EXHIBIT 10.47
STOCK FOR STOCK EXCHANGE AGREEMENT
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THIS STOCK FOR STOCK EXCHANGE AGREEMENT ("Agreement") is made and entered
into as of the 11th day of October, 2001, by and among The Bio Balance Corp.
(formerly The Bio Balance Corp.), a Delaware corporation ("Bio Balance"), for
itself and for the benefit of the shareholders and warrantholders of Bio Balance
as of the Closing Date (individually "Bio Balance Shareholder" and collectively
"Bio Balance Shareholders"), as Seller, and New York Health Care, Inc., a New
York corporation ("NYHC"), as Buyer. Collectively, the Bio Balance Shareholders,
Bio Balance and NYHC are referred to as "Parties," and sometimes the Bio Balance
Shareholders, sometimes Bio Balance and sometimes NYHC are individually referred
to as "Party."
WHEREAS, the Bio Balance Shareholders as of the Closing Date will own 100%
of the issued and outstanding $.0001 par value common stock of Bio Balance and
rights to purchase Bio Balance common stock ("Bio Balance Shares");
WHEREAS, the Bio Balance Shareholders desire to exchange all but not less
than 90% of the Bio Balance Shares and 100% of the outstanding Options (as
defined in Section 1.2) for corresponding shares of NYHC's $0.01 par value
common stock and rights to purchase NYHC common stock ("NYHC Shares") and NYHC
desires to effectuate such exchange, on the terms and subject to the conditions
contained herein; and
WHEREAS, the Bio Balance Shareholders and NYHC desire this transaction to
be a tax-free reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises made herein and in consideration of the covenants, representations,
warranties and conditions set forth herein, the receipt and sufficiency of which
are hereby acknowledged, the Parties, intending to be legally bound, agree as
follows:
ARTICLE 1
EXCHANGE OF BIO BALANCE SHARES FOR NYHC SHARES
1.1. EXCHANGE OF BIO BALANCE SHARES FOR NYHC SHARES. Subject to the
terms and conditions of this Agreement, the Bio Balance Shareholders shall
transfer to NYHC the Bio Balance Shares and, in exchange therefor, NYHC hereby
agrees to issue the NYHC Shares to the Bio Balance Shareholders (the
"Exchange"). The NYHC Shares shall be issued to the Bio Balance Shareholders on
the following basis: one NYHC Share for one Bio Balance Share. The foregoing
exchange ratio assumes and reflects the one for one and one-half (1:1-1/2)
reverse split of NYHC's outstanding common stock described in Section
3.2.a.(iii) herein.
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1.2. BIO BALANCE STOCK OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES.
Except as set forth on Schedule 1.2, as of immediately prior to the Closing, Bio
Balance will have outstanding stock options, warrants or convertible securities
to acquire common stock or other securities of Bio Balance (collectively
"Options"), which on an "as if issued" basis, together with all outstanding
common stock including the common stock issuable in the Private Placement
described in Section 3.4, will not be more than 23,043,334 common shares. In
the event additional Bio Balance Shares are required to be issued pursuant to
the Asset Purchase Agreement (defined in Section 4.1(c), then the number of NYHC
Shares issuable to holders of Bio Balance Shares who did not receive Bio Balance
Shares pursuant to the Asset Purchase Agreement, will be proportionately
reduced.
1.3. NYHC STOCK OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. As of
immediately prior to the Closing, NYHC will not have outstanding any stock
options, warrants or convertible securities to acquire common stock or other
securities of NYHC (collectively "Options") except as set forth on Schedule 1.3,
which on an "as if issued" basis, together with all outstanding common stock
will not be more than 4,050,000 common shares.
1.4. CHANGE OF CONTROL OF BIO BALANCE. The parties agree that at
Closing the officers, directors, consultants and key employees ("Key Employees")
of Bio Balance will be as are set forth on Exhibit A that is attached hereto and
incorporated herein by this reference, which schedule may be amended by Bio
Balance with the consent of NYHC prior to the effective date of the S-4
Registration Statement described in Section 3.3, which consent will not be
unreasonably withheld.
1.5. CHANGE OF CONTROL OF NYHC. The parties agree that at Closing the
officers, directors and key employees ("Key Employees") of NYHC will be as are
set forth on Exhibit B that is attached hereto and incorporated herein by this
reference.
ARTICLE 2
CLOSING
2.1. THE CLOSING. Subject to the conditions precedent contained
herein, the Exchange ("Closing") shall take place at the offices of Scheichet &
Xxxxx, P.C., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 at 1:00 p.m.
(local time) on (i) February 13,, 2002, or (ii) if by April 29, 2002 (A) any
required NYDH Consent (as defined in Section 4.1(n)) has not been obtained, (B)
the Securities Compliance (as defined in Section 3.3) has not been completed or
(C) the Shareholder Consent has not been obtained, then on such later date as
the NYDH Consent, the Securities Compliance and the Shareholder Consent shall
have been obtained and completed, or (iii) such other date and time as is
mutually agreed to by Bio Balance and NYHC ("Closing Date").
ARTICLE 3
ACTIONS PRIOR TO CLOSING
3.1. NASDAQ APPROVAL. Within ten (10) days after the date of this
Agreement NYHC shall submit this Agreement and other documents delivered
herewith to The Nasdaq Stock Market, Inc. ("NASDAQ") pursuant to the rules and
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regulations governing companies with a class of stock listed for trading on the
NASDAQ SmallCap Market ("Smallcap"). Within seventy-five (75) days after
Closing, NYHC must receive "no objections" from NASDAQ for the Exchange and
other transactions set forth in this Agreement, subject only to NYHC obtaining
the approval of NYHC Shareholders of the Exchange ("NASDAQ Approval"). The
written NASDAQ Approval may not be conditioned on NYHC being required to apply
for a SmallCap listing based on NASDAQ's "new listing" requirements.
3.2. SHAREHOLDER CONSENT.
a. Shareholder Meeting. Prior to Closing, NYHC shall convene a
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meeting of its shareholders and use its best efforts to obtain the consent of
NYHC Shareholders of each of the following matters:
(i) The election to the board of directors of two members to
be identified by Bio Balance. The board of directors after the meeting shall be
comprised of six directors.
(ii) Amendment of the Articles of Incorporation of NYHC for
the increase in the authorized $.01 par value common stock of NYHC from
50,000,000 shares to 100,000,000 shares.
(iii) The reverse split of NYHC $.01 par value common stock
in the ratio of one share of common stock for each 1.5 shares outstanding, so
that holders of common stock and rights to receive common stock shall receive
one share of common stock for each 1.5 shares of common stock held or entitled
to be received.
(iv) Approval of the Exchange and all other transactions
described in this Agreement.
(v) The approval of an amendment to the New York Health Care,
Inc. Performance Incentive Plan (the "Stock Option Plan") authorizing the
reservation of an additional 2,230,000 shares of the Company's $.01 par value
common stock for issuance under the Stock Option Plan after April 29, 2002 for
the promotion and benefit of Bio Balance's business.
Collectively, the approval of the requisite number of shareholders is the
"Shareholder Consent."
b. Proxy Statement. On or before the later of forty-five (45)
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days after NYHC has received the Bio Balance Financial Statements and twenty
(20) days after NYHC has received the private placement memorandum to be
employed by Bio Balance in connection with the Private Placement, NYHC will file
a preliminary proxy statement with the Securities and Exchange Commission.
The Company further covenants to use its best efforts to conduct the meeting of
NYHC Shareholders on or before February 14, 2002.
c. Insider Approval. Upon execution of this Agreement, NYHC will
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deliver to Bio Balance the irrevocable proxies of officers and directors of the
Company owning not less than 50.1% of the capital stock permitted to vote on the
subject matter of the Shareholder Consent, in favor of the Shareholder Consent.
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3.3. REGISTRATION. NYHC will prepare and file with the Securities and
Exchange Commission a registration statement on Form S-4 ("S-4 Registration
Statement") for the purpose of registering the offer of the NYHC Shares to the
Bio Balance Shareholders and make all filings required to be made with state
regulatory authorities, the unrestricted resale (except as otherwise described
herein) of the NYHC Shares received by Bio Balance Shareholders in the Exchange
("Securities Compliance").
3.4. PRIVATE PLACEMENT. Bio Balance shall conduct a private placement
of its common stock on the terms more particularly described in Schedule 3.4
("Private Placement") at Bio Balance's sole cost and expense. Bio Balance will
offer up to 3,000,000 common shares at a per share price of not less than $2.00.
Up to 300,000 Bio Balance common stock purchase warrants will be issued to
broker-dealers who participate in the Private Placement. NYHC shall cooperate
with Bio Balance in the preparation of the documents necessary to conduct the
Private Placement and all filings required to be made in connection with the
Private Placement. All proceeds from the Private Placement will be employed to
pay expenses of the Private Placement and then exclusively for use by Bio
Balance in furtherance of its business.
3.5 LOCKUP.
a. NYHC Lockup. The officers and directors of NYHC identified on
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Schedule 3.5a shall agree to restrictions on the sale and transfer of the NYHC
common stock set forth on Schedule 3.5a, for the period set forth on Schedule
3.5a.
b. Bio Balance Lockup. The Bio Balance Shareholders identified on
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Schedule 3.5b shall agree to restrictions on the sale and transfer of the NYHC
Shares received by them in the Exchange, set forth on Schedule 3.5b, for the
period set forth on Schedule 3.5b.
c. All of the NYHC common shares subject to the foregoing lockups
shall be imprinted with the following legend which may be removed at the
holder's request after the expiration of the lockup period.
"The Common Shares of New York Health Care, Inc.
represented by this certificate are subject to certain
restrictions on sale, transfer or conveyance. A
description of the restrictions may be obtained from
the Company."
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF BIO BALANCE. Bio Balance
represents and warrants to NYHC as follows:
a. Authorization. The execution, delivery and performance of this
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Agreement have been duly authorized, adopted and approved by the board of
directors of Bio Balance. Bio Balance has taken all necessary corporate action
and has all of the necessary corporate power to enter into this Agreement and to
consummate the transactions described in this Agreement. This Agreement has been
duly and validly executed and delivered by an officer of Bio Balance, and
assuming that this Agreement is the valid and binding obligation of NYHC, is the
valid and binding obligation of Bio Balance, enforceable against it in
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accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect or by legal or equitable principles relating to
or limiting creditors' rights generally, and except that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Bio Balance has the ability to consummate
the Exchange.
b. Organization; Subsidiaries. Bio Balance is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware. Bio Balance has the corporate power and authority to own and lease
its assets and to carry on its business as it is now being conducted and is duly
qualified to do business as a foreign corporation in each jurisdiction where it
conducts business, except where the failure to be so qualified would not have a
material adverse effect on the business, operations, earnings, prospects, assets
or condition (financial or otherwise) of Bio Balance. As of the date hereof,
Bio Balance is only qualified to do business in Delaware. Bio Balance does not
own any shares of capital stock or other interest in any corporation,
partnership, association or other entity.
c. Capitalization. The number of authorized, issued and
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outstanding shares of Company Stock as of the date hereof is as set forth on
Schedule A. Bio Balance has not issued any shares of capital stock which could
give rise to claims for violation of any federal or state securities laws
(including any rules or regulations promulgated thereunder) or the securities
laws of any other jurisdiction (including any rules or regulations promulgated
thereunder). Except as described herein and on the schedules and exhibits
hereto, as of the date hereof, there are no options, warrants, calls,
convertible securities or commitments of any kind whatsoever relating to the
shares of Bio Balance Stock subject hereto or any of the unissued shares of
capital stock of Bio Balance, and there are no voting trusts, voting agreements,
stockholder agreements or other agreements or understandings of any kind
whatsoever which relate to the voting of the capital stock of Bio Balance,
except as set forth in an asset purchase agreement by and among Danron Ltd., an
Isle of Xxxx company; Uprising Investment Ltd., a Turks and Caicos Islands
company; Xxxxxx Trading Ltd., a Turks and Caicos Islands company; and Bio
Balance dated as of July 31, 2001 and all addenda and attachments thereto
("Asset Purchase Agreement"), annexed hereto as Exhibit C.
d. Financial Statements. Bio Balance will promptly deliver to NYHC
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audited financial statements of Bio Balance as at August 31, 2001 (the "Bio
Balance Financial Statements"). The Bio Balance Financial Statements will fairly
present, in all material respects, the financial position of Bio Balance at
August 31, 2001 and the results of operations and cash flows of Bio Balance for
the period indicated in conformity with generally accepted accounting principles
applied on a consistent basis.
e. Owned Real Property. Bio Balance does not own (of record or
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beneficially), nor does it have any interest in any real property.
f. Leased Property; Tenancies. Bio Balance does not lease any
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property, real or otherwise. Accordingly, Bio Balance is not a party to any
leases or subleases with respect to any property.
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g. Title. Bio Balance's only assets are those reflected on the
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balance sheet of the Bio Balance Financial Statements and as more particularly
described in the Asset Purchase Agreement. Bio Balance has good and marketable
title to all of such assets and to those assets purchased by Bio Balance after
the date thereof. The assets reflected on the balance sheet of the Bio Balance
Financial Statements, and as described in the Asset Purchase Agreement, and
those purchased by Bio Balance after the dates thereof, are owned free and clear
of all adverse claims, liens, mortgages, charges, security interests,
encumbrances and other restrictions or limitations of any kind whatsoever,
except: (i) as stated in the Bio Balance Financial Statements (including the
notes thereto); (ii) as stated in the Asset Purchase Agreement (iii) for liens
for taxes or assessments not yet due and payable or which are being contested by
Bio Balance in good faith; (iv) for minor liens imposed by law for sums not yet
due or which are being contested by Bio Balance in good faith; and (v) for
imperfections of title, adverse claims, charges, restrictions, limitations,
encumbrances, liens or security interests that are minor and which do not
detract in any material respect from the value of any of the assets subject
thereto or which do not impair the operations of Bio Balance in any material
respect or affect the present use of the assets in any material respect. Bio
Balance has not made any commitments or received any notice, oral or written,
from any public authority or other entity with respect to the taking or use of
any of Bio Balance's assets, whether temporarily or permanently, for any purpose
whatsoever, nor is there any proceeding pending or, to the knowledge of Bio
Balance, threatened which could adversely affect any asset owned or used by Bio
Balance as of the date hereof.
h. Condition of Assets. All documents and agreements pursuant to
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which Bio Balance has obtained the assets or the right to use any assets are
valid and enforceable in all respects in accordance with their respective terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect, or
by legal or equitable principles, relating to or limiting creditors' rights
generally and except that the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
All licenses, permits and authorizations related to the location or operation of
the business of Bio Balance are in good standing and are valid and enforceable
in all respects in accordance with their respective terms. There is not, under
any of the foregoing instruments, documents or agreements, any existing default,
nor is there any event which, with notice or lapse of time or both, would
constitute a default arising through Bio Balance or any third party which could:
(i) have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of Bio Balance; or
(ii) materially adversely affect its use of any assets. Bio Balance is not in
violation of and has complied with all applicable codes, statutes, regulations,
ordinances, notices and orders of any governmental authority with respect to the
use, maintenance, condition, operation and improvement of any assets, except
where the failure to comply with which would not have a material adverse effect
on the business, assets, operations, earnings, prospects or condition (financial
or otherwise) of Bio Balance. Bio Balance's use of any improvements for the
purposes for which any of the assets are being used as of the date hereof does
not violate any such code, statute, regulation, ordinance, notice or order. Bio
Balance possesses all licenses, permits and authorizations required to be
obtained by Bio Balance with respect to Bio Balance's ownership, operation and
maintenance of the assets for all uses for which such assets are operated or
used by Bio Balance as of the date hereof, except where the failure to do so
would not have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of Bio Balance. All of
the assets are in good operating condition and repair, subject to normal wear
and use and each such item is usable in a manner consistent with current use by
Bio Balance.
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i. Intellectual Property. Bio Balance has applied for a
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servicemark (trademark) for the name Bio Balance in the State of Israel. Bio
Balance has applied for a trademark/servicemark registration with the United
States Patent and Trademark Office for the name BACTRIX. Except for the above
and other trademarks, trade-names and servicemarks that will be applied for in
the normal course, Bio Balance does not own, license or use any registered and
unregistered trademarks, service marks or trade names, trade secrets, registered
or unregistered copyrights, or computer programs or software (the "Intellectual
Property") except as described in the Bio Balance Financials or Asset Purchase
Agreement.
j. Accounts Receivable. As of the date hereof, Bio Balance has no
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accounts receivable.
k. Accounts Payable. As of the date hereof, except as set forth
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in the Bio Balance Financial Statements or arising out of transactions described
in this Agreement, Bio Balance has no accounts payable outside of the ordinary
course of business.
l. Absence of Undisclosed Liabilities. Other than as set forth in
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the Bio Balance Financial Statements, Bio Balance has not had nor does it have
any indebtedness, loss or liability of any nature whatsoever, whether accrued,
absolute, contingent or otherwise and whether due or become due, which is
material to Bio Balance's business, assets, operations, prospects, earnings or
condition (financial or otherwise) of Bio Balance.
m. Absence of Certain Changes or Events. Except as expressly
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disclosed or set forth in this Agreement and the exhibits and schedules hereto,
Bio Balance has not, since August 31, 2001:
(i) issued, sold, granted or contracted to issue, sell or grant
any of its stock, notes, bonds, other securities or any option to purchase
any of the same;
(ii) amended its articles of organization or bylaws;
(iii) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment;
(iv) entered into any transaction, which could be deemed to be
material to Bio Balance or its business;
(v) incurred any damage, destruction or any other loss to any of
its assets in an aggregate amount exceeding Twenty-Five Thousand Dollars
($25,000) whether or not covered by insurance;
(vi) suffered any loss in an aggregate amount exceeding
Twenty-Five Thousand Dollars ($25,000) nor become aware of any intention on
the part of any client, dealer or supplier to discontinue its current
relationship with Bio Balance, the loss or discontinuance of which, alone
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or in the aggregate, could have a material adverse effect on Bio Balance's
business, assets, operations, earnings, prospects or condition (financial
or otherwise) of Bio Balance;
(vii) entered into, modified, amended or altered any contractual
arrangement with any client, dealer or supplier, the execution,
performance, modification, amendment or alteration of which, alone or in
the aggregate, could have a material adverse effect on Bio Balance's
business, assets, operations, earnings, prospects or condition (financial
or otherwise) of Bio Balance;
(viii) incurred any material liability or obligation (absolute or
contingent);
(ix) experienced any material adverse change in Bio Balance's
business, assets, operations, earnings, prospects or condition (financial
or otherwise) of Bio Balance or experienced or have knowledge of any event
which could have a material adverse effect on Bio Balance's business,
assets, operations, earnings, prospects or condition (financial or
otherwise) of Bio Balance;
(x) declared, set aside or paid any dividend or other
distribution in respect of the capital stock of Bio Balance;
(xi) redeemed, repurchased, or otherwise acquired any of its
capital stock or securities convertible into or exchangeable for its
capital stock or entered into any agreement with respect to any of the
foregoing;
(xii) purchased, disposed of or contracted to purchase or dispose
of, or granted or received an option or any other right to purchase or
sell, any of its assets;
(xiii) increased the rate of compensation payable or to become
payable to the officers or employees of Bio Balance, or increased the
amounts paid or payable to such officers or employees under any bonus,
insurance, pension or other benefit plan, or made any arrangements therefor
with or for any of said officers or employees;
(xiv) adopted or amended any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement, trust, fund or arrangement for the
benefit of its employees; or
(xv) changed any material accounting principle, procedure or
practice followed by Bio Balance or changed the method of applying such
principle, procedure or practice.
n. Agreements. Set forth on Schedule 4.1n hereto is a true,
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correct and complete list of all contracts, agreements and other instruments
material to the business or operation of Bio Balance, including without
limitation, those to which Bio Balance is a party and those by which any of its
assets are bound (the "Material Agreements"). Copies of all such agreements have
heretofore been delivered or made available by Bio Balance to NYHC. Other than
as set forth on Schedule 4.1n, there is no contract, agreement or other
instrument to which Bio Balance is a party or which affects the assets,
liabilities or outstanding securities of Bio Balance. Bio Balance may enter
into up to ten additional consulting agreements with directors, consultants and
advisory board members substantially similar to the agreements previously
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delivered to NYHC and on substantially similar terms ("Additional Consulting
Agreements"). Each such consultant may be granted the right to purchase up to
10,000 shares of Bio Balance common stock at a per share purchase price of
$1.50. Such right will be exercisable for two years after the issue date. From
and after the Closing, the right to purchase Bio Balance common stock will be
exchanged for the right to purchase NYHC Shares on a one for one basis with all
other terms being substantially the same. Neither Bio Balance, nor any third
party is in default and no event has occurred which, with notice or lapse of
time or both, could cause or become a default by Bio Balance, or any third
party, under any Material Agreement. Each Material Agreement is enforceable in
accordance with its terms, against all other parties thereto, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights generally and
except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
o. Non-Contravention; Consents. Neither the execution and delivery
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of this Agreement by Bio Balance, nor consummation of the Exchange, does or
will: (i) violate or conflict with any provision of the articles of
incorporation or bylaws of Bio Balance; (ii) violate or, with the passage of
time, result in the violation of any provision of, or result in the acceleration
of or entitle any party to accelerate any obligation under, or result in the
creation an imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the assets, which are material to the business or
operation of Bio Balance, pursuant to any provision of any mortgage, lien,
lease, agreement, permit, indenture, license, instrument, law, order,
arbitration award, judgment or decree to which Bio Balance is a party or by
which it or any of such assets are bound, the effect of which violation,
acceleration, creation or imposition could have a material adverse effect on the
business, assets, operations, earnings, prospects or (financial or otherwise) of
Bio Balance; (iii) violate or conflict with any other restriction of any kind
whatsoever to which Bio Balance is subject or by which any of its assets may be
bound, the effect of any of which violation or conflict could have a material
adverse effect on the business, assets, operations, earnings, prospects or
(financial or otherwise) of Bio Balance; or (iv) constitute an event permitting
termination by a third party of any agreement, including the Material
Agreements, to which Bio Balance is a party or is subject, which termination
could have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of Bio Balance. No
consent, authorization, order or approval of, or filing or registration with,
any governmental commission, board or other regulatory body is required in
connection with the execution, delivery and performance of the terms of this
Agreement by Bio Balance, except as same may derive from NYHC.
p. Employee Benefit Plans. Except as provided for in any
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employment agreements described on Schedule 4.1(n), Bio Balance does not have
any "employee benefit plans" as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Benefit Plans") covering the employees of Bio Balance.
q. Labor Relations. There are no agreements with or pending
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petitions for recognition of any labor union or association as the exclusive
bargaining agent for any or all of the employees of Bio Balance and no such
petition has been pending at any time since Bio Balance's inception. There has
not been any organizing effort by any union or other group seeking to represent
any employees of Bio Balance as its exclusive bargaining agent at any time since
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Bio Balance's inception. There are no labor strikes, work stoppages or other
labor disputes now pending or threatened against Bio Balance, nor has there been
any such labor strike, work stoppage or other labor dispute or grievance at any
time since Bio Balance's inception. Bio Balance has no knowledge that any
executive, key employee or any group of employees of Bio Balance has any plans
to terminate his/her employment with Bio Balance.
r. Insurance. Bio Balance has no insurance policies or binders of
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insurance or programs of self-insurance. However, Bio Balance may purchase
employee medical insurance prior to Closing. In such event, a copy of the
medical insurance policy will be promptly delivered to NYHC.
s. Tax Matters. Bio Balance has timely filed with the appropriate
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taxing authorities all returns (including, without limitation, information
returns and other material information) in respect of Taxes required to be filed
through the date hereof. The information contained in such returns is complete
and accurate in all material respects. Bio Balance has not requested any
extension of time within which to file returns (including, without limitation,
information returns) in respect of any Taxes. Bio Balance has accurately
computed and timely paid all Taxes for periods beginning before the date hereof,
or an adequate reserve has been established therefor, as set forth in the Bio
Balance Financial Statements. NYHC shall have no obligation or liability for
or with respect to (a) any Taxes or other assessments as a consequence of the
transactions contemplated by this Agreement all of which Taxes shall be paid by
Bio Balance, or each Bio Balance Shareholder, as the case may be, or (b) any
other Taxes or assessments of Bio Balance, or each Bio Balance Shareholder of
any kind whatsoever or any penalties or interest with respect to such Tax
liabilities. Bio Balance has withheld or collected from each payment made to
each of its employees, consultants, contractors and other payees the amount of
Taxes required to be withheld and collected therefrom for all periods through
the date hereof. Any liability for Taxes due and payable through the date of
this Agreement for which no returns are due or have been filed (including,
without limitation, property, payroll and withholding taxes) have been properly
accrued or provided for on the books of Bio Balance. No material deficiencies
for Taxes have been claimed, proposed, or assessed by any taxing or other
governmental authority against Bio Balance. There are no pending or, to the
best knowledge of Bio Balance, threatened audits, investigations or claims for
or relating to any material liability in respect of Taxes, and there are no
matters under discussion with any governmental authorities with respect to Taxes
that, in the reasonable judgment of Bio Balance, or its counsel is likely to
result in a material amount of Taxes. The federal, state and local returns of
Bio Balance have never been audited, and Bio Balance has not been notified that
any taxing authority intends to audit a return for any other period. No
extension of a statute of limitations relating to Taxes is in effect with
respect to Bio Balance. Bio Balance: (i) has not been an includible corporation
in an affiliated group that files consolidated income tax returns; (ii) is not a
party to any tax-sharing agreements or similar arrangements; and (iii) is not a
"foreign person" as defined in section 1445(f)(3) of the Code.
The term "taxes" or "tax" as used in this section or referred to
elsewhere in this Agreement shall mean all taxes, charges, fees, levies,
penalties, or other assessments, including without limitation, income, capital
gain, profit, gross receipts, ad valorem, excise, property, payroll,
withholding, employment, severance, social security, workers' compensation,
occupation, premium, customs duties, windfall profits, sales, use, and franchise
taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest,
penalties or additions attributable thereto.
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t. Compliance with Applicable Law. Bio Balance has been and is in
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compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations applicable to the business, except where the
failure to comply with which would not materially adversely affect the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
Bio Balance or which would subject any officer or director of Bio Balance to
civil or criminal penalties or imprisonment. Bio Balance has complied with the
rules and regulations of all governmental agencies having authority over its
business and its operations, including without limitation, agencies concerned
with intra-state and interstate commerce, occupational safety and employment
practices, except where the failure to comply would not have a material adverse
effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of Bio Balance. Bio Balance has no any knowledge of nor
received any notice of violation of any such rule or regulation since Bio
Balance's inception which could result in any liability of Bio Balance for
penalties or damages or which could subject Bio Balance to any injunction or
government writ, order or decree. To the knowledge of Bio Balance, there are no
facts, events or conditions that could interfere with, prevent continued
compliance with or give rise to any liability under any foreign, federal, state
or local governmental laws, statutes, ordinances or regulations applicable to
the business, assets, operations, earnings, prospects or condition (financial or
otherwise) of Bio Balance, except where the failure to do so would not have a
material adverse effect on the business, operations, earnings, prospects, assets
or condition (financial or otherwise) of Bio Balance.
u. Litigation. There is no action, suit, proceeding or
----------
investigation pending or, to the knowledge of Bio Balance, threatened, which
could restrict the ability of Bio Balance to perform its obligations hereunder
or could have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of Bio Balance. Bio
Balance is not in default in respect of any judgment, order, writ, injunction or
decree of any court or any federal, state, local or other governmental agency,
authority, body, board, bureau, commission, department or instrumentality which
could have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of Bio Balance.
v. Permits. Bio Balance holds all permits, licenses, orders and
-------
approvals of all federal, state or local governmental or regulatory authorities,
agencies or bodies required for the conduct and operation of Bio Balance's
business as currently conducted, except where the failure to do so would not
have a material adverse effect on the business, operations, earnings, prospects,
assets or condition (financial or otherwise) of Bio Balance. All such permits,
licenses, orders, and approvals are in full force and effect and no suspension,
termination or revocation of any of the foregoing is threatened. None of such
permits, licenses, orders or approvals will be materially adversely affected by
consummation of the Exchange. Bio Balance has no knowledge of nor has received
any notice of violation of any of such rules or regulations since Bio Balance's
inception which would result in any liability of Bio Balance for penalties or
damages or which would subject Bio Balance to any injunction or governmental
writ, order or decree.
w. Unlawful Payments. Neither Bio Balance nor any officer,
------------------
director, employee, agent or representative of Bio Balance has paid or received,
directly or indirectly, any bribe or kickback, illegal political contribution,
payment from corporate funds which was incorrectly recorded on the books and
records of Bio Balance, unlawful payment from corporate funds to governmental or
11
municipal officials in their individual capacities for the purpose of affecting
their action or the actions of the jurisdiction which they represent to obtain
favorable treatment in securing business or licenses or to obtain special
concessions of any kind whatsoever, or illegal payment from corporate funds to
obtain or retain any business.
x. Officers, Directors and Employees. Schedule 4.1x hereto sets
------------------------------------
forth a true, correct and complete list of all of the officers, directors and
principal employees of Bio Balance as of the date hereof, including their
respective names, titles, salaries and bonuses since Bio Balance's inception.
Bio Balance has also provided true, correct and complete copies of any
employment agreements between Bio Balance and any of the foregoing officers,
directors and principal employees of Bio Balance in effect as of the date
hereof.
y. Loans to or from Affiliates. There exist no outstanding loans
-----------------------------
by Bio Balance to any current or former officer, director, employee, consultant
or stockholder of Bio Balance or any affiliate of any of the foregoing. There
are no outstanding loans to Bio Balance by any current or former officer,
director, employee, consultant or stockholder of Bio Balance.
z. Books and Records.
-------------------
(i) The books of account and other financial records of Bio
Balance are complete and correct and have been maintained in accordance with
good business practices.
(ii) All material corporate action of the boards of directors
of Bio Balance (including any committees) since the date of Bio Balance's
incorporation has been authorized, approved and/or ratified in the minute books
of Bio Balance.
aa. Bank Accounts. Set forth on Schedule 4.1aa is a true, correct
--------------
and complete list of the names of each bank, savings and loan, or other
financial institution, at which Bio Balance maintains any account (including any
cash contribution or similar accounts) and the names of all persons authorized
to draw thereon or who have access thereto. As of the date hereof, Bio Balance
has no credit or loan facility or guaranty established and/or maintained by or
on behalf of Bio Balance.
bb. Solvency of Bio Balance. Since its inception and through the
------------------------
Closing Date, Bio Balance has been and will be solvent. "Solvent" shall mean,
for purposes of application of this provision, that: (i) the fair saleable value
of Bio Balance's property is in excess of the total amount of its debts; and
(ii) Bio Balance is able to pay its debts as they mature.
cc. Agreements with Affiliates. Except as otherwise described or
---------------------------
disclosed in this Agreement, Bio Balance is not a party to any instrument,
license, lease or other agreement, written or oral, with any officer or director
of Bio Balance.
dd. Accuracy of Information Furnished. Bio Balance represents
------------------------------------
that no statement made by Bio Balance set forth herein or in the exhibits or the
schedules hereto, and no statement set forth in any certificate or other
instrument or document required to be delivered by or on behalf of Bio Balance
pursuant hereto or in connection with the Exchange, contained, contains or will
contain any untrue statement of a material fact, or omits, omitted or will omit
12
to state any material fact which is necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
4.2 REPRESENTATIONS AND WARRANTIES OF NYHC. NYHC represents and
warrants to NYHC as follows:
a. Authorization. The execution, delivery and performance of this
-------------
Agreement have been duly authorized, adopted and approved by the board of
directors of NYHC. NYHC has taken all necessary corporate action and has all of
the necessary corporate power to enter into this Agreement and to consummate the
Exchange. This Agreement has been duly and validly executed and delivered by an
officer of NYHC, and assuming that this Agreement is the valid and binding
obligation of Bio Balance, is the valid and binding obligation of NYHC,
enforceable against it in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. NYHC has the ability
to consummate the Exchange.
b. Organization; Subsidiaries. NYHC is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
New York. NYHC has the corporate power and authority to own and lease its
assets and to carry on its business as it is now being conducted and is duly
qualified to do business as a foreign corporation in each jurisdiction where it
conducts business, except where the failure to be so qualified would not have a
material adverse effect on the business, operations, earnings, prospects, assets
or condition (financial or otherwise) of NYHC. As of the date hereof, NYHC is
qualified to do business in New Jersey. NYHC does not own any shares of capital
stock or other interest in any corporation, partnership, association or other
entity except as disclosed in prospectuses, registration statements and reports
filed with the Securities and Exchange Commission (the "Commission") and
publicly available on the Commission's XXXXX Filing System (collectively "SEC
Documents").
c. Capitalization. The number of authorized, issued and
--------------
outstanding shares of Company Stock as of the date hereof is as set forth on
Schedule A. NYHC has not issued any shares of capital stock which could give
rise to claims for violation of any federal or state securities laws (including
any rules or regulations promulgated thereunder) or the securities laws of any
other jurisdiction (including any rules or regulations promulgated thereunder).
As of the date hereof, there are no options, warrants, calls, convertible
securities or commitments of any kind whatsoever relating to the shares of NYHC
Stock subject hereto or any of the unissued shares of capital stock of NYHC, and
there are no voting trusts, voting agreements, stockholder agreements or other
agreements or understandings of any kind whatsoever which relate to the voting
of the capital stock of NYHC except as set forth on Schedule A and in the SEC
Documents.
d. Financial Statements. The SEC Documents contain the (i)
---------------------
audited balance sheets of NYHC as of December 31, 2000, 1999 and 1998 (including
the notes thereto), and the related statements of operations, cash flows and
shareholders' equity (deficit) for each of the years then ended, and (ii)
13
unaudited balance sheets of NYHC as of June 30, 2001 and March 31, 2001
(including any notes thereto), and the related statements of operations, cash
flows and shareholders' equity (deficit) for each of the periods then ended
(collectively, the "NYHC Financial Statements"). The NYHC Financial Statements
fairly present the financial condition and the results of operations, changes in
stockholders' equity and cash flows of NYHC at the respective dates of and for
the periods referred to in the NYHC Financial Statements, which were prepared in
conformity with GAAP, consistently applied.
e. Financial Statement Compliance. NYHC's Financial Statements
---------------------------------
have been prepared in accordance with Regulation S-X or S-B, as applicable,
adopted under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
for the periods specified.
f. Owned Real Property. Except as set forth in the SEC Documents,
-------------------
NYHC does not own (of record or beneficially), nor does it have any interest in,
any real property.
g. Leased Property; Tenancies. Except as set forth in the SEC
----------------------------
Documents, NYHC does not lease any property, real or otherwise.
h. Title. NYHC has good and marketable title to all of the
-----
assets set forth on the most recent balance sheet included in the NYHC Financial
Statements (the "Current Balance Sheet"), and those assets purchased by NYHC
after the date thereof. (collectively "NYHC Assets"). The NYHC Assets are owned
free and clear of all adverse claims, liens, mortgages, charges, security
interests, encumbrances and other restrictions or limitations of any kind
whatsoever, except: (i) as stated in the NYHC Financial Statements; (ii) for
liens for taxes or assessments not yet due and payable or which are being
contested by NYHC in good faith; (iii) for minor liens imposed by law for sums
not yet due or which are being contested by NYHC in good faith; and (iv) for
imperfections of title, adverse claims, charges, restrictions, limitations,
encumbrances, liens or security interests that are minor and which do not
detract in any material respect from the value of any of the NYHC Assets subject
thereto or which do not impair the operations of NYHC in any material respect or
affect the present use of the NYHC Assets in any material respect. NYHC has not
made any commitments or received any notice, oral or written, from any public
authority or other entity with respect to the taking or use of any of the NYHC
Assets, whether temporarily or permanently, for any purpose whatsoever, nor is
there any proceeding pending or, to the knowledge of NYHC, threatened which
could adversely affect any NYHC Asset owned or used by NYHC as of the date
hereof.
i. Condition of Assets. Except as described in the SEC Documents,
-------------------
all documents and agreements pursuant to which NYHC has obtained the NYHC Assets
or the right to use any NYHC Assets are valid and enforceable in all respects in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. Except as described
in the SEC Documents, all licenses, permits and authorizations related to the
location or operation of the business of NYHC are in good standing and are valid
and enforceable in all respects in accordance with their respective terms. There
is not, under any of the foregoing instruments, documents or agreements, any
existing default, nor is there any event which, with notice or lapse of time or
both, would constitute a default arising through NYHC or any third party which
could: (i) have a material adverse effect on the business, NYHC Assets,
operations, earnings, prospects or condition (financial or otherwise) of NYHC;
or (ii) materially adversely affect its use of any NYHC Assets. Except as
described in the SEC Documents, NYHC is not in violation of and has complied
with all applicable codes, statutes, regulations, ordinances, notices and orders
of any governmental authority with respect to the use, maintenance, condition,
operation and improvement of any NYHC Assets, except where the failure to comply
with which would not have a material adverse effect on the business, NYHC
14
Assets, operations, earnings, prospects or condition (financial or otherwise) of
NYHC. NYHC's use of any improvements for the purposes for which any of the
assets are being used as of the date hereof does not violate any such code,
statute, regulation, ordinance, notice or order. Except as described in the SEC
Documents, NYHC possesses all licenses, permits and authorizations required to
be obtained by NYHC with respect to NYHC's ownership, operation and maintenance
of the assets for all uses for which such assets are operated or used by NYHC as
of the date hereof, except where the failure to do so would not have a material
adverse effect on the business, NYHC Assets, operations, earnings, prospects or
condition (financial or otherwise) of NYHC. All of the NYHC Assets are in good
operating condition and repair, subject to normal wear and use and each such
item is usable in a manner consistent with current use by NYHC.
j. Intellectual Property. NYHC does not own, license or use any
----------------------
registered and unregistered trademarks, service marks or trade names, trade
secrets, registered or unregistered copyrights, or computer programs or software
(the "Intellectual Property") except as described in the SEC Documents.
k. Accounts Payable. Except as set forth in the NYHC Financial
-----------------
Statements and on Schedule 4.2k, as of the date hereof, NYHC has no accounts
payable outside of the ordinary course of business.
l. Absence of Undisclosed Liabilities. Other than as set forth in
-----------------------------------
the NYHC Financial Statements or on Schedule 4.2l, NYHC has not had nor does it
have any indebtedness, loss or liability of any nature whatsoever, whether
accrued, absolute, contingent or otherwise and whether due or become due, which
is material to NYHC's business, assets, operations, prospects, earnings or
condition (financial or otherwise) of NYHC.
m. Absence of Certain Changes or Events. Except as disclosed in
---------------------------------------
the SEC Documents or on Schedule 4.2m and except as expressly set forth in this
Agreement, NYHC has not, since December 31, 2000:
(i) issued, sold, granted or contracted to issue, sell or grant
any of its stock, notes, bonds, other securities or any option to purchase
any of the same;
(ii) amended its articles of organization or bylaws;
(iii) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment;
(iv) entered into any transaction, which could be deemed to be
material to NYHC or its business;
15
(v) incurred any damage, destruction or any other loss to any of
its assets in an aggregate amount exceeding Fifty Thousand Dollars
($50,000) whether or not covered by insurance;
(vi) suffered any loss in an aggregate amount exceeding Fifty
Thousand Dollars ($50,000) nor become aware of any intention on the part of
any client, dealer or supplier to discontinue its current relationship with
NYHC, the loss or discontinuance of which, alone or in the aggregate, could
have a material adverse effect on NYHC's business, assets, operations,
earnings, prospects or condition (financial or otherwise) of NYHC;
(vii) entered into, modified, amended or altered any contractual
arrangement with any client, dealer or supplier, the execution,
performance, modification, amendment or alteration of which, alone or in
the aggregate, could have a material adverse effect on NYHC's business,
assets, operations, earnings, prospects or condition (financial or
otherwise) of NYHC;
(viii) incurred any material liability or obligation (absolute or
contingent);
(ix) experienced any material adverse change in NYHC's business,
assets, operations, earnings, prospects or condition (financial or
otherwise) of NYHC or experienced or have knowledge of any event which
could have a material adverse effect on NYHC's business, assets,
operations, earnings, prospects or condition (financial or otherwise) of
NYHC;
(x) declared, set aside or paid any dividend or other
distribution in respect of the capital stock of NYHC;
(xi) redeemed, repurchased, or otherwise acquired any of its
capital stock or securities convertible into or exchangeable for its
capital stock or entered into any agreement with respect to any of the
foregoing;
(xii) purchased, disposed of or contracted to purchase or dispose
of, or granted or received an option or any other right to purchase or
sell, any of its assets;
(xiii) increased the rate of compensation payable or to become
payable to the officers or employees of NYHC, or increased the amounts paid
or payable to such officers or employees under any bonus, insurance,
pension or other benefit plan, or made any arrangements therefor with or
for any of said officers or employees;
(xiv) adopted or amended any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement, trust, fund or arrangement for the
benefit of its employees; or
(xv) changed any material accounting principle, procedure or
practice followed by NYHC or changed the method of applying such principle,
procedure or practice.
16
n. Agreements. Except as otherwise disclosed in the SEC Documents,
----------
set forth on Schedule 4.2n hereto is a true, correct and complete list of all
material contracts, agreements and other instruments material to the business or
operation of NYHC, including without limitation, those to which NYHC is a party
and those by which any of its assets are bound (the "Material Agreements").
Copies of all such agreements have heretofore been delivered or made available
by NYHC to Bio Balance. Other than as set forth on Schedule 4.2n, there is no
material contract, agreement or other instrument to which NYHC is a party or
which affects the assets, liabilities or outstanding securities of NYHC.
Neither NYHC, nor any third party is in default and no event has occurred which,
with notice or lapse of time or both, could cause or become a default by NYHC,
or any third party, under any Material Agreement. Each Material Agreement is
enforceable in accordance with its terms, against all other parties thereto,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect, or
by legal or equitable principles, relating to or limiting creditors' rights
generally and except that the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
o. Non-Contravention; Consents. Neither the execution and delivery
---------------------------
of this Agreement by NYHC, nor consummation of the transactions described
herein, does or will: (i) violate or conflict with any provision of the articles
of incorporation or bylaws of NYHC; (ii) violate or, with the passage of time,
result in the violation of any provision of, or result in the acceleration of or
entitle any party to accelerate any obligation under, or result in the creation
an imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the assets, which are material to the business or
operation of NYHC, pursuant to any provision of any mortgage, lien, lease,
agreement, permit, indenture, license, instrument, law, order, arbitration
award, judgment or decree to which NYHC is a party or by which it or any of such
assets are bound, the effect of which violation, acceleration, creation or
imposition could have a material adverse effect on the business, NYHC Assets,
operations, earnings, prospects or (financial or otherwise) of NYHC; (iii)
violate or conflict with any other restriction of any kind whatsoever to which
NYHC is subject or by which any of its assets may be bound, the effect of any of
which violation or conflict could have a material adverse effect on the
business, assets, operations, earnings, prospects or (financial or otherwise) of
NYHC; or (iv) constitute an event permitting termination by a third party of any
agreement, including the Material Agreements, to which NYHC is a party or is
subject, which termination could have a material adverse effect on the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
NYHC. No consent, authorization, order or approval of, or filing or
registration with, any governmental commission, board or other regulatory body
is required in connection with the execution, delivery and performance of the
terms of this Agreement by NYHC, except for the Securities Compliance,
Shareholder Consent, NASDAQ Approval and, if required, the consent of the New
York State Department of Health ("NYDH Consent").
p. Employee Benefit Plans. Except as set forth in the SEC
------------------------
Documents, NYHC does not have any "employee benefit plans" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (the "Benefit Plans") covering the employees of NYHC.
q. Labor Relations. There are no agreements with or pending
----------------
petitions for recognition of any labor union or association as the exclusive
bargaining agent for any or all of the employees of NYHC and no such petition
17
has been pending at any time since NYHC's inception. There has not been any
organizing effort by any union or other group seeking to represent any employees
of NYHC as its exclusive bargaining agent at any time since NYHC's inception.
There are no labor strikes, work stoppages or other labor disputes now pending
or threatened against NYHC, nor has there been any such labor strike, work
stoppage or other labor dispute or grievance at any time since NYHC's inception.
NYHC has no knowledge that any executive, key employee or any group of employees
of NYHC has any plans to terminate his/her employment with NYHC.
r. Insurance. NYHC has furnished to Bio Balance a list of, or
---------
made available true and complete copies of, all insurance policies and fidelity
bonds relating to the assets, business, operations, employees, officers or
directors of NYHC. To the knowledge of NYHC, there is no material claim by NYHC
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds or
in respect of which such underwriters have reserved their rights. All premiums
payable under all such policies and bonds have been timely paid and the NYHC has
otherwise complied in all material respects with the terms and conditions of all
such policies and bonds. Such policies and bonds are of the type and in amounts
required and/or customarily carried by entities conducting businesses similar to
those of NYHC. NYHC does not know of any threatened termination of, material
premium increase (other than in the ordinary course of business) with respect
to, or material alteration of coverage under, any of such policies or bonds.
s. Tax Matters. NYHC has timely filed with the appropriate taxing
------------
authorities all returns (including, without limitation, information returns and
other material information) in respect of Taxes required to be filed through the
date hereof. The information contained in such returns is complete and accurate
in all material respects. NYHC has not requested any extension of time within
which to file returns (including, without limitation, information returns) in
respect of any Taxes. NYHC has accurately computed and timely paid all Taxes
for periods beginning before the date hereof, or an adequate reserve has been
established therefor, as set forth in Schedule 4.2s. Bio Balance shall have no
obligation or liability for or with respect to (a) any Taxes or other
assessments as a consequence of the transactions contemplated by this Agreement
all of which Taxes shall be paid by NYHC, or each NYHC Shareholder, as the case
may be, or (b) any other Taxes or assessments of NYHC, or each NYHC Shareholder
of any kind whatsoever or any penalties or interest with respect to such Tax
liabilities. NYHC has withheld or collected from each payment made to each of
its employees, consultants, contractors and other payees the amount of Taxes
required to be withheld and collected therefrom for all periods through the date
hereof. Any liability for Taxes due and payable through the date of this
Agreement for which no returns are due or have been filed (including, without
limitation, property, payroll and withholding taxes) have been properly accrued
or provided for on the books of NYHC. No material deficiencies for Taxes have
been claimed, proposed, or assessed by any taxing or other governmental
authority against NYHC. There are no pending or, to the best knowledge of NYHC,
threatened audits, investigations or claims for or relating to any material
liability in respect of Taxes, and there are no matters under discussion with
any governmental authorities with respect to Taxes that, in the reasonable
judgment of NYHC, or its counsel is likely to result in a material amount of
Taxes. The federal, state and local returns of NYHC have never been audited,
and NYHC has not been notified that any taxing authority intends to audit a
return for any other period. No extension of a statute of limitations relating
to Taxes is in effect with respect to NYHC. NYHC: (i) has not been an
18
includible corporation in an affiliated group that files consolidated income tax
returns; (ii) is not a party to any tax-sharing agreements or similar
arrangements; and (iii) is not a "foreign person" as defined in section
1445(f)(3) of the Code.
The term "taxes" or "tax" as used in this section or referred to
elsewhere in this Agreement shall mean all taxes, charges, fees, levies,
penalties, or other assessments, including without limitation, income, capital
gain, profit, gross receipts, ad valorem, excise, property, payroll,
withholding, employment, severance, social security, workers' compensation,
occupation, premium, customs duties, windfall profits, sales, use, and franchise
taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest,
penalties or additions attributable thereto.
t. Compliance with Applicable Law. Except as described in the SEC
------------------------------
Documents, NYHC has been and is in compliance with all foreign, federal, state
and local laws, statutes, ordinances, rules and regulations applicable to the
business, except where the failure to comply with which would not materially
adversely affect the business, assets, operations, earnings, prospects or
condition (financial or otherwise) of NYHC or which would subject any officer or
director of NYHC to civil or criminal penalties or imprisonment. NYHC has
complied with the rules and regulations of all governmental agencies having
authority over its business and its operations, including without limitation,
agencies concerned with intra-state and interstate commerce, occupational safety
and employment practices, except where the failure to comply would not have a
material adverse effect on the business, operations, earnings, prospects, assets
or condition (financial or otherwise) of NYHC. NYHC has no any knowledge of nor
received any notice of violation of any such rule or regulation since NYHC's
inception which could result in any liability of NYHC for penalties or damages
or which could subject NYHC to any injunction or government writ, order or
decree. To the knowledge of NYHC, there are no facts, events or conditions that
could interfere with, prevent continued compliance with or give rise to any
liability under any foreign, federal, state or local governmental laws,
statutes, ordinances or regulations applicable to the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of NYHC,
except where the failure to do so would not have a material adverse effect on
the business, operations, earnings, prospects, assets or condition (financial or
otherwise) of NYHC.
u. Litigation. Except as described in the SEC Documents, there is
----------
no action, suit, proceeding or investigation pending or, to the knowledge of
NYHC, threatened, which could restrict the ability of NYHC to perform its
obligations hereunder or could have a material adverse effect on the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
NYHC. NYHC is not in default in respect of any judgment, order, writ,
injunction or decree of any court or any federal, state, local or other
governmental agency, authority, body, board, bureau, commission, department or
instrumentality which could have a material adverse effect on the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
NYHC.
v. Permits. Except as described in the SEC Documents, NYHC holds
-------
all permits, licenses, orders and approvals of all federal, state or local
governmental or regulatory authorities, agencies or bodies required for the
conduct and operation of NYHC's business as currently conducted, except where
the failure to do so would not have a material adverse effect on the business,
operations, earnings, prospects, assets or condition (financial or otherwise) of
NYHC. All such permits, licenses, orders, and approvals are in full force and
19
effect and no suspension, termination or revocation of any of the foregoing is
threatened. None of such permits, licenses, orders or approvals will be
materially adversely affected by consummation of the Exchange. NYHC has no
knowledge of nor has received any notice of violation of any of such rules or
regulations since NYHC's inception which would result in any liability of NYHC
for penalties or damages or which would subject NYHC to any injunction or
governmental writ, order or decree.
w. Unlawful Payments. Neither NYHC nor any officer, director,
------------------
employee, agent or representative of NYHC has paid or received, directly or
indirectly, any bribe or kickback, illegal political contribution, payment from
corporate funds which was incorrectly recorded on the books and records of NYHC,
unlawful payment from corporate funds to governmental or municipal officials in
their individual capacities for the purpose of affecting their action or the
actions of the jurisdiction which they represent to obtain favorable treatment
in securing business or licenses or to obtain special concessions of any kind
whatsoever, or illegal payment from corporate funds to obtain or retain any
business.
x. Officers, Directors and Employees. Schedule 4.2x hereto sets
------------------------------------
forth a true, correct and complete list of all of the officers, directors and
principal employees of NYHC as of the date hereof, including their respective
names, titles, and current salaries and bonuses. NYHC has also provided true,
correct and complete copies of any employment agreements between NYHC and any of
the foregoing officers, directors and principal employees of NYHC in effect as
of the date hereof.
y. Loans to or from Affiliates. There exist no outstanding loans
-----------------------------
by NYHC to any current or former officer, director, employee, consultant or
stockholder of NYHC or any affiliate of any of the foregoing. There are no
outstanding loans to NYHC by any current or former officer, director, employee,
consultant or stockholder of NYHC.
z. Books and Records.
-------------------
(i) The books of account and other financial records of NYHC
are complete and correct and have been maintained in accordance with good
business practices.
(ii) All material corporate action of the boards of directors
of NYHC (including any committees) since the date of NYHC's incorporation has
been authorized, approved and/or ratified in the minute books of NYHC.
aa. Solvency of NYHC. Since its inception and through the Closing
----------------
Date, NYHC has been and will be solvent. "Solvent" shall mean, for purposes of
application of this provision, that: (i) the fair saleable value of NYHC's
property is in excess of the total amount of its debts; and (ii) NYHC is able to
pay its debts as they mature.
bb. Agreements with Affiliates. Except as described in the SEC
----------------------------
Documents, NYHC is not a party to any instrument, license, lease or other
agreement, written or oral, with any officer or director of NYHC.
cc. The NYHC Shares. The NYHC Shares upon issuance:
-----------------
20
(i) will be free and clear of any security interests, liens,
claims or other encumbrances and not subject to restrictions upon transfer under
the Securities Act of 1933 (the "1933 Act"), except for the restrictions imposed
by the 1934 Act on "insiders" as defined therein, State laws, and the Lockup as
described in Section 3.5 of this Agreement;
(ii) will be duly and validly authorized, issued, fully paid
and nonassessable;
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of NYHC; and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
dd. Reporting Company. NYHC is a publicly-held company subject to
-----------------
reporting obligations pursuant to Sections 15(d) and 13 of the 1934 Act and has
a class of common shares registered pursuant to Section 12(g) of the 1934 Act.
Pursuant to the provisions of the 1934 Act, NYHC has filed all reports and other
materials required to be filed thereunder with the Securities and Exchange
Commission during the preceding twelve months.
ee. Information Concerning NYHC. The SEC Documents contain all
-----------------------------
material information relating to NYHC and its operations and financial condition
as of their respective dates which information is required to be disclosed
therein. The SEC Documents do not contain any untrue statement of a material
fact or omit to state a material fact in light of the circumstances when made
required to be stated therein or necessary to make the statements therein not
misleading.
ff. Listing. NYHC's common stock is quoted and listed for trading
-------
on the NASDAQ SmallCap Market ("SmallCap"). NYHC has not received any oral or
written notice from NASDAQ that its common stock will be delisted from SmallCap
or that the common stock does not meet all requirements for the continuation of
such listing.
gg. Information on Bio Balance. NYHC has been furnished with
-----------------------------
information concerning operations, financial condition and other matters of Bio
Balance as NYHC has requested. NYHC has considered all factors NYHC deems
material in deciding on the advisability of purchasing the Bio Balance Shares.
NYHC, with its representatives, has such knowledge and experience in financial,
tax and other business matters as to enable NYHC to make an informed investment
decision with respect to the Exchange.
hh. Intent. NYHC is entering into this Agreement for its own
------
account. NYHC has no present arrangement (whether or not legally binding) at
any time to sell the Bio Balance Shares to or through any person or entity.
ii. Compliance with Securities Act. NYHC understands and agrees
--------------------------------
that the Bio Balance Shares have not been registered under the 1933 Act, by
reason of their exchange in a transaction that does not require registration
under the 1933 Act (based in part on the accuracy of the representations and
warranties of NYHC contained herein), and that the Bio Balance Shares must be
held unless a subsequent disposition is registered under the 1933 Act or is
exempt from such registration.
21
jj. Accuracy of Information Furnished. NYHC represents that no
------------------------------------
statement made by NYHC set forth herein or in the exhibits or the schedules
hereto, and no statement set forth in any certificate or other instrument or
document required to be delivered by or on behalf of NYHC pursuant hereto or in
connection with the Exchange, contained, contains or will contain any untrue
statement of a material fact, or omits, omitted or will omit to state any
material fact which is necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
4.3. REPRESENTATIONS AND WARRANTIES OF BIO BALANCE SHAREHOLDERS.
a. Title to Shares. Each Bio Balance Shareholder by tendering the
---------------
Bio Balance Shares for exchange will be deemed to represent and warrant that he
is the legal and beneficial owner of the number of shares of Company Stock as
set forth in Schedule A hereto and that such Bio Balance Shares owned by such
Bio Balance Shareholder fully paid, non-assessable and are owned free of
preemptive rights and free and clear of any and all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or
limitations of any kind whatsoever.
ARTICLE 5
CONDITIONS
5.1 CONDITIONS TO OBLIGATIONS OF NYHC. The obligation of NYHC to
consummate the transactions described in this Agreement is subject to the
fulfillment of each of the following conditions, which may be waived in whole or
in part by NYHC to the extent permitted by applicable law:
a. No Material Adverse Change. No material adverse change in the
---------------------------
business, assets, operations, earnings, prospects or condition (financial or
otherwise) of Bio Balance, and no event which would materially and adversely
affect the business, assets, operations, earnings, prospects or condition
(financial or otherwise) of Bio Balance shall have occurred since the date of
the Financial Statements provided by Bio Balance pursuant to Section 4.1(d).
b. Copies of Resolutions. Bio Balance shall have furnished NYHC
-----------------------
with certified copies of resolutions duly adopted by the board of directors of
each of Bio Balance authorizing the execution, delivery and performance of the
terms of this Agreement and all other necessary or proper corporate action to
enable Bio Balance to comply with the terms of this Agreement.
c. Certificates of Good Standing. At the Closing, Bio Balance
--------------------------------
shall have furnished NYHC with certified copies of certificates of good standing
of Bio Balance dated not more than five (5) business days prior to the Closing
Date.
d. Opinion of Bio Balance's Counsel. An opinion of counsel for
-----------------------------------
Bio Balance that: (i) the Bio Balance Shares constitute all of the issued and
outstanding equity securities in Bio Balance and are fully paid and
nonassessable; (ii) Bio Balance is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
22
corporate power and authority to own its properties and engage in its business
as presently conducted or contemplated, and is duly qualified and in good
standing as a foreign corporation under the laws of each other jurisdiction in
which it conducts business except where the failure to be so qualified would not
have a material adverse effect on the financial condition of Bio Balance; (iii)
neither the execution and delivery of this Agreement nor the consummation of any
or all of the transactions contemplated by this Agreement breaches or
constitutes a default under any agreement or commitment known to counsel to
which Bio Balance is a party, or violates any provision of the Articles of
Incorporation or Bylaws of Bio Balance, or causes the acceleration of the
maturity of any debt or obligation of Bio Balance that is known to counsel, or
violates any statute, law, regulation or rule, or any judgment, decree or order
of any court or other governmental or quasi-governmental body; and (iv) counsel
knows of no litigation pending or threatened which would adversely affect Bio
Balance or the transactions contemplated by this Agreement.
e. Accuracy of Representations and Warranties. Each of the
----------------------------------------------
representations and warranties of Bio Balance and the Bio Balance Shareholders
set forth in this Agreement shall have been true, correct and complete in all
material respects when made and shall also be true, correct and complete in all
material respects at and as of the Closing Date, with the same force and effect
as if made at and as of the Closing Date. Bio Balance and the Bio Balance
Shareholders shall have performed and complied in all material respects with all
agreements and covenants required by this Agreement to be performed by Bio
Balance and the Bio Balance Shareholders at or prior to the Closing Date.
f. Delivery of Officers' Certificates. Bio Balance shall have
-------------------------------------
delivered to NYHC certificates, dated as of the Closing Date, and signed by the
President of Bio Balance representing and affirming on behalf of Bio Balance
that: (i) the representations and warranties made by Bio Balance as set forth in
Section 4.1 of this Agreement and referred to in Subsection 5.1e above were and
are true, correct and complete as required by Subsection 5.1e above and the
conditions set forth in this Section 5.1 have been satisfied. Bio Balance shall
also have delivered certificates signed by its Secretary with respect to the
authority and incumbency of the officers of Bio Balance officers executing this
Agreement and any documents required to be executed or delivered in connection
therewith.
g. Delivery of Stock Certificates. At the Closing, the Bio Balance
------------------------------
Shareholders shall have delivered to NYHC certificates representing not less
than 90% of the Bio Balance Shares and 100% of the Options, outstanding as of
the Closing Date, which certificates shall be properly endorsed in blank or
shall be accompanied by a properly executed stock power.
h. Consents and Waivers. Any and all necessary consents,
----------------------
authorizations, orders or approvals described in Subsection 4.1o above shall
have been obtained, except as the same shall have been waived by NYHC.
i. Litigation. There shall be no effective injunction, writ or
----------
preliminary restraining order or any order of any kind whatsoever with respect
to Bio Balance or the Bio Balance Shareholders issued by a court or governmental
agency (or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions described in
this Agreement or making consummation thereof unduly burdensome to Bio Balance
or the Bio Balance Shareholders. As of the Closing Date, no proceeding or
23
lawsuit shall have been commenced, be pending or have been threatened by any
governmental or regulatory agency or authority or any other person with respect
to the transactions described in this Agreement.
j. Delivery of Documents and Other Information. Bio Balance shall
--------------------------------------------
have delivered to NYHC all of the agreements, contracts, documents and other
instruments required to be delivered pursuant to the provisions of this
Agreement.
k. Percentage Ownership of NYHC. On the date of the Exchange, no
------------------------------
Bio Balance Shareholder or affiliated group of Bio Balance Shareholders will
own, of record or beneficially, 10% or more of the NYHC Shares on a fully
diluted basis (assuming the exercise of all Bio Balance Options).
5.2 CONDITIONS TO OBLIGATIONS OF BIO BALANCE AND THE BIO BALANCE
SHAREHOLDERS. The obligations of Bio Balance and the Bio Balance Shareholders to
consummate the transactions described in this Agreement are subject to the
fulfillment of each of the following conditions, which may be waived in whole or
in part by Bio Balance and/or the Bio Balance Shareholders to the extent
permitted by law:
a. Copies of Resolutions. NYHC shall have furnished the Bio
-----------------------
Balance Shareholders with certified copies of resolutions duly adopted by the
board of directors of NYHC authorizing the execution, delivery and performance
of the terms of this Agreement and all other necessary or proper corporate
action to enable NYHC to comply with the terms of this Agreement.
b. Certificates of Good Standing. NYHC shall have furnished the
--------------------------------
Bio Balance Shareholders with certified copies of certificates of good standing
of NYHC dated not more than five (5) business day prior to the Closing Date.
c. Opinion of NYHC's Counsel. NYHC shall have furnished to Bio
----------------------------
Balance, with an opinion of Scheichet & Xxxxx, P.C., counsel to NYHC and other
counsel to NYHC with respect to health care matters, dated as of the Closing
Date, that: (i) NYHC is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, with full corporate power
and authority to own its properties and engage in its business as presently
conducted or contemplated, and is duly qualified and in good standing as a
foreign corporation under the laws of each other jurisdiction in which it
conducts business except where the failure to be so qualified would not have
a material adverse effect on the financial condition of NYHC; (ii) neither the
execution and delivery of this Agreement nor the consummation of any or all of
the transactions contemplated by this Agreement breaches or constitutes a
default under any agreement or commitment known to counsel to which NYHC is a
party, or violates any provision of the Articles of Incorporation or Bylaws
of NYHC, or causes the acceleration of the maturity of any debt or obligation
of NYHC that is known to counsel, or violates any statute, law, regulation or
rule, or any judgment, decree or order of any court or other governmental or
quasi-governmental body; (iii) counsel knows of no litigation pending or
threatened which would adversely affect NYHC or the transactions contemplated by
this Agreement; (iv) consummation of the transactions contemplated by this
Agreement required no action by or in respect of, or filing with any New York
health care agency including the New York Department of Health, that has not
been made and consent obtained; (v) the Shareholder Consent has been obtained;
(vi) the Securities Compliance has been obtained; (vii) the Exchange Shares,
24
when issued in compliance with this Agreement, will be duly authorized, validly
issued, fully paid, and non-assessable and free of preemptive rights set forth
in the Articles, Bylaws and any agreement filed as an exhibit to the SEC
Documents, and may be restricted from transfer but only to the extent set forth
in this Agreement; and (viii) in connection with the registration of the
Exchange Shares, counsel advised NYHC as to the requirements of the Securities
Act and the applicable Rules and Regulations and rendered other legal advice and
assistance in the course of preparation of the S-4 Registration Statement and
Prospectus, including review and discussion of the contents thereof. On the
basis of the information that was developed in the course of the performance of
such services considered in the light of counsel's understanding of the
Securities Act, including the requirements of Forms S-4, counsel had no reason
to believe that (a) the S-4 Registration Statement (other than the financial
statements and related statements and schedules) as of its Effective Date
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (b) the Prospectus (other than the
financial statements and related statements and schedules) as of the Effective
Date of the S-4 Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Counsel will not be
required to assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the S-4 Registration Statement or the Prospectus.
d. Accuracy of Representations and Warranties. Each of the
----------------------------------------------
representations and warranties of NYHC set forth in this Agreement shall have
been true, correct and complete in all material respects when made and shall
also be true, correct and complete in all material respects at and as of the
Closing Date, with the same force and effect as if made at and as of the Closing
Date. NYHC shall have performed and complied with in all material respects all
agreements and covenants required by this Agreement to be performed by NYHC at
or prior to the Closing Date.
e. Delivery of Officers' Certificates. NYHC shall have delivered
------------------------------------
to Bio Balance and Bio Balance Shareholders, certificates, dated the Closing
Date and signed by the Chief Executive Officer of NYHC, affirming that: (i) the
representations and warranties of NYHC as set forth in Section 4.2 of this
Agreement and referred to in Subsection 5.2d above were and are true, correct
and complete as required by Subsection 5.2d above; and (ii) the conditions set
forth in this Section 5.2 have been satisfied. NYHC shall also have delivered a
certificate signed by the Secretary of NYHC with respect to the authority and
incumbency of the officers of NYHC officers executing this Agreement and any
documents required to be executed or delivered in connection therewith
f. Stock Certificates. At the Closing, NYHC shall have issued and
-------------------
delivered to the Bio Balance Shareholders certificates representing the NYHC
Shares, which certificates shall be in the name of the respective Bio Balance
Shareholders, as set forth on Schedule A hereto.
g. Consents and Waivers. Any and all necessary consents,
----------------------
authorizations, orders or approvals described in Subsection 4.2o above shall
have been obtained, except as the same shall have been waived by Bio Balance
and/or the Bio Balance Shareholders.
25
h. Shareholder Consent. The Shareholder Consent shall have been
--------------------
obtained and a certified copy of such component NYHC Shareholder resolutions
shall have been delivered.
i. Securities Compliance. The Securities Compliance shall have
----------------------
been accomplished.
j. S-4. The S-4 Registration Statement shall have become
---
effective under the Securities Act and no stop order suspending the
effectiveness of the S-4 Registration Statement or injunction preventing the
issuance and free trading of the Exchange Shares shall have been issued and no
proceedings for such purpose shall have been initiated or threatened by the SEC
or any other entity.
k. Lockup. The NYHC common shares subject to the lock-up
------
described in Section 3.5a shall have been imprinted with the legend described in
Section 3.5c.
l. Litigation. There shall be no effective injunction, writ or
----------
preliminary restraining order or any order of any kind whatsoever with respect
to NYHC issued by a court or governmental agency (or other governmental or
regulatory authority) of competent jurisdiction restraining or prohibiting the
consummation of the transactions described in this Agreement or making the
consummation thereof unduly burdensome to NYHC. As of the Closing Date, no
proceeding or lawsuit shall have been commenced, be pending or have been
threatened or by any governmental or regulatory agency or authority or any other
person with respect to the transactions described in this Agreement.
5.3 POST-CLOSING COVENANTS AND AGREEMENTS. On the day of the
Exchange and subsequent thereto, NYHC and Bio Balance hereby covenant and agree
as follows:
x. Xxxxxx Health Care Finance Line of Credit. The Xxxxxx Health
-------------------------------------------
Care Finance line of credit and any replacement line of credit of NYHC will be
drawn upon only for the financing of the NYHC home health care business and
shall not be drawn upon for disbursement with respect to the financing of the
business of Bio Balance.
b. Private Placement Proceeds. The proceeds of the Private
----------------------------
Placement will be employed exclusively to pay expenses of the Private Placement
and for use by Bio Balance in furtherance of its business.
c. Short Form Merger. If less than 100% of the Bio Balance
-------------------
shareholders submit their Bio Balance Shares and Options for exchange into NYHC
Shares and Options within 30 days after the closing of the Exchange, NYHC will
form a wholly-owned subsidiary corporation ("Newco") pursuant to the Delaware
General Corporation Law capitalized with all of the Bio Balance Shares and
Options which NYHC received in the Exchange for NYHC Shares and Options, and
Newco will then promptly perform all actions required for it to merge with Bio
Balance pursuant to Sections 253 and 262 of the Delaware General Corporation
Law, unless then NYHC Board of Directors as constituted immediately after
Closing, adopts a resolution barring such action within such 30-day period.
26
d. SmallCap Listing. Bio Balance will take all action reasonably
-----------------
necessary on its part to preserve the NYHC SmallCap listing, and will refrain
from taking any action which may jeopardize the NYHC SmallCap listing.
e. No Commingling of Accounts. Bio Balance and NYHC shall each
-----------------------------
maintain separate banking and other financing accounts and shall not commingle
their respective funds or accounts.
f. Expense Reimbursement. Bio Balance will promptly reimburse
----------------------
NYHC for all additional expenses of NYHHC (i) arising after the Closing as a
result of its acquisition of Bio Balance and the status of Bio Balance as a
subsidiary of NYHC or merged entity pursuant to Section 5.3(c), (ii) transfer
agent costs in connection with the preparation and distribution of the NYHC
Shares, and (iii) listing of the NYHC Shares on the SmallCap and Boston Stock
Exchange.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION BY BIO BALANCE. Bio Balance agrees to indemnify in
respect of, and hold NYHC harmless against, any and all damages, claims,
deficiencies, losses, and expenses (including, without limitation, legal and
investigatory and other fees in attempting to avoid the same or defending
against the same) (collectively "Damages") resulting from any misrepresentation,
breach of warranty, or non-fulfillment or failure to perform any covenant or
agreement on the part of Bio Balance made as a part of or contained in this
Agreement or in any certificate executed and delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby.
6.2 INDEMNIFICATION BY NYHC. NYHC agrees to indemnify in respect of,
and hold Bio Balance and Bio Balance Shareholders harmless against, any and all
damages, claims, deficiencies, losses, and expenses (including, without
limitation, legal and investigatory and other fees in attempting to avoid the
same or defending against the same) (collectively "Damages") resulting from any
misrepresentation, breach of warranty, or non-fulfillment or failure to perform
any covenant or agreement on the part of NYHC made as a part of or contained in
this Agreement or in any certificate executed and delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby. Provided
NYHC timely complies with its obligations described in Section 3.1, NYHC's
indemnification shall not apply to a failure to obtain the NASDAQ Approval if
the failure to obtain that NASDAQ Approval is result of the Exchange or because
NYHC is required to apply for a SmallCap listing based on NASDAQ's "new listing"
requirements, or a delisting from the SmallCap due to matters not within the
control of NYHC.
6.3 INDEMNIFYING PARTIES. The party claiming indemnification hereunder
is hereinafter referred to as the "Indemnified Party" and the party against whom
such claims are asserted hereunder is hereinafter referred to as the
"Indemnifying Party."
6.4 LIMITATION OF LIABILITY. Neither party shall be liable to the
other party to this Agreement except to the extent that the aggregate amount of
Damages for which they would otherwise (but for this provision) be liable under
this Section, net of any insurance payments, exceeds in the aggregate the sum of
27
twenty-five thousand dollars ($25,000) and then only to the extent of such
excess.
6.5 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the parties under this Section are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or otherwise for
any misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party including without limitation the
right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby.
ARTICLE 7
TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated
at any time prior to the Closing by consent of Bio Balance and NYHC, provided
that such consent to terminate is in writing and is signed by Bio Balance and
NYHC.
7.2 TERMINATION FOR FAILURE TO CLOSE. This Agreement may be terminated
by any of the parties hereto if the Closing shall not have occurred by April 29,
2002, provided that, the right to terminate this Agreement pursuant to this
section shall not be available to any party whose failure to fulfill any of its
obligations hereunder has been the cause of or resulted in the failure to
consummate the Exchange by the foregoing date.
7.3 TERMINATION BY OPERATION OF LAW. This Agreement may be terminated
by any of the parties hereto if, in the reasonable opinion of counsel to the
respective parties hereto, there shall be any statute, rule or regulation that
renders consummation of the Exchange illegal or otherwise prohibited, or a court
of competent jurisdiction or any government (or governmental authority) shall
have issued an order, decree or ruling, or has taken any other action
restraining, enjoining or otherwise prohibiting the consummation of such
transactions and such order, decree, ruling or other action shall have become
final and nonappealable.
7.4 EFFECT OF TERMINATION OR DEFAULT; REMEDIES. In the event of
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any Non-Defaulting
Party (as defined below). The foregoing shall not relieve any Defaulting Party
from liability for damages actually incurred as a result of such party's breach
of any term or provision of this Agreement.
7.5 REMEDIES; SPECIFIC PERFORMANCE. In the event that any party shall
fail or refuse to consummate the Exchange (except pursuant to Sections 7.1, 7.2
or 7.3 above) or if any default under or breach of any representation, warranty,
covenant or condition of this Agreement on the part of any party (the
"Defaulting Party") shall have occurred that results in the failure to
consummate the Exchange, then in addition to the other remedies provided herein,
the non-defaulting party (the "Non-Defaulting Party") shall be entitled to seek
and obtain money damages from the Defaulting Party and/or may seek to obtain an
order of temporary or permanent injunctive relief or specific performance
thereof against the Defaulting Party from a court of competent jurisdiction,
provided that, the Non-Defaulting party seeking any injunctive relief or
specific performance such protection must file its request with such court
within forty-five (45) days after it becomes aware of the Defaulting Party's
28
failure, refusal, default or breach and further provided, that in no event shall
a Defaulting Party be liable for special, incidental or consequential damages.
In addition, the Non-Defaulting Party shall be entitled to obtain from the
Defaulting Party court costs, disbursements and attorneys' fees incurred in
connection with or in pursuit of enforcing the rights and remedies provided
hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 FEES AND EXPENSES. Except as otherwise described herein, each party
hereto shall pay its own expenses incident to negotiation, execution, delivery
and performance of the terms of this Agreement and the consummation of the
Exchange.
8.2 MODIFICATION, AMENDMENTS AND WAIVER. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by unanimous consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
8.3 INSPECTION OF PROPERTIES AND BOOKS. Bio Balance shall, at
reasonable times acceptable to NYHC and Bio Balance, assist any individual or
individuals designated by NYHC with reasonable prior notice to visit or inspect
any property of Bio Balance with respect to its business, including books of
accounts and records with respect to the business, to make extracts or copies of
such books and records and to discuss the affairs, finances and accounts of Bio
Balance with its officers, and shall use its best efforts to obtain access for
NYHC to accountants' work papers. NYHC agrees to treat all such material (the
"Evaluation Material") confidentially, and shall not disclose any Evaluation
Material or any information contained therein to any party, except as otherwise
set forth herein; provided, however, that NYHC is authorized to disclose the
Evaluation Material to its investment bankers, financial advisors and legal
counsel. NYHC shall instruct its investment bankers, financial advisors, legal
counsel, officers, directors, employees, agents or representatives of the
confidential nature of the Evaluation Material and shall be responsible for
insuring that the Evaluation Material is kept confidential by such persons.
8.4 ASSIGNMENT. Neither NYHC, Bio Balance, nor the Bio Balance
Shareholders shall have the authority to assign its rights or obligations under
this Agreement without the prior written consent of the other parties hereto.
8.5 BURDEN AND BENEFIT. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of the
parties and their respective successors and assigns. In the event of a default
by Bio Balance of its respective obligations hereunder, the sole and exclusive
recourse and remedy of NYHC shall be against Bio Balance, and any of Bio
Balance's assets; under no circumstances shall any officer or director of Bio
Balance be liable in law or equity for any obligations of Bio Balance hereunder.
In the event of a default by NYHC of any of its obligations hereunder, the sole
and exclusive recourse and remedy of the Bio Balance Shareholders and Bio
Balance shall be against NYHC and its assets; under no circumstances shall any
officer, director, stockholder or affiliate of NYHC be liable in law or equity
for any obligations of NYHC hereunder.
29
8.6 BROKERS. Bio Balance represents and warrants to NYHC that there
are no brokers or finders entitled to any brokerage or finder's fee or other
commission or fee based upon arrangements made by or on behalf of Bio Balance,
or any Bio Balance Shareholder or any other person in connection with this
Agreement. NYHC represents and warrants to Bio Balance and the Bio Balance
Shareholders that no broker or finder is entitled to any brokerage or finder's
fee or other commission or fee based upon arrangements made by or on behalf of
NYHC in connection with this Agreement.
8.7 ENTIRE AGREEMENT. This Agreement and the exhibits, lists and other
documents referred to herein contain the entire agreement among the parties
hereto with respect to the Exchange and supersede all prior agreements with
respect thereto, whether written or oral.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard, however, to
such jurisdiction's principles of conflicts of laws.
8.9 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by commercial overnight
delivery service or registered or certified mail (return receipt requested),
postage prepaid, addressed as follows:
If to Bio Balance or
The Bio Balance
Shareholders: The Bio Balance Corp.
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx, President
Facsimile: (000) 000-0000
with a copy to: Grushko & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to NYHC: New York Health Care, Inc.
0000 XxXxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
with a copy to: Scheichet & Xxxxx, P.C.
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxx, Esq.
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If sent as aforesaid, the date any such notice
30
shall be deemed to have been delivered on the date of transmission of a
facsimile, the day after delivery to a commercial overnight delivery service, or
five (5) days after delivery into a United States Post Office.
8.10 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original or a facsimile copy, but all of
which shall constitute but one agreement.
8.11 RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
8.12 SEVERABILITY OF PROVISIONS. The provisions of this Agreement shall
be considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
8.13 HEADINGS. The headings set forth in the articles and sections of
this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
8.14 KNOWLEDGE STANDARD. When used in this Agreement, the phrase "to
the best knowledge of, " "knowledge of, " "known to" or similar phrases shall
mean the actual knowledge of: (i) with respect to NYHC, the officers and
directors of NYHC; (ii) with respect to Bio Balance, the officers and directors
of Bio Balance; and (iii) the Bio Balance Shareholders.
8.15 JOINT PREPARATION. This Agreement was jointly prepared by NYHC
and Bio Balance, and is not to be construed against any party hereto. Should any
provision of this Agreement be found to be illegal or unenforceable by any court
of competent jurisdiction and cannot be modified to be enforceable, such
provision shall immediately become null and void leaving the remainder of this
Agreement in effect.
8.16 FORCE XXXXXX. In the event either party is prevented from
performing under this Agreement due to weather, strikes, labor disputes, natural
disasters or acts of G-d, or similar occurrences which are beyond such party's
control, such party's performance shall be suspended for the time equal to the
delay caused by such events.
31
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE BIO BALANCE CORP.
By: /s/ Xxxx Xxxxxxxx
----------------------
Its: President and Director
--------------------------
NEW YORK HEALTH CARE, INC.
By: /s/ Xxxxx Xxxxx
-------------------
Its: President and CEO
---------------------
32
SCHEDULE 1.2
After the date of the Agreement, Bio Balance may enter into agreements with
employees, and advisory board members. Up to ten of such advisory board
members in the aggregate may be granted the right to purchase up to 10,000
shares of Bio Balance common stock at a per share purchase price of $1.50. Such
right will be exercisable for two years after the issue date. From and after
the Closing, the right to purchase Bio Balance common stock will be exchanged
for the right to purchase NYHC Shares on a one for one basis with all other
terms being substantially the same.
33
SCHEDULE 3.4
PRIVATE PLACEMENT
Maximum: 3,000,000 Common Shares
Minimum Sales Price: Not less than $2.00 per share
Underwriting Compensation: Ten percent (10%) commissions, three percent (3%)
non-accountable expense allowance and one common
stock purchase warrant for each ten shares sold.
The Underwriters warrants will be exercisable at a
price not less than the price at which the Common
Shares are sold to investors, until 5 years after
the closing date of the Private Placement, with
customary demand and piggyback registration
rights.
Closing Date: Prior to Closing of Exchange.
34
SCHEDULE 3.5A
NYHC LOCKUP
1,501,985 NYHC Common Shares owned by Xxxxx Xxxxx and Xxxxx Xxxxxxxxx will
be restricted from sale, transfer or hypothecation until 120 days after the
effective date of the S-4 Registration Statement referred to in Section 3.3 of
the Agreement, provided all such Shares owned and transferred by them which
Share are subject to the irrevocable proxies described in Section 3.2(c) remain
subject to the irrevocable proxies through the Closing Date or termination of
this Agreement. Thereafter, for so long as each such holder is a director of
NYHC each calendar month, each such holder may convey not more than 10% of the
NYHC Common Shares owned by him on the date of Closing.
Each such holder may transfer NYHC Common Shares owned by them as of the
date of this Agreement to family trusts and registered charities provided such
transferred NYHC Common Shares remain subject to restriction from further sale,
transfer or hypothecation until 120 days after the effective date of the S-4
Registration Statement referred to in Section 3.3 of the Agreement. Thereafter,
for so long as each such holder is a director of NYHC each calendar month, each
such transferee may convey not more than 10% of the NYHC Common Shares received
by the transferee. The foregoing notwithstanding, registered charities who
receive NYHC Common Shares may sell up to 1,000 NYHC Shares per trading day
commencing on the Closing and until 120 days thereafter.
35
SCHEDULE 3.5B
BIO BALANCE LOCKUP
The NYHC Shares issuable upon Exchange for 9,006,625 Bio Balance common
shares issued in Bio Balance's private placement described in a Private
Placement Memorandum dated June 1, 2001 shall be restricted from sale, transfer
or hypothecation until the sooner of June 27, 2003, or one year after the
effective date of the S-4 Registration Statement referred to in Section 3.3 of
the Agreement, in which such NYHC Shares are registered.
The NYHC Shares issuable upon Exchange for 400,000 Bio Balance common
shares issued in Bio Balance's private placement described in a Private
Placement Memorandum dated July 16, 2001 shall be restricted from sale, transfer
or hypothecation until the sooner of August 10, 2003, or one year after the
effective date of the S-4 Registration Statement referred to in Section 3.3 of
the Agreement, in which such NYHC Shares are registered.
The NYHC Shares issuable upon Exchange for 990,000 Bio Balance common
shares issued to Danron Ltd., Uprising Investments Ltd., and Xxxxxx Trading Ltd.
will be restricted from sale, transfer or hypothecation until 120 days after the
Closing. Thereafter between the 120th and 150th days after Closing, up to 10%
of the aforedescribed NYHC Shares received by each of them may be conveyed; and
thereafter 7% of the aforedescribed NYHC Shares received by them may be conveyed
each calendar month.
The NYHC Shares issuable upon exchange for 7,000,000 Bio Balance common
shares outstanding prior to August 31, 2001 will be restricted from sale,
transfer, or hypothecation until 180 days after the effective date of the S-4
Registration Statement referred to in Section 3.3 of the Agreement in which such
NYHC Shares are registered.
After the Closing, NYHC may release from the terms of the Lockup described
above, any of the above described NYHC Shares provided one of the NYHC Common
Shares described on Schedule 3.5(a) are also released from the terms of Lockup
for each two NYHC Shares received upon Exchange that are released from lockup.
Such release shall be proportionate among NYHC shareholders who are subject to
lockup.
36
SCHEDULE 4.1N
Schedule of documents related to the acquisition of E-coli based probiotic
technology by The Bio Balance Corp.
1. Asset Purchase Agreement - July 31, 2001 by and among Danron Ltd., Uprising
Investments Ltd., Xxxxxx Trading Ltd. and The Bio Balance Corp.
a. counsel's opinion - Danron
b. counsel's opinion - Uprising
c. counsel's opinion - Xxxxxx
x. counsel's opinion - Bio Balance
2. Letter of understandings - Bio Balance to Danron, Uprising, Xxxxxx - July
31, 2001.
a. appointment of Trustee
b. instructions to Trustee
c. Bio Balance undertakings (N.D.A and Non-Compete in case of failure to close)
d. Xxx Xxxx confirmation of delivery of Assets to trustee August 22, 2001.
3. Assignment of Patent
a. US
b. PCT
c. Israel
4. Confirmation of representations, N.D.A, Non-Compete - July 31, 2001
a. M.G. Novobiotec, Belbo, Olshenitsky
b. Biosanel, Xxxxxxx-Padelka
c. Tetra, Xxxxx, Xxxxxx
5. NDA and Non-Compete
a. Xxxxx Xxxxxxxx
b. Xxxx Olshenitsky
c. Xxxxxx Xxxxxxx
d. Xxxx Xxxxxxx
e. Xxxx Padelka
f. Xxxxxx Xxxxx
g. Gidi Kahana
h. Xxx Xxxxxxx
i. Xxxx. Xxxxxx
6. Asset Purchase Agreement, M.G. Novobiotec, Belbo, Olshenitsky and Xxxxxxx to
Danron, June 20, 2001.
a. counsel's opinion - M.G. Novobiotec
b. counsel's opinion - Belbo
c. counsel's opinion - Danron
7. Sale of Rights Agreement - Tetra Pharm, Xxxxx and Bechar to Xxxxxx - June 4,
2001.
a. counsel's opinion - Tetra
b. counsel's opinion - Xxxxxx
37
8. Sale of Assets - Biosanel and Xxxxxxx to Uprising - March 1, 2001
a. counsel's opinion - Biosanel
b. counsel's opinion - Uprising
Additional Bio Balance Documents
Consulting Agreement with Xx. Xxxxxx Xxxxx dated August 31, 2001
Consulting Agreement with Xxxxxx Xxxxx, M.D. dated June 1, 2001
Consulting Agreement with Emerald Asset Management, Inc. dated June 1, 2001.
Consulting Agreement with BMF Engineering, executed as of August 31, 2001.
38
SCHEDULE 4.1X
Officers and directors of Bio Balance as of the date of Stock for Stock Exchange
--------------------------------------------------------------------------------
Agreement:
----------
Compensation
------------
President and Director Xxxx Xxxxxxxx None
Secretary and Director Xxxx Xxxxx None
Treasurer and Director Xxxxxx Xxxxxx None through
September 30, 2001. Commencing October 1, 2001, Xx. Xxxxxx will receive
annual compensation of $45,000, pursuant to oral agreement.
Officers and directors as of immediately following closing:
------------------------------------------------------------------
President and Director [TO BE DETERMINED]
Vice-President and Director Xxxx Xxxxx
Secretary/Treasurer and Director Xxxxxx Xxxxxx
Two directors to be appointed to NYHC Board of Directors:
------------------------------------------------------------------
Xxxx Xxxxx and Xxxxx Xxxx
Consultants:
------------
Xx. Xxxxxx Xxxxx - Annual compensation is $36,000. 10,000 Common Stock Purchase
Warrants exercisable at $1.50 per Bio Balance common share for 2 years from
vesting date. 800 Warrants presently vested. An additional 400 Warrants vest
on the first day of each month commencing September 1, 2001.
Xxxxxx Xxxxx, M.D. - Annual compensation is $65,000.
Emerald Asset Management, Inc. - Annual compensation is $250,000. Emerald Asset
Management, Inc. also received 200,000 Bio Balance Common Stock Purchase
Warrants exercisable for $1.00 per common share until June 1, 2006.
BMF Engineering - Annual compensation is $12,000. BMF Engineering also received
200,000 Bio Balance Common Stock Purchase Warrants exercisable for $1.50 per
common share until August 31, 2004.
39
SCHEDULE 4.1AA
Bio Balance maintains a checking account at the Lower Broadway branch of The
Fleet Bank.
The authorized signators on the account are Xxxx Xxxxxxxx and Xxxxxx Xxxxxx.
40
SCHEDULE 4.2N
NYHC and Bio Balance have agreed that, upon the approval of the presently
constituted Compensation Committee, the presently existing employment contracts
between NYHC and each of Xxxxx Xxxxx and Xxxxx Xxxxxxxxx shall be amended at
Closing to provide for the following:
1. assurance of continuation of their election to the NYHC Board of
Directors for the full term of their respective employment contracts;
2. extension of the term of each of their respective employment contracts
for a period of five years;
3. in the event of termination "without cause," as defined in the
respective employment contracts, the issuance to each of Xxxxx Xxxxx
and Xxxxx Xxxxxxxxx of options to purchase up to 500,000 shares of
NYHC common stock for a period of ten years for a purchase price per
share equal to the closing market price per share on the day of grant,
the underlying shares of which shall be promptly registered on SEC
Form S-8 or on any other SEC form appropriate for such registration so
that such shares shall have been fully registered no later than 90
days after such termination of the employment contract; and
4. if the "Closing" of the "Exchange," as defined in the Stock For Stock
Exchange Agreement between The Bio Balance Corp. and New York Health
Care, Inc., is deemed to be a "change of control" of New York Health
Care, Inc. as referred to in paragraph 5 of each of those employment
contracts, the benefits accruing to the employees as a result of that
"change of control" shall be deferred for 369 days following the
Closing.
SCHEDULE 4.2X
NYHC has three employees whose compensation is required to be disclosed
pursuant to SEC rules and regulations; Xxxxx Xxxxx, President and CEO, Xxxxx
Xxxxxxxxx, Vice President, Treasurer, Secretary and COO, and Xxxxxxx Xxxxxxxx,
Controller. Xx. Xxxxx'x and Xx. Xxxxxxxxx'x current salaries are the same as
disclosed in the NYHC Form 10-K Report for 2000, plus 10%. Xx. Xxxxxxxx'x
current salary is $110,000 per year. No decision has as yet been made by the
Compensation Committee with respect to bonuses for 2001.
