 9.02(a).
SECTION 1.2. Delivery of Shares and Payment of Purchase
Price. (a) On the Closing Date, against delivery of the Purchase Price, the
Seller shall deliver to the Purchaser certificates in definitive form,
registered in the name of the Seller, evidencing the Shares being purchased by
the Purchaser hereunder, duly endorsed for transfer or accompanied by stock
trans-
fer powers duly endorsed in blank, with all requisite stock transfer Taxes paid
and stamps affixed.
(b) On the Closing Date, against delivery of the certificates
evidencing the Shares as aforesaid, the Purchaser shall pay the cash component
of the Purchase Price (or $9,195,000) to the Seller by wire transfer of
immediately available funds to the following account of the Seller: Health
Management Systems, Inc., x/x Xxxxx Xxxxxxxxx Xxxx, 0000 Avenue of the Americas,
New York, New York, Account #0971-106307, ABA# 000-0000-00.
SECTION 1.3. Closing. The closing of the sale and transfer of
the Shares pursuant to Sections 1.01 and 1.02 (the "Closing") shall take place
at the offices of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, 00 Xxxxxxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other location as the Seller and the
Purchaser mutually agree, at 10:00 a.m. (EDT) on December 11, 2001, or at such
other time and on such other date as the Seller and the Purchaser mutually agree
(such date and time of Closing being herein called the "Closing Date"). The
Closing shall be deemed to be effective for tax and accounting purposes as of
the close of business on November 30, 2001 (the "Effective Date").
SECTION 1.4. Interim Period Payment. (a) As promptly as
practicable after the Closing Date, but in no event later than 35 days after the
Closing Date, the Company shall deliver to the Seller and the Purchaser a
statement (the "Interim Period Statement") presenting the Company's cash
receipts (the "Interim Period Receipts") and the Company's cash disbursements
(the "Interim Period Disbursements"), in each case during the period commencing
on the Balance Sheet Date and continuing through the close of business on the
Closing Date (the "Interim Period"). Included as a component of the Interim
Period Disbursements will be items incurred during the Interim Period by the
Seller on behalf of the Company which are currently accounted for through the
Intercompany Accounts Payable/Intercompany Accounts Receivable accounts for the
following business expenses: (i) flexible spending and health, life and
disability insurance premiums, (ii) 401(k) employer contributions, (iii)
wide-area-network data line connectivity costs, (iv) Genesys Teleconferencing
for conference calls and (v) Xxxxxxx & Company for employee service awards.
These Interim Period Receipts and Interim Period Disbursements (exclusive of the
Intercompany items described above) being defined respectively as increases to
cash and decreases to cash according to GAAP. Promptly following receipt of the
Interim Period Statement, the Seller and the Purchaser shall review the same and
each of the Seller and the Purchaser shall use their best efforts to resolve any
differences between them regarding the Interim Period Statement within the
10-day period following the Seller's and the Purchaser's receipt thereof. If the
Seller and the Purchaser resolve all such differences and each sign a
certificate to that effect, then the Interim Period Statement shall be final and
binding on all the parties to this Agreement as of the date of such certificate.
If by the end of such 10-day period, the Seller and the Purchaser cannot resolve
any of such differences or can only resolve some of such differences, the items
as to which such parties have agreed shall thereafter be final and binding on
all the parties to this Agreement and the remaining differences shall be
resolved as provided in Section 1.06; provided, however, that the accounting
firm's written report
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described in Section 1.06 shall be delivered not later than 20 days after the
expiration of the aforementioned 10-day period.
(b) Within five days after either the acceptance by the Seller
and the Purchaser of the Interim Period Statement or the receipt by the Seller
and the Purchaser of the report prepared by the independent accountants as
provided above: (i) if during the Interim Period the Interim Period Receipts are
greater than the Interim Period Disbursements, then the Seller shall pay to the
Purchaser an amount equal to the excess of the Interim Period Receipts over the
Interim Period Disbursements; and (ii) if during the Interim Period the Interim
Period Receipts are less than the Interim Period Disbursements, then the
Purchaser shall pay to the Seller an amount equal to the shortfall of the
Interim Period Receipts over the Interim Period Disbursements.
SECTION 1.5. HCA Earnout. (a) The Seller has received a copy
of the letter dated June 27, 2001 from HCA Information Technology & Services
("HCA") notifying the Company in writing (the "HCA Notification") that HCA is
planning to begin the wind-down of the Company's Product Management products
currently being licensed and maintained through its current master agreement,
software license, call center and maintenance contracts with the Company
(collectively, the "Existing HCA Contracts"). Neither Xxxxxxxxx nor Kazamek has
received any representation from HCA that contradicts HCA's intentions as stated
in the HCA Notification or has knowledge of any new agreements being entered
into between the Company and HCA, other than extensions of the Existing HCA
Contracts in the ordinary course of business.
(b) In the event that:
(i) (A) the Company (or any of its subsidiaries) and
HCA enter into a software license and/or other similar or related agreements
(collectively, the "New HCA Agreement") for the Company's Alliance for Decision
Support product or (B) HCA gives the Company written notification to reverse its
decision to replace the Product Management products currently being licensed and
maintained under the Existing HCA Contracts, in each case within 120 days after
the Effective Date; and
(ii) the Total HCA Revenue for the two-year period
after the Balance Sheet Date (the "Measuring Period") is equal to at least
$8,250,000; and
(iii) the HCA Recurring Revenue for the Measuring
Period is equal to at least $6,000,000; and
(iv) the Company's Non-HCA Revenue for the Measuring
Period is equal to at least $39,390,000;
then the Company shall pay to the Seller an amount (the "HCA Earnout Amount")
equal to 20% of the HCA Recurring Revenue in excess of $6,000,000 earned by the
Company and/or its
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subsidiaries during the Measuring Period; provided, however, that the HCA
Earnout Amount shall not exceed $1,000,000. The HCA Earnout Amount shall be
payable in four equal semi- annual installments over the 24-month period
following the end of the Measuring Period.
For purposes of this Agreement, the following terms have the
meanings set forth below: "HCA Recurring Revenue" means all Alliance for
Decision Support or Product Management processing center and maintenance fees
earned (net of any bad debt or allowances) by the Company and/or its
subsidiaries under the New HCA Agreement or Existing HCA Contracts, as the case
may be.
"Total HCA Revenue" means all Alliance for Decision Support or Product
Management license, implementation and training fees earned (net of any bad debt
or allowances) by the Company and/or its subsidiaries under the New HCA
Agreement or the Existing HCA Contracts, as the case may be, plus all HCA
Recurring Revenue.
"Non-HCA Revenue" means all revenues earned (net of any bad debt or
allowances) by the Company and its subsidiaries, except for Total HCA Revenue.
(c) As promptly as practicable after the expiration of the
120-day period following the Effective Date, the Purchaser shall give written
notice to the Seller (the "Event Notice") if none of the events specified in
Section 1.05(b)(i) has occurred during such 120-day period. If the Seller
disputes the findings of the Purchaser, the Seller shall notify the Purchaser in
writing within 30 days from the Event Notice setting forth in reasonable detail
the event that has occurred under Section 1.05(b)(i). If no such dispute notice
is received by the Purchaser in such 30-day period from the Event Notice, then
neither party shall have any further obligation or liability to the other party
under this Section 1.05. If a dispute notice is received by the Purchaser in
such 30-day period, each of the Seller and the Purchaser shall use their best
efforts to resolve any differences between them regarding the occurrence of
events under Section 1.05(b)(i) within the 30-day period following the
Purchaser's receipt thereof. If the Seller and the Purchaser resolve all such
differences and each sign a certificate to that effect, then the determination
of events under Section 1.05(b)(i), as so agreed, shall be deemed final and
binding on all the parties to this Agreement as of the date of such certificate.
If by the end of such 30-day period, the Seller and the Purchaser cannot resolve
any of such differences or can only resolve some of such differences, the items
as to which such parties have agreed shall thereafter be final and binding on
all of the parties to this Agreement and the remaining differences shall be
resolved as provided in Section 1.06; provided, however, that the accounting
firm's written report described in Section 1.06 shall be delivered not later
than 30 days after the expiration of the aforementioned 30-day period.
(d) If an event under Section 1.05(b)(i) has occurred as
determined in accordance with Section 1.05(c), as promptly as practicable after
the determination of the applicable revenue figures for the Measuring Period,
but in no event later than 45 days after the end of the Measuring Period, the
Company shall deliver to the Seller a statement (the "HCA
4
Revenue Statement") consisting of (i) calculations of the Total HCA Revenue and
the HCA Recurring Revenue for the Measuring Period and the corresponding revenue
figures for the applicable pre-Closing period, (ii) a calculation of the
Company's Non-HCA Revenue for the Measuring Period, (iii) a calculation of the
HCA Earnout Amount, if any, and (iv) a summary of the information used in
connection with such calculations. Promptly upon receipt of the HCA Revenue
Statement, the Seller shall review the same and each of the Seller and the
Company shall use their best efforts to resolve any differences between them
regarding the HCA Revenue Statement within the 30-day period following the
Seller's receipt thereof. If the Seller and the Company resolve all such
differences and each sign a certificate to that effect, then the HCA Revenue
Statement, as so adjusted, shall be deemed final and binding on all the parties
to this Agreement as of the date of such certificate. If by the end of such
30-day period, the Seller and the Company cannot resolve any of such differences
or can only resolve some of such differences, the items as to which such parties
have agreed shall thereafter be final and binding on all of the parties to this
Agreement and the remaining differences shall be resolved as provided in Section
1.06; provided, however, that the accounting firm's written report described in
Section 1.06 shall be delivered not later than 30 days after the expiration of
the aforementioned 30-day period.
SECTION 1.6. Resolution of Differences. To resolve those
differences relating to the Interim Period Statement, the Event Notice or the
HCA Revenue Statement, as the case may be, that are not resolved pursuant to
Section 1.04(a), 1.05(c) or 1.05(d), as applicable, the Seller and the Purchaser
shall jointly retain Deloitte & Touche LLP, or such other independent accounting
firm of nationally recognized standing as mutually determined by the Seller and
the Purchaser, acting through one or more audit partners knowledgeable in
auditing businesses comparable to that of the Company, and using such dispute
resolution procedures as such parties may agree (or, in the absence of such
agreement, as such accounting firm shall determine in its discretion), to review
and resolve any remaining differences and to deliver a written report to the
Seller and the Purchaser of its determination of the proper resolution of such
remaining differences. The independent accounting firm shall be instructed by
the Seller and the Purchaser to deliver its written report within the time
periods set forth in Section 1.04(a), 1.05(c) or 1.05(d), as applicable. The
Interim Period Statement, the Event Notice or the HCA Revenue Statement, as the
case may be, after giving effect to such further adjustments, if any, set forth
in such written report, shall be deemed final and binding on all of the parties
on the date such written report is provided to the Seller and the Purchaser by
such independent accounting firm.
SECTION 1.7. Cooperation of the Parties. Each of the Seller
and the Purchaser shall make available (and shall cause the Company to make
available) to each other and their respective accountants, and, if applicable,
the independent accounting firm referred to in Section 1.06, such books, records
and other information (including work papers) as any of them may reasonably
request of the other to prepare the calculations and certificates and conduct
the reviews contemplated by Sections 1.04, 1.05 and 1.06. The fees and expenses
of any independent accounting firm mutually selected pursuant to Section 1.06
shall be borne 50% by the Seller and 50% by the Purchaser.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
AS TO THE SELLER, THE COMPANY AND THE SHARES
The Seller hereby represents and warrants to the Purchaser
Parties as follows. Unless otherwise set forth in this Article II, such
representations and warranties are being made by the Seller on the date hereof
assuming the effectiveness as of the date hereof of the Asset Transfer.
SECTION II.1. Organization, Qualifications and Corporate
Power; Subsidiaries. (a) Each of the Seller and the Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Seller and the Company is duly
licensed or qualified as a foreign corporation to do business, and is in good
standing, in each other jurisdiction in which it owns or leases any real
property or in which the character and location of its properties and assets
owned or leased or the nature of its activities makes such licensing or
qualification necessary, except such jurisdictions where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse
Effect. The Company is currently not so licensed, qualified or in good standing
in the jurisdictions set forth on Schedule 2.01. Each of the Seller and the
Company has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as currently
conducted.
(b) The Seller has previously made available to the Purchaser
or its counsel complete and correct copies of the Articles of Incorporation and
Bylaws of the Company, each as in effect on the date hereof.
(c) The Company does not own of record or beneficially,
directly or indirectly, or have any obligation to acquire (i) any shares of
capital stock or securities convertible into or exchangeable for capital stock
of any other corporation or (ii) any participating or equity interest in any
partnership, limited liability company, joint venture or other non-corporate
business enterprise. The Company is not subject to any obligation or requirement
to make any investment in or provide funds for (in the form of a loan, capital
contribution or otherwise) in any corporation or other non-corporate business
enterprise.
SECTION II.2. Authorization of Agreements, Etc. (a) The Seller
has all requisite corporate power and authority to execute and deliver this
Agreement and all related documents, certificates, instruments and agreements to
be delivered at Closing or otherwise in connection with this Agreement
(collectively, the "Ancillary Agreements") to which it is a party, and to
perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance by the Seller of
this Agreement and the Ancillary Agreements to which it is a party have been
duly authorized by all requisite corporate action on the part of the Seller.
Neither the execution and delivery by the Seller of this
6
Agreement and the Ancillary Agreements to which it is a party nor the
performance by the Seller of its obligations hereunder and thereunder, will (i)
violate any provision of law or any governmental regulation or order of any
court or other agency of government that is applicable to the Seller or the
Company, (ii) violate the Certificate of Incorporation or Bylaws of the Seller
or the Company, (iii) violate any judgment, award or decree applicable to the
Seller or the Company, (iv) except as set forth on Schedule 2.02, violate any
provision of any note, indenture, agreement, lease or other instrument to which
the Seller or the Company is a party, or by which the Seller or the Company or
any of their respective properties or assets are bound or affected, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such note, indenture, agreement, lease or other
instrument, (v) result in the creation or imposition of any liens, pledges,
security interests, mortgages, options, restrictions, demands, charges or other
encumbrances or claims ("Liens") upon any of the properties or assets of the
Company or the Shares, or (vi) result in any suspension, revocation, impairment,
forfeiture or nonrenewal of any Governmental Permit of the Company, except, in
the case of clauses (i), (iii) or (iv) above, where any such violation,
conflict, breach or default would not, individually or in the aggregate, have a
Material Adverse Effect or a material adverse effect on the Seller's ability to
perform its obligations under this Agreement or any of the Ancillary Agreements
to which it is a party.
SECTION II.3. Validity. This Agreement has been duly executed
and delivered by the Seller and constitutes, and each of the Ancillary
Agreements to which the Seller is to be a party, when executed and delivered by
the Seller as contemplated hereby, will constitute, the legal, valid and binding
obligation of the Seller, enforceable against it in accordance with their
respective terms.
SECTION II.4. Capitalization of the Company. (a) The
authorized capital stock of the Company consists of 1,000 shares of Company
Common Stock, all of which have been duly authorized, are validly issued and
outstanding, fully paid and nonassessable and owned beneficially and of record
by the Seller free and clear of all Liens. The Shares were issued in compliance
with all applicable securities laws, and are not subject to, nor were they
issued in violation of, any preemptive rights. Since February 14, 1995, no
shares of any of the capital stock of the Company have been issued, canceled,
repurchased or redeemed nor have there been any changes in the capitalization of
the Company, and neither the Company nor the Seller has any obligation,
understanding, agreement or commitment that would require the Company to issue,
cancel, repurchase or redeem any capital stock of the Company. The Seller has no
obligation, understanding, agreement or commitment that could require the Seller
to sell, transfer or otherwise dispose of any of the capital stock of the
Company, other than this Agreement. Upon the delivery by the Seller of
certificates evidencing the Shares, duly endorsed for transfer or accompanied by
stock transfer powers duly endorsed in blank, to the Purchaser pursuant to
Section 1.02(a), against payment of the Purchase Price as provided in Section
1.02(b), the Seller will transfer valid title to the Shares to the Purchaser,
free and clear of any and all Liens.
(b) Except as expressly contemplated by this Agreement, (i) no
subscription, warrant, option, call, convertible security or other right
(contingent or other) to purchase or
7
acquire any shares of any class of capital stock of the Company is authorized or
outstanding, (ii) there is not any commitment of the Company to issue any
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidences of indebtedness or assets, (iii)
the Company has no obligation (contingent or other) to purchase, redeem or
otherwise acquire, convert or exchange any shares of the capital stock of the
Company or any interest therein or to pay any dividend or make any other
distribution in respect thereof, (iv) there are no outstanding or authorized
stock appreciation, phantom stock, profit participation or similar rights with
respect to the Company and (v) there is not any agreement relating to the
voting, transfer or registration under any securities laws of any Company Common
Stock nor any outstanding proxies with respect thereto.
SECTION II.5. Financial Statements. The Company has previously
delivered to the Purchaser the unaudited balance sheet of the Company as of
September 30, 2001 (the "Balance Sheet Date"), a copy of which is attached as
Schedule 2.05 (the "Balance Sheet"), and the unaudited balance sheets and
statements of income as of and for the fiscal years ended October 31, 2000 and
October 31, 1999 (collectively with the Balance Sheet, the "Financial
Statements"). The Financial Statements (i) are consistent with and were derived
from the Company's books and records as maintained by the Company in the
ordinary course of business, (ii) were prepared in accordance with United States
generally accepted accounting principals consistently applied ("GAAP") and (iii)
fairly present the financial position of the Company and the results of its
operations as of the dates and periods covered thereby, subject to normal,
recurring year-end adjustments. To the Seller and the Company's knowledge, since
the Balance Sheet Date, no event has occurred which could reasonably be expected
to have a material adverse effect on the assets, properties, liabilities,
business, financial condition, operations or prospects of the Company by an
amount greater than $325,000 (a "Material Adverse Effect").
SECTION II.6. Absence of Undisclosed Liabilities. Except as
and to the extent (i) reflected or reserved against on the Balance Sheet, (ii)
set forth on Schedule 2.06 or (iii) incurred since the Balance Sheet Date in
the ordinary course of business and consistent with past practice, the Company
has no material liabilities, debts or obligations of any kind or nature
whatsoever (whether fixed, absolute, accrued, contingent, known or unknown or
otherwise).
SECTION II.7. Absence of Certain Changes or Events. Since the
Balance Sheet Date, except (i) as otherwise set forth on Schedule 2.07 or (ii)
as otherwise expressly contemplated by this Agreement, the Company has not:
(a) changed or amended its Articles of Incorporation or
Bylaws;
(b) incurred any obligation, debt or liability (whether fixed,
absolute, accrued, contingent, known or unknown, or otherwise, of any kind or
nature whatsoever), except trade payables and other business obligations (other
than to Related Parties or any guarantees, obligations in respect of letters of
credit or debt for borrowed money) incurred in the ordinary course of business
and consistent with past practice;
8
(c) discharged or satisfied any Lien or paid any obligation,
debt or liability (whether fixed, absolute, accrued, contingent, secured and
unsecured, known or unknown, or otherwise, and whether due or to become due, of
any kind or nature whatsoever), other than payments of obligations, debts or
liabilities (other than guarantees, obligations in respect of letters of credit
or debt for borrowed money) in the ordinary course of business and consistent
with past practice;
(d) mortgaged, pledged or subjected to any Lien (other than
Permitted Liens) any of its assets or properties;
(e) transferred, leased or otherwise disposed of any of its
assets or properties except to persons other than Related Parties for fair
consideration in the ordinary course of business and consistent with past
practice, or acquired any assets or properties, except from persons other than
Related Parties in the ordinary course of business and consistent with past
practice;
(f) declared, set aside or paid any distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock or redeemed or otherwise acquired any of its capital stock or split,
combined or otherwise similarly changed its capital stock or authorized the
creation or issuance of or issued or sold any capital stock or any securities or
obligations convertible into or exchangeable therefor, or given any person any
right to acquire any capital stock from the Company, or agreed to take any such
action;
(g) made any loan or investment of a capital nature, whether
by purchase of stock or securities, contributions to capital, property transfers
or otherwise, in any other partnership, corporation or other entity or person;
(h) canceled or compromised any debt or claim, other than
debts of or claims against persons other than Related Parties in the ordinary
course of business consistent with past practice;
(i) waived or released any rights of material value, including
without limitation, any Intangible Rights;
(j) transferred or granted any rights under or with respect to
any Intangible Rights, or permitted any license, permit or other form of
authorization relating to an Intangible Right to lapse;
(k) made or granted any wage, salary or benefit increase or
bonus payment applicable to any group or classification of employees generally,
entered into or amended the terms of any employment contract with, or made any
loan to, or grant any severance benefits to, or entered into or amended the
terms of any transaction of any other nature with, any Related Party;
9
(l) suffered any material casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance);
(m) surrendered, had revoked or had terminated, any
Governmental Permit or other material approval, authorization or consent from
any court, administrative agency or other governmental authority;
(n) delayed, postponed or otherwise failed to pay amounts owed
or satisfy other liabilities when due, other than in the ordinary course of
business and consistent with past practice;
(o) changed accounting methods or practices or revalued
assets, liabilities or reserves or changed the calculation of bad debt,
allowances, contingencies or other reserves; or
(p) entered into any agreement or commitment to take any
action described in this Section 2.07.
SECTION II.8. Governmental Approvals. No order, authorization,
approval or consent from, or filing with, any federal or state governmental or
public body or other authority having jurisdiction over the Seller or the
Company is required for the execution, delivery and performance by the Seller of
this Agreement or any of the Ancillary Agreements to which the Seller is a
party, is necessary in order to ensure the legality, validity, binding effect or
enforceability against the Seller of this Agreement or any such Ancillary
Agreement, or is necessary in order that the business of the Company can be
conducted immediately following the Closing Date substantially in the same
manner as heretofore conducted.
SECTION II.9. Title to Properties, Absence of Liens and
Encumbrances. The Company has good and valid title to all of its assets and
properties, including the Transferred Assets, in each case free and clear of all
Liens other than (i) liens for taxes not yet due and payable, (ii) mechanics',
carriers', workmen's, repairmen's or other like liens arising or incurred in the
ordinary course of business and (iii) imperfections of title that do not detract
from the value or impair the use of the property subject thereto (the Liens
described in clauses (i), (ii) and (iii) above being referred to herein as
"Permitted Liens"). The Company does not own any real property.
SECTION II.10. List of Properties, Contracts and Other Data.
Attached as Schedule 2.10 is a list setting forth the following:
(a) all leases of real or personal property to which the
Company is a party, either as lessee or lessor;
(b) (i) all patents, trademarks and trade names, trademark and
trade name registrations, logos, service xxxx registrations, copyright
registrations, all applications pending on the date hereof for patent
or for trademark, trade name, service xxxx or copy right registrations,
and all other proprietary rights (collectively "Intangible Rights")
10
owned by the Company and (ii) all licenses granted by or to the Company
and all other agreements to which the Company is a party that relate,
in whole or in part, to any Intangible Rights or to other proprietary
rights reasonably necessary to the Company, whether owned by the
Company or otherwise;
(c) all employment, consulting and independent contractor
agreements relating to the employment or engagement of any person by
the Company; and
(d) all contracts, understandings and commitments to which the
Company is a party, or to which the Company or any of its assets or
properties is subject, and which are not specifically referred to in
clauses (a), (b) or (c) above; provided, that there need not be listed
on Schedule 2.10 any contracts, understandings or commitments incurred
in the ordinary course of business and consistent with past practice
and involving annual payments of less than $100,000.
To the knowledge of the Seller and the Company, all material provisions of the
Company's customer contracts referred to in such Schedule are valid and
enforceable obligations of the Company and of the other parties thereto. Except
as disclosed on Schedule 2.10A, all material provisions of all other contracts
referred to in such Schedule are valid and enforceable obligations of the
Company, and to the knowledge of the Seller and the Company, of the other
parties thereto. Except as disclosed on Schedule 2.10A, neither the Seller nor
the Company has been notified or has any other knowledge of any claim that any
contract referred to in such Schedule is not valid and enforceable in accordance
with its terms for the periods stated therein, or that there is under any such
contract any existing default or event of default or event which with notice or
lapse of time or both would constitute such a default under such contracts or
event that has occurred which would permit the termination or modification of
such contracts.
SECTION II.11. Intangible Rights. (a) Except as set forth on
Schedule 2.11, (i) the Company has complied with its contractual obligations
relating to the protection of the Intangible Rights used by it pursuant to
licenses or other contracts, (ii) the Company has the right to use its
Intangible Rights to provide, sell and produce the products and services
provided and sold by it and to conduct its business as heretofore conducted,
and, except as set forth on Schedule 2.11, the consummation of the transactions
contemplated hereby will not alter or impair any such Intangible Rights, (iii)
all such Intangible Rights are valid, enforceable and in good standing, and no
claims have been asserted or, to the knowledge of the Seller and the Company,
threatened, with respect to the use by the Company of any of the Intangible
Rights or otherwise for patent, copyright or trademark infringement and (iv) to
the knowledge of the Seller and the Company, no person is infringing on or
violating the Intangible Rights or know-how used by the Company.
(b) Except as set forth on Schedule 2.11, upon consummation of
the transactions contemplated by this Agreement, the Company will continue to
own and have the right to use the Intangible Rights necessary to conduct its
business as heretofore conducted, and all agreements for the license of any
licensed Intangible Rights which require consents or other actions as a result
of the consummation of the transactions contemplated by this Agreement in order
for the
11
Company to continue to use and operate such Intangible Rights after the Closing
Date, are identified on Schedule 2.11 under the heading "Consents Required."
SECTION II.12. Software. (a) The operating and applications
computer software programs and databases used by the Company in the conduct of
its business (collectively, the "Software") are described on Schedule 2.12.
Except as set forth on Schedule 2.12, to the knowledge of the Seller and the
Company, the Company owns outright or holds valid licenses to all copies of the
Software used by it in its business. None of the Software used by the Company,
and no use thereof, infringes upon or violates any patent, copyright, trade
secret or other proprietary right of any other person and no claim with respect
to any such infringement or violation has been asserted, or to the knowledge of
the Seller and the Company, threatened. The Company has taken all steps
reasonably necessary to protect its right, title and interest in and to the
Software owned by it.
(b) The Company possesses or has access to the original and
all copies of all documentation for all Software owned or used by it. Upon
consummation of the transactions contemplated by this Agreement, except as set
forth on Schedule 2.12, the Company will continue to own all the Software owned
by it, free and clear of all Liens, and all agreements for the lease or license
of Software which require consents or other actions as a result of the
consummation of the transactions contemplated by this Agreement in order for the
Company to continue to use and operate such Software after the Closing Date are
listed on Schedule 2.12 under the heading "Consents Required."
(c) Any programs, modifications, enhancements or other
inventions, improvements, discoveries, methods or works of authorship included
in the Software that were created by employees of the Company were made in the
regular course of such employees' employment with the Company using the
Company's facilities and resources and, as such, constitute "works made for
hire".
SECTION II.13. Litigation, Etc. (a) Except as set forth on
Schedule 2.13, there are no claims, actions, suits, proceedings, enforcement
actions or investigations pending or, to the knowledge of the Seller and the
Company, threatened, (i) by or against the Company or any of its properties,
assets, rights or businesses or (ii) by or against the Seller or its affiliates
which would affect the Shares, the Company or any of the Company's properties,
assets, rights or businesses. No such pending or threatened claims, actions,
suits, proceedings or investigations, if adversely determined, could reasonably
be expected to, individually or in the aggregate, have a Material Adverse
Effect. Neither the Seller nor the Company has any knowledge of any basis for
any other claim, action, suit, proceeding or investigation which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
(b) There are no claims, actions, suits, proceedings or
investigations pending before or by any court, arbitrator, regulatory authority
or government agency against or affecting, the Seller or the Company that could
reasonably be expected to enjoin or prevent the consummation of the
transactions contemplated by this Agreement.
12
SECTION II.14. Taxes. (a) Except as set forth on Schedule
2.14, (i) the Company and any affiliated group, within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the "Code"), of which the
Company is or has been a member, has filed or caused to be filed in a timely
manner (within any applicable extension periods) all material Tax returns,
reports, declarations, statements and forms (collectively, "Returns") required
to be filed by the Code or by applicable state, local or foreign tax laws, (ii)
all Taxes shown to be due on such returns, reports and forms or required to be
paid in respect of the periods covered by such returns, reports and forms have
been timely paid in full or will be timely paid in full by the due date thereof,
and (iii) no material tax Liens have been filed and no material claims are being
asserted in writing or, to the knowledge of the Seller and the Company,
threatened with respect to any Taxes.
For purposes of this Agreement, "Taxes" means (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, withholding
on amounts paid or received, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit taxes, custom
duties or other taxes, unclaimed property assessments, governmental fees or
other like assessments or charges of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed on the
Company, the Transferred Assets or the Shares by any governmental authority
responsible for the imposition of any such taxes (domestic or foreign) ("Taxing
Authorities"), (ii) liability for the payment of any amounts of the type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability for payments of such amounts was determined or
taken into account with reference to the liability of any other person for any
period prior to the Closing Date and (iii) liability with respect to the payment
of any amounts described in clause (i) as a result of any express or implied
obligation to indemnify any other person.
(b) Except as set forth on Schedule 2.14, no Federal, state,
local or foreign Returns of or relating to the Company have been examined by any
Taxing Authority. The statute of limitations for the assessment of Federal,
state and local income taxes with respect to the Company has expired for all
periods prior to November 1, 1994.
(c) (i) neither the Seller nor any of its affiliates has made
with respect to the Company, or any property held by the Company, any consent
under Section 341 of the Code, (ii) no property of the Company is "tax exempt
use property" within the meaning of Section 168(h) of the Code, and (iii) the
Company is not a party to any lease made pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954 as in effect prior to the repeal thereof.
(d) Except as set forth on Schedule 2.14, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any material Returns required to be filed with respect to the
Company and neither the Company nor any affiliated group, within the meaning of
Section 1504 of the Code, of which the Company is or has been a member, has
13
requested any extension of time within which to file any material Return, which
Return has not yet been filed.
(e) Except as set forth on Schedule 2.14, none of the Company,
the Seller or its affiliates has ever, with respect to the Company, (i)
requested or received a Tax ruling (other than a determination with respect to a
qualified employee benefit plan) or entered into a legally binding agreement
(such as a closing agreement) with any Taxing Authority, which ruling or
agreement could have an effect on the Taxes of the Company on or after the
Closing Date or (ii) filed any election or caused any deemed election under
Section 338 of the Code, or any similar state or local provision.
(f) The Company is not a party to any agreement, contract or
arrangement that would result, by reason of the consummation of any of the
transactions contemplated herein, separately or in the aggregate, in the payment
of any "excess parachute payment" within the meaning of Section 280G of the
Code.
(g) The Seller is eligible to join the Purchaser in making an
election under Section 338(h)(10) of the Code (and any corresponding elections
under state, local or foreign tax law, including, but not limited to, Section
23051.5 of the California Revenue and Taxation Code) with respect to the
purchase and sale of the Shares.
SECTION II.15. Governmental Authorizations and Regulations.
(a) The Company has obtained all governmental licenses, franchises and permits
("Governmental Permits") required under applicable law for the conduct of its
business as currently conducted, except where the failure to obtain any such
license, franchise or permit would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The business of the Company is being conducted in
compliance with all applicable laws, ordinances, rules and regulations of all
governmental authorities relating to its properties or applicable to their
business, including without limitation the terms of all Governmental Permits
except for instances of noncompliance that, individually or in the aggregate,
would not have a Material Adverse Effect. The Company has not received any
written notice of any alleged violation of any of the foregoing.
(c) Neither the Company nor any of its assets or properties is
subject to any court or administrative order, judgment, injunction or decree.
SECTION II.16. Labor Matters. The Company is not a party to
any collective bargaining agreement with respect to any of its employees. There
are no controversies between the Seller or the Company and any of the Company's
employees that might reasonably be expected to have a Material Adverse Effect,
or any unresolved labor union grievances or unfair labor practice or labor
arbitration proceedings pending, or, to the knowledge of the Seller and the
Company, threatened against the Seller or the Company, and, to the knowledge of
the Seller and the Company, there are no organizational efforts currently being
made or threatened involving
14
any of the Company's employees. No payments to any employee of the Company for
any wages, salaries, commissions, bonuses or other compensation for any
services, or for amounts required to be reimbursed, are delinquent. All such
payments to such employees, and applicable withholding and other Taxes with
respect to such payments, have been made in compliance with all applicable laws.
SECTION II.17. Insurance. All policies of fire, liability,
workers' compensation and other forms of insurance providing insurance coverage
to or for the Company or any of its properties or assets are listed on Schedule
2.17, and, except as set forth on Schedule 2.17, (i) the Company is named
insured under all such policies, (ii) all premiums with respect thereto covering
all periods up to and including the Closing Date have been paid, (iii) no notice
of cancellation or termination has been received with respect to any such
policy, (iv) no party is in breach or default and no event has occurred which,
with notice or the lapse of time, would constitute a breach or default or permit
the termination, modification or other cancellation of any such policy and (v)
such policies provide insurance in such amounts and against such risks as are,
in the Seller's judgment, reasonable for the business and assets of the Company.
All such policies are in full force and effect and will remain in full force and
effect through the Closing Date.
SECTION II.18. Use of Real Property. The leased real
properties listed on Schedule 2.10 are used and operated by the Company in
compliance and conformity in all material respects with all applicable zoning
and building regulations, ordinances or other laws, orders, regulations and
requirements relating thereto and all applicable leases.
SECTION II.19. Condition of Assets. All material tangible
personal property, fixtures, machinery and equipment comprising the assets of
the Company and the Transferred Assets are in a reasonable state of repair
(ordinary wear and tear excepted) and operating condition and are suitable for
the purposes for which they are being used.
SECTION II.20. Accounts Receivable. Except as set forth on
Schedule 2.20, the accounts receivable reflected on the Balance Sheet, and all
accounts receivable arising between the Balance Sheet Date and the date hereof,
arose from bona fide transactions in the ordinary course of business with
unaffiliated third parties, and the goods and services involved have been sold,
delivered and performed to the account obligers, and no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company to collect such accounts receivable in full. Except as set forth on
Schedule 2.20, no account receivable nor any note receivable reflected on the
Balance Sheet or which arose between the Balance Sheet Date and the date hereof
(i) has been assigned or pledged to any other person, firm or corporation or
(ii) is subject to any right of set-off in respect of any obligations of the
Company or otherwise.
SECTION II.21. Books and Records; Bank Accounts; Proxies. (a)
The corporate minute books and stock record books of the Company (which have
been made available for
15
inspection by the Purchaser prior to the date hereof) are true and complete in
all material respects.
(b) Schedule 2.21 sets forth (i) a true and correct list of
all bank and savings accounts, certificates of deposit and safe deposit boxes of
the Company and those persons authorized to sign thereon, (ii) a true and
correct list of those persons authorized to act under any corporate borrowing,
depository and transfer resolutions, (iii) a true and correct list of all powers
of attorney granted by the Company and those persons authorized to act
thereunder and (iv) a true and correct list of all officers, directors and
managers of the Company.
SECTION II.22. Employee Benefit Plans. Schedule 2.22 lists
each pension, retirement, profit-sharing, stock bonus, deferred compensation,
bonus, incentive, performance, stock option, stock purchase, restricted stock,
cafeteria, flexible spending, medical, vision, dental, life disability or other
group insurance, severance, termination or other similar plan, policy or
arrangement (whether oral or written and whether or not subject to the Employee
Retirement Income Security Act of 1974 ("ERISA")), maintained by the Seller or
the Company or to which the Seller or the Company contributes or is required to
contribute, in which any employee of the Company participates or to which the
Company could have any liability (a "Plan"). The Seller and the Company have
complied and currently are in compliance in all material respects, both as to
form and operation, with the terms of each Plan and with the provisions of ERISA
and the Code applicable to each Plan. No event has occurred, and there exists no
condition or set of circumstances which has resulted in, or which could result
in, the imposition of any liability on the Seller or the Company under ERISA,
the Code or other applicable law with respect to any Plan maintained for the
benefit of any of the Company's employees. There exist no unfunded pension plan
liabilities with respect to either the Seller or the Company relating to any of
the Company's employees.
SECTION II.23. Related Party Transactions. Except as set forth
on Schedule 2.23 or as contemplated by this Agreement and the Ancillary
Agreements, there are no existing material arrangements or proposed material
transactions between the Company and (i) any shareholder, officer or director of
the Seller or any of its subsidiaries (such shareholders, officers and directors
being hereinafter individually referred to as a "Related Party"), (ii) any
business (corporate or otherwise) which a Related Party owns, directly or
indirectly, or in which a Related Party has an ownership interest, or (iii)
between any Related Party and any business (corporate or otherwise) with which
the Company or any of its subsidiaries regularly does business. Set forth on
Schedule 2.23 is a complete and accurate list of each contract, agreement,
license, lease or other arrangement or understanding between the Company, on the
one hand, and the Seller and any of its other subsidiaries, on the other hand.
SECTION II.24. Environmental Matters. (a)(i) Neither the
Seller nor the Company has received any written notice from any governmental
authority that alleges that the Company is not in compliance in any material
respect with any Environmental Law, (ii) the Company holds, and is in compliance
with, all Environmental Permits and is in compliance with all Environmental
Laws, except for instances of noncompliance which, individually or in the
16
aggregate, would not have a Material Adverse Effect, (iii) the Company has not
entered into or agreed to any court decree or order and is not subject to any
judgment, decree or order relating to compliance with any Environmental Law or
to investigation or cleanup of any pollutants, contaminants or hazardous or
toxic wastes, substances or materials under any Environmental Law.
(b) For the purposes of this Agreement, the following terms
have the meanings set forth below:
"Environmental Law" shall mean any law, statute, regulation,
rule, order, consent decree, settlement agreement or governmental
requirement of any governmental authority, which relates to or
otherwise imposes liability or standards of conduct concerning
discharges or releases of any pollutants, contaminants or hazardous or
toxic wastes, substances or materials into ambient air, water or land,
or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or
handling of pollutants, contaminants or hazardous or toxic wastes,
substances or materials.
"Environmental Permit" shall mean any licenses, permits,
variances, approvals or other authorizations required by or pursuant
to any applicable Environmental Law.
SECTION II.25. Absence of Certain Business Practices. Neither
the Company nor any officer, director, employee or agent of the Company, nor any
other person or entity acting on behalf of the Company, acting alone or
together, has (i) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic benefits, regardless
of their nature or type, from any customer, governmental employee or other
person or entity with whom the Company has done business directly or indirectly
or (ii) directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, governmental employee or other person or entity who is
or may be in a position to help or hinder the business of the Company (or assist
the Company in connection with any actual or proposed transaction) which, under
current law, in the case of either clause (i) or (ii) above, could reasonably be
expected to subject the Company to any damage or penalty in any civil, criminal
or governmental litigation or proceeding.
SECTION II.26. Brokers' or Finders' Fees. All negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by the Seller and Xxxx Brothers directly with the Purchaser, without
the intervention of any person on behalf of the Seller or the Company in such
manner as to give rise to any claim by any person against the Purchaser (or any
of its members) or the Company for a finder's fee, brokerage commission or
similar payment.
17
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER PARTIES
Each Purchaser Party represents, warrants and acknowledges to
the Seller as to itself and not as to any other Purchaser Party, severally and
not jointly, as follows:
SECTION III.1. Power and Authority. The Purchaser is a
corporation duly formed, validly existing and in good standing under the laws of
its jurisdiction of formation, and has the requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party, and to perform its obligations hereunder and thereunder.
Xxxxxxxxx and Kazamek each have full legal capacity and authority to execute and
deliver this Agreement and the Ancillary Agreements to which he is a party, and
to perform his obligations hereunder and thereunder.
SECTION III.2. Authorization of Agreements, Etc. The
execution, delivery and performance by the Purchaser of this Agreement and the
Ancillary Agreements to which it is a party have been duly authorized by all
requisite corporate action on the part of the Purchaser. Neither the execution
and delivery by each of the Purchaser Parties of this Agreement and the
Ancillary Agreements to which it or he is a party nor the performance by any of
the Purchaser Parties of its or his obligations hereunder and thereunder, will
(i) violate any provision of law or any governmental regulation or order of any
court or other agency of government that is applicable to any of the Purchaser
Parties, (ii) violate the Articles of Incorporation or bylaws of the Purchaser,
(iii) violate any judgment, award or decree applicable to any of the Purchaser
Parties, (iv) violate any provision of any note, indenture, agreement, lease or
other instrument to which any of the Purchaser Parties is a party, or by which
any of the Purchaser Parties or any of their respective properties or assets are
bound or affected, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such note, indenture,
agreement, lease or other instrument, or (v) result in the creation or
imposition of any Liens upon any of the properties or assets of any of the
Purchaser Parties, except, in the case of clauses (i), (iii) or (iv) above,
where any such violation, conflict, breach or default would not, individually or
in the aggregate, have a material adverse effect on the assets, properties,
liabilities or financial condition of the Purchaser or the ability of any of the
Purchaser Parties to perform its or his obligations under this Agreement or any
of the Ancillary Agreements to which it or he is a party.
SECTION III.3. Validity. This Agreement has been duly executed
and delivered by each of the Purchaser Parties and constitutes, and the
Ancillary Agreements to which each of the Purchaser Parties is a party, when
executed and delivered by such Purchaser Party as contemplated hereby, will
constitute, the legal, valid and binding obligation of such Purchaser Party,
enforceable against it or him in accordance with their respective terms.
SECTION III.4. Governmental Approvals. No order,
authorization, approval or consent from, or filing with, any federal or state
governmental or public body or other authority having jurisdiction over any of
the Purchaser Parties is required for the execution, delivery and performance by
each of the Purchaser Parties of this Agreement or any Ancillary Agreement to
which such Purchaser Party is a party, or is necessary in order to ensure the
legality, validity,
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binding effect or enforceability against such Purchaser Party of this Agreement
or any such Ancillary Agreement.
SECTION III.5. Litigation Relating to the Transactions
Contemplated Hereby. There are no actions, suits, proceedings or claims pending
before any court, arbitrator or government agency against or affecting any of
the Purchaser Parties that could reasonably be expected to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
SECTION III.6. Acknowledgment by Xxxxxxxxx and Xxxxxxx.
Xxxxxxxxx and Xxxxxxx acknowledge that they are not aware of any fact or
circumstance that would result in or constitute a failure of a condition to the
obligations of the Purchaser, Xxxxxxxxx or Kazamek, or a breach of any
representation, warranty or covenant of the Seller with respect to the Company
and its properties, assets, liabilities, business, financial condition and
operations, contained in this Agreement.
SECTION III.7. Availability of Funds. The Purchaser has a firm
financing commitment sufficient to enable it to consummate the transactions
contemplated hereby. A true and correct copy of such commitment has been
provided to the Seller. The financing so required is referred to in this
Agreement as the "Financing." As of the date hereof, none of the Purchaser
Parties has any reason to believe that any of the conditions to the Financing
will not be satisfied or that the Financing will not be available to the
Purchaser on a timely basis to consummate the transactions contemplated hereby.
SECTION III.8. Brokers' or Finders' Fees. All negotiations
relative to this Agreement and the transactions contemplated hereby and thereby
have been carried out by the Purchaser Parties and Duff & Xxxxxx, LLC directly
with the Seller, without the intervention of any person on behalf of any of the
Purchaser Parties in such manner as to give rise to any claim by any person
against the Seller for a finder's fee, brokerage commission or similar payment.
ARTICLE IV
PRE-CLOSING COVENANTS
AND AGREEMENTS
SECTION IV.1. Certain Covenants of the Seller. (a) Except as
otherwise expressly contemplated by this Agreement or agreed to in writing by
the Purchaser, at all times between the date hereof and the Closing Date, the
Seller agrees that it shall cause the Company to:
(i) operate no business other than the Company's existing
business and operate such business only in the usual, regular and
ordinary manner and on a basis consistent with past practice, and use
reasonable efforts to preserve the Company's current business
organization in all material respects, keep available the services of
the officers and
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employees of the Company, and preserve the Company's present
relationships with all material customers of, and all other persons
having material business dealings with, the Company;
(ii) maintain the Company's assets and properties in good
repair, order and condition, consistent with past practice, reasonable
wear and tear excepted;
(iii) maintain the Company's books of account and records in
the usual, regular and ordinary manner, on a basis consistent with
past practice; and
(iv) not, with respect to the Company, undertake any of the
actions specified in Section 2.07.
(b) Between the date of this Agreement and the Closing Date,
the Seller shall afford, and shall cause the Company to afford, the
representatives of the Purchaser reasonable access during normal business hours
to the offices, facilities, books and records of the Company and the Seller (to
the extent relating to the affairs of the Company) and the opportunity to
discuss the affairs of the Company with officers, employees, accountants,
customers, suppliers and landlords of the Company and the Seller familiar
therewith.
(c) Between the date of this Agreement and the Closing Date,
Seller shall not permit the Company to, except as required by GAAP, (i) utilize
accounting principles different from those used in the preparation of the
Balance Sheet, (ii) change in any manner its method of maintaining its books of
account and records from such methods as in effect on the Balance Sheet Date or
(iii) accelerate booking of revenues or the deferral of expenses.
(d) Between the date hereof and the Closing Date, the Seller
(i) shall not, nor shall it permit the Company to, enter into any transaction,
make any agreement or commitment, or take any action, that would result in any
of the representations, warranties or covenants of the Seller contained in this
Agreement not being true and correct in any material respect at and as of the
time immediately after the occurrence of such transaction, agreement or action,
(ii) shall not incur any liability or other obligation or pay any expenses or
make any disbursements for or on behalf of the Company or make any accounting or
other entries for any of the foregoing without the prior written consent of the
Purchaser and (iii) shall use its reasonable efforts to promptly apply for and
cause the Company to promptly apply for and seek to obtain all authorizations,
consents, waivers, resignations and approvals required (including those
specifically requested by the Purchaser with respect to real property leases of
the Company) in connection with the execution, delivery and performance of this
Agreement and the Ancillary Agreements.
SECTION IV.2. Certain Covenants of Xxxxxxxxx, Xxxxxxx and the
Purchaser. (a) Between the date hereof and the Closing Date, the Purchaser and
each of its representatives shall cooperate fully with the Seller and its
representatives with respect to the investigation by the Purchaser and its
representatives of the Company so as to minimize any disruption to the Company's
business and operations that may result from such investigation.
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(b) Between the date hereof and the Closing Date, (i) neither
Xxxxxxxxx, Xxxxxxx nor the Purchaser shall enter into any transaction, make any
agreement or commitment, or take any action, that would result in any of the
representations, warranties or covenants of any of the Purchaser Parties
contained in this Agreement not being true and correct in any material respect
at and as of the time immediately after the occurrence of such transaction,
agreement or action, and (ii) neither Xxxxxxxxx nor Kazamek, in their capacity
as employees of the Company, shall, without the express direction of the Seller,
enter into any transaction, make any agreement or commitment or take any action,
that would result in any of the representations, warranties or covenants of the
Seller contained in this Agreement not being true and correct in any material
respect at and as of the time immediately after the occurrence of such
transaction, agreement or action.
(c) Between the date hereof and the Closing Date, the
Purchaser Parties shall cooperate with the Seller in its efforts to obtain the
authorizations, consents, waivers and approvals referred to in Section 4.01(d).
(d) The Purchaser Parties shall keep all information obtained
from the Seller and the Company confidential in accordance with the terms of the
Confidentiality Agreement dated February 8, 2001 (the "Confidentiality
Agreement") between the Seller and the Purchaser.
(e) The Purchaser Parties shall notify the Seller immediately
upon any amendment to, or modification of the terms of, the Financing commitment
described in Section 3.07, to the extent that any such amendment or modification
would adversely affect the transactions contemplated hereby.
SECTION 4.03. Settlement of Intercompany Accounts; Retention
of Cash Balances. (a) The Seller shall settle, before the Closing, all
intercompany accounts receivable (net of all intercompany accounts payable) due
to (or from) the Company as of the Balance Sheet Date and relating to the Seller
or any of its other subsidiaries (i) by making a cash payment to the Company in
an amount sufficient to retire all such net intercompany balances and (ii) by
causing the Company, immediately thereafter, to pay to the Seller a
corresponding amount in cash.
(b) The Seller shall retain all cash balances existing
immediately prior to the Closing in the bank accounts of the Seller used by the
Company and listed on Schedule 2.21.
(c) The Seller may cause the Company to make any such payment
to it pursuant to this Section in the form of a dividend or a redemption (in
either case, if and to the extent legally permissible), or in such other form as
may be mutually agreed by the Seller and the Purchaser.
SECTION IV.4. Transfer of Certain Assets. (a) The Seller and
the Purchaser acknowledge that the assets and properties listed on Schedule
4.04(a) are used primarily or exclusively in connection with the business of the
Company and are currently owned by the Seller (the "Transferred Assets"). Prior
to the Closing, the Seller shall transfer and assign to the Company the
Transferred Assets, free and clear of any and all Liens other than Permitted
Liens
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(such transaction, the "Asset Transfer") and execute and deliver to the Company
a xxxx of sale, substantially in the form of the Xxxx of Sale attached as
Exhibit A (the "Xxxx of Sale") .
(b) On or prior to the Closing Date, and pursuant to an
Assignment and Assumption of Stay-In-Place/Separation Agreements, substantially
in the form of Exhibit B (the "Stay-In-Place Assignment Agreement"), the Seller
shall assign to the Company, and the Company shall assume all of the Seller's
liabilities and obligations under, the Stay-In- Place/Separation Agreements
listed on Schedule 4.04(b) (collectively, the "Stay-In-Place Agreements").
(c) On or prior to the Closing Date, and pursuant to
Assignment and Assumption Agreements in form and substance reasonably
satisfactory to the Seller and the Purchaser (collectively, the "Assignment and
Assumption Agreements"), the Seller shall assign to the Company, and the Company
shall assume certain liabilities and obligations of the Seller under, the
agreements listed on Schedule 4.04(c) (the "Assigned Agreements").
Notwithstanding anything contained in the Assignment and Assumption Agreements
to the contrary, (i) the Seller shall retain all liabilities and obligations
under the Assigned Agreements arising on or prior to the Closing Date (other
than up to an aggregate of $113,000 in fees and charges currently payable under
the License Agreement dated June 15, 1999 between ABT Corporation and the
Seller) and (ii) the Company shall assume (A) all liabilities and obligations
arising after the Closing Date under the Assigned Agreements (other than any
liability or obligation arising from any default, breach or failure by the
Seller or the Company to comply with the Assigned Agreements prior to the
Closing Date) and (B) up to an aggregate of $113,000 in fees and charges
currently payable under the aforementioned License Agreement.
SECTION IV.5. Books and Records. Seller shall cause the
Company to deliver to the Purchaser or shall cause to be held at the principal
office or other office of the Company where such principal records are normally
kept, all books and records used in the operation of the business of the Company
and all files, documents, papers, agreements, books of account, stock books,
stock ledgers, minute books, corporate seal, and other records pertaining to the
business of the Company, to the extent that such books, records, files and other
materials are not theretofore located at the office of the Company.
SECTION IV.6. Publicity. Between the date hereof and the
Closing Date, none of the Purchaser Parties shall publish any public
announcement, statement or interview (in each case whether oral or written)
regarding the transactions contemplated hereby; provided, that the Seller
consents to, and agrees that it will cooperate with the Purchaser with respect
to the content of, a press release to be issued regarding the transactions
contemplated hereby. Nothing contained herein shall prevent any of the Purchaser
Parties from at any time furnishing any information to any government authority
or from disclosing any information required by law, so long as the disclosing
party provides prior written notice to the Seller of its intention to disclose
such information.
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ARTICLE V
CONDITIONS PRECEDENT
SECTION V.1. Conditions Precedent to the Obligations of the
Purchaser. The obligation of the Purchaser to consummate the purchase of the
Shares contemplated by this Agreement is subject, at the option of the
Purchaser, to the satisfaction or waiver in writing at or prior to the Closing
of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Seller contained in Article II shall be
true and correct in all material respects on and as of the Closing Date as
though made at and as of that date (except for those representations and
warranties that specifically relate to an earlier date, which shall be true and
correct in all material respects as of such earlier date), and the Seller shall
have so certified to the Purchaser in writing.
(b) Compliance with Covenants. The Seller shall have performed
and complied in all material respects with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by it at or prior
to the Closing, and the Seller shall have so certified to the Purchaser in
writing.
(c) All Proceedings To Be Satisfactory. All proceedings to be
taken by the Seller and the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser's counsel.
(d) No Material Adverse Change. There shall not have occurred
since the Balance Sheet Date any undisclosed liabilities as described in Section
2.06 or any event which, in each case, could reasonably be expected to have a
Material Adverse Effect.
(e) Opinion of Counsel. The Purchaser shall have received the
opinion of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, counsel for the Seller,
dated the Closing Date, in form and substance satisfactory to the Purchaser and
its counsel, to the effect that:
(i) Each of the Company and the Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
States of California and New York, respectively. The Company is duly
licensed or qualified as a foreign corporation to do business, and is
in good standing, in each other jurisdiction in which it owns or
leases any real property or in which the character and location of its
properties and assets owned or leased or the nature of its activities
makes such licensing or qualification necessary, except such
jurisdictions where the failure to be so licensed, qualified or in
good standing would not have a Material Adverse Effect. The Company is
currently not so licensed, qualified or in good standing in the
jurisdictions set forth on Schedule 2.01. Each of the Company and the
Seller has all requisite corporate power and authority to own or lease
and operate its properties and assets, to carry on its business as
currently conducted and to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, and to perform its
obligations hereunder and thereunder.
23
(ii) The execution, delivery and performance by the Seller of
this Agreement and each of the Ancillary Agreements to which it is a
party have been duly authorized by all requisite corporate action on
the part of the Seller, and this Agreement and such Ancillary
Agreements constitute the legal, valid and binding obligations of the
Seller, enforceable against it in accordance with their respective
terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
(iii) Neither the execution and delivery by the Seller of this
Agreement and the Ancillary Agreements to which it is a party nor the
performance by the Seller of its obligations hereunder and thereunder,
will (i) violate any provision of law or any governmental regulation or
order of any court or other agency of government that is applicable to
the Seller or the Company, (ii) violate the Certificate of
Incorporation or Bylaws of the Seller or the Company, (iii) violate any
judgment, award or decree known to such counsel applicable to the
Seller or the Company or (iv) except as set forth on Schedule 2.02,
violate any provision of any note, indenture, agreement, lease or other
instrument known to such counsel to which the Seller or the Company is
a party, or by which the Seller or the Company or any of their
respective properties or assets are bound or affected, or conflict
with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such note, indenture, agreement,
lease or other instrument.
(iv) The authorized capital stock of the Company consists of
1,000 shares of Company Common Stock, all of which have been duly
authorized, are validly issued and outstanding, fully paid and
nonassessable and owned of record by the Seller. Upon delivery to the
Purchaser of certificates evidencing the Shares, duly endorsed for
transfer or accompanied by stock transfer powers duly endorsed in
blank, against payment of the Purchase Price as provided herein, the
Purchaser will acquire valid title to the Shares, free and clear of any
Liens, other than any adverse claim (as such term is defined in the
Uniform Commercial Code - Investment Securities as in effect in the
State of California on the Closing Date) of which the Purchaser has
notice. During the course of such counsel's representation of the
Seller in connection with this matter, nothing has come to its
attention that would lead such counsel to conclude that any Liens exist
with respect to the Shares immediately prior to the Closing.
(v) Except as expressly contemplated by this Agreement, to
such counsel's knowledge, (i) no subscription, warrant, option, call,
convertible security or other right (contingent or other) to purchase
or acquire any shares of any class of capital stock of the Company is
authorized or outstanding, (ii) there is not any commitment of the
Company to issue any shares, warrants, options or other such rights or
to distribute to holders of any class of its capital stock any
evidences or indebtedness or assets, (iii) the Company has no
obligation (contingent or other) to purchase, redeem or otherwise
acquire, convert or
24
exchange any shares of the capital stock of the Company or any interest
therein or to pay any dividend or make any other distribution in
respect thereof, (iv) there are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights
with respect to the Company and (v) there is not any agreement relating
to the voting, transfer or registration under the securities laws of
any Company Common Stock nor any outstanding proxies with respect
thereto.
(vi) No order, authorization, approval or consent from, or
filing with, any federal or state governmental or public body or other
authority having jurisdiction over the Seller or the Company is
required for the execution, delivery and performance by the Seller of
this Agreement or any of the Ancillary Agreements to which the Seller
is a party, is necessary in order to ensure the legality, validity,
binding effect or enforceability against the Seller of this Agreement
or any such Ancillary Agreement, or is necessary in order that the
business of the Company can be conducted immediately following the
Closing Date substantially in the same manner as heretofore conducted.
In rendering such opinions, counsel for the Seller shall be entitled to rely on
certificates of fact by officers of the Seller and its subsidiaries (including
the Company), and certificates of government officials.
(f) Consents and Approvals. All authorizations, consents,
waivers and approvals (including the approval of the Board of Directors of the
Seller, but excluding any consents, waivers or approvals required under any real
property lease of the Company) required in connection with the execution,
delivery and performance of this Agreement and each Ancillary Agreement, shall
have been duly obtained, delivered to the Purchaser and shall be in form and
substance satisfactory to the Purchaser and its counsel.
(g) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted by any party or threatened by any
governmental department, agency or authority, in either case seeking to
restrain, prohibit, invalidate or otherwise materially affect the consummation
of the transactions contemplated hereby.
(h) Legal Prohibitions. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued by
any federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign or other legal restraint or
prohibition preventing the purchase and sale of the Shares shall be in effect.
(i) Fairness Opinion. The Board of Directors of the Seller
shall have received a fairness opinion (the "Fairness Opinion") with respect to
the transactions contemplated hereby from Xxxx Brothers, or a similar
internationally recognized investment banking firm acceptable to the Seller,
indicating that the Purchase Price is fair to its shareholders from a financial
point of view.
25
(j) Resignations. The Company shall have received the written
resignation from his or her positions effective as of the Closing Date, of each
person other than Xxxxxxxxx, Xxxxxxx and Xxxx Xxxxx, who is, immediately prior
to the Closing Date, an officer or director of the Company.
(k) Financing. The Purchaser shall have arranged the Financing
substantially on the terms contemplated by the commitment provided to the
Seller, unless the failure to arrange the Financing was the result of a failure
by any of the Purchaser Parties to perform any covenant or condition contained
therein or herein or the inaccuracy of any representation or warranty of the of
the Purchaser Parties.
(l) Transition Agreement. The Seller shall have executed and
delivered to the Company a Transition Agreement substantially in the form of
Exhibit C (the "Transition Agreement").
(m) Releases. The Seller shall have executed a release in
favor of the Company and the Purchaser Parties substantially in the form of
Exhibit D (the "Release") and the Release shall have been delivered to the
Purchaser.
(n) El Segundo Office Agreement. The Seller shall have
executed and delivered to the Company the El Segundo Office Agreement
substantially in the form of Exhibit E (the "El Segundo Office Agreement").
(o) Assignment and Assumption Agreements. The Seller shall
have executed and delivered to the Company the Assignment and Assumption
Agreements.
(p) Supporting Documents. On or prior to the Closing Date, the
Purchaser and its counsel shall have received copies of the following supporting
documents:
(i) (A) the Articles of Incorporation of the Company certified
as of a recent date by the Secretary of State of the State of
California, (B) a certificate of such Secretary as to the due
incorporation, existence and good standing of the Company and listing
all documents on file with said official and (C) a certificate of the
Secretary or a Vice President of the Company dated the Closing Date
and certifying that attached thereto is a true and complete copy of
the Bylaws of the Company;
(ii) a certificate of the Secretary of the Seller dated the
Closing Date and certifying (A) that attached thereto is a true and
complete copy of the resolutions of the Board of Directors of the
Seller approving the transactions contemplated by this Agreement as in
effect on the date of such certification and (B) that the Articles of
Incorporation of the Company has not been amended since the date of
the last amendment referred to in the certificate delivered pursuant
to clause (i)(B) above; and
26
(iii) such additional officer's and secretary's certificates
with respect to the Seller and the Company and other supporting
documents and information with respect to the operations and affairs
of such entities as the Purchaser or its counsel may reasonably
request.
All such documents shall be satisfactory in form and substance to the Purchaser
and its counsel.
SECTION V.2. Conditions Precedent to the Obligations of the
Seller. The obligation of the Seller to consummate the sale and transfer of the
Shares contemplated by this Agreement is subject, at the option of the Seller,
to the satisfaction or waiver in writing at or prior to the Closing of each of
the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser Parties contained in Section
1.05(a) and Article III of this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though made on and as of that
date (except for those representations and warranties that specifically relate
to an earlier date, which shall be true and correct in all material respects as
of such earlier date) and the Purchaser Parties shall have so certified to the
Seller in writing.
(b) Compliance with Covenants. The Purchaser Parties shall
have performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
them at or prior to the Closing, and the Purchaser Parties shall have so
certified to the Seller in writing.
(c) All Proceedings To Be Satisfactory. All proceedings to be
taken by the Purchaser in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Seller's counsel.
(d) Consents and Approvals. All authorizations, consents,
waivers and approvals (including the approval of the Board of Managers (or
similar governing body) of the Purchaser) required in connection with the
execution, delivery and performance of this Agreement and each Ancillary
Agreement, shall have been duly obtained and shall be in form and substance
satisfactory to the Purchaser and its counsel.
(e) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted by any party or threatened by any
governmental department, agency or authority, in either case seeking to
restrain, prohibit, invalidate or otherwise materially affect the consummation
of the transactions contemplated hereby.
(f) Legal Prohibitions. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order enacted, entered, promulgated, enforced or issued by
any federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or
27
instrumentality, domestic or foreign, or other legal restraint or prohibition
preventing the purchase and sale of the Shares shall be in effect.
(g) Fairness Opinion. The Board of Directors of Seller shall
have received the Fairness Opinion.
(h) Transition Agreement. The Company shall have executed and
delivered to the Seller the Transition Agreement.
(i) Release. The Company and the Purchaser Parties named
therein shall have executed and delivered to the Seller the Release.
(j) Stay-In-Place Assignment Agreement. The Company,
Xxxxxxxxx, Xxxxxxx and the other individuals named therein shall have executed
and delivered to the Seller the Stay- In-Place Assignment Agreement.
(k) El Segundo Office Agreement. The Company shall have
executed and delivered to the Seller the El Segundo Office Agreement.
(l) Assignment and Assumption Agreements. The Company shall
have executed and delivered to the Seller the Assignment and Assumption
Agreements.
ARTICLE VI
POST-CLOSING COVENANTS
AND AGREEMENTS
SECTION VI.1. Covenant Not to Compete. (a) Until the third
anniversary of the Closing Date, without the prior written consent of the
Company which may be withheld in the Company's sole discretion, the Seller shall
not, nor shall it permit any of its subsidiaries to, anywhere in the world,
directly or indirectly, develop, create, maintain, sell, promote or otherwise
deal in any products or perform any services that compete with any products or
services that are currently offered for sale by the Company, or are currently in
development by the Company and set forth on Schedule 6.01 (collectively,
"Competing Products"), or prepare, commit or undertake to do any of the
foregoing. Notwithstanding anything contained in this paragraph, the foregoing
covenant shall not be deemed breached as a result of: (i) the ownership by the
Seller or any subsidiary of the Seller of (A) less than an aggregate 5% of any
class of stock or other equity interests in any publicly-traded company or (B)
less than 10% in value of any instrument of indebtedness of a person or entity
engaged, directly or indirectly, in the sale of Competing Products, (ii) the
inclusion of retrospective reimbursement contract modeling capabilities in the
Seller's product currently known as "Remit," so long as (A) the Remit product
provides remittance processing and workflow management capabilities to a
hospital's business office, (B) the Remit contract modeling capabilities are
only offered as a bundled feature of the Remit product and (C) the Seller does
not include support for, or reporting of, any cost
28
accounting or cost information in the Remit product or (iii) the participation
by the Seller or any of its subsidiaries in any joint venture or other alliance
so long as (A) neither Seller nor any of its subsidiaries receives any fee or
other compensation in respect of any Competing Products sold by such venture or
other alliance and (B) the primary purpose of such joint venture or other
alliance is not to develop, create, maintain, sell, promote or otherwise deal in
Competing Products.
(b) Until the second anniversary of the Closing Date, without
the prior written consent of the other party which may be withheld in that
party's sole discretion, each of the Seller and the Purchaser agrees that,
except as otherwise set forth in Section 4.05, it shall not, nor shall it permit
any of its subsidiaries to, directly or indirectly solicit, recruit, hire, or
subcontract work to, any person who is then (or within the preceding 12 months
was) employed by such other party or any of such other party's subsidiaries.
(c) It is the desire and intent of the Seller and the
Purchaser that the provisions of this Section shall be enforced to the fullest
extent permitted under the laws and public policies of each jurisdiction in
which enforcement is sought. If any court of competent jurisdiction determines
that any provision of this Section is unenforceable, such court shall have the
power to reduce the duration or scope of such provision, as the case may be, or
terminate such provision, and, in reduced form, such provision shall be
enforceable; it is the intention of such parties that the foregoing restrictions
shall not be terminated, unless so terminated by a court of competent
jurisdiction, but shall be deemed amended to the extent required to render them
valid and enforceable, such amendment only to apply with respect to the
operation of this Section in the jurisdiction of the court that has made the
adjudication.
SECTION VI.2. Certain Tax Matters.
(a) Tax Sharing Agreements. Prior to the Closing, the Seller
shall provide to the Purchaser copies of any existing tax sharing agreements
between the Seller or any of its affiliates and the Company. Any tax sharing
agreement between the Seller or any of its affiliates and the Company shall be
deemed terminated, insofar as they relate to the Company, and the Company shall
have no further obligation or liabilities thereunder, as of the Effective Date
and such agreements, insofar as they relate to the Company, shall be of no
further force or effect for any taxable year.
(b) Returns for Periods Through the Effective Date. The Seller
shall include the income of the Company on its consolidated federal income Tax
Return for all periods through the Effective Date and pay any federal income Tax
attributable to such income. The Company shall furnish Tax information to the
Seller for inclusion in the Seller's consolidated federal income Tax Return for
the period that includes the Effective Date in accordance with the Company's
past custom and practice. The income of the Company shall be apportioned to the
period up to and including the Effective Date and the period after the Effective
Date by closing the books of the Company as of the end of the Effective Date.
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(c) Section 338(h)(10) Election. The Seller shall take all
actions necessary to join the Purchaser in making, and shall make an effective
and timely, election under Section 338(h)(10) of the Code (and any corresponding
elections under, local or foreign tax law, including Section 23051.5 of the
California Revenue and Taxation Code) with respect to the purchase and sale of
the Shares.
(d) Allocation of Purchase Price. For all federal, state,
local and foreign income and franchise Tax purposes, the Seller and the
Purchaser agree that the Purchase Price and the liabilities of the Company will
be allocated to the assets and properties of the Company (i) as determined by
the Purchaser in its sole discretion; provided, that if the Purchaser does not
deliver to the Seller within 90 days after the Closing Date a schedule setting
forth such allocation, then the Seller shall be entitled to determine the
allocation of the Purchase Price in a manner reasonably consistent with the
balance sheet of the Company as of the Effective Date. The Seller, the Purchaser
and the Company shall file all Tax Returns and information reports in a manner
consistent with such allocation. If any federal, state, local or foreign Taxing
Authority challenges such allocation, the party receiving notice of such
challenge shall give the other parties prompt written notice of such challenge,
and the parties shall cooperate in good faith in responding to it in order to
preserve the effectiveness of such allocation.
(e) Transfer Taxes. All transfer, documentary, sales, use,
recording, filing, stamp and other similar transaction Taxes or fees
("Transaction Taxes") imposed upon or incurred by the parties in connection with
this Agreement and the transactions contemplated hereby (other than stock
transfer Taxes) shall be borne 50% by the Seller and 50% by the Purchaser, and
the Seller and the Purchaser shall cooperate in timely making all Returns and
other filings as may be required to comply with the provisions of any applicable
Tax laws. The Seller shall pay any stock transfer Taxes due as a result of the
sale of the Shares.
SECTION VI.3. Names. After the Closing, neither the Seller nor
any of its subsidiaries shall use or infringe in any manner any Intangible
Rights of the Company, including the names Health Care Microsystems, HCm or any
derivations of them.
SECTION VI.4. Receivables. Upon receipt of any monies due to
the Company after the Closing, the Seller shall, and shall cause its
subsidiaries to, immediately pay upon receipt such monies to the Company.
SECTION VI.5. Cooperation. After the Closing, upon reasonable
written notice, the Purchaser and the Seller shall furnish or cause to be
furnished to each other and their employees, counsel, auditors and
representatives access, during normal business hours, to such information and
assistance relating to the Company as is reasonably necessary for financial and
regulatory reporting and accounting matters, the preparation and filing of any
tax returns, reports or forms, the defense of any tax claim or assessment or any
regulatory authority or other governmental inquiry or investigation. In
addition, if and to the extent necessary, the Purchaser shall cause the Company
to cooperate with the Seller in facilitating the closing of the bank accounts of
the Seller used by the Company prior to the closing and listed on Schedule 2.21.
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Each party shall reimburse the other for reasonable out-of-pocket costs and
expenses incurred in assisting the other pursuant to this Section. Neither party
shall be required by this Section to take any action that would unreasonably
interfere with the conduct of its business or unreasonably disrupt its normal
operations (or, in the case of the Purchaser, the business or operations of the
Company). If the Company goes out of business or ceases all of its operations,
then before disposing of any books or records relating to its business and
operations for the period prior to and including the Effective Date, the
Purchaser shall cause the Company to give notice to such effect to the Seller
and to give the Seller, at Seller's sole cost and expense, an opportunity to
copy all or any part of such books and records.
SECTION VI.6. Foreign Jurisdiction Filings. The Seller has
provided the Company with the applications to do business, annual report forms,
applications for reinstatement and such other forms as may be required to
qualify or reinstate the Company to do business or otherwise return the Company
to good standing in the jurisdictions listed on Schedule 2.01. Within 60 days
after the Closing Date, the Purchaser shall cause the Company to prepare and
deliver to the Seller all such required application, reports and forms. Promptly
following the Seller's receipt thereof, the Seller shall (a) cause such
applications, reports and forms to be filed in the appropriate jurisdictions,
(b) pay all outstanding Taxes, fees, penalties and other amounts required in
connection with such filings and (c) deliver to the Company a good standing or
other similar certificate from each such jurisdiction evidencing the
qualification or reinstatement of the Company to do business in such
jurisdiction. The Purchaser and the Seller shall (and the Purchaser shall cause
the Company to) cooperate with each other in connection with the foregoing.
SECTION VI.7. Survival. The provisions of this Article VI and
Article VII shall survive the Closing.
ARTICLE VII
INDEMNIFICATION
SECTION VII.1. Survival of Representations, Warranties and
Covenants. The representations and warranties made by each party in this
Agreement and the Ancillary Agreements (including any certificate or instrument
delivered pursuant to this Agreement at Closing) shall survive the Closing Date
and shall terminate at the close of business on the date that is the first
anniversary of the Closing Date, provided, that the representations and
warranties made in Sections 2.14 and 2.22 shall survive until 90 days after the
expiration of all applicable statutes of limitation (including all periods of
extension, whether automatic or permissive). The covenants and other agreements
contained herein and in the Ancillary Agreements shall survive in accordance
with their terms. Notwithstanding the foregoing, if notice of an indemnification
claim shall have been delivered before the aforementioned time period has
elapsed with respect to a breach of representation, warrant or covenant, such
representation, warranty or covenant shall survive until such claim is resolved.
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SECTION VII.2. Indemnity. (a) Subject to the terms and
conditions of this Article VII, the Seller hereby agrees to indemnify, defend
and hold each of the Purchaser Parties and the Company and their respective
affiliates, controlling persons, officers, directors, shareholders, members,
agents, partners, representatives and employees (collectively, the "Purchaser
Indemnified Group") harmless from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and expenses,
including without limitation interest, penalties and reasonable attorneys' fees
and expenses (collectively, "Damages"), asserted against, resulting to, imposed
upon, suffered by or incurred by any member of the Purchaser Indemnified Group
to the extent arising out of:
(i) a breach of any representation or warranty of the Seller
contained in or made pursuant to this Agreement or any Ancillary
Agreement (including any certificate or instrument delivered at Closing
pursuant hereto);
(ii) a breach of any covenant or agreement of the Seller
contained in or made pursuant to this Agreement or any Ancillary
Agreement (including any certificate or instrument delivered at Closing
pursuant hereto);
(iii) any liability or obligation for (A) any and all Taxes
(other than income Taxes) incurred by, imposed upon or attributable to
the Company through the Balance Sheet Date, (B) any and all income
Taxes incurred by, imposed upon or attributable to the Company through
the Effective Date or (C) any and all Taxes incurred by, imposed upon
or attributable to the Seller or any of its other subsidiaries or any
affiliated or combined group member; and/or
(iv) any other liabilities or obligations in respect of the
assets, properties, activities or operations of the Company, the
Transferred Assets, the Shares, the Seller or its other subsidiaries
based upon an event or omission occurring or a claim arising prior to
the Closing Date (even if the claim is made after the Closing Date),
except for (A) any such event or claim of which Xxxxxxxxx or Xxxxxxx
had knowledge that was not communicated to the Seller prior to the
Closing Date, (B) accounts payable and accrued expenses of the Company,
if any, as of the Closing Date, which are reflected on the Balance
Sheet or were incurred by the Company (and not by the Seller for or on
behalf of the Company) after the Balance Sheet Date, (C) liabilities of
the Company pursuant to revenue agreements existing as of the Closing
Date, which are reflected on the Balance Sheet or were entered into by
the Company (and not by the Seller for or on behalf of the Company)
after the Balance Sheet Date and (D) obligations of the Company arising
from and after the Closing Date under any and all operating agreements,
leases, maintenance agreements and other executory agreements to which
the Company is a party or to which the Company or any of its assets or
properties is subject (other than any liability or obligation arising
from any default, breach or failure by the Company or the Seller to
comply with such agreements prior to the Closing Date).
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(b) Subject to the terms and conditions of this Article VII,
the Purchaser hereby agrees to indemnify, defend and hold the Seller and its
affiliates, controlling persons, officers, directors, shareholders, agents,
partners, representatives and employees (collectively, the "Seller Indemnified
Group") harmless from and against all Damages asserted against, resulting to,
imposed upon or incurred by any member of the Seller Indemnified Group to the
extent arising out of:
(i) a breach of any representation or warranty of any of the
Purchaser Parties contained in or made pursuant to this Agreement or
any Ancillary Agreement (including any certificate or instrument
delivered at Closing pursuant hereto); and/or
(ii) a breach of any covenant or agreement of any of the
Purchaser Parties contained in or made pursuant to this Agreement or
any Ancillary Agreement (including any certificate or instrument
delivered at Closing pursuant hereto).
(c) The parties agree to treat any indemnification payment
under this Article VII as an adjustment to the Purchase Price for Tax purposes.
Thus, the indemnifying party will not claim any deduction with respect to the
indemnification payment and the indemnified party will not report the
indemnification payment as income. To the extent any indemnification payment
under this Article VII cannot properly be treated as an adjustment to the
Purchase Price for Tax purposes, then any such amount shall be increased to take
account of any net Tax cost actually incurred by the indemnified party by reason
of the receipt of any indemnity payment and shall be reduced to take account of
any net Tax benefit actually realized by the indemnified party in respect of the
loss for which the indemnification payment is being paid. With respect to a Tax
benefit realized in a year subsequent to the year in which indemnification
payment is made, the indemnified party shall pay to the indemnifying party the
amount of such Tax benefit only when such Tax benefit is actually realized for
Tax purposes. In computing the amount of any such Tax cost or Tax benefit, the
indemnified party shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any
indemnified loss, liability, claim, damage or expense.
SECTION VII.3. Limitations on Indemnity. Notwithstanding
anything in this Article VII to the contrary except pursuant to Section 7.06,
(i) the aggregate liability of the Seller pursuant to Section 7.02(a)(i) (other
than in respect of a breach of a representation or warranty contained in Section
2.14 or 2.22) shall not exceed $1,000,000; (ii) the aggregate liability of the
Purchaser Parties pursuant to Section 7.02(b)(i) shall not exceed $1,000,000;
and (iii) neither the Seller, on the one hand, nor the Purchaser Parties, on the
other hand, shall be obligated to indemnify the other and hold it or them, as
the case may be, harmless against Damages caused by a breach of any
representation or warranty of such party, unless the aggregate amount of such
Damages to the other shall exceed $100,000, and then from the first dollar to
the full extent of such Damages.
SECTION VII.4. Conditions of Indemnification. (a) In order for
a party to be
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entitled to any indemnification provided for under this Agreement arising out of
a claim made by any person against the indemnified party (a "Third Party
Claim"), the indemnified party must within 20 days after receipt of notice of
commencement of any action or the assertion of a Third Party Claim, give the
indemnifying party written notice thereof together with a copy of such claim,
process or other legal pleading (provided that failure so to notify the
indemnifying party of the assertion of a claim within such period shall not
affect its indemnity obligation hereunder except as and to the extent that such
failure shall adversely affect the defense of such claim), and, subject to
paragraph (c) below, the indemnifying party shall have the right to undertake
the defense thereof by counsel of its own choosing (unless the indemnifying
party is also a party to such proceeding and the indemnified party determines in
good faith that joint representation would be inappropriate); provided, that
such counsel is not reasonably objected to by the indemnified party.
(b) In the event that the indemnifying party, by the 20th day
after receipt of notice of any such Third Party Claim (or, if earlier, by the
tenth day preceding the day on which an answer or other pleading must be served
in order to prevent judgment by default in favor of the person asserting such
Third Party Claim), does not elect to defend against such claim, the indemnified
party will have the right to undertake the defense, compromise or settlement of
such claim on behalf of and for the account and risk of the indemnifying party.
(c) If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, it being understood that the indemnifying
party shall control such defense.
(d) If the indemnifying party assumes the defense of a Third
Party Claim, (i) no compromise or settlement of such Third Party Claim may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other claims that may
be made against the indemnified party and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such Third Party Claim effected without its consent.
(e) Anything in this Section to the contrary notwithstanding,
the indemnifying party shall not be entitled to assume the defense of any Third
Party Claim (and shall be liable for the fees and expenses of counsel incurred
by the indemnified party in defending such Third Party Claim) if the Third Party
Claim seeks an order, injunction or other equitable relief or relief for other
than money damages against the indemnified party that the indemnified party
reasonably determines, after conferring with its outside counsel, cannot be
separated from any related claim for money damages (if such equitable relief or
other relief portion of the Third Party Claim can be so separated from that for
money damages, the indemnifying party shall be entitled to assume the defense of
the portion relating to money damages).
(f) In connection with any such indemnification, the
indemnified party will
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cooperate in all reasonable requests of the indemnifying party.
SECTION VII.5. Other Claims. In the event any indemnified
party should have a claim against any indemnifying party that does not involve a
Third Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any indemnified
party so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to such indemnified party, except to
the extent that the indemnifying party demonstrates that it has been materially
prejudiced by such failure. If the indemnifying party does not notify the
indemnified party within 20 days following its receipt of such notice that the
indemnifying party disputes its liability to the indemnified party, such claim
specified by the indemnified party in such notice shall be conclusively deemed a
liability of the indemnifying party and the indemnifying party shall pay the
amount of such liability to the indemnified party on demand or, in the case of
any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as provided above, the
indemnifying party shall promptly pay any amount of such claim that is not
disputed and the indemnifying party and the indemnified party shall proceed in
good faith to negotiate a resolution of such dispute and, if not resolved
through negotiations, such dispute shall be resolved by litigation in an
appropriate court of competent jurisdiction.
SECTION VII.6. Certain Pending Causes of Action. The Seller
has agreed to indemnify, defend and hold harmless the Company and the Purchaser
from and against all Damages, costs of investigation and costs of defense (not
subject to the amounts set forth in Section 7.03) relating to the pending causes
of action described in items 1-4 of Schedule 2.13. The Purchaser agrees, on
behalf of itself and the Company, that the Seller shall, from and after the
Closing Date, continue to undertake the defense thereof by counsel of the
Seller's own choosing and at Seller's expense. The Company shall have the right
to continue to participate in the defense thereof and to employ counsel, at its
own expense, it being understood that the Seller shall control such defense. The
Seller agrees that no compromise or settlement of such causes of action may be
effected by it without the Company's consent unless (i) there is no finding or
admission of any liability or violation of law or any violation by the Company
of the rights of any person and no effect on any other claims that may be made
against the Company and (ii) the sole relief provided is monetary damages that
are paid in full by the Seller. Neither the Company nor the Purchaser will have
any liability with respect to any compromise or settlement of such causes of
action effected without its consent. The Purchaser shall cause the Company to
cooperate in all reasonable requests of the Seller, at the Seller's expense,
relating to the foregoing.
SECTION VII.7. Remedies Cumulative. The remedies provided
herein shall be cumulative and shall not preclude assertion by any party of any
other rights or the seeking of any other remedies against the other parties.
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ARTICLE VIII
TERMINATION OF AGREEMENT
SECTION VIII.1. Termination of Agreement Prior to Closing.
This Agreement may be terminated and the sale and transfer of the Shares
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of the Seller and the
Purchaser;
(b) by either (i) the Purchaser if there shall have been a
material breach of any of the representations, warranties, covenants or
agreements of the Seller contained in this Agreement or (ii) the Seller if there
shall have been a material breach of any of the representations, warranties,
covenants or agreements of any of the Purchaser Parties contained in this
Agreement, in either case, only if (A) such breach would result in the failure
to satisfy one or more of the conditions set forth in Section 5.01 (in the case
of a breach by the Seller) or Section 5.02 (in the case of a breach by any of
the Purchaser Parties) and (B) such breach (1) by its nature is not capable of
being cured or (2) shall not have been cured within 30 days after written notice
thereof shall have been given by the terminating party to the party or parties
alleged to be in breach; or
(c) by either the Purchaser, on the one hand, or the Seller,
on the other hand, if the Closing shall not have occurred prior to the close of
business on December 12, 2001; provided, that (i) the right to terminate this
Agreement under this paragraph (c) shall not be available to the Purchaser if
any breach of the representations, warranties, covenants or agreements of any of
the Purchaser Parties contained in this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before the close of
business on such date and (ii) the right to terminate this Agreement under this
paragraph (c) shall not be available to the Seller if any breach of the
representations, warranties, covenants or agreements of the Seller contained in
this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before the close of business on such date.
SECTION VIII.2. Method and Effect of Termination. (a) Any
party desiring to terminate this Agreement pursuant to Section 8.01 shall give
notice to each of the other parties in accordance with Section 9.04.
(b) In the event of the termination of this Agreement pursuant
to Section 8.01, this Agreement, except for the representations and warranties
contained in Sections 2.26 and 3.08 and the provisions of this Article VIII and
Article IX, shall become void and have no further effect, with no liability on
the part of any party or its members, directors, officers or stockholders;
provided, that nothing in this Section 8.02 shall relieve any party of liability
for a breach of any provision of this Agreement occurring prior to such
termination.
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ARTICLE IX
MISCELLANEOUS
SECTION IX.1. Specific Performance. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement, this being in
addition to any other remedy to which they are entitled at law or in equity.
SECTION IX.2. Expenses, Etc. All costs and expenses, including
fees and disbursements of counsel, advisors, accountants and consultants,
incurred in connection with the negotiation, preparation, execution and delivery
of this Agreement, the Ancillary Agreements and the closing of the transactions
contemplated hereby and thereby (collectively, "Expenses") shall be paid by the
party incurring such Expenses, whether or not the transactions contemplated by
this Agreement are consummated; provided, however, that the Seller agrees that
it shall reimburse the Purchaser for (a) 50% of such reasonable fees and
expenses incurred by the Purchaser up to a maximum reimbursement of $25,000 or
(b) 100% of such reasonable fees and expenses incurred by the Purchaser if the
Seller fails to consummate the transactions contemplated hereby because the
Board of Directors of the Seller fails to approve such transactions prior to the
termination of this Agreement for any other reason. Notwithstanding the
foregoing, any fees to be paid to Xxxx Brothers by the Seller in connection with
the transactions contemplated hereby will be paid by the Seller out of the
proceeds from the Purchase Price.
SECTION IX.3. Execution in Counterparts. This Agreement may be
executed in one or more counterparts (which may be transmitted by facsimile),
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION IX.4. Notices. All notices, requests, instructions and
other documents that are required to be or may be given or delivered pursuant to
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if delivered by hand or national overnight courier service, transmitted
by facsimile (confirmed by another method of delivery permitted hereunder) or
mailed by registered or certified mail, postage prepaid, as follows:
if to the Seller to:
Health Management Systems, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Mr. Xxxxxx Holster
Facsimile: (000) 000-0000
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
37
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
if to any Purchaser Party to:
Avega Partners, Inc.
000 Xxxxx Xxxxxxxxx, Xxxxx 000
Xx Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxx LLP
Xxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
or such other address or addresses as any party shall have designated by notice
in writing to the other parties. Such notices, requests, instructions and other
documents shall be deemed given or delivered (i) five business days following
sending by registered or certified mail, postage prepaid, (ii) one business day
following sending by national overnight courier service, (iii) when sent, if
sent by facsimile (but only if such facsimile is promptly confirmed by such
other method of delivery) or (iv) when delivered, if delivered by hand.
SECTION IX.5. Waivers. The Seller, on the one hand, and the
Purchaser Parties, on the other hand, may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement; (iii) waive compliance with any
of the conditions or covenants of the other contained in this Agreement; or (iv)
waive performance of any of the obligations of the other under this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of the
Seller, on the one hand, and the Purchaser Parties, on the other hand, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by the Seller, on the one hand, and the Purchaser Parties,
on the other hand, of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
SECTION IX.6. Amendments, Supplements, Etc. This Agreement may
be amended, modified or supplemented only by a writing signed by the Seller and
the Purchaser Parties.
38
SECTION IX.7. Entire Agreement. This Agreement, its exhibits
and schedules, the Ancillary Agreements and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral and
written, between the parties with respect to the subject matter hereof.
Notwithstanding the foregoing, Section 10 of the Letter of Intent dated May 31,
2001 among the Seller, HCm Acquisition Company, LLC, Xxxxxxxxx and Xxxxxxx shall
survive the execution and delivery of this Agreement.
SECTION IX.8. Applicable Law. This Agreement and each of the
Ancillary Agreement (unless otherwise specified therein) shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to the conflict of laws principles thereof.
SECTION IX.9. Further Assurances. The parties agree (i) to
furnish upon request to each other such further information, (ii) to execute and
deliver to each other such other documents and (iii) to do or cause to be done
such other acts and things, all as the other parties may from time to time
reasonably request for the purpose of carrying out the intent of this Agreement
and the Ancillary Agreements.
SECTION IX.10. Interpretation. (a) As used herein, the words
"hereof," "herein," "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement, and the words "Article," "Section"
and "Schedule" are references to the articles, sections and schedules of this
Agreement unless otherwise specified. Whenever the words "include," "includes"
or "including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms. Any
agreement, instrument or statute defined or referred to herein means such
agreement, instrument or statute as from time to time amended, qualified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes. References to a person or entity are also to its successors and
permitted assigns.
(b) As used herein, (i) "knowledge" of any person means the
actual knowledge of such person, (ii) "knowledge of the Company" and words of
similar import means the knowledge of Xxxxxxxxx and/or Kazamek and (iii)
"knowledge of the Seller and the Company" and words similar import means the
knowledge of the Company and/or the Seller.
(c) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.
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SECTION IX.11. Binding Effect; Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties and their respective
successors and permitted assigns and nothing in this Agreement, expressed or
implied, is intended to confer on any person, other than the parties and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION IX.12. Assignability. Neither this Agreement nor any
of the parties' rights hereunder shall be assignable by any party without the
prior written consent of the other parties.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties as of the date first above written.
HEALTH MANAGEMENT SYSTEMS, INC.
By /s/ Xxxxxx X. Holster
__________________________________
Xxxxxx X. Holster
President
AVEGA PARTNERS, INC.
By /s/ Xxxxxx X. Xxxxxxxxx
___________________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: President
/s/ Xxxxxx X. Xxxxxxxxx
_____________________________________
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxx Xxxxxxx
_____________________________________
Xxxxxx Xxxxxxx
