ASSET PURCHASE AGREEMENT
dated as of September 16, 1998
by and among
HEALTHCARE IMAGING SERVICES, INC.,
ECHELON MRI, P.C.,
MAINLAND IMAGING CENTER, P.C.,
NORTH JERSEY IMAGING MANAGEMENT ASSOCIATES, L.P.,
BLOOMFIELD IMAGING ASSOCIATES, P.A.,
XXXXXX X. XXXXX, M.D., P.A.,
THE ESTATE OF XXXXXX X. XXXXX, DECEASED
XXX. XXXXXXX XXXXX
and
XXX XXXXX, M.D.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..........................................................................................- 1 -
Section 1.01 Definitions........................................................................- 1 -
Section 1.02 Rules of Construction.............................................................- 11 -
ARTICLE II
PURCHASE AND SALE OF ASSETS.........................................................................- 11 -
Section 2.01 Sale and Purchase of Assets.......................................................- 11 -
Section 2.02 Excluded Assets...................................................................- 13 -
Section 2.03 Liabilities Transferred...........................................................- 13 -
Section 2.04 Transfer of Assets................................................................- 15 -
Section 2.05 Purchase Price and Adjustments....................................................- 15 -
Section 2.06 Closing Date Statements...........................................................- 15 -
Section 2.07 Accounts Receivable Adjustment....................................................- 16 -
Section 2.08 Payment of Purchase Price and Adjustments.........................................- 17 -
Section 2.09 Work Papers.......................................................................- 17 -
Section 2.10 Allocation of Purchase Price......................................................- 17 -
Section 2.11 Clearance Certificates............................................................- 18 -
Section 2.12 Transfer Taxes....................................................................- 18 -
ARTICLE III
THE CLOSING.........................................................................................- 18 -
Section 3.01 Closing Date......................................................................- 18 -
Section 3.02 Deliveries by the Purchaser at the Closing........................................- 19 -
Section 3.03 Deliveries by the Sellers at the Closing..........................................- 20 -
Section 3.04 Power of Attorney.................................................................- 21 -
Section 3.05 Non-Assignable Assets.............................................................- 22 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE STOCKHOLDERS................................................................................- 23 -
Section 4.01 Organization and Qualification....................................................- 23 -
Section 4.02 Authority.........................................................................- 23 -
Section 4.03 Consents and Approvals; No Violations.............................................- 24 -
Section 4.04 Capitalization....................................................................- 24 -
Section 4.05 Subsidiaries......................................................................- 24 -
Section 4.06 Articles of Incorporation and By-laws.............................................- 24 -
Section 4.07 Compliance With Laws; Licenses....................................................- 24 -
Section 4.08 Litigation; Investigations........................................................- 25 -
Section 4.09 Taxes.............................................................................- 25 -
- ii -
Section 4.10 Employee Benefit Plans; ERISA.....................................................- 27 -
Section 4.11 Labor Relations...................................................................- 28 -
Section 4.12 Insurance Policies................................................................- 28 -
Section 4.13 Financial Statements and Books and Records........................................- 29 -
Section 4.14 No Material Adverse Change........................................................- 30 -
Section 4.15 Absence of Liabilities............................................................- 30 -
Section 4.16 Absence of Specified Changes......................................................- 30 -
Section 4.17 Corporate Names...................................................................- 32 -
Section 4.18 Real Property; Leases.............................................................- 32 -
Section 4.19 Equipment and Personal Property...................................................- 33 -
Section 4.20 Intellectual Property.............................................................- 33 -
Section 4.21 Software..........................................................................- 34 -
Section 4.22 Contracts.........................................................................- 34 -
Section 4.23 Inventory.........................................................................- 34 -
Section 4.24 Directors, Officers and Employees.................................................- 35 -
Section 4.25 Title, Condition and Sufficiency of Assets; Conduct of Practice...................- 35 -
Section 4.26 Transactions with Affiliates......................................................- 35 -
Section 4.27 Absence of Certain Practices......................................................- 35 -
Section 4.28 Accounts Payable..................................................................- 36 -
Section 4.29 Accounts Receivable...............................................................- 36 -
Section 4.30 Records...........................................................................- 36 -
Section 4.31 Fraud and Abuse/Referrals.........................................................- 36 -
Section 4.32 Third-Party Payors................................................................- 37 -
Section 4.33 Compliance with Medicare and Medicaid Programs....................................- 37 -
Section 4.34 Rate Limitations and Rates........................................................- 37 -
Section 4.35 Participation in Audits...........................................................- 37 -
Section 4.36 Reimbursement Documentation.......................................................- 37 -
Section 4.37 Environmental Laws................................................................- 37 -
Section 4.38 Patients..........................................................................- 38 -
Section 4.39 Medical Waste.....................................................................- 38 -
Section 4.40 Bulk Sales........................................................................- 38 -
Section 4.41 Liabilities and Indebtedness......................................................- 38 -
Section 4.42 Investment Intent.................................................................- 38 -
Section 4.43 Disclosure........................................................................- 39 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................................................- 39 -
Section 5.01 Organization and Qualification....................................................- 39 -
Section 5.02 Authority.........................................................................- 39 -
Section 5.03 Consents and Approvals; No Violations.............................................- 40 -
ARTICLE VI
CERTAIN COVENANTS...................................................................................- 40 -
- iii -
Section 6.01 Access to Information.............................................................- 40 -
Section 6.02 Conduct of Business in Normal Course..............................................- 41 -
Section 6.03 No Solicitation...................................................................- 43 -
Section 6.04 Notification of Certain Matters...................................................- 44 -
Section 6.05 Supplements to Schedules..........................................................- 44 -
Section 6.06 Confidentiality...................................................................- 44 -
Section 6.07 Facilities Employees..............................................................- 46 -
Section 6.08 Obligations and Indebtedness......................................................- 46 -
Section 6.09 Purchase Orders...................................................................- 47 -
Section 6.10 Mainland Facility.................................................................- 47 -
Section 6.11 Recoupment Claims.................................................................- 47 -
ARTICLE VII
CONDITIONS TO EACH PARTY'S OBLIGATIONS..............................................................- 47 -
Section 7.01 Governmental Authorizations; Consents.............................................- 47 -
Section 7.02 Absence of Litigation.............................................................- 47 -
Section 7.03 No Injunction.....................................................................- 48 -
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS.................................................- 48 -
Section 8.01 Accuracy of Representations and Warranties........................................- 48 -
Section 8.02 Performance by the Sellers........................................................- 48 -
Section 8.03 Non-Competition Agreement.........................................................- 48 -
Section 8.04 Casualty Losses; Material Change..................................................- 48 -
Section 8.05 Assets............................................................................- 48 -
Section 8.06 Financial Statements..............................................................- 49 -
Section 8.07 Compliance with Laws..............................................................- 49 -
Section 8.08 Leases............................................................................- 49 -
Section 8.09 Consents and Approvals............................................................- 49 -
Section 8.10 Stockholder Approval..............................................................- 49 -
Section 8.11 Opinion of Counsel................................................................- 49 -
Section 8.12 FIRPTA Certificate................................................................- 49 -
Section 8.13 Obligations and Indebtedness......................................................- 49 -
Section 8.14 Notes.............................................................................- 50 -
ARTICLE IX
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS....................................................- 50 -
Section 9.01 Accuracy of Representations and Warranties........................................- 50 -
Section 9.02 Performance by Purchaser.........................................................- 50 -
Section 9.03 Opinion of Counsel................................................................- 50 -
Section 9.04 Registration Rights Agreement.....................................................- 50 -
- iv -
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION OBLIGATIONS.....................................................................- 50 -
ARTICLE XI
INDEMNIFICATION.....................................................................................- 51 -
Section 11.01 General Indemnity.................................................................- 51 -
Section 11.02 Limitation on Indemnification Liabilities.........................................- 52 -
Section 11.03 Indemnification Procedure.........................................................- 53 -
ARTICLE XII
TERMINATION.........................................................................................- 55 -
Section 12.01 Right to Terminate................................................................- 55 -
Section 12.02 Obligations to Cease..............................................................- 55 -
ARTICLE XIII
OBLIGATIONS AFTER THE CLOSING.......................................................................- 56 -
Section 13.01 Tax Returns; Tax Periods Ending on or Before the Closing Date.....................- 56 -
Section 13.02 Employees and Employee Benefits...................................................- 56 -
Section 13.03 Tax Audits........................................................................- 56 -
Section 13.04 Further Assurances and Cooperation................................................- 56 -
Section 13.05 Access............................................................................- 57 -
Section 13.06 Consent of the Sellers' Accountants...............................................- 57 -
Section 13.07 Closing Period Financial Statements...............................................- 57 -
Section 13.08 Stockholders' Meeting.............................................................- 57 -
Section 13.09 Change of Name....................................................................- 58 -
Section 13.10 Transfer Restrictions on Series D Stock...........................................- 58 -
Section 13.11 Recoupment Claims.................................................................- 58 -
ARTICLE XIV
MISCELLANEOUS.......................................................................................- 59 -
Section 14.01 Publicity.........................................................................- 59 -
Section 14.02 Costs.............................................................................- 59 -
Section 14.03 Headings..........................................................................- 59 -
Section 14.04 Notices...........................................................................- 59 -
Section 14.05 Assignment and Successors.........................................................- 60 -
Section 14.06 Binding Effect....................................................................- 60 -
Section 14.07 Governing Law; Forum; Process.....................................................- 60 -
Section 14.08 Entire Agreement..................................................................- 61 -
Section 14.09 Counterparts......................................................................- 61 -
Section 14.10 Severability......................................................................- 61 -
Section 14.11 No Prejudice......................................................................- 61 -
Section 14.12 Parties in Interest...............................................................- 61 -
- v -
Section 14.13 Amendment and Modification........................................................- 61 -
Section 14.14 Waiver............................................................................- 61 -
Section 14.15 Knowledge.........................................................................- 61 -
Section 14.16 Consents..........................................................................- 61 -
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SCHEDULES
---------
Schedule 1.01 Location of Facilities
Schedule 1.02 Stockholders
Schedule 2.01(a) Accounts Receivable
Schedule 2.01(b) Assumed Contracts
Schedule 2.01(c) Personal Property
Schedule 2.01(d) Licenses
Schedule 2.01(f) Computer Software
Schedule 2.01(g) Patents
Schedule 2.01(h) Real Property Leases
Schedule 2.01(i) Tangible Assets
Schedule 2.01(j) Corporate Names
Schedule 2.02(b) Tax Refunds
Schedule 2.02(c) Insurance Policies
Schedule 2.02(d) Prepaid Assets
Schedule 2.02(e) Security Deposits
Schedule 2.02(f) Deposits with Picker International, Inc.
Schedule 2.02(g) Excluded Contracts
Schedule 2.02(h) Non-transferable Licenses
Schedule 2.03(a)(i) Assumed Liabilities
Schedule 2.03(b)(vi) Terminated Purchase Orders
Schedule 2.03(b)(viii) Vista Upgrade
Schedule 3.02 New Leases
Schedule 2.04 Permitted Liens
Schedule 4.03 Consents and Approvals
Schedule 4.04 Capitalization
Schedule 4.07 Permits
Schedule 4.08 Litigation
Schedule 4.09 Taxes
Schedule 4.10 Employee Benefit Plans
Schedule 4.12 Insurance Policies
Schedule 4.13 Financial Statements
Schedule 4.14 Material Adverse Changes
Schedule 4.15 Liabilities
Schedule 4.16 Specified Changes
Schedule 4.17 Corporate Names
Schedule 4.18 Real Property/Leases
Schedule 4.19 Equipment and Personal Property
Schedule 4.20 Intellectual Property
Schedule 4.21 Software
Schedule 4.22 Contracts
Schedule 4.23 Inventory
- vii -
Schedule 4.24 Directors, Officers and Employees
Schedule 4.25 Liens
Schedule 4.26 Transactions with Affiliates
Schedule 4.27 Absence of Certain Practices
Schedule 4.29 Accounts Receivable
Schedule 4.32 Third Party Payor Contracts
Schedule 4.38 Adverse Relationships with Patients
Schedule 4.44 Residence Addresses
Schedule 5.03 Purchaser's Consents
Schedule 6.02 Conduct of Business pending Closing
Schedule 6.07 Vacation
Schedule 6.08 Obligations and Indebtedness
Schedule 13.08 Meeting Proposals
Schedule 14.16 Consents
EXHIBITS
---------
Exhibit 1 Form of Non-Competition Agreement
Exhibit 2 Form of Note and Pledge and Security Agreement
Exhibit 3 Certificate of Designations, Preferences and Rights of Series D
Cumulative Accelerating Redeemable Preferred Stock
Exhibit 4 Form of Escrow Agreement
Exhibit 5 Opinion of Counsel to the Purchaser
Exhibit 6 Form of Assignment and Assumption Agreement
Exhibit 7 Form of Lease
Exhibit 8 Registration Rights Agreement
Exhibit 9 Form of Voting Agreement
Exhibit 10 Opinion of Counsel to the Sellers
Exhibit 11 Form of FIRPTA Certificate
- viii -
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as
of September 16, 1998, by and among HealthCare Imaging Services, Inc., a
Delaware corporation (the "Purchaser"), and Echelon MRI, P.C., a New Jersey
professional corporation, Mainland Imaging Center, P.C., a New Jersey
professional corporation, North Jersey Imaging Management Associates, L.P., a
New Jersey limited partnership, Bloomfield Imaging Associates, P.A., a New
Jersey professional corporation, and Xxxxxx X. Xxxxx, M.D., P.A., a New Jersey
professional corporation (referred to collectively herein as the "Sellers" and
each individually as a "Seller"), the estate of Xxxxxx X. Xxxxx, Deceased (the
"Estate"), Xxx. Xxxxxxx Xxxxx ("Xxx. Xxxxx") and Xxx Xxxxx, M.D. ("Xx. Xxxxx";
the Estate, Xxx. Xxxxx and Xx. Xxxxx are referred to herein collectively as the
"Stockholders" and each individually as a "Stockholder").
WHEREAS, the Sellers currently operate three diagnostic imaging
facilities, one radiology/x- ray/ultrasound facility and certain other radiology
facilities located at the addresses set forth on Schedule 1.01 (referred to
herein collectively as the "Facilities" and each individually as a "Facility")
and are engaged in the provision of diagnostic imaging services (the
"Practice");
WHEREAS, the Stockholders own a majority of the Capital Stock, as the
case may be, in each of the Sellers;
WHEREAS, the Purchaser desires to acquire from the Sellers and the
Sellers desire to sell to the Purchaser, substantially all of the Sellers'
assets and properties that pertain to the Facilities upon the terms and subject
to the conditions set forth in this Agreement; and
WHEREAS, the Board of Directors of the Purchaser and the requisite
stockholders or other equity owners, the Board of Directors, general partner or
other governing board, as the case may be, of each Seller has, or will have
prior to the consummation of the transactions contemplated herein, duly approved
the transactions contemplated herein upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements contained herein and other good and
valuable consideration, the adequacy and receipt of which are hereby
acknowledged, intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 Definitions. As used throughout this Agreement, the
following terms have the following meanings:
"Accounts Receivable Adjustment" has the meaning ascribed thereto in
Section 2.07.
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of Capital Stock,
by contract or otherwise.
"Agreement" means this Agreement, as amended, modified or
supplemented from time to time in accordance with the terms hereof, together
with any exhibits, schedules or other attachments thereto.
"Allocation" has the meaning ascribed thereto in Section 2.10.
"Allocation Notice" has the meaning ascribed thereto in Section
2.10.
"Assets" means all of the Sellers' properties, assets, privileges,
rights, interests and claims, real and personal, tangible and intangible, of
every type and description (including all intangible property, tangible property
and real property of the Sellers), except the Excluded Assets, and any Assets
disposed of by the Sellers prior to the Closing pursuant to and not in violation
of this Agreement, whether owned or leased or otherwise possessed, used or held
for use by the Sellers with respect to the operation of the Facilities and the
Practice, whether or not described in the schedules to this Agreement and
whether or not reflected on the Financial Statements, now in existence or
hereafter acquired by the Sellers prior to the Closing.
"Assumed Liabilities" has the meaning ascribed thereto in Section
2.03(a).
"Bloomfield Facility" means the diagnostic imaging Facility operated
by Bloomfield Imaging Associates, P.A.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated and whether voting or non-voting) of such Person's capital stock or
any form of membership interests, as applicable, including, without limitation,
partnership interests, whether outstanding on the Closing Date or issued after
the Closing Date and any and all rights, warrants or options exercisable or
exchangeable for or convertible into such capital stock.
"Cash Consideration" has the meaning ascribed thereto in Section
2.05.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act of 1980.
"Closing" has the meaning ascribed thereto in Section 3.01.
"Closing A/R Adjustment" has the meaning ascribed thereto in Section
2.07.
- 2 -
"Closing Date" has the meaning ascribed thereto in Section 3.01.
"Closing Date A/R Amount" has the meaning ascribed thereto in
Section 2.06.
"Closing Date A/R Amount Certificate" has the meaning ascribed
thereto in Section 2.06.
"Closing Period" has the meaning ascribed thereto in Section 2.06.
"Closing Period Financial Statements" has the meaning ascribed
thereto in Section 2.06.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985.
"Code" means the Internal Revenue Code of 1986 (or any successor
statute thereto), as amended from time to time.
"Confidential Information" means all non-public information and
records, including the existence and terms of this Agreement, whether written or
oral, concerning the business of any other party hereto; provided, however, that
the term Confidential Information shall not include information or data which
(i) at the time of disclosure is generally available to and known by the public
other than as a result of disclosure in violation of clause (a) or (b) of
Section 6.06, (ii) was or becomes available to a party on a non-confidential
basis from a source other than the other party or its agents or advisors;
provided, however, that such source is not bound by a confidentiality agreement
or obligation of secrecy in respect thereof or (iii) may be disclosed by the
Purchaser pursuant to Section 14.01 hereof.
"Consents" means governmental and third party consents, permits,
approvals, orders, authorizations, qualifications and waivers necessary for the
consummation of the sale of the Assets contemplated hereby.
"Contracts" has the meaning ascribed thereto in Section 4.22.
"Conversion Shares" has the meaning ascribed thereto in Section
5.02.
"Disclosing Party" has the meaning ascribed thereto in Section
6.06(b).
"Echelon Facility" means the diagnostic imaging Facility operated by
Echelon MRI, P.C.
"Environmental Laws" means any applicable federal, state, local or
foreign laws, statutes, rules, regulations, orders, consent decrees, judgments,
permits or licenses, relating to prevention, remediation, reduction or control
of pollution, or protection of the environment, natural
- 3 -
resources and/or human health and safety, including, without limitation, such
applicable Laws or Licenses relating to (a) solid waste and/or Hazardous
Materials generation, handling, transportation, use, treatment, storage or
disposal, (b) air, water, and noise pollution, (c) soil, ground, water or
groundwater contamination, (d) the manufacture, generation, processing,
handling, distribution, use, treatment, storage, transportation or release,
emission or discharge into the environment of Hazardous Materials, (e)
regulation of underground and above ground storage tanks, (f) the obtaining,
sale, use, storage, disposal or testing of any human blood or blood product and
(g) the disposal of medical waste.
"ERISA" means the Employee Retirement Income Security Act of 1974,
and the rules and regulations thereunder, as amended from time to time.
"Escrow Agent" has the meaning ascribed thereto in Section 2.08.
"Excluded Assets" has the meaning ascribed thereto in Section 2.02.
"Facilities" has the meaning ascribed thereto in the Preamble to
this Agreement.
"Facilities Employees" means all persons employed on the Closing
Date by the Sellers at the Facilities.
"FDA" means the Food and Drug Administration.
"Final Closing Date A/R Amount" has the meaning ascribed thereto in
Section 2.06.
"Final Closing Period Financial Statements" has the meaning ascribed
thereto in Section 2.06.
"Financial Statements" means the 1997 Financial Statements, the 1996
Financial Statements, the 1997 Tax Basis Financial Statements, the 1996 Tax
Basis Financial Statements and the Interim Financial Statements.
"1997 Financial Statements" means the audited financial statements
of the Sellers for the fiscal year ended December 31, 1997, including the
statements of assets, liabilities and stockholders' equity as at December 31,
1997 and the statements of revenues, expenses and retained earnings and the
statement of cash flows and the notes and supplementary information thereto for
the fiscal year ended December 31, 1997, prepared on a accrual basis in
accordance with GAAP, together with the audit opinion of the Sellers'
Accountants thereon.
"1996 Financial Statements" means the audited financial statements
of the Sellers for the fiscal year ended December 31, 1996, including the
statements of assets, liabilities and stockholder's equity as at December 31,
1996 and the statements of revenues, expenses and retained earnings and the
statement of cash flows and the notes and supplementary information thereto for
- 4 -
the fiscal year ended December 31, 1996, prepared on an accrual basis in
accordance with GAAP, together with the audit opinion of the Sellers'
Accountants thereon.
"FIRPTA Certificate" has the meaning ascribed thereto in Section
8.12.
"GAAP" means U.S. generally accepted accounting principles and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession that are applicable to the circumstances as
of the date of determination.
"Governmental Authority" means any governmental authority including,
without limitation, any federal, state, territorial, county, municipal or other
governmental agency, board, branch, bureau, commission, court, arbitration
panel, department, authority, body or other instrumentality or political unit or
subdivision or official thereof, whether domestic or foreign.
"Hazardous Materials" means and includes any pollutants, hazardous
or toxic materials, substances or wastes, including: petroleum and petroleum
products and derivatives; asbestos; radon; polychlorinated bi-phenyls;
urea-formaldehyde foam insulation; explosives; radioactive materials; laboratory
wastes and medical wastes (including contaminated clothing, body fluids,
contaminated medical instruments and equipment, catheters, used bandages,
gauzes, needles or other sharp instruments); and any chemicals, materials or
substances designated or regulated as hazardous or as toxic substances,
materials, or wastes, or otherwise regulated, under any Environmental Law;
hazardous waste, hazardous material, hazardous substance, petroleum product,
oil, toxic substance, pollutant, contaminant, or other material or substance
hazardous to human health or safety, as defined or regulated under any
Environmental Law.
"HCFA" means the Health Care Financing Administration.
"Indemnitee" has the meaning ascribed thereto in Section 11.01.
"Indemnitor" has the meaning ascribed thereto in Section 11.01.
"Independent Auditor" means an impartial certified public accounting
firm of national standing which has not provided accounting services to any
party hereto or its Affiliates at any time within the prior three (3) years and
which is reasonably acceptable to the Purchaser and the Sellers.
"Interim Balance Sheet Date" has the meaning ascribed thereto in
Section 4.23.
"Interim Financial Statements" means the financial statements of the
Sellers, compiled by SCW&Co, for the six months ended June 30, 1998, including
the statements of assets, liabilities and stockholder's equity as at June 30,
1998 and the statements of revenues, expenses and
- 5 -
retained earnings and the statement of cash flows and the notes and
supplementary information thereto, for the six months ended June 30, 1998,
prepared on an accrual basis in accordance with GAAP.
"IRS" means the U.S. Internal Revenue Service or any successor
agency.
"Law" means any statute, ordinance, code, rule, regulation or court
order enacted, adopted or promulgated by any Governmental Authority.
"Leased Premises" means any real property which the Sellers lease or
sublease.
"Leases" has the meaning ascribed thereto in Section 2.01(h).
"Letter of Intent" means the letter of intent, dated March 6, 1998,
by and among the Company, the Sellers and the Stockholders.
"Licenses" means all licenses, permits, consents, authorizations,
registrations and approvals of, with or from Governmental Authorities, including
all occupancy, fire, business and other permits from local officials required
for the conduct of the business by the Sellers, the Facilities and the Practice
as now being conducted.
"Lien" means any security agreement, financing statement (whether or
not filed), mortgage, lien (statutory or otherwise), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance, lien, charge, restrictive
agreement, mortgage, deed of trust, indenture, pledge, option, limitation,
exception to or other title defect in or on any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale, lease, consignment, or bailment given for security purposes, trust receipt
or other title retention agreement with respect to any property or asset of such
Person, whether direct, indirect, accrued or contingent.
"Losses" means any and all losses, claims, damages, liabilities (or
actions, suits or proceedings, including any inquiry or investigation with
respect thereto), costs (including the reasonable costs of preparation and
reasonable attorneys' fees) and expenses (including reasonable expenses of
investigation).
"Mainland Facility" means the diagnostic imaging Facility operated
by Mainland Imaging Center, P.C.
"Material Adverse Effect" means any event, circumstance or condition
that, individually or when aggregated with all other similar events,
circumstances or conditions could reasonably be expected to have, or has had, a
material adverse effect on: (i) the business, property, operations, condition
(financial or otherwise), results of operations or prospects of the Sellers, the
Facilities or the Practice; (ii) the Assets; (iii) the ability of the Sellers to
consummate the transactions
- 6 -
contemplated hereunder in the manner contemplated hereby; or (iv) the ability of
the Purchaser to perform and conduct the operations of the Facilities and the
Practice after the consummation of the transactions contemplated by this
Agreement substantially in the manner conducted prior to the consummation of
such transactions.
"Medical Waste" means (i) pathological waste, (ii) blood, (iii)
sharps, (iv) wastes from surgery or autopsy, (v) dialysis waste, including
contaminated disposable equipment and supplies, (vi) cultures and stocks of
infectious agents and associated biological agents, (vii) contaminated animals,
(viii) isolation wastes, (ix) contaminated equipment, (x) laboratory waste, (xi)
any substance, pollutant, material, or contaminant listed or regulated under any
Medical Waste Law, and (xii) other biological waste and discarded materials
contaminated with or exposed to blood, excretion, or secretions from human
beings or animals.
"Medical Waste Laws" means the following, including regulations
promulgated and orders issued thereunder, as in effect on the date hereof and
the Closing Date: (i) the Medical Waste Tracking Act of 1988, 42 USCA
ss.ss.6992, et seq., (ii) the U.S. Public Vessel Medical Waste Anti- Dumping Act
of 1988, 33 USCA ss.ss.2501 et seq., (iii) the Marine Protection, Research, and
Sanctuaries Act of 1972, 33 USCA ss.ss.1401 et seq., (iv) the Occupational
Safety and Health Act, 29 USCA ss.ss.651 et seq., (v) the United States
Department of Health and Human Services, National Institute for Occupational
Safety and Health, Infectious Waste Disposal Guidelines, Publication No. 88-119,
and (vi) and any Laws insofar as they are applicable to assets or operations of
the Sellers, the Facilities and the Practice purport to regulate Medical Waste
or impose requirements relating to Medical Waste.
"Meeting" shall have the meaning ascribed thereto in Section 13.08
"Minority Stockholders" means all stockholders, other than the
Stockholders, of each Seller, all of whom are listed on Schedule 1.02.
"Non-Assignable Assets" has the meaning ascribed thereto in Section
3.05.
"Non-Competition Agreements" means the Non-Competition Agreements,
effective as of the Closing Date, between the Purchaser and each of the Sellers,
Xxx. Xxxxx, Xx. Xxxxx, Xxxxxx Xxxxx and Xxxxx Xxxxx, as amended, modified or
supplemented from time to time in accordance with the terms thereof, together
with any exhibits, schedules or other attachments thereto, substantially in the
form of Exhibit 1 hereto.
"Notes" means the Sellers' notes in the form attached hereto as
Exhibit 2 in favor of the Purchaser in the aggregate amount of the Purchaser
Loan Amount and each referencing the Pledge and Security Agreements containing a
pledge of such Seller's Series D Stock as collateral security for the payment of
the Notes.
"Notice" has the meaning ascribed thereto in Section 11.03(a).
- 7 -
"Patients" means all patients who are currently or have been
patients of such Seller at any time during the two (2) year period preceding the
date of this Agreement.
"Patient Files" means all materials or information of the Sellers
relating to the Patients.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning ascribed thereto in Section 4.07.
"Permitted Liens" has the meaning ascribed thereto in Section 2.04.
"Person" means any corporation, partnership, firm, joint venture,
individual, association, trust, unincorporated organization or other entity.
"Physician Employees" means any physicians who, at any time during
the two (2) year period preceding the date of this Agreement, have performed or
currently are performing services for such Seller.
"Plans" means all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans and all multi-employer plans
(as defined in Sections 3(3), (1) and (2), respectively, of ERISA), (including,
without limitation, benefit plans or arrangements that are not subject to ERISA,
such as employment agreements and any other agreements containing "golden
parachute" provisions and deferred compensation agreements), together with
copies of any trusts related thereto and a classification of employees covered
thereby.
"Pledge and Security Agreements" means the Pledge and Security
Agreements, effective as of the Closing Date, by each Seller in favor of the
Purchaser, as amended, modified or supplemented from time to time in accordance
with the terms thereof, together with any exhibits, schedules or other
attachments thereto, substantially in the form of Exhibit 2 hereto.
"Practice" has the meaning ascribed thereto in the Preamble to this
Agreement.
"Pre-Closing A/R Adjustment" has the meaning ascribed thereto in
Section 2.07(a).
"Preferred Stock Consideration" has the meaning ascribed thereto in
Section 2.05.
"Pre-Tax Profits" means the aggregate amount of the earnings before
income taxes of the Sellers for the fiscal year ended December 31, 1997, as
reflected in the 1997 Tax Basis Financial Statements.
"Proposed Allocation" has the meaning ascribed thereto in Section
2.10.
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"Purchase Price" has the meaning ascribed thereto in Section 2.05.
"Purchaser" means HealthCare Imaging Services, Inc. and any
subsidiary thereof to which it may assign its rights, without delegating its
obligations, hereunder.
"Purchaser Common Stock" means the common stock, par value $0.01 per
share, of the Purchaser.
"Purchaser Health Plan" has the meaning ascribed thereto in Section
6.07.
"Purchaser Loan Amount" means an aggregate of $2.5 million.
"Purchaser's Accountants" means Deloitte & Touche, LLP, certified
public accountants.
"Qualified Plans" has the meaning ascribed thereto in Section
4.10(b).
"Recoupment Claim" means any recoupment or overpayment, set-off,
penalty or fine pending, or to the knowledge of the Sellers or the Stockholders
threatened, by any third-party payor or Governmental Authority having
jurisdiction over the Sellers, the Facilities or the Practice for amounts
arising from or related to payments to the Sellers, the Facilities or the
Practice for services rendered at the Facilities prior to the Closing.
"Registration Rights Agreement" has the meaning ascribed thereto in
Section 3.02.
"Representative" has the meaning ascribed thereto in Section
6.06(b).
"Retraining Obligations" has the meaning ascribed thereto in Section
6.07.
"SCW&Co" means Seligman, Cupersmith, Xxxxxxxx & Company, LLP,
certified public accountants.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
"Seller" has the meaning ascribed thereto in the preamble to this
Agreement.
"Sellers' Accountants" means Xxxxx Xxxxxxx & Company, P.A.,
certified public accountants.
"Selling Group" has the meaning ascribed thereto in Section 6.06(a).
"Series D Stock" has the meaning ascribed thereto in Section 2.05.
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"Subject Party" has the meaning ascribed thereto in 6.06(b).
"Tax" and "Taxes" means any and all taxes, charges, fees, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, premium, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties (including penalties for failure to file in accordance with
applicable information reporting requirements), and additions to tax by any
Governmental Authority.
"Taxpayers" has the meaning ascribed thereto in Section 4.09(a).
"Tax Action" has the meaning ascribed thereto in Section 13.03.
"1997 Tax Basis Financial Statements" means the financial statements
of the Sellers, compiled by SCW&Co, for the fiscal year ended December 31, 1997,
including the statements of assets, liabilities and stockholder's equity as at
December 31, 1997 and the statements of revenues, expenses and retained earnings
and the statement of cash flows and the notes and supplementary information
thereto, for the fiscal year ended December 31, 1997, prepared on an income tax
basis.
"1996 Tax Basis Financial Statements" means the financial statements
of the Sellers, compiled by SCW&Co, for the fiscal year ended December 31, 1996,
including the statements of assets, liabilities and stockholder's equity as at
December 31, 1996 and the statements of revenues, expenses and retained earnings
and the statement of cash flows and the notes and supplementary information
thereto for the fiscal year ended December 31, 1996, prepared on an income tax
basis.
"Tax Return" means any report, return, form, declaration or other
document or information required to be supplied to any Governmental Authority in
connection with Taxes.
"Threshold Amount" has the meaning ascribed thereto in Section
11.02.
"Transaction Documents" means, collectively, this Agreement and any
and all agreements, exhibits, schedules, certificates, instruments and other
documents contemplated hereby or executed and delivered in connection herewith.
"12/31/97 A/R Amount" means $5,817,540
"Vista Upgrade" has the meaning ascribed thereto in Section 2.03.
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Section 1.02 Rules of Construction.
----------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in
the plural include the singular;
(e) provisions apply to successive events and transactions;
(f) the words "include" and "including" shall be deemed to
mean "include, without limitation," and "including,
without limitation";
(g) "herein," "hereof," "hereto," "hereunder" and other
words of similar import refer to this Agreement as a
whole and not to any particular article, section,
paragraph or clause where such terms may appear;
(h) references to sections or articles mean references to
such section or article in this Agreement, unless
stated otherwise; and
(i) the use of any gender shall be applicable to all
genders.
ARTICLE II
PURCHASE AND SALE OF ASSETS
---------------------------
Section 2.01 Sale and Purchase of Assets. Except as set forth in
Section 2.02 hereof, upon the terms and subject to the conditions set forth
herein, at the Closing, the Sellers shall sell, convey, transfer, assign and
deliver to the Purchaser, and the Purchaser shall purchase, acquire and accept
from the Sellers, free and clear of all Liens, all of the Assets, including,
without limitation, the following:
(a) all accounts receivable of any kind of the Sellers with respect
to services provided at the Facilities, including but not limited, to accounts
receivable arising from services rendered prior to the Closing Date,
notwithstanding that invoices relating thereto have not yet been issued, and
those which are specified on Schedule 2.01(a);
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(b) all right, title and interest of the Sellers in and to all
contracts, agreements, arrangements, instruments, documents of any nature or
description that pertain to the Practice or the Facilities, including, but not
limited to, those which are specified on Schedule 2.01(b);
(c) all machinery, equipment, furniture, fixtures, office and
computer equipment, leasehold improvements, vehicles and other tangible personal
property of the Sellers, used or held for use in the Facilities or the Practice,
including, but not limited to, those which are specified on Schedule 2.01(c);
(d) all interests of the Sellers in regulatory licenses, approvals,
permits and applications held by the Sellers that pertain to the Practice or the
Facilities which are capable of being transferred, including, but not limited
to, those which are specified on Schedule 2.01(d);
(e) all Patient Files in any form (and all software related to any
such computer records) in the possession or control of the Sellers to the extent
legally transferable;
(f) all computer software, computer databases, computer programs,
application software, source codes and object codes owned by the Sellers and
used or held for use by the Facilities or the Practice, including, but not
limited to, those which are specified on Schedule 2.01(f);
(g) all patents, trademarks, trade secrets, inventions, processes,
procedures, research records, market surveys, copyrights, service marks, trade
names and know-how and other intellectual property, wherever located, of the
Sellers related to the Facilities or the Practice and all registrations and
applications for registration of any of the foregoing, including, but not
limited to, those which are specified on Schedule 2.01(g);
(h) all right, title and interest of the Sellers under the real
property leases, written or oral (collectively, the "Leases"), listed, and, with
respect to oral leases, the terms and conditions of which are set forth, on
Schedule 2.01(h);
(i) all inventories, supplies and similar tangible assets of the
Sellers related to the Facilities or the Practice, including, but not limited
to, those which are specified on Schedule 2.01(i);
(j) all right, title and interest of the Sellers in and to the
corporate names of the Sellers and all names under which the Sellers are
currently doing business, including, but not limited to, those which are
specified on Schedule 2.01(j) to the extent legally transferable;
(k) all goodwill of the Sellers generated by the Facilities or the
Practice;
(l) all books and records of the Sellers relating to the Facilities
or the Practice, including, without limitation, manuals, standard operating
procedures, correspondence, customer, vendor and mailing lists, production
records, employment records, customer relation information and all other
confidential or proprietary information pertaining to the Facilities or the
Practice;
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(m) all rights of the Sellers residuary to or arising out of or
under express or implied warranties from suppliers, manufacturers or vendors
with respect to the Assets; and
(n) all other assets and properties of any nature whatsoever held by
the Sellers, either directly or indirectly, and used in, allocated to, or
required for the conduct of, the Facilities or the Practice, including all data,
files, indices, analyses and similar information, all stationery, invoices and
other forms and all other records of any kind.
Section 2.02 Excluded Assets. Notwithstanding anything to the contrary
in this Agreement, the Sellers shall retain and shall not sell, transfer, convey
or assign to the Purchaser, and the Purchaser shall not purchase or acquire, any
of the Sellers' right, title and interest in and to the following (the "Excluded
Assets"):
(a) all cash of the Sellers;
(b) all tax refunds including, but not limited to, those specified
on Schedule 2.02(b);
(c) all insurance policies and claims against officers and directors
including, but not limited to, those specified on Schedule 2.02(c);
(d) all prepaid assets specified on Schedule 2.02(d);
(e) all security deposits specified on Schedule 2.02(e);
(f) all deposits with Picker International, Inc. specified on
Schedule 2.02(f);
(g) all contracts specified on Schedule 2.02(g); and
(h) all non-transferable regulatory licenses, approvals, permits and
applications held by any Seller that pertain to the Practice or the Facilities
and specified on Schedule 2.02(h).
Section 2.03 Liabilities Transferred.
(a) Notwithstanding anything to the contrary in this Agreement, the
Purchaser shall not assume any liabilities of the Sellers, the Stockholders or
the Minority Stockholders, whether accrued, absolute or contingent, recorded or
unrecorded or otherwise, other than the following ("Assumed Liabilities"):
(i) the Purchaser will assume the performance of all obligations
that accrue after the Closing Date with respect to (x) the agreements specified
in Schedule 2.03(a)(i), provided, however, that the Stockholders and/or the
Sellers, as the case may be, shall remain liable for, and shall fully perform,
all liabilities of or with respect to the Practice and Facilities that accrue
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on or prior to the Closing, and (y) Recoupment Claims which arose from actual
services performed at the Facilities and were in the ordinary course of business
consistent with past practice, other than those for which payment has been
received by the Sellers, the Facilities or the Practice, as applicable, prior to
the Closing.
(b) The Sellers shall be responsible for all obligations and
liabilities of the Sellers, other than the Assumed Liabilities, included but not
limited to the following (the "Excluded Liabilities"):
(i) liabilities or obligations of any of the Sellers for
indebtedness to any of their stockholders or other equity owners or to any
Person affiliated or associated therewith;
(ii) except as otherwise specifically provided herein,
liabilities or obligations with respect to this Agreement or any of the
transactions contemplated hereunder including, without limitation, legal and
accounting fees;
(iii) liabilities or obligations which may arise by reason of or
with respect to the dissolution of any of the Sellers;
(iv) subject to Section 6.07, liabilities or obligations for any
severance or post-termination benefits or other payments or awards (including,
without limitation, disability payments and workers compensation awards) owed to
or incurred on behalf of any employee of the Sellers and/or the Facilities or
Practice terminated prior to or at the Closing, including, without limitation,
any obligations under COBRA;
(v) liabilities or obligations incurred by any Seller or
Stockholder which violate or breach any representation, warranty, covenant or
agreement of the Sellers or the Stockholders included herein or made in
connection herewith;
(vi) the obligations of the Sellers and/or Stockholders with
respect to the purchase orders for the equipment specified on Schedule
2.03(b)(vi), and the Purchaser will have no liability with respect to such
equipment or any termination of such purchase orders;
(vii) all accounts payable, accrued expenses, and Taxes of, and
pertaining to, the Facilities and the Practice, including but not limited to,
the foregoing and the payment of employee salaries, benefits, vacation, sick
pay, and severance and termination payments that accrue on or prior to the
Closing;
(viii) the obligations of the Sellers and/or Stockholders, if
any, with respect to the upgrade of the Picker 1.OT Vista MR System located at
the Bloomfield Facility as specified on Schedule 2.03(b)(viii) (the "Vista
Upgrade"); and
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(ix) all liabilities or obligations that are not Assumed
Liabilities (including, without limitation, Recoupment Claims for which payment
has been received by the Sellers, the Facilities or the Practice, as applicable,
prior to the Closing (which claims and any and all Losses related thereto shall
be payable by the Sellers in cash or in shares of Series D Stock, as the Sellers
may determine) and any amount payable in respect of the termination of any
insurance policy covering the Assets as of the Closing).
Section 2.04 Transfer of Assets. The transfer of the Assets as herein
contemplated shall be made by the Sellers, free and clear of all Liens of any
kind or nature except Liens specified on Schedule 2.04 that relate to the
Assumed Liabilities (collectively, "Permitted Liens") and shall be effected by
such bills of sale, endorsements, assignments, drafts, checks, deeds and other
instruments of transfer, conveyance and assignment as shall be necessary or
appropriate to transfer, convey and assign the Assets to the Purchaser on the
Closing Date as contemplated by this Agreement and as shall be reasonably
requested by the Purchaser. The Sellers shall, at any time and from time to time
after the Closing Date at the Purchaser's sole cost and expense, execute and
deliver such other instruments of transfer and conveyance and do all such
further acts and things as may be reasonably requested by the Purchaser to
transfer, convey, assign, and deliver to the Purchaser or to aid and assist the
Purchaser in collecting and reducing to possession any and all of the Assets, or
to vest in the Purchaser good, valid and legal and beneficial title to the
Assets which had been owned by the Sellers prior to the Closing.
Section 2.05 Purchase Price and Adjustments. The purchase price for the
Assets (the "Purchase Price") shall be $11,500,000 in cash (the "Cash
Consideration") and 1,000 shares (subject to adjustment as set forth in Section
2.07) of the Purchaser's Series D Cumulative Accelerating Redeemable Preferred
Stock (the "Series D Stock") having an aggregate liquidation preference of
$10,500,000 (the "Preferred Stock Consideration"). The Certificate of
Designations, Preferences and Rights of the Series D Stock is attached hereto as
Exhibit 3. Any adjustments to the Purchase Price shall be payable in shares of
Series D stock valued at its liquidation preference.
Section 2.06 Closing Date Statements. As promptly as practicable after
the Closing Date (but in no event later than thirty (30) days after the Closing
Date), the Sellers will deliver to the Purchaser (i) unaudited financial
statements of the Sellers prepared by SCW&Co, on an accrual basis, in a manner
consistent with the 1997 Financial Statements, for the period commencing July 1,
1998 and ending on the last day of the month immediately preceding the month in
which the Closing occurs (the "Closing Period"), including statements of
revenues, expenses and retained earnings, statements of assets, liabilities and
stockholders' equity and statement of cash flows, as well as the supplementary
information and notes thereto (the foregoing financial statements are referred
to as the "Closing Period Financial Statements") and (ii) a statement, with
requisite supporting schedules and notes (the "Closing Date A/R Amount
Certificate"), of the aggregate amount of the net collectible accounts
receivable of the Sellers as at the Closing Date, calculated on an accrual basis
in accordance with GAAP and in a manner consistent with the calculation of the
12/31/97 A/R Amount (the "Closing Date A/R Amount"). The Purchaser and its
representatives shall have the right to review the Closing Period Financial
Statements and the Sellers' calculation
- 15 -
of the Closing Date A/R Amount. Within thirty (30) days after the delivery of
the Closing Period Financial Statements and the Sellers' calculation of the
Closing Date A/R Amount, the Purchaser may notify the Sellers of any objections
or changes thereto, specifying in reasonable detail any such objections or
changes. If the Purchaser does not notify the Sellers of any objections or
changes to the Closing Period Financial Statements and the Sellers' calculation
of the Closing Date A/R Amount within such thirty (30) day period, or if the
Sellers and the Purchaser agree on the resolution of all objections or changes,
then such Closing Period Financial Statements and the Sellers' calculation of
the Closing Date A/R Amount, with such changes as are agreed upon, shall be
final and binding, and shall be referred to as the "Final Closing Period
Financial Statements" or the "Final Closing Date A/R Amount", respectively. If
the Sellers and the Purchaser shall fail to reach an agreement with respect to
all objections or changes, then all disputed objections or changes shall, not
later than ten (10) days after one of the parties affirmatively terminates
discussions in writing with respect to such objections or changes, be submitted
for resolution to an Independent Auditor. The Purchaser and the Sellers shall
use reasonable efforts to cause the Independent Auditor, within twenty (20) days
of its appointment, to use its best judgment in resolving the disputes submitted
to it. The Closing Period Financial Statements and the Sellers' calculation of
the Closing Date A/R Amount, as adjusted pursuant to the preceding sentence,
shall be final and binding and shall be referred to as the "Final Closing Period
Financial Statements" or the "Final Closing Date A/R Amount", respectively. In
the event that the Independent Auditor resolves all disputes presented to it in
the manner proposed by one of the parties, the fees and expenses of the
Independent Auditor relating to the resolution of such dispute shall be paid by
the other party. In all other events, the fees and expenses of the Independent
Auditor shall be shared in the same proportion that the Sellers' position, on
the one hand, and the Purchaser's position, on the other hand, initially
presented to the Independent Auditor bears to the final resolution as determined
by the Independent Auditor.
Section 2.07 Accounts Receivable Adjustment.
(a) To the extent, if any, that the Pre-Tax Profits and/or the
12/31/97 A/R Amount is less than $4.5 million and $7.0 million, respectively,
then the Preferred Stock Consideration payable at the Closing shall be adjusted
on the Closing Date on a $4.90 for $1.00 basis with respect to adjustments for
decreases in aggregate pre-tax profits and on a $1.00 for $1.00 basis with
respect to adjustments for decreases in aggregate net collectible accounts
receivable, without duplication (the "Pre-Closing A/R Adjustment").
(b) In the event that the Final Closing Date A/R Amount is less than
$7.0 million, then the Preferred Stock Consideration shall be reduced on a $1.00
for $1.00 basis for the amount of such shortfall, without duplication for the
Pre-Closing A/R Adjustment; however, if the Final Closing Date A/R Amount
exceeds the 12/31/97 A/R Amount the Preferred Stock Consideration shall be
increased by such excess amount but only up to the amount of the Pre-Closing A/R
Adjustment (the "Closing A/R Adjustment"). The net effect of the Pre-Closing A/R
Adjustment and the Closing A/R Adjustment shall be referred to herein as the
"Accounts Receivable Adjustment".
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Section 2.08 Payment of Purchase Price and Adjustments.
(a) The Purchase Price payable at Closing by the Purchaser to the
Sellers shall be (i) the Cash Consideration of $11,500,000, which sum shall be
paid by transfer of immediately available funds to an account or accounts
previously designated in writing by the Sellers or by certified check payable to
the order of the Sellers and (ii) certificates evidencing 871.023 shares of
Series D Stock (as adjusted in accordance with the provisions of Section 2.07).
Certificates evidencing 16.362 shares of Series D Stock (which shares shall have
an aggregate liquidation preference equal to the sum of (x) $125,000 and (y)
$46,800) shall be deposited with Xxxxxxx Berlin Shereff Xxxxxxxx, LLP as escrow
agent pursuant to the terms of an escrow agreement in the form attached hereto
as Exhibit 4 (the "Escrow Agreement"), which certificates shall be duly endorsed
in blank or accompanied by stock powers duly endorsed in blank. Such shares
shall be held in escrow commencing on the Closing Date for purposes of funding
the Accounts Receivable Adjustment and for obtaining appropriate tax clearance
certificates from the State of New Jersey in accordance with the Escrow
Agreement. The shares shall be released by the escrow agent in accordance with
the terms set forth in the Escrow Agreement.
(b) Within four (4) days of the parties' receipt of the Final
Closing Date A/R Amount, the net amount owing to the Purchaser or the Sellers,
as the case may be, due to the Accounts Receivable Adjustment, shall be paid to
the Purchaser or the Sellers, as the case may be, by transfer from the Sellers
of shares of Series D Stock (valued at its liquidation preference) to the
Purchaser, or from the Purchaser of immediately available funds to an account
previously designated by the Sellers, as appropriate. The Stockholders shall be
jointly and severally liable for amounts payable by the Sellers hereunder.
Section 2.09 Work Papers. Each of the Purchaser and the Sellers agrees
to permit the other party and such other party's accounting firm and the
Independent Auditor, if any, to have reasonable access during normal business
hours to its books and records as they relate to the Sellers, the Facilities,
the Practice and the books and records of the Sellers, including, without
limitation, the work papers of its accountants, and to have reasonable access to
such party's representatives or its accountants, including in connection with
the preparation and review of the Financial Statements, the 12/31/97 A/R Amount
and the Final Closing Date A/R Amount.
Section 2.10 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets being sold hereunder in the manner required by
Treasury Regulations ss.1.1060-1T and as mutually agreed among the Purchaser and
the Sellers. The Purchaser will submit to the Sellers a proposed allocation (the
"Proposed Allocation") within thirty (30) days after the Final Closing Date A/R
Amount is determined. The Proposed Allocation shall allocate the Final Closing
Date A/R Amount to accounts receivable, no more than one-half of the sum of (i)
$5.5 million and (ii) the book value of property, plant and equipment at August
31, 1998 to property, plant and equipment, and the balance to goodwill. If the
Sellers do not notify the Purchaser within fifteen (15) days of receipt of the
Proposed Allocation of any disagreement with the Proposed Allocation, then the
Proposed Allocation shall become the final allocation (the "Allocation"). If the
Sellers notify the Purchaser
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within such fifteen (15) day period (the "Allocation Notice") of its
disagreement with the Proposed Allocation, then the Sellers and the Purchaser
shall in good faith attempt to resolve their disagreement. If such disagreement
is not resolved within fifteen (15) days from the delivery of the Allocation
Notice then such disagreement shall be resolved by an Independent Auditor. In
the event the allocation is determined after delivery of the Allocation Notice,
either by discussions among the Sellers and the Purchaser or by an Independent
Auditor, then such allocation shall become the Allocation. The Purchaser and the
Sellers agree that, except as otherwise required by law, (i) the Allocation
shall be binding on the Purchaser and the Sellers for all federal, state and
local tax purposes, (ii) the Purchaser and the Sellers shall each execute a
writing memorializing the Allocation and (iii) the Purchaser and the Sellers
shall file with their respective federal income tax returns consistent IRS Forms
8594-Asset Acquisition Statements Under Section 1060, including any required
amendment thereto which shall reflect the allocations set forth in the
Allocation. The parties acknowledge that the allocation of the Purchase Price
provided for in the Allocation will be reasonable. In the event that the
Independent Auditor resolves all disputes presented to it in the manner proposed
by one of the parties, the fees and expenses of the Independent Auditor relating
to the resolution of such dispute shall be paid by the other party. In all other
events, the fees and expenses of the Independent Auditor shall be shared in the
same proportion that the Sellers' position, on the one hand, and the Purchaser's
position, on the other hand, initially presented to the Independent Auditor,
bears to the final resolution as determined by the Independent Auditor.
Section 2.11 Clearance Certificates. To the extent required by law to
relieve Purchaser of any secondary liability for unpaid sales or similar Taxes
of the Sellers attributable to periods prior to the Closing Date, each of the
Sellers shall, prior to the Closing Date, take all necessary action in order to
obtain clearance certificates or similar documents from any applicable state Tax
authority as soon as practicable after the Closing.
Section 2.12 Transfer Taxes. All municipal, county, state and federal
sales and transfer taxes incurred, if any, in connection with the transactions
contemplated by this Agreement shall be the responsibility of, and paid promptly
by, the Purchaser. Each party, as appropriate, shall in a timely manner sign and
swear to any return, certificate, questionnaire or affidavit as to any matter
within its knowledge required in connection with the payment of any such tax.
ARTICLE III
THE CLOSING
-----------
Section 3.01 Closing Date. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Blank Rome
Xxxxxxx & XxXxxxxx LLP, Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 on October 1,
1998, or such other location, date and time as to which the parties may mutually
agree (such date and time of the Closing is referred to herein as the "Closing
Date").
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Section 3.02 Deliveries by the Purchaser at the Closing. At the
Closing, the Purchaser shall deliver to the Sellers the following:
(i) the Cash Consideration;
(ii) stock certificates, containing appropriate restrictive
legends regarding transferability restrictions related to
applicable securities laws and this Agreement, evidencing
871.023 shares of the Series D Stock;
(iii) resolutions duly adopted by the Board of Directors of the
Purchaser authorizing the transactions which are the
subject of this Agreement and recommending to the
Purchaser's stockholders ratification and approval of the
issuance of the Series D Stock (which recommendation may
be withdrawn prior to such stockholder vote because of
fiduciary responsibilities arising from facts or
circumstances and/or any consequences thereof, whether
related to the transactions contemplated by this Agreement
or otherwise, which were not known by the Board of
Directors of the Purchaser at the time such Board
resolutions were adopted), certified by the Secretary of
the Purchaser;
(iv) a certificate of an authorized executive officer of the
Purchaser certifying to the fulfillment of conditions set
forth in Sections 5.01 and 5.02;
(v) the Escrow Agreement duly executed by the Purchaser
(together with the stock certificates, containing
appropriate restrictive legends regarding transferability
restrictions related to applicable securities laws and
this Agreement, evidencing 16.362 shares of Series D
Stock, and executed stock powers, as required by Section
2.08);
(vi) the opinion of counsel to the Purchaser in the form of
Exhibit 5;
(vii) the Assignment and Assumption Agreement in the form
attached hereto as Exhibit 6, duly executed by the
Purchaser, transferring to the Purchaser all interests of
the Sellers with respect to the Leases and Contracts;
(viii) duly executed leases with respect to certain of the
Facilities with such parties as listed on Schedule 3.02 in
the form attached hereto as Exhibit 7;
(ix) the Purchaser Loan Amount;
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(x) the registration rights agreement among the Purchaser and
the Sellers, substantially in the form attached hereto as
Exhibit 8 (the "Registration Rights Agreement"), duly
executed by the Purchaser;
(xi) copies of the Consents referred to in Section 5.03;
(xii) the voting agreement among the Sellers, the Stockholders,
Xxxxxxx X. Xxxxxx and another stockholder of the Purchaser
who beneficially owns at least 1.0 million shares of the
Purchaser's common stock, substantially in the form
attached hereto as Exhibit 9, duly executed by Xx. Xxxxxx
and such other stockholder of the Purchaser; and
(xiii) such other instruments and certificates, evidencing the
transactions contemplated hereby, as may be reasonably
requested by the Sellers.
Section 3.03 Deliveries by the Sellers at the Closing. At the Closing,
the Sellers shall deliver to the Purchaser the following:
(i) executed and acknowledged (if appropriate) assignments,
bills of sale and/or certificates of title, dated the
Closing Date, transferring to the Purchaser all of the
Assets free and clear of all Liens, other than Permitted
Liens, each reasonably satisfactory to the Purchaser in
form and substance;
(ii) the Escrow Agreement duly executed by each of the Sellers;
(iii) recent good standing certificates and certified articles
of incorporation or other organizational documents of the
Sellers and their subsidiaries;
(iv) an opinion of counsel to the Sellers in the form of
Exhibit 10;
(v) certificates of an authorized executive officer of each of
the Sellers certifying to the fulfillment of the
conditions set forth in Sections 4.01 and 4.02;
(vi) a copy of the resolutions of (i) the Board of Directors of
each Seller (or of such Seller's general partner, as the
case may be, or other governing board) and (ii) the
stockholders (or other owners, as the case may be) of each
Seller, certified by their respective chief executive
officer, authorizing the execution, delivery and
performance of this Agreement and the other Transaction
Documents;
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(vii) copies of the Consents referred to in Section 4.03;
(viii) if applicable, payoff letters, UCC-3 termination
statements and other documentation relating to the release
of all Liens;
(ix) a duly executed Assignment and Assumption Agreement in the
form attached hereto as Exhibit 6, transferring to the
Purchaser all interests of the Sellers with respect to the
Leases and Contracts, and related estoppel and consent of
the landlord;
(x) originals of all books and records relating to the
Accounts Receivable;
(xi) the FIRPTA Certificate in the form of Exhibit 11; and
(xii) the Notes and related Pledge and Security Agreements duly
executed by the Sellers;
(xiii) the Registration Rights Agreement duly executed by the
Sellers;
(xiv) the Non-Competition Agreements duly executed by the
Sellers, and each of Xxx. Xxxxx, Xx. Xxxxx, Xxxxxx Xxxxx
and Xxxxx Xxxxx;
(xv) duly executed leases with respect to certain of the
Facilities with such parties as listed on Schedule 3.02 in
the form attached hereto as Exhibit 7;
(xvi) duly executed amendments to each Seller's Articles of
Incorporation (or other applicable organizational
document) changing such Seller's corporate (or
partnership, as applicable) name in accordance with
Section 13.09; and
(xvii) such other instruments and certificates as may be
reasonably requested by the Purchaser.
Section 3.04 Power of Attorney. Effective upon the Closing Date, the
Sellers hereby irrevocably constitute and appoint the Purchaser, its successors
and assigns, the true and lawful attorney of Sellers with full power of
substitution, in the name of the Purchaser, or the name of the Sellers, on
behalf of and for the benefit of the Purchaser, to collect all accounts
receivable and other items being transferred, conveyed and assigned to the
Purchaser as provided herein, to endorse, without recourse, checks, notes and
other instruments in the name of the Sellers which have been transferred to the
Purchaser, to institute and prosecute, in the name of the Sellers or otherwise,
all proceedings which the Purchaser may deem proper in order to collect, assert
or enforce any claim,
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right or title of any kind in or to the Assets, to defend and compromise any and
all actions, suits or proceedings in respect of any of the Assets subject to the
Sellers' indemnification obligations under this Agreement, and to do all such
acts and things in relation thereto as the Purchaser may deem reasonably
advisable. The Sellers agree that the foregoing powers are coupled with an
interest and shall be irrevocable by the Sellers directly or indirectly by the
dissolution of any Seller or in any manner or for any reason. The Sellers
further agree that the Purchaser shall retain for its own account any amounts
collected pursuant to the foregoing powers, and the Sellers shall promptly
transfer and deliver to the Purchaser any cash or other property received by any
of the Sellers after the Closing Date in respect of any accounts receivable or
otherwise relating to the Assets.
Section 3.05 Non-Assignable Assets. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement or an attempted agreement to transfer, sublease or assign any
contract, license, lease, commitment, sales order, purchaser order or other
agreement, or any claim or right of any benefit arising thereunder or resulting
therefrom if any such attempted transfer, sublease or assignment thereof,
without the consent of any other party thereto, would constitute a breach
thereof or in any way affect the rights of the Purchaser thereunder (the
"Non-Assignable Assets"). Each Seller and Stockholder shall, if requested by the
Purchaser after the Closing Date, use its reasonable efforts to obtain any such
consent. If any such consent is not obtained, or if any attempted assignment
thereof would be ineffective or would affect the rights of any of the Sellers
thereunder such that the Purchaser would not in fact receive all such rights, on
and after the Closing Date, each such Non-Assignable Asset shall be held by the
Sellers in trust for the Purchaser, and the Sellers shall perform such agreement
for the account of the Purchaser or otherwise cooperate with the Purchaser in
any arrangement necessary or desirable to provide for the Purchaser the benefits
under any such agreement, including, without limitation, enforcement for the
benefit of the Purchaser of any and all rights of any of the Sellers against the
other party thereto arising out of the breach, termination or cancellation of
such agreement by such other party or otherwise. The Sellers will take or cause
to be taken such action in the Sellers' names or otherwise as the Purchaser may
reasonably request, at the Purchaser's sole cost and expense, so as to provide
the Purchaser with the benefits of the Non-Assignable Assets and to effect
collection of money or other consideration to become due and payable under the
Non-Assignable Assets and the Sellers shall promptly pay over to the Purchaser
all money or other consideration received by any of them or their Affiliates in
respect of Non-Assignable Assets. As and from the Closing Date, the Sellers
authorize the Purchaser, to the extent permitted by applicable law and the terms
of the Non- Assignable Assets, at the Purchaser's sole cost and expense, to
perform all of the obligations and receive all of the benefits under the
Non-Assignable Assets and appoint the Purchaser their attorney-in-fact to act in
their names and on their behalf with respect thereto. Notwithstanding the
foregoing, this Agreement shall not constitute an agreement by the Sellers to
assign or delegate, or by the Purchaser to assume and agree to pay, perform or
otherwise discharge, any Non-Assignable Asset if an attempted assignment,
delegation or assumption thereof without the consent of a third Person would
constitute a breach thereof unless and until such consent is obtained. The
foregoing shall not limit, waive or otherwise affect the Purchaser's right to
not close the transactions contemplated by this Agreement to the extent the
receipt of any consent to the transfer, sublease or assignment of any
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contract, license, lease, commitment, sales order, purchaser order or other
agreement is a condition to the obligation of the Purchaser to close hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
AND THE STOCKHOLDERS
--------------------
As of the date hereof and as of the Closing Date, the Stockholders,
jointly and severally, and each Seller, severally and not jointly, represent and
warrant to the Purchaser as follows:
Section 4.01 Organization and Qualification. Such Seller (i) is a
corporation or a limited partnership duly organized, validly existing and in
good standing as a business corporation or a limited partnership, as the case
may be, under the laws of the State of New Jersey; (ii) has all requisite power
and authority under the corporate and limited partnership laws of the State of
New Jersey to own, lease and operate its properties and to carry on its business
as currently being conducted; and (iii) is not required to be qualified or
licensed to do business in any foreign jurisdiction, except where the failure to
be so organized, existing and in good standing or to be so qualified or licensed
would not have a Material Adverse Effect.
Section 4.02 Authority.
(a) On or prior to the Closing, such Seller will have the requisite
power and authority to execute and deliver the Transaction Documents, as
applicable, and to consummate the transactions contemplated hereby and thereby.
On or prior to the Closing, the execution, delivery and performance of the
Transaction Documents, and the consummation of the transactions contemplated
hereby and thereby, will have been duly authorized by all necessary corporate
and partnership, as applicable, action on the part of such Seller, and no other
proceedings on the part of such Seller will be necessary to authorize the
Transaction Documents or to consummate the transactions contemplated hereby or
thereby. On or prior to the Closing, the Transaction Documents will have been
duly executed and delivered by such Seller and, assuming the Transaction
Documents constitute valid and legally binding obligations of the Purchaser,
will constitute valid and legally binding obligations of such Seller,
enforceable against such Seller in accordance with their terms, subject, as to
enforceability, to general equitable principles, and bankruptcy, reorganization,
receivership and other laws affecting creditors rights generally.
(b) The Stockholders have the requisite legal capacity and
competence to execute and deliver the Transaction Documents, as applicable, and
to consummate the transactions contemplated hereby and thereby. The Transaction
Documents, when executed by the Stockholders, will have been duly executed and
delivered by the Stockholders and, assuming the Transaction Documents constitute
valid and legally binding obligations of the Purchaser, will constitute valid
and legally binding obligations of the Stockholders, enforceable against the
Stockholders in accordance with their terms, subject, as to enforceability, to
general equitable principles, and bankruptcy, reorganization, receivership and
other laws affecting creditors rights generally.
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Section 4.03 Consents and Approvals; No Violations. None of the
execution, delivery or performance of this Agreement or the Transaction
Documents by such Seller or the Stockholders, the consummation by such parties
of the transactions contemplated hereby or thereby or compliance by such parties
with any of the provisions hereof or thereof will (i) conflict with or result in
any breach of any provision of the charter, by-laws or any other organizational
documents of such Seller, (ii) require on the part of such Seller or the
Stockholders, prior to the Closing, any filing with or Consent of a Governmental
Authority or other Person, including with respect to the Xxxx-Xxxxx- Xxxxxx
Antitrust Improvements Act of 1976, as amended, other than as described on
Schedule 4.03 hereto, (iii) result in a violation or breach of, or constitute a
default or give rise to any right of termination, amendment, cancellation or
acceleration (with or without the giving or receipt of notice or passage of time
or both) under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, License (except to the extent that those Licenses
specified on Schedule 4.03 hereto relating to the Bloomfield Facility and the
Echelon Facility shall be terminated as a result of the consummation of the
transactions contemplated by this Agreement), contract, agreement or other
instrument or obligation to which such Seller is a party or by which its
properties or assets or its Practice or Facilities may be bound or subject,
other than as described on Schedule 4.03 hereto, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to such Sellers
or any of its properties or assets. Any Consent to the execution, delivery or
performance of this Agreement or the Transaction Documents by such Seller or the
Stockholders, the consummation by such parties of the transactions contemplated
hereby or thereby (including, but not limited to, the assignment of any contract
to the Purchaser) or compliance by such parties with any of the provisions
hereof which is not obtained and delivered to the Purchaser in accordance with
Section 7.01 and Section 8.09 relates to a contract which, individually or
together with all other contracts for which Consents are not being obtained, is
not material to the Practice and the Facilities.
Section 4.04 Capitalization. The authorized and outstanding Capital
Stock of such Seller as of the date hereof is as set forth on Schedule 4.04
hereto. All of the outstanding shares of the Capital Stock of such Seller are
validly issued, fully paid and non-assessable, free and clear of any Liens on or
with respect to any outstanding shares of Capital Stock of such Seller.
Section 4.05 Subsidiaries. Such Seller does not own, of record or
beneficially, or control, directly or indirectly, any Capital Stock of any
corporation, association or business entity, and such Seller is not, directly or
indirectly, a participant in any joint venture, partnership or other entity.
Section 4.06 Articles of Incorporation and By-laws. Such Seller has
heretofore delivered to the Purchaser true and complete copies of its Articles
of Incorporation and By-laws (or other applicable organizational documents) as
in effect on the date hereof.
Section 4.07 Compliance With Laws; Licenses.
(a) To the knowledge of the Stockholders and such Seller, the
conduct of the operations of such Seller (including the conduct of the Physician
Employees at such Seller's Facilities), and its Practice and Facilities has not
violated and, as presently conducted does not
- 24 -
violate, any Laws, including, but not limited to, the Clinical Laboratories
Improvements Act of 1988 ("CLIA"), or any other promulgations, interpretative
advice or guidance of any court or Governmental Authority, including, but not
limited to, the Occupational Safety and Health Administration, the Department of
Transportation, the HCFA and the FDA or any industry standards, nor has such
Seller or the Stockholders received any notice, nor are they aware, of any such
violation which remains outstanding, except for any such violation which,
individually or in the aggregate, would not have a Material Adverse Effect and
except for any such violation which is discovered during the course of a
reinspection of a Facility after the date hereof by any Governmental Authority
with jurisdiction to conduct such reinspection.
(b) Except as set forth on Schedule 4.07, such Seller holds all
permits, authority, consents, licenses, certificates of need, exemptions,
accreditation and the like, including use or occupancy permits, necessary to
enable it to (i) conduct its Practice as heretofore conducted and (ii) obtain
reimbursement under Medicare and Medicaid and under all contracts, programs and
other arrangements with third-party payors, insurers or fiscal intermediaries
(collectively, the "Permits"). Schedule 4.07 contains a complete and correct
list of such Seller's Permits, showing their dates of expiration where
applicable. Except as set forth on Schedule 4.07, such Seller's Permits are
valid and in full force and effect; no material violations (individually or in
the aggregate) exist in respect thereof; and there are no pending or, to such
Seller's knowledge, threatened investigations or proceedings with respect to
such Seller's Permits.
Section 4.08 Litigation; Investigations. Schedule 4.08 sets forth a
complete and accurate list of all suits, claims, proceedings, investigations or
reviews which are pending or, to the knowledge of such Seller, threatened
against, likely of assertion against or affecting such Seller, or its Facilities
or Practice or any properties or assets used by such Seller or at its Facilities
in conducting the operations of its Practice. Except as disclosed in Schedule
4.08, (i) no investigation or review by any Governmental Authority or other
regulatory body (including trade associations) with respect to either such
Seller, or its Facilities or Practice is pending or, to the knowledge of such
Seller, threatened, nor has any Governmental Authority or other regulatory body
(including trade associations) indicated to such Seller an intention to conduct
the same, and (ii) such Seller is not aware of any action, suit or proceeding
pending or threatened against or affecting such Seller, or its Facilities or
Practice, at law or in equity, or before any Governmental Authority or other
regulatory body (including trade associations). There are no suits, claims,
proceedings, investigations or reviews, including, without limitation, those set
forth on Schedule 4.08, which are pending or, to the knowledge of such Seller,
threatened against, likely of assertion against or affecting such Seller or its
Facilities or Practice or any properties or assets used by such Seller or at its
Facilities in conducting the operations of its Practice which may have a
Material Adverse Effect.
Section 4.09 Taxes.
(a) Such Seller has filed all Tax Returns that were required to be
filed. All such Tax Returns were when filed, and continue to be, correct and
complete in all respects. All Taxes owed by and of such Sellers (whether or not
shown on any Tax Return) have been timely paid except
- 25 -
as disclosed on Schedule 4.09. Such Seller currently is not the beneficiary of
any extension of time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where such Seller did not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Liens with respect to Taxes on any of the assets or property of such Seller.
(b) Such Seller has withheld or collected and paid all Taxes
required to have been withheld or collected and paid in connection with amounts
paid or owing to any employee, independent contractor, consultant, creditor,
stockholder, other third party, or otherwise.
(c) There is no dispute or claim concerning any Tax Liability of
such Seller either (A) claimed or raised by any Governmental Authority in
writing or (B) as to which such Seller or the directors and officers (and
employees responsible for Tax matters) of such Seller has knowledge. There are
no proceedings with respect to Taxes pending.
(d) Schedule 4.09 sets forth an accurate, correct and complete list
of all federal, state, local, and foreign Tax Returns filed with respect to such
Seller or its subsidiaries for taxable periods ended on or after December 31,
1991, indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of audit. Such Seller has delivered to
the Purchaser correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by such Seller and its subsidiaries since January 1, 1992. To the knowledge
of such Seller and the directors and officers (and employees responsible for Tax
matters) of such Seller, no other audit or investigation with respect to Taxes
has been threatened.
(e) Such Seller has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(f) Such Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(g) Such Seller is not a party to any agreement, whether written or
unwritten, providing for the payment of Tax liabilities, payment for Tax losses,
entitlements to refunds or similar Tax matters.
(h) Such Seller (A) has never been a member of an affiliated group
(within the meaning of Section 1504 of the Code, or any similar group as defined
for state, local or foreign tax purposes) filing a consolidated federal (or
combined or unitary state, local or foreign) income Tax Return nor (B) has such
Seller ever had any liability for the taxes of any Person (other than its own
Taxes) under Reg. ss. 1.1502-6 (or any similar provision of state, local or
foreign Law), as a transferee or successor, by contract, or otherwise.
(i) For purposes of this Section 4.09, references to such Seller
shall also refer to any predecessor companies of such Seller.
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Section 4.10 Employee Benefit Plans; ERISA.
(a) Attached hereto as Schedule 4.10 are complete and accurate
copies of all Plans which are currently maintained and/or sponsored by such
Seller, or to which such Seller currently contributes, has an obligation to
contribute in the future or which have been terminated within the past three
years.
(b) Except for the Plans, such Seller does not maintain or sponsor,
nor is a contributing employer to, a pension, profit-sharing, deferred
compensation, stock option, employee stock purchase or other employee benefit
plan or employee welfare benefit plan subject to ERISA. All Plans are in
material compliance with all applicable provisions of ERISA and the regulations
issued thereunder, as well as with all other applicable Laws, and, in all
material respects, have been administered, operated and managed in accordance
with the governing documents. No circumstances exist pursuant to which such
Seller has or could have any direct or indirect material liability whatsoever
(including being subject to any statutory Lien to secure payment of any such
liability), to the PBGC under Title IV of ERISA or to the IRS for any excise tax
or penalty with respect to any plan now or hereafter maintained or contributed
to by such Seller or any member of a "controlled group" (as defined in Section
4001(a)(14) of ERISA) that includes such Seller; and neither such Sellers nor
any member of a "controlled group" (as defined above) that includes such Seller
currently has (or at the Closing Date will have) any obligation whatsoever to
contribute to any "multi-employer pension plan" (as defined in ERISA Section
4001(a)(14)), nor has any withdrawal liability whatsoever (whether or not yet
assessed) arising under or capable of assertion under Title IV of ERISA
(including, but not limited to, Sections 4201, 4202, 4203, 4204, or 4205
thereof) been incurred by any Plan. Further:
(i) with respect to Plans which qualified as "group health
plans" under Section 4980B of the Code and Section 607(1) of
ERISA and related regulations (relating to the benefit
continuation rights imposed by "COBRA"), such Seller has
complied (and on the Closing Date will have complied) in all
material respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed
thereunder as and when applicable to such plans, and such
Seller has not incurred (and will not incur) any direct or
indirect material liability and are not (and will not be)
subject to any material loss, assessment, excise tax
penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect to any direct
or indirect failure by such Seller, at any time prior to the
Closing Date to comply with any such federal or state
benefit continuation requirement, which is capable of being
assessed or is asserted before or after the Closing Date
directly or indirectly against such Seller with respect to
such group health plans;
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(ii) except as disclosed on Schedule 4.10 hereto, none of the
Sellers is currently or have been within the past five years
a member of a "controlled group" as defined in ERISA Section
4001(a)(14) or Code Section 414(b), (c), (m) or (o);
(iii) there is no pending litigation, arbitration or disputed
claim, settlement or adjudication proceeding, and, to such
Seller's knowledge, there is no threatened litigation,
arbitration or disputed claim, settlement or adjudication
proceeding, or investigation with respect to any Plan, or
with respect to any fiduciary, administrator or sponsor
thereof (in their capacities as such), or any party in
interest thereof which, individually or in the aggregate,
would have a Material Adverse Effect; and
(iv) the total pension, medical and other benefit expense for all
Plans are accurately reflected in the Financial Statements
of such Seller and no material funding changes or
irregularities are reflected thereon which would cause such
financial statements to be not representative of prior
periods; and
If reasonably requested by the Purchaser, such Seller will terminate any Plan
identified on Schedule 4.10 as a "Pension or Profit Sharing Plan to be
Terminated" immediately prior to the Closing.
Section 4.11 Labor Relations. Such Seller (i) has performed all
material obligations with respect to its employees, independent sales
representatives, consultants, agents, officers and directors; (ii) has paid or
properly accrued for in its Financial Statements all wages, salaries,
commissions, bonuses, severance pay, vacation pay, sick pay, holiday pay,
benefits and other compensation, to the extent applicable, for all services
performed by such persons and all amounts required to be paid or reimbursed to
such persons; (iii) is in compliance with all Laws respecting employment and
employment practices, terms and conditions of employment and wages and hours
where the failure to so comply would, individually or in the aggregate, have a
Material Adverse Effect; (iv) has no pending or, to the Seller's knowledge,
threatened charge, complaint, allegation, application or other process against
such Seller before the National Labor Relations Board or any other Governmental
Authority; (v) has no labor strike, dispute, slowdown or work stoppage or other
job action pending or, to the Seller's knowledge, threatened against or
otherwise affecting or involving such Seller; and (vi) has no employees covered
by any collective bargaining agreements and, to the knowledge of such Seller, no
effort is being made by any union to organize any employees of such Seller.
Section 4.12 Insurance Policies. Schedule 4.12 contains a complete and
accurate list of all insurance policies currently providing coverage and that
for the past three (3) years have been providing coverage in favor of such
Seller with respect to its Practice or Facilities specifying the insurer and
type of insurance under each policy. Each current policy is in full force and
effect and
- 28 -
all premiums are currently paid and no notice of cancellation or termination has
been received with respect to any such policy. To such Seller's knowledge, such
policies have been sufficient for compliance with all material requirements of
Law. Such Seller has not been refused any insurance with respect to its Practice
or Facilities, nor has its coverage been limited by any insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance during the last three (3) years. Such Seller has insured by reputable
insurers the assets used by such Seller in the operation of its Facility that
are of an insurable character against risks of liability, casualty and fire in
adequate amounts and consistent with prudent industry practice and all
contractual requirements, and maintains such insurance against hazards, risks
and liability to persons and property to the extent and in the manner deemed
prudent by such Seller and such insurance has been effective, in full force and
effect, without interruption since the date such Seller, as the case may be,
commenced business. Except as set forth on Schedule 4.12, such Seller does not
have any outstanding claims, settlements or premiums owed with respect to any
insurance policy, and such Seller, to its knowledge, has given all notices or
have presented all potential or actual claims under any insurance policy in due
and timely fashion. Since January 1, 1995, such Seller has not filed a written
application for any professional liability insurance coverage which has been
denied by an insurance agency or carrier, and, except as specified on Schedule
4.12, such Seller has been continuously insured for professional liability
claims for at least the past seven (7) years. The insurance specified on
Schedule 4.12 has been effective, in full force and effect, without interruption
since the date specified on Schedule 4.12 as the initial date of coverage.
Section 4.13 Financial Statements and Books and Records. Such Seller
has previously delivered to the Purchaser a copy of its Financial Statements.
The 1997 Financial Statements and the 1996 Financial Statements of such Seller
have been audited by the Sellers' Accountants, and the 1997 Tax Basis Financial
Statements, the 1996 Tax Basis Financial Statements and the Interim Financial
Statements have been compiled by SCW&Co, and each of such Financial Statements
are true and accurate in all material respects and present fairly in all
material respects the financial position and related results of operations and
cash flows of such Seller, respectively, as of the times and for the periods
referred to therein, on an accrual basis or on an income tax basis, as the case
may be, and, in the case of the 1997 Financial Statements, 1996 Financial
Statements and the Interim Financial Statements, in accordance with GAAP
(subject, in the case of unaudited financial statements, to normal, recurring
audit adjustments and the absence of footnotes). Such Seller will, as
contemplated by Section 2.06 hereof, deliver to the Purchaser a copy of the
Closing Period Financial Statements. The Closing Period Financial Statements of
such Seller will not be audited but, when delivered pursuant hereto, will have
been prepared by SCW&Co on an accrual basis, in a manner consistent with the
1997 Financial Statements of such Seller and will be true and accurate in all
material respects and will present fairly in all material aspects the financial
position and related results of operations and cash flows of such Seller,
respectively, as of the times and for the periods referred to therein. All of
the financial books and records (other than those set forth on Schedule 4.13) of
such Seller have been made available to the Purchaser and such books and
records, on the whole, completely and fairly record in all material respects the
financial affairs of such Seller which should normally be recorded in financial
books and records. As of the dates of the statements of assets, liabilities and
stockholder's equity included in such Seller's 1997 Financial Statements,
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Interim Financial Statements and Closing Period Financial Statements, such
Seller has not, nor will have, any liabilities or obligations of any kind or
nature, fixed or contingent, material or immaterial, or otherwise, which are not
fully reflected or reserved against in such statements of assets, liabilities
and stockholder's equity or which were not incurred in the ordinary course of
business consistent with past practices and this Agreement.
Section 4.14 No Material Adverse Change. Since June 30, 1998, except as
set forth on Schedule 4.14, there has been no material adverse change in the
business, operations, condition (financial or otherwise), prospects (as a going
concern), liabilities or assets of such Seller or its Practice or Facilities and
such Seller does not know of any change that is threatened or pending or any
facts or circumstances which could give rise to or cause such a change (other
than general conditions affecting the industry as a whole), nor has there been
any damage, destruction or loss, whether or not covered by insurance, which
could have a Material Adverse Effect.
Section 4.15 Absence of Liabilities. Except as described on Schedule
4.15, such Seller does not have any debt, liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due and whether or not the amount thereof is readily ascertainable, that
are not accurately reflected as a liability in the 1997 Financial Statements of
such Seller, except for liabilities incurred by such Seller subsequent to
December 31, 1997 and in the ordinary course of business consistent with past
practices which are not (x) otherwise prohibited by, in violation of, or which
will result in a breach of the representations, warranties or covenants of such
Seller contained in this Agreement and (y) material, either individually or in
the aggregate.
Section 4.16 Absence of Specified Changes. Except as disclosed on
Schedule 4.16, since December 31, 1997 (or, in the case of clause (a) below,
since June 30, 1998), there has not been with respect to such Seller any:
(a) action, omission or other facts or circumstances (other than
general conditions affecting the industry as a whole) which would result in a
material adverse change, whether direct or indirect, in the business,
operations, condition (financial or otherwise), prospects (as a going concern),
liabilities or assets of such Seller in the aggregate, whether or not insured;
(b) material transaction not in the ordinary course of business,
including without limitation, any sale of a material portion of the assets of
such Seller or any merger of such Seller and any other entity;
(c) unfulfilled commitment as of the date of this Agreement
requiring expenditures by such Seller exceeding $50,000 (excluding commitments
expressly described elsewhere in this Agreement or the schedules hereto);
(d) material damage, destruction or loss, whether or not insured;
- 30 -
(e) failure to maintain in full force and effect substantially the
same level and types of insurance coverage as in effect on December 31, 1997 or
destruction, damage to, or loss of any asset of such Seller (whether or not
covered by insurance) that could have a Material Adverse Effect;
(f) change in accounting principles, methods or practices,
investment practices, claims, payment and processing practices or policies
regarding intercompany transactions;
(g) revaluation of any assets or material write down of the value of
any assets;
(h) any direct or indirect redemption, purchase or other acquisition
of any shares of the Capital Stock of such Seller;
(i) issuance or sale of any shares of any Capital Stock of such
Seller;
(j) amendment to its Articles of Incorporation, By-laws or other
organizational documents;
(k) sale, assignment or transfer of any tangible or intangible
asset, including any rights to intellectual property, except in the ordinary
course of business, consistent with past practice;
(l) disposition of or lapse of any patent, trademark, trade name,
service xxxx or copyright or any application for the foregoing, or disposition
of any technology, software or know-how, or any license, permit or authorization
to use any of the foregoing;
(m) mortgage, pledge or other encumbrance, including Liens, of any
tangible or intangible asset;
(n) discharge or satisfaction of any Lien or payment or cancellation
of any liability other than payment of current liabilities in the ordinary
course of business, consistent with past practice;
(o) cancellation of any debt or waiver or release of any material
contract, right or claim, except for cancellations, waivers and releases in the
ordinary course of business, consistent with past practice, which do not exceed
$50,000 in the aggregate (other than in respect of those Excluded Assets
described on Schedule 2.02(f));
(p) indebtedness incurred for borrowed money or any commitment to
borrow money, any capital expenditure or capital commitment requiring an
expenditure of monies in the future, any incurrence of a contingent liability or
any guaranty or commitment to guaranty the indebtedness of others entered into,
by such Seller, other than customary transactions in the ordinary course of
business not in excess of $50,000 in the aggregate;
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(q) amendment, termination or revocation of (or notice of intent to
do so), or a failure to perform obligations or the occurrence of any default (or
other event which, with or without the giving or receipt of notice or the
passage of time or both, would result in a notice of cancellation, acceleration
or termination) under, any contract or agreement to which any of the Sellers is,
or as of December 31, 1997 was, a party or of any license, permit or franchise
required for the continued operation of any business conducted by such Seller on
December 31, 1997 which would have a Material Adverse Effect (other than in
respect of those Excluded Assets described on Schedule 2.02(f));
(r) increase or commitment to the increase of the salary or other
compensation payable or to become payable to any of its officers, directors or
employees, agents or independent contractors, or the payment of any bonus to the
foregoing persons except in the ordinary course of business, consistent with
past practice and applicable policies and procedures of such Seller; or
(s) agreement or understanding to take any of the actions described
above in this Section 4.16.
Section 4.17 Corporate Names. Schedule 4.17 sets forth a complete and
accurate list of names used by such Seller in addition to its respective
corporate or partnership name(s), as applicable.
Section 4.18 Real Property; Leases. Except as set forth on Schedule
4.18, such Seller does not own, lease, or sublease any real property. Such
Seller has heretofore delivered to the Purchaser either (a) a complete and
accurate copy of each such written lease and sublease or (b) an abstract of each
such oral lease or sublease certified by such Seller. Unless otherwise noted on
Schedule 4.18, such Seller is the sole lessee or sublessee under each of the
leases and subleases listed on Schedule 4.18 and, to the knowledge of such
Seller, each such lease and sublease is valid and in full force and effect and
enforceable in accordance with its terms and has not been further supplemented,
amended or modified. Unless otherwise noted on Schedule 4.18, there exists no
event of default or, to the knowledge of such Seller, event, occurrence,
condition or act, including without limitation, the consummation of the
transactions contemplated hereunder, which constitutes or would constitute (with
or without the giving or receipt of notice or the passage of time or both) a
default in any respect, or give rise to a right of acceleration, cancellation or
termination, under any of the leases or subleases on Schedule 4.18. Such Seller
has not received any notice of any event of default or event, occurrence,
condition or act, including without limitation, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereunder,
which constitutes or would constitute (with or without the giving or receipt of
notice or the passage of time or both) a default in any respect, or give rise to
a right of acceleration, cancellation or termination, under any of the leases or
subleases on Schedule 4.18. Such Seller has complied with all commitments and
obligations on its part to be performed or observed under any lease or sublease
set forth on Schedule 4.18 and, to the knowledge of such Seller, all other
parties to such lease or sublease have complied with all commitments and
obligations on their part to be performed or observed under such lease or
sublease, except for any such non-compliance which is discovered during the
course of a
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reinspection of a Facility after the date hereof by any Governmental Authority
with jurisdiction to conduct such reinspection or otherwise. Unless otherwise
noted on Schedule 4.18, such Seller has been in peaceable possession of the
Leased Premises since the commencement of the original term of each respective
lease or sublease listed on Schedule 4.18. To the knowledge of such Seller, its
respective Leased Premises are structurally sound with no material defects and
are in good operating condition and repair and are adequate to meet all present
and reasonably anticipated future requirements of the operations of the Practice
of such Seller, as currently conducted; and, to the knowledge of such Seller,
none of its respective Leased Premises is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs which are not material in
nature or cost. Except as set forth on Schedule 4.18, such Seller is not aware
that any real property covered by any leasehold interests listed on Schedule
4.18, the buildings, fixtures and improvements on such, and the present use
thereof, do not comply in all material respects with all restrictive covenants,
deeds and other restrictions and all Laws with regard to the operation of the
Facilities by the Sellers, including provisions relating to permissible
nonconforming uses; and such Seller is not aware of any such premises which are
presently affected or threatened by any condemnation or eminent domain
proceeding or any proceeding by a mortgagee.
Section 4.19 Equipment and Personal Property. Schedule 4.19 sets forth
a complete and accurate description of all equipment and personal property owned
by such Seller as well as all capital leases and operating leases pursuant to
which such Seller leases property. Except as described in Schedule 4.19, all
equipment and tangible personal property used by such Seller is either owned,
free and clear of all Liens or are (i) used under capital leases and reflected
as such in the 1997 Financial Statements or Schedule 4.19 hereto, as the case
may be, or (ii) used under operating leases. To the knowledge of such Seller,
all such leases are valid and in full force and effect and enforceable in
accordance with their terms and have not been supplemented, amended or modified.
Such Seller has not received any notice of, and there exists no event of default
by such Seller, or event, occurrence, condition or act, including, without
limitation, the execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, which constitutes or would constitute
(with or without the giving or receipt of notice or the passage of time or both)
a default in any respect, or give rise to a right of acceleration, cancellation
or termination, under any such lease. All of the equipment and tangible personal
property owned or leased by such Seller, on the whole, is in good operating
condition and repair (taking into account the age of such equipment), subject to
normal wear and tear, none of such assets is in need of maintenance or repairs
except for ordinary, routine maintenance and such assets are suitable for and
operating according to their intended use.
Section 4.20 Intellectual Property. Schedule 4.20 contains a complete
and accurate schedule of all trade names, trademarks, service marks, patents and
copyrights (including any registrations or pending applications for registration
of any of the foregoing), trade secrets, inventions, processes, formulae,
technology, technical data, information and know-how, and all licenses or other
rights relating to any of the foregoing that are attributable to the conduct of,
used in, or related to, the operations of such Seller or its Facilities or
Practice (collectively, the "Intangible Property"). Except as set forth on
Schedule 4.20, (i) such Seller has the sole and exclusive good,
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valid and transferable title with respect to the Intangible Property, (ii) no
royalties or other consideration is required in connection with such Seller's
use and enjoyment of the Intangible Property and (iii) no claim has been
asserted by any person against such Seller with respect to the ownership or use
of any of the Intangible Property by such Seller nor has such Seller asserted
any similar claim against any person, and, to the knowledge of such Seller,
there exists no valid basis for any such claim.
Section 4.21 Software. Schedule 4.21 contains a complete and accurate
list of all computer software, databases and programs utilized by such Seller in
the conduct of the operations of the Sellers. Except as set forth on Schedule
4.21 all such computer software, databases and programs are owned by, or
licensed to such Seller, without any restrictions thereon except as provided in
the applicable license agreements.
Section 4.22 Contracts.
(a) Schedule 4.22 sets forth a complete and accurate list of all
material contracts, agreements, arrangements and other instruments involving
expenditures or other payments in excess of $2,500 to which such Seller is a
party or by which such Seller or any of its Assets are bound (hereinafter
referred to collectively as the "Contracts"). Each of the Contracts is in full
force and effect and enforceable against such Seller in accordance with its
terms. Except as set forth on Schedule 4.22, such Seller has not received notice
of cancellation of or intent to cancel, or notice to make a material
modification or intent to make a material modification in, any of the Contracts.
There exists no event of default or event, occurrence, condition or act on the
part of such Seller or, to the knowledge of such Seller, on the part of the
other party to such Contracts, which constitutes or would constitute (with or
without the giving or receipt of notice or the passage of time or both) a
default in any respect, or give rise to a right of acceleration, cancellation or
termination under any such Contract which would have a Material Adverse Effect.
Except as set forth on Schedule 4.22, no consent of any other party to any of
the Contracts is required in connection with the execution, delivery and
performance of this Agreement by the Sellers.
(b) Such Seller is not a party to or bound by any agreement which
limits its freedom to compete in any line of business or with any person.
(c) As of the Closing, employees of such Sellers who continue their
employment with the Purchaser shall not be restricted by the provisions of any
employment agreement or non-competition agreement between any such employee and
such Seller or Stockholders, to the extent that such agreement would restrict
such employees from engaging in any business conducted by the Purchaser.
Section 4.23 Inventory. Schedule 4.23 sets forth a complete and
accurate list of the inventory of such Seller as of June 30, 1998 (the "Interim
Balance Sheet Date") valued in excess of $50,000. All inventory of such Seller,
taken as a whole, consists of a quality and quantity usable in the ordinary
course of business as currently labeled and classified in the inventory records,
except
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for items of obsolete materials and materials of below-standard quality, all of
which have been written off or down to fair market value.
Section 4.24 Directors, Officers and Employees. Schedule 4.24 sets
forth a complete and accurate list of the names, titles, ages, years of service
and compensation of all directors, officers and employees of such Seller.
Section 4.25 Title, Condition and Sufficiency of Assets; Conduct of
Practice. Such Seller has good, valid and legal and beneficial title to all of
its Assets, free and clear of Liens, except for such Liens specifically set
forth on Schedule 4.25. At the Closing, the Seller will convey to the Purchaser
legal and beneficial title to its Assets, free and clear of any Lien of any
nature whatsoever, other than Permitted Liens. The Assets of such Seller, taken
as a whole, are in good working order and condition (taking into account the age
of any such Asset), subject to normal wear and tear and normal maintenance, and
have no defects which would materially interfere with the operation of its
Facilities or Practice as presently conducted or to be conducted after the
Closing Date. The Practice is conducted solely through the Sellers, and the
Assets constitute all of the assets and properties necessary to conduct the
business of the Practice and the Facilities subsequent to the Closing
substantially in the manner conducted prior to the Closing (taking into account
the exclusion of the Excluded Assets and except to the extent that the
Purchaser, with respect to the operation of the Mainland Facility or the
reinspection of any Facility, (a) needs to obtain any license or permit
necessary to conduct the business of the Practice and the Facilities subsequent
to the Closing or (b) needs to modify any Asset in order to obtain any such
license or permit).
Section 4.26 Transactions with Affiliates. Except as set forth on
Schedule 4.26, no officer, director, employee or stockholder of such Seller nor
any affiliate thereof (a) has borrowed money from, or loaned money to, any
Seller, (b) is a party to any contract or other arrangement, written or oral,
with any Seller, (c) has asserted or threatened to assert any claim against any
Seller or (d) is engaged in any transaction with any Seller.
Section 4.27 Absence of Certain Practices. To the knowledge of such
Seller and except as set forth on Schedule 4.27 hereto, none of such Seller or
its Practice nor any director, officer, agent, employee or other Person acting
on behalf of such Seller or its Practice, directly or indirectly, has given,
made or agreed to give or make any commission, payment, gratuity, gift,
political contribution or similar benefit to any customer, supplier, or employee
or official of any Governmental Authority or any other Person who is or may be
in a position to help or hinder such Seller or its Practice, or assist such
Seller or its Practice in connection with any proposed transaction. To the
knowledge of such Seller, none of such Seller or its Practice, nor any director,
officer, agent, employee, or other Person acting on behalf of such Seller or its
Practice has (a) used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to, or on behalf of, employees of any Governmental Authority
or others or (b) accepted or received any unlawful contributions, payments,
gifts or expenditures.
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Section 4.28 Accounts Payable. All accounts payable and accrued
expenses reflected in such Seller's 1997 Financial Statements and Interim
Financial Statements and which, when such Seller's Closing Period Financial
Statements are delivered pursuant hereto, will be reflected in such Seller's
Closing Period Financial Statements, arose from bona fide transactions in the
ordinary course of business.
Section 4.29 Accounts Receivable. Each of the accounts receivable of
such Seller (a) arose from bona fide sales in the ordinary course of business,
(b) was entered into under circumstances and by methods usual and customary in
its businesses in the applicable state and the collection practices used with
respect thereto have been and are in all respects legal and proper, and (c) was
entered into, and credit granted pursuant thereto, consistent with the
historical credit policies and practices of such Seller. Such Seller knows of no
right of recourse, defense, deduction, counterclaim, off-set or set-off on the
part of the obligor with respect to such accounts receivable other than as set
forth on Schedule 4.29 hereto. The books of such Seller correctly record the
provision of all services at its Facility and amounts initially billed therefor,
and each of the security instruments securing any account receivable, if any,
constitutes a valid lien in favor of such Seller upon the property which it
describes, and is enforceable by such Seller.
Section 4.30 Records. All books and records relating to the operations
of such Seller and its Facilities and Practice since inception, including but
not limited to, recruiting records, Patient Files and other records required by
Governmental Entities or otherwise, are true, accurate and complete in all
material respects. The invoices and checkbooks are kept at the offices of SCW&Co
or at the home of Xxx. Xxxxx; the Patient Files are kept at the offices where
the related services were performed; and the billing cards are kept at (a) the
offices where the related services were performed, (b) 000 Xxxxxxxxx Xxxx,
Xxxxxxxx, XX or (c) 000 Xxxxxxxxx Xxxx, Xxxxxxxx, XX.
Section 4.31 Fraud and Abuse/Referrals. To the knowledge of such Seller
and except as set forth on Schedule 4.27 hereto, such Seller, its Practice and
its officers, directors, employees, stockholders and providers, have not engaged
in any activities in connection with the Practice which are prohibited under
federal Medicare/Medicaid statutes, 42 U.S.C. Section 1320a-7a and 7b, and
Section 1395nn, or the regulations promulgated pursuant to such statutes or New
Jersey state or local healthcare or insurance Laws or regulations, including,
without limitation, the New Jersey Administrative Code 13:36-6.17 or New Jersey
Revenue Statute Section 45.9-22.4 et seq, or which are prohibited by rules of
professional conduct or which otherwise could constitute fraud, including, but
not limited to, the following: (a) making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) making or causing to be made any false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (c) failing to disclose knowledge by a claimant of the occurrence of
any event affecting the initial or continued right to any benefit or payment on
its behalf or on behalf of another, with intent to secure such benefit or
payment fraudulently; and (d) soliciting, paying or receiving any remuneration
(including any kickback, bribe, or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay such remuneration (i) in return
for referring an individual to any Seller for the furnishing or arranging for
the furnishing of any item or service for
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which payment may be made in whole or in part by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid.
Section 4.32 Third-Party Payors. All contracts with third-party payors
were entered into by such Seller in the ordinary course of business. Schedule
4.32 sets forth an accurate and complete list of all third-party payors which
have agreements with such Seller, and such Seller has provided to the Purchaser
accurate and complete copies of all such contracts. Except as set forth on
Schedule 4.32, such Seller is in compliance in all material respects with each
third-party payor's contract, and have properly charged and billed in accordance
with the terms of those contracts, including, where applicable, billing and
collection of all deductibles and co-payments. None of such contracts are
assignable by the Sellers without the prior consent of the applicable
third-party payor.
Section 4.33 Compliance with Medicare and Medicaid Programs. Such
Seller has timely and accurately filed all requisite claims and other reports
required to be filed in connection with all state and federal Medicare and
Medicaid programs in which such Seller participates due on or before the Closing
Date. There are no claims pending or, to such Seller's knowledge, threatened or
scheduled before any Governmental Authority, including without limitation, any
intermediary, carrier, the HCFA or any other state or federal agency with
respect to any Medicare or Medicaid claim filed by such Seller on or before the
Closing Date. Except for routinely scheduled reviews pursuant to the Medicare
and Medicaid Contracts to which such Seller is a party, no valid review or
program integrity review related to such Seller has been conducted by any
Governmental Authority or otherwise in connection with the Medicare or Medicaid
programs and no such review is scheduled, or to such Seller's knowledge, pending
or threatened against or affecting such Seller or its business or assets, or the
consummation of the transactions contemplated hereby.
Section 4.34 Rate Limitations and Rates. Each Facility currently
operated by such Seller charges rates and accordingly bills for services which
are legal.
Section 4.35 Participation in Audits. Such Seller has not been informed
of any Recoupment Claims arising in connection with audits or reviews conducted
by Medicaid, Medicare or private insurance companies other than in the ordinary
course of business consistent with past practice. To the knowledge of such
Seller, there is no basis for any Recoupment Claims based upon cost reports,
claims or bills submitted or to be submitted in connection with services
rendered by such Seller.
Section 4.36 Reimbursement Documentation. The Sellers have filed when
due any and all costs reports and other documentation and reports, if any,
required to be filed with third-party payors and Governmental Authorities in
compliance with applicable contractual provisions and Laws.
Section 4.37 Environmental Laws. Such Sellers and all properties owned
or operated by such Seller have complied in all material respects during the
time such Seller has operated its
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Facilities and Practice and currently comply in all material respects with all
Environmental Laws and such Seller has not received any communication (whether
from a Governmental Authority, private party, employee or otherwise) that
alleges that such Seller or its Practice or Facilities is not in such
compliance, and such Seller is not aware of any circumstances that may prevent
or interfere with such compliance in the future or otherwise give rise to any
liability or other loss under such Environmental Laws. Such Seller has all
Licenses required under Environmental Laws in connection with the operation of
such Seller's Practice and Facilities including any permits or licenses relating
to disposals or emissions. Such Seller has not been named or, to the knowledge
of such Seller, threatened to be named a "potentially responsible party" within
the meaning of CERCLA or any similar Law.
Section 4.38 Patients. All Patient Files relating to such Seller's
Patients are complete and accurate in all material respects and have been
maintained substantially in accordance with all requirements of Governmental
Authorities and other bodies having jurisdiction over such Seller. Such Seller
has no materials or information relating to its Patients other than its Patient
Files.
Section 4.39 Medical Waste. With respect to the generation,
transportation, treatment, storage, and disposal, or other handling of Medical
Waste, such Seller has complied in all material respects with all Medical Waste
Laws.
Section 4.40 Bulk Sales. The bulk sales laws set forth in the Uniform
Commercial Code of the jurisdiction in which such Seller conducts business are
not applicable to the transactions contemplated hereby.
Section 4.41 Liabilities and Indebtedness. All accounts payable,
accrued expenses, payroll and federal, state and local taxes (including real
estate taxes) of and pertaining to such Seller and its Facilities and Practice
shall remain the responsibility of such Seller through the Closing Date. Such
Seller is current with all of, and is not otherwise in default under any term
of, its obligations and liabilities consistent with past practice.
Section 4.42 Investment Intent. Such Seller represents that (i) by
reason of its business and financial experience, and the business and financial
experience of those Persons, if any, retained by it to advise it with respect to
its acquisition of the Preferred Stock Consideration pursuant hereto, such
Seller, together with such advisers, have such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risk of the prospective acquisition and can bear the economic risk of
such investment, and that it is purchasing the Preferred Stock Consideration for
its own account and not with a view to the distribution thereof or with any
present intention of distributing or selling any of such stock except in
compliance with the Securities Act and applicable state securities laws, (ii) it
understands and agrees that the Purchaser's offer and sale of the Preferred
Stock Consideration have not been registered under the Securities Act and the
Preferred Stock Consideration may be resold only if registered pursuant to the
provisions thereunder and applicable state securities laws or if an exemption
from registration is available, and (iii) it has received all the information it
has requested from the Purchaser and has had the opportunity to ask
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questions of the Purchaser and, relying on the completeness and accuracy of such
information, such Seller believes such information is sufficient to make an
informed decision with respect to its acquisition of the Preferred Stock
Consideration.
Section 4.43 Disclosure. No representation, warranty or statement made
by such Seller in (i) this Agreement, (ii) the schedules and exhibits attached
hereto or (iii) any other Transaction Document contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact required to be stated herein or therein or necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser represents and warrants to the Sellers as follows:
Section 5.01 Organization and Qualification. The Purchaser (i) is a
corporation duly organized, validly existing and in good standing as a business
corporation under the laws of the state of Delaware, (ii) has all corporate
power and authority to own, lease and operate its properties and to carry on its
business as currently being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not have a material adverse effect on it. The Purchaser is qualified and
licensed to do business in the State of New Jersey.
Section 5.02 Authority.
(a) On or prior to the Closing, the Purchaser will have the
requisite corporate power and authority to execute and deliver the Transaction
Documents and all other instruments or agreements to be executed in connection
herewith or therewith, and to consummate the transactions contemplated hereby
and thereby. On or prior to the Closing, the execution, delivery and performance
of the Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby, will have been duly authorized by all necessary
corporate action on the part of the Purchaser and no other corporate proceedings
on the part of the Purchaser will be necessary to authorize the Transaction
Documents or to consummate the transactions contemplated hereby or thereby. On
or prior to the Closing, the Transaction Documents to which it is a party will
have been duly executed and delivered by the Purchaser and, assuming the
Transaction Documents constitute valid and binding obligations of each of the
Sellers, will constitute valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms
subject, as to enforceability, to general equitable principles, and bankruptcy,
reorganization, receivership and other laws affecting creditors rights
generally.
(b) The Preferred Stock Consideration that is being offered and sold
to the Sellers at the Closing will have the voting powers, dividend rights,
liquidation rights, designations,
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preferences and relative, participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof, as set forth in the
Certificate of Designations, Preferences and Rights attached hereto as Exhibit
3, which will be filed with the Secretary of State of the State of Delaware
prior to the Closing. Subject to the terms of the Escrow Agreement, when paid
for by, and issued to, the Sellers in accordance with the terms hereof, the
Preferred Stock Consideration will be duly authorized, validly issued, fully
paid and non-assessable and will not have been issued in violation of any
preemptive right of stockholders or rights of first refusal; and the Sellers
will have good title to such preferred stock, free and clear of all Liens (other
than any created by any Seller or Stockholder or applicable federal or state
securities Laws). On or prior to the Closing, the shares of Purchaser Common
Stock (the "Conversion Shares") issuable upon conversion of the Series D Stock
will have been reserved for issuance therefor by the Purchaser and, when
converted by, and issued to, the Sellers in accordance with the terms of the
Series D Stock (subject to the stockholder approval contemplated by Section
13.08), the Conversion Shares will be duly authorized, validly issued, fully
paid and non-assessable and will not have been issued in violation of any
preemptive right of stockholders or rights of first refusal; and the Sellers
will have good title to such stock, free and clear of all Liens (other than any
created by any Seller or Stockholder or other holder thereof or applicable
federal or state securities Laws).
Section 5.03 Consents and Approvals; No Violations. Neither the
execution, delivery or performance of the Transaction Documents by the
Purchaser, nor the consummation by the Purchaser of the transactions
contemplated hereby or thereby (including, without limitation, the issuance of
the Preferred Stock Consideration), nor the compliance by the Purchaser with any
of the provisions hereof or thereof will (i) conflict with or result in any
breach of any provision of the charter or by-laws of the Purchaser, (ii) require
any filing with, or Consent of, any Governmental Authority or other Person other
than as set forth on Schedule 5.03, (iii) result in a violation or breach of, or
constitute (with or without the receipt or giving of notice or the passage of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, License, contract, agreement, or
other instrument or obligation to which the Purchaser is a party or by which any
of its properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Purchaser or
any of its properties or assets. Assuming the accuracy of the Sellers'
representations and warranties contained herein, the Preferred Stock
Consideration, when issued in accordance with the terms and provisions of this
Agreement, will be issued in compliance with applicable federal and state
securities laws.
ARTICLE VI
CERTAIN COVENANTS
-----------------
Section 6.01 Access to Information. From the date hereof until the
Closing Date, the Purchaser and its directors, officers, employees, agents,
attorneys, accountants and other representatives shall have full access, upon
reasonable notice and during normal business hours, to the employees and
financial, legal and other representatives of the Sellers with knowledge of the
Sellers' business and operations, such persons to be instructed by the Sellers
to make full and candid
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disclosure of all information reasonably requested, and to the books, records
and properties relating to the Sellers' business and operations (including
obtaining copies thereof upon reasonable notice). From the date hereof until the
Closing Date, the Sellers shall provide the Purchaser with (a) written reports
each week during such period by the close of business on Wednesday of each week
detailing, with respect to the preceding week, the number of procedures
performed at the Facilities and (b) such other financial and operating data as
the Purchaser may reasonably request. The Purchaser will use its best efforts
not to disrupt the Sellers' operations or impinge unnecessarily upon the time of
the Sellers' employees. Notwithstanding anything to the contrary set forth in
this Section 6.01, neither the Purchaser nor its directors, officers, employees,
agents, attorneys, accountants and other representatives shall contact any
employees or referral sources of the Sellers without the prior written consent
of Xxx. Xxxxx unless or until all of the conditions to Closing, other than the
provisions of Section 8.04 herein, have been satisfied, and thereafter the
Purchaser shall be permitted to contact the Sellers' employees and referral
sources after providing Xxx. Xxxxx prior notice of the intended contact and so
long as the Purchaser has committed in writing to consummate the Closing within
ten (10) days of its first contact with any such employees or referral sources.
Moreover, Xxx. Xxxxx or her designee shall be given the option to attend any
meeting with, or participate in any contact of, such employees or referral
sources.
Section 6.02 Conduct of Business in Normal Course. Each Seller,
severally and not jointly, covenants and agrees, except as otherwise expressly
contemplated by this Agreement or as specifically consented to in writing by the
Purchaser (which consent shall not be unreasonably withheld) and set forth on
Schedule 6.02 hereto, from and after the date of this Agreement and until the
Closing Date, to use its respective reasonable efforts consistent with good
business judgment to maintain its respective present business organizations
intact, keep available the services of its respective present employees,
preserve its respective present relationships with Persons having business
dealings with it and generally operate its respective business in the ordinary
and regular course consistent with its prior practices, maintain its respective
books and records in accordance with good business practice, on a basis
consistent with prior practice, and maintain all certificates, licenses and
permits necessary for the conduct of its respective business as currently
conducted. Each Seller, severally and not jointly, covenants and agrees that,
except as otherwise expressly contemplated by this Agreement or as specifically
consented to in writing by the Purchaser (which consent shall not be
unreasonably withheld), from and after the date of this Agreement and until the
Closing Date, such Seller shall not undertake or permit the following to occur
with respect to such Seller, any:
(a) action or omission which would result in a material adverse
change, whether direct or indirect, in the business, operations, condition
(financial or otherwise), prospects (as a going concern), liabilities or assets,
whether or not insured;
(b) transaction not in the ordinary course of business, including
without limitation, any sale of all or substantially all of the assets (or any
merger with any other entity);
(c) material damage, destruction or loss, whether or not insured;
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(d) unfulfilled commitment as of the date of this Agreement
requiring expenditures exceeding $75,000 in the aggregate (excluding commitments
expressly described elsewhere in this Agreement or the schedules hereto);
(e) failure to maintain in full force and effect substantially the
same level and types of insurance coverage as in effect on December 31, 1997, or
any destruction, damage to, or loss of any asset (whether or not covered by
insurance) that materially and adversely affects the business, operations,
condition (financial or otherwise), prospects, liabilities or assets;
(f) material change in accounting principles, methods or practices,
investment practices, claims, payment and processing practices or policies
regarding intercompany transactions;
(g) material revaluation of any assets or material write-down of the
value of any inventory;
(h) any direct or indirect redemption, purchase or other acquisition
of any shares of Capital Stock (other than distributions consistent with prior
practice);
(i) issuance or sale, or agreement to issue or sell, any Capital
Stock except for shares issued upon exercise of options and warrants currently
outstanding;
(j) amendment to its Certificate of Incorporation, By-laws or other
organizational documents;
(k) sale, assignment or transfer of any tangible or intangible
asset, including any rights to intellectual property, except in the ordinary
course of business;
(l) disposition or lapse of any patent, trademark, trade name,
service xxxx or copyright or any application for the foregoing, or disposition
of any technology, software or know-how, or any license, permit or authorization
to use any of the foregoing;
(m) mortgage, pledge or other encumbrance, including Liens and
security interests, of any tangible or intangible asset;
(n) discharge or satisfaction of any Lien or payment or cancellation
of any liability other than payment of current liabilities in the ordinary
course of business;
(o) entering into any agreement, whether written or oral, or
transaction (i) to waive, relinquish, terminate or forebear (other than as
contemplated by Section 2.03(b)(vi) hereof) the enforcement of any right not in
the ordinary course of business or involving consideration in excess of $75,000
(other than inventory acquisitions and dispositions in the ordinary course of
business) or (ii) for the sale or acquisition or lease of any material assets;
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(p) indebtedness incurred for borrowed money or any commitment to
borrow money, any capital expenditure or capital commitment requiring an
expenditure of monies in the future, any incurrence of a contingent liability or
any guaranty or commitment to guaranty the indebtedness of others entered into,
other than customary transactions in the ordinary course of business not in
excess of $75,000 in the aggregate;
(q) amendment, termination or revocation of (or notice of intent to
do so), or a failure in any material respect to perform obligations or the
occurrence of any default under, any material contract or agreement to which it
is, or as of December 31, 1997 was, a party or of any material license, permit
or franchise required for the continued operation of any business conducted by
it on December 31, 1997;
(r) increase or commitment to the increase of the salary or other
compensation payable or to become payable to any officer, director or employee,
agent or independent contractors (other than members of the Xxxxx family), the
payment of any bonus to the foregoing persons or entering into any employment,
consulting or other service agreements except in the ordinary course of business
and consistent with past practice and applicable policies and procedures; or
(s) enter into any material agreement (e.g., relating to capitated
payment and discounted fee-for-service arrangements) with any physician,
insurance company, managed care organizations or other healthcare organization,
other than agreements (for terms not in excess of one year), on customary terms
and conditions with past practice.
Notwithstanding the foregoing, nothing herein shall preclude any
Seller's distribution of monies in respect of its Capital Stock, repayment of
that certain indebtedness listed on Schedule 6.08, payment of professional
reading and other fees in the ordinary course of business consistent with past
practice, and settlement or other termination of those certain purchase orders
set forth on Schedule 2.03(b)(vi).
Section 6.03 No Solicitation.
(a) From the date hereof to the Closing Date, each Seller
agrees that neither it nor any of its directors, officers, employees,
representatives or agents or any Stockholder will, and each Seller will use all
reasonable efforts to cause the non-management employees of such Seller who
become aware of the matters contemplated by this Agreement not to, directly or
indirectly, solicit or initiate any discussions or negotiations with,
participate in any negotiations with, provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by, any Person, other than the Purchaser and its directors, officers,
employees, representatives and agents, concerning any merger, sale of
substantial assets, sale of shares of capital stock or similar transaction
involving such Seller. Each Seller will promptly advise the Purchaser of any
proposal or inquiry made to it or any of its directors, officers, employees,
representatives, agents or stockholders with respect to any of the foregoing
transactions.
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(b) From the date hereof to the Closing Date, the Estate agrees that
neither it nor any of its or the Sellers' respective directors, officers,
employees, representatives or agents or any Stockholder (as applicable) will,
and the Estate will use all reasonable efforts to cause the non-management
employees of the Sellers who become aware of the matters contemplated by this
Agreement not to, directly or indirectly, solicit or initiate any discussions or
negotiations with, participate in any negotiations with, provide any information
to or otherwise cooperate in any other way with, or facilitate or encourage any
effort or attempt by, any Person, other than the Purchaser and its directors,
officers, employees, representatives and agents, concerning any merger, sale of
substantial assets, sale of shares of capital stock or similar transaction
involving any Seller. The Estate will promptly advise the Purchaser of any
proposal or inquiry made to it or any of such directors, officers, employees,
representatives, agents or stockholders with respect to any of the foregoing
transactions.
Section 6.04 Notification of Certain Matters. Each party hereto agrees
to give prompt notice to the other of (i) the occurrence, or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
of its representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing Date, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of or the failure to deliver
any notice pursuant to this Section 6.04 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 6.05 Supplements to Schedules. Prior to the Closing Date, each
Seller will supplement or amend the schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
schedules. Subject to the last sentence of Article X which shall be controlling,
no supplement or amendment of the schedules made pursuant to this Section 6.05
shall be deemed to cure any breach of any representation or warranty made in
this Agreement unless the Purchaser specifically agrees thereto in writing.
Section 6.06 Confidentiality.
(a) Except as otherwise provided in this Section 6.06, the
Purchaser, on the one hand, and the Stockholders and the Sellers (the "Selling
Group"), on the other hand, shall not disclose any Confidential Information.
Prior to the Closing Date, the Purchaser and the Selling Group shall use the
Confidential Information solely in connection with its analysis and review of
the transactions contemplated by this Agreement; provided that upon and
subsequent to the Closing Date all Confidential Information provided to the
Purchaser by the Selling Group shall become the property of the Purchaser, and
the Purchaser shall have no further obligations pursuant to this Section 6.06.
Subsequent to the Closing Date, the obligations of the Selling Group under this
Section 6.06 shall continue in effect and all confidential information
previously provided by the Selling Group to the Purchaser will constitute
Confidential Information which the Selling Group shall keep confidential in
accordance with the terms of this Section 6.06.
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(b) The Purchaser and the Selling Group may disclose Confidential
Information to any of their respective directors, officers, employees, agents,
financing sources, and advisors (each a "Representative" and collectively, the
"Representatives") who need to know such Confidential Information, for the
purpose of assisting such party in connection with the transactions contemplated
by this Agreement. The Purchaser and the Selling Group (the "Disclosing Party")
may disclose Confidential Information if required by legal process or by
operation of applicable Law (including in respect of the Selling Group's Tax
Returns); provided, however, that the Disclosing Party shall first promptly
advise and consult with the other party (the "Subject Party") and its counsel
concerning the information the Disclosing Party proposes to disclose, except in
respect of proceedings between the Disclosing Party and the Subject Party. The
Subject Party shall have the right to seek an appropriate protective order or
other remedy concerning the Confidential Information that the Disclosing Party
proposes to disclose, and the Disclosing Party shall cooperate with the Subject
Party to obtain such protective order. In the event that such protective order
or other remedy is not obtained by the Subject Party, the Disclosing Party shall
disclose only that portion of the Confidential Information which, in the written
opinion of the Disclosing Party's counsel, the Disclosing Party is legally
required to disclose, and the Disclosing Party shall use its best efforts to
obtain assurances that confidential treatment will be accorded to such
information. Notwithstanding anything contained herein to the contrary, nothing
herein shall preclude the disclosure of Confidential Information by a Disclosing
Party as part of its defense in any legal proceeding instituted against the
Disclosing Party, including any indemnification claim under Article XI; provided
that the Disclosing Party shall disclose only that portion of the Confidential
Information which, in the written opinion of the Disclosing Party's counsel, is
necessary for the defense of the Disclosing Party in such proceeding and the
Disclosing Party shall use its best efforts to obtain assurances that
confidential treatment will be accorded to such information.
(c) In the event that the transactions contemplated hereby are not
consummated, all Confidential Information whether or not then in each parties'
possession, and any copies thereof, or notes or extracts therefrom shall be
returned to the other party, without retaining any copies thereof, and each
party shall destroy, as soon as practicable, all copies of any analyses,
studies, compilations or other documents prepared by it or any of its
Representatives to the extent that they contain, reflect or are generated from
any Confidential Information.
(d) Each party acknowledges and agrees that any breach by it of the
provisions of this Section 6.06 will cause the other party irreparable injury
and damage, for which it cannot be adequately compensated in damages. Each
party, therefore, expressly agrees that the other party shall be entitled to
seek injunctive relief and/or other equitable relief to prevent any anticipatory
breach or continuing breach of the provisions of this Section 6.06, or any part
thereof, and to secure their enforcement. Nothing herein shall be construed as a
waiver by a party of any right it may now have or hereafter acquire to monetary
damages by reason of any injury to its property, business or reputation or
otherwise arising out of any wrongful act or omission of a party under the
provisions of this Section 6.06.
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(e) In the event the transactions contemplated hereby are not
consummated, the Purchaser agrees that it will not, directly or indirectly, for
a period of eighteen (18) months from the date of this Agreement (x) solicit for
employment or employ or engage any of the present employees of the Sellers;
provided, however, that Purchaser shall not be prohibited from employing any
such person (other than marketing employees and the Facilities' radiologists)
who contacts the Purchaser on his or her own initiative and without any direct
or indirect solicitation by the Purchaser or (y) solicit for the provision of
diagnostic imaging services or accept such business from any of the physicians
who refer a material number of diagnostic imaging procedures to any of the
Facilities and whose identity as a Seller's referral source becomes known by the
Purchaser as a result of its evaluation of the Facilities; provided that the
Purchaser shall not be prohibited from soliciting any persons who were
specifically solicited by the Purchaser prior to the date of the Letter of
Intent or who are solicited as part of a general solicitation not targeted to
physicians not currently solicited by the Purchaser. For purposes of this
Section 6.06(f), a material number of diagnostic imaging procedure referrals
shall mean forty (40) or more of such referrals in a twelve (12) month period.
Section 6.07 Facilities Employees.
(a) At or prior to the Closing, the Sellers shall terminate the
employment of, and the Purchaser will offer employment to, all Facilities
Employees (other than members of the Xxxxx family), which employment by the
Purchaser shall be on substantially the same terms and conditions upon which
they were employed immediately prior to the Closing. The Sellers will indemnify
the Purchaser for up to $50,000, pursuant to Article XI herein, that the
Purchaser may incur in connection with certain employee retraining,
rationalization or reduction measures ("Retraining Obligations").
(b) The Sellers shall be solely responsible for the payment of any
accrued but unpaid vacation pay as of the Closing Date for all such terminated
employees. The parties agree that those certain Facilities Employees listed on
Schedule 6.07 hereto shall be entitled to such unpaid vacation after the Closing
as set forth on Schedule 6.07.
(c) Each Facilities Employee employed by the Purchaser after the
Closing shall continue to participate, through the end of the month in which the
Closing occurs, in the Sellers' group health insurance plans on the same terms
and subject to the same conditions as such employee participated prior to the
Closing without giving effect to such employee's termination, and the Purchaser
agrees to promptly reimburse the Sellers for any amounts paid by the Sellers for
such coverage on behalf of each such employee during such period in accordance
with the terms and provisions of the Sellers' plans.
(d) The indemnification limitations set forth in Section 11.02 shall
not apply in the event the Purchaser shall seek any indemnification in respect
of the foregoing agreements.
Section 6.08 Obligations and Indebtedness. At or prior to the Closing,
all obligations secured by, or which encumber, any of the assets of, or utilized
by, the Facilities, including but not
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limited to, indebtedness to CoreStates Bank, N.A. and Commerce Bank, as well as
indebtedness owed to members of the Xxxxx family, the amount of which
indebtedness is set forth on Schedule 6.08 hereto, will be repaid and all
security interests and other encumbrances with respect to such indebtedness will
be terminated and appropriate UCC-3 Financing Statement Terminations will have
been filed in all jurisdictions in which any UCC-1 Financing Statements were on
file in connection with such indebtedness so repaid.
Section 6.09 Purchase Orders. At or prior to the Closing, the
obligations of the Sellers with respect to the purchase orders for the equipment
specified on Schedule 2.03(b)(vi) shall be terminated without any continuing
obligation of the Purchaser or the Facilities, and the Purchaser will have no
liability with respect to such equipment or the termination of the purchase
orders with respect thereto.
Section 6.10 Mainland Facility. The Purchaser shall be solely
responsible for all costs and expenses, if any, related to any renovation of the
Mainland Facility which may be necessary or desirable in order for the Purchaser
to obtain a license from the State of New Jersey or any subdivision thereof to
operate the Mainland Facility.
Section 6.11 Recoupment Claims. As more fully set forth in Section
2.03, notwithstanding the transactions contemplated herein, the Sellers shall
retain all obligations and liabilities in respect of Recoupment Claims for which
payment has been received by the Sellers, the Facilities or the Practice, as
applicable, prior to the Closing, and such claims and any and all Losses related
thereto shall be payable by the Sellers in cash in immediately available funds
or in shares of Series D Stock, as the Sellers may determine.
ARTICLE VII
CONDITIONS TO EACH PARTY'S OBLIGATIONS
--------------------------------------
The respective obligations of each party hereunder are subject to the
satisfaction, at or before the Closing Date, of the conditions set forth below.
Section 7.01 Governmental Authorizations; Consents. The Sellers and the
Purchaser shall have obtained all Consents which are required for the
consummation of the transactions contemplated under this Agreement and for the
Purchaser to be able to continue to operate the Practice and the Facilities
immediately after consummation of this Agreement, in accordance with all Laws
(taking into account, and subject to, the contemplated operation of the Mainland
Facility in the manner consented to by the State of New Jersey), other than such
Consents in respect of the assignment of such contracts which are not material,
either individually or in the aggregate, to the Practice and the Facilities.
Section 7.02 Absence of Litigation. There shall not have been issued
and be in effect any order of any court or tribunal of competent jurisdiction
which (i) prohibits or makes illegal the
- 47 -
purchase by the Purchaser of the Assets, (ii) would require the divestiture by
the Purchaser of all or a material portion of the Assets, the Facilities, the
Practice or any other assets of the Purchaser as a result of the transactions
contemplated hereby, or (iii) would impose limitations on the ability of the
Purchaser to effectively exercise full rights of ownership of the Assets, or of
a material portion of the Facilities and the Practice as a result of the
transactions contemplated hereby.
Section 7.03 No Injunction. On the Closing Date there shall be no
effective injunction, writ, preliminary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein or any of them not be consummated as so
provided or imposing any conditions on the consummation of the transactions
contemplated hereby which the Purchaser deems unacceptable in its sole
discretion.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
---------------------------------------------------
The obligation of the Purchaser to purchase the Assets is subject to
the satisfaction, at or prior to the Closing, of the conditions set forth below.
The benefit of these conditions are for the Purchaser only and may be waived in
writing by the Purchaser at any time in its sole discretion.
Section 8.01 Accuracy of Representations and Warranties. The
representations and warranties of the Sellers shall be true and correct in all
material respects as of the date when made and as of Closing Date as though made
at that time, and the Purchaser shall have received certificates attesting
thereto from each Seller signed by a duly authorized officer of each Seller.
Section 8.02 Performance by the Sellers. The Sellers shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, including, without
limitation, the deliveries required under Section 3.03, and the Purchaser shall
have received certificates attesting thereto from each Seller, signed by a duly
authorized officer of each Seller.
Section 8.03 Non-Competition Agreement. The Purchaser shall have
entered into the Non- Competition Agreements with the Sellers and each of Xxx.
Xxxxx, Xx. Xxxxx, Xxxxxx Xxxxx and Xxxxx Xxxxx on or prior to the Closing,
effective as of the Closing Date.
Section 8.04 Casualty Losses; Material Change. Since December 31, 1997,
none of the Sellers, the Practice, the Facilities or the Assets shall have
suffered (a) any material casualty loss, (b) any material business interruption,
(c) any material labor difficulty or customer boycott or (d) any material
adverse change in its business, operations, prospects or condition (financial or
otherwise).
Section 8.05 Assets. The Assets shall be free and clear of all Liens of
any nature whatsoever.
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Section 8.06 Financial Statements. The Sellers shall have delivered the
1997 Financial Statements, the 1996 Financial Statements, the 1997 Tax Basis
Financial Statements and the 1996 Tax Basis Financial Statements. The 1997 Tax
Basis Financial Statements and the 1996 Tax Basis Financial Statements shall
reflect that the Sellers had aggregate revenues of at least $10.0 million for
fiscal 1997 and fiscal 1996, respectively, and an aggregate pre-tax profit of at
least $4.5 million and $4.4 million for fiscal 1997 and fiscal 1996,
respectively, in each case, after excluding all compensation paid to members of
the Xxxxx Family, other than Xx. Xxxxxx Xxxxx and Xxx. Xxxxx.
Section 8.07 Compliance with Laws. None of the Sellers, the Facilities
or the Practice being in violation of any Law, which such violation may have a
Material Adverse Effect.
Section 8.08 Leases. The Purchaser shall have received from the Sellers
a duly executed Assignment and Assumption Agreement in the form attached hereto
as Exhibit 6, transferring to the Purchaser all interests of the Sellers with
respect to the Leases and Contracts, and related estoppel and consent of the
landlord. The Purchaser shall have received the leases referenced on Schedule
3.02, duly executed by the appropriate landlord, in the form attached hereto as
Exhibit 7.
Section 8.09 Consents and Approvals. The receipt of the Consents
required to transfer the Assets and the Assumed Liabilities, and for the
Purchaser to operate the business conducted at the Facilities subsequent to the
Closing in substantially the same manner conducted prior to the Closing (other
than such governmental consent required for the continued operation of the
Mainland Facility referenced on Schedule 6.02 hereto and other than such
Consents in respect of the assignment of such contracts which are not material,
either individually or in the aggregate, to the Practice and the Facilities).
Section 8.10 Stockholder Approval. The approval of the stockholders or
limited and general partners, as the case may be, of the Sellers as required by
Law, contract or otherwise.
Section 8.11 Opinion of Counsel. The Purchaser shall have received from
counsel to the Sellers and the Stockholders, an opinion of counsel, dated as of
the Closing Date and addressed to the Purchaser substantially in the form of
Exhibit 10 attached hereto.
Section 8.12 FIRPTA Certificate. Each of the Sellers shall deliver to
the Purchaser a certificate (the "FIRPTA Certificate") on a form substantially
identical to the form attached hereto as Exhibit 11.
Section 8.13 Obligations and Indebtedness. All obligations which, prior
to the Closing, were secured by or which encumbered any of the assets of or
utilized by the Sellers, the Facilities and the Practice, including indebtedness
to CoreStates Bank, N.A. and Commerce Bank, as well as indebtedness owed to
members of the Xxxxx Family, shall have been repaid and all security interests
and other encumbrances terminated.
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Section 8.14 Notes. The Purchaser shall have received the Notes and
related Pledge and Security Agreements, each duly executed by the appropriate
Seller.
ARTICLE IX
CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS
------------------------------------------------
The obligation of the Sellers to sell the Assets is subject to the
satisfaction, at or prior to the Closing, of the conditions set out below. The
benefit of these conditions are for the Sellers only and may be waived by the
Sellers in writing at any time in its sole discretion.
Section 9.01 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
respects as of the date when made and as of the Closing Date, as though made at
that time, and the Sellers shall have received a certificate attesting thereto
signed by a duly authorized officer of the Purchaser.
Section 9.02 Performance by Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, including, without
limitation, the deliveries required under Section 3.02, and the Sellers shall
have received a certificate from the Purchaser signed by a duly authorized
officer of the Purchaser to such effect.
Section 9.03 Opinion of Counsel. The Sellers shall have received from
counsel to the Purchaser, an opinion of counsel, dated as of the Closing Date
and addressed to the Sellers substantially in the form of Exhibit 5 attached
hereto.
Section 9.04 Registration Rights Agreement. The Sellers shall have
received the Registration Rights Agreement, duly executed by the Purchaser.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
AND INDEMNIFICATION OBLIGATIONS
-------------------------------
Except as otherwise specifically provided for herein, the
representations and warranties of the Purchaser and the Sellers included or
provided for herein, or in other instruments or agreements delivered or to be
delivered at or prior to Closing in connection herewith, including the
representations and warranties of all Persons made in the certificates to be
delivered to the Purchaser pursuant hereto, and the obligation of the Purchaser
and the Sellers and the Stockholders to indemnify on account of a breach or
violation of such representations and warranties shall survive for a period of
eighteen (18) months following the Closing Date; provided, however, that (a)
there shall be no limit on the survival of the indemnification obligations of
the Sellers for breaches of the representations or warranties made by the
Sellers as to the transfer of legal and valid title to the
- 50 -
Assets and (b) the indemnification obligations of the Sellers for breaches of
the representations or warranties made by the Sellers with respect to Taxes or
Tax matters or with respect to environmental matters shall survive until the
expiration of the applicable statute of limitations. Similarly, the obligation
of the Sellers and the Stockholders to indemnify the Purchaser with respect to
all Excluded Liabilities (other than those liabilities or obligations resulting
from a breach of any representation or warranty of the Sellers or the
Stockholders included herein or made in connection herewith for which the
indemnification obligations of the Sellers and the Stockholders are limited as
set forth in the preceding sentence) shall survive until such liability or claim
is fully paid and discharged. Notwithstanding anything herein to the contrary,
if, prior to the expiration of any indemnification period, the Purchaser, or the
Sellers, as the case may be, shall have been notified of a claim for indemnity
hereunder and such claim shall not have been finally resolved before the
expiration of such period, any representation or warranty that is the basis for
such claim shall continue to survive and shall remain a basis for indemnity as
to such claim until such claim is finally resolved. The respective
representations and warranties of the Sellers and the Purchaser contained herein
or in any other documents covered in the first sentence of this Article shall
not be deemed waived or otherwise affected by any investigation made by any
party hereto or any amendment or supplement to the schedules or exhibits hereto
occurring after the signing of this Agreement. Notwithstanding the foregoing, if
the investigating party had actual knowledge of any breach of any representation
and warranty of the other party and failed to notify the other party thereof
prior to the Closing, the investigating party shall not be entitled to any
indemnification from the other party for such breach.
ARTICLE XI
INDEMNIFICATION
---------------
Section 11.01 General Indemnity.
(a) Subject to the limitations and other provisions of Article X
(which pertain only to clause (i) below) and this Article XI, Xxx. Xxxxx and Xx.
Xxxxx, jointly and severally, agree to indemnify and hold harmless the
Purchaser, its respective Affiliates, and the successors and assigns of all of
them, including Persons providing financing to the Purchaser in their capacity
as successors or assigns of the Purchaser, from, against and in respect of any
and all Losses resulting from, incurred in connection with or arising out of (i)
any breach, or alleged breach claimed by a third party, of any representation or
warranty of any Sellers or Stockholder contained herein or made in the
Transaction Documents and any actual or threatened action or proceeding in
connection with any breach or alleged breach claimed by a third party, (ii) any
breach, or alleged breach claimed by a third party, or other failure to perform
or threatened failure to perform, of any covenant or agreement of any Seller or
Stockholder contained herein or in any of the Transaction Documents and any
actual, or threatened action or proceeding by a third party, in connection with
any such breach, failure of performance or threatened breach or failure of
performance, (iii) the Excluded Liabilities, (iv) any liability for Taxes (1) of
the Sellers or the Stockholders and (2) of any person other than a Seller or a
Stockholder for which the Sellers or the Stockholders has liability as a
transferee or successor, by contract or otherwise, and (v) the Retraining
Obligations. Xx. Xxxxx'x indemnification
- 51 -
obligations hereunder and all other obligations to the Purchaser hereunder
arising due to his execution of this Agreement shall cease upon his transfer to
the Estate of his portion of the Purchase Price in payment of certain
indebtedness owing to the Estate, and the Purchaser, upon such occurrence, shall
be deemed to have released, remised and forever discharged Xx. Xxxxx from any
liability under this Agreement arising due to his execution hereof, including,
without limitation, any and all Losses of any kind or nature, whether known or
unknown, in law or equity, that specifically pertain or relate to any obligation
arising due to his execution of this Agreement.
(b) Each Seller, severally and not jointly, agrees to indemnify and
hold harmless the Purchaser, its respective Affiliates, and the successors and
assigns of all of them, including Persons providing financing to the Purchaser
in their capacity as successors or assigns of the Purchaser, from, against and
in respect of any and all Losses resulting from, incurred in connection with or
arising out of (i) any breach, or alleged breach claimed by a third party, of
any representation or warranty of such Seller contained herein or made in the
Transaction Documents and any actual, or threatened action or proceeding by a
third party, in connection with any breach or alleged breach by a third party,
(ii) any breach, or alleged breach claimed by a third party, or other failure to
perform or threatened failure to perform, of any covenant or agreement of such
Seller contained herein or in any of the Transaction Documents and any actual or
threatened action or proceeding in connection with any such breach, failure of
performance or threatened breach or failure of performance, (iii) the Excluded
Liabilities, (iv) any liability for Taxes (1) of such Seller and (2) of any
person other than such Seller for which such Seller has liability as a
transferee or successor, by contract or otherwise, and (v) the Retraining
Obligations.
(c) The Purchaser shall indemnify and hold harmless the Stockholders
and the Sellers and their respective successors and assigns from, against and in
respect of any and all Losses resulting from, incurred in connection with or
arising out of (i) any breach, or alleged breach claimed by a third party, of
any representation, warranty, covenant or agreement of the Purchaser and any
actual or threatened action or proceeding in connection therewith and (ii) the
operation of the Facilities after the Closing including, without limitation, in
respect of the Assumed Liabilities.
The party or parties being indemnified are referred to herein
as the "Indemnitee" and the indemnifying party is referred to herein as the
"Indemnitor".
Section 11.02 Limitation on Indemnification Liabilities.
(a) No claim for indemnification under Section 11.01(a) or (b) may
be brought or maintained by the Purchaser unless and until the aggregate dollar
amount of all Losses sought by the Purchaser to be indemnified against under
such aforesaid Sections equals or exceeds $375,000 (the "Threshold Amount"), in
which event the Stockholders and the Sellers shall be responsible for and shall
hold the Purchaser harmless from, any and all such Losses in excess of the
Threshold Amount; provided, further, however, that the maximum liability that
the Stockholders and the Sellers may have with respect to claims for
indemnification under Section 11.01(a) and (b), as the case may be, will be $2.5
million, other than with respect to matters involving (i) fraud, willful
misconduct
- 52 -
or bad faith, (ii) Taxes, (iii) accounts payable, (iv) the Sellers' liabilities
or obligations (x) to any of its stockholders, partners or other equity owners
or any of their affiliates, or (y) which may arise by reason of or with respect
to (A) any Seller's dissolution, liquidation or distribution of assets to its
stockholders, partners or other equity owners, (B) any Seller's bank
indebtedness (including, without limitation, to CoreStates Bank, N.A. and
Commerce Bank) or (C) the Vista Upgrade, (v) any Recoupment Claims for which
payment has been received by the Sellers, the Facilities or the Practice, as
applicable, prior to the Closing (which claims and any and all Losses related
thereto shall be payable by the Sellers in cash or in shares of Series D Stock,
as the Sellers may determine ), or (vi) the Retraining Obligations.
(b) Any Losses payable by any Seller or Stockholder to the Purchaser
pursuant to Section 11.01 (including in respect of Recoupment Claims for which
payment has been received by the Sellers, the Facilities or the Practice, as
applicable, prior to the Closing) may be payable, in the sole discretion of the
payor, in cash in immediately available funds, or in shares of Series D Stock
valued at its liquidation preference.
Section 11.03 Indemnification Procedure.
(a) Any party who receives notice of a potential claim that may, in
the judgment of such party, result in a Loss shall use all reasonable efforts to
provide the parties hereto notice thereof, provided that failure or delay or
alleged delay in providing such notice shall not adversely affect such party's
right to indemnification hereunder except to the extent that the Indemnitor
demonstrates that the defense of such action has been prejudiced by the
Indemnitee's failure to give such notice. In the event that any party shall
incur or suffer any Losses in respect of which indemnification may be sought by
such party hereunder, the Indemnitee shall assert a claim for indemnification by
written notice ("Notice") to the Indemnitor stating the nature and basis of such
claim. In the case of Losses arising by reason of any third party claim, the
Notice shall be given within thirty (30) days of the filing or other written
assertion of any such claim against the Indemnitee, but the failure of the
Indemnitee to give the Notice within such time period shall not relieve the
Indemnitor of any liability that the Indemnitor may have to the Indemnitee
except to the extent that the Indemnitor demonstrates that the defense of such
action has been materially prejudiced by the Indemnitee's delay in giving such
notice and then only to the extent of such prejudice.
(b) In the case of third party claims for which indemnification is
sought, the Indemnitor shall have the option (i) to conduct any proceedings or
negotiations in connection therewith, (ii) to take all other steps to settle or
defend any such claim (provided that the Indemnitor shall not settle any such
claim without the consent of the Indemnitee which consent shall not be
unreasonably withheld) and (iii) to employ counsel to contest any such claim or
liability in the name of the Indemnitee or otherwise. In any event, the
Indemnitee shall be entitled to participate at its own expense and by its own
counsel in any proceedings relating to any third party claim. The Indemnitor
shall, within twenty (20) days of receipt of the Notice, notify the Indemnitee
of its intention to assume the defense of such claim. If (i) the Indemnitor
shall decline to assume the
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defense of any such claim, (ii) the Indemnitor shall fail to notify the
Indemnitee within twenty (20) days after receipt of the Notice of the
Indemnitor's election to defend such claim; (iii) the Indemnitee shall have
reasonably concluded that there may be defenses available to it which are
different from or in addition to those available to the Indemnitor and any of
such defenses are, or in the reasonable opinion of the Indemnitee may be,
unavailable or materially adversely affected if the Indemnitor directs the
defense of such action on behalf of the Indemnitee; or (iv) a conflict exists
between the Indemnitor and the Indemnitee which the Indemnitee has reasonably
concluded would prejudice the Indemnitor's defense of such action, then in each
such case the Indemnitor shall not have the right to direct the defense of such
action on behalf of the Indemnitee and the Indemnitee shall defend against such
claim and may settle such claim without the consent of the Indemnitor, and
Indemnitor may not challenge the reasonableness of any such settlement. Subject
to the limitations and other provisions of Article X and this Article XI, the
expenses of all proceedings, contests or lawsuits in respect of such claims
shall be borne and paid by the Indemnitor and the Indemnitor shall pay the
Indemnitee, in immediately available funds (or, if the Indemnitor is a Seller or
Stockholder, in shares of Series D Stock valued at its liquidation preference),
as such Losses are incurred. Regardless of which party shall assume the defense
of the claim, the parties agree to cooperate fully with one another in
connection therewith. In the event that any Losses incurred by the Indemnitee do
not involve payment by the Indemnitee of a third party claim, then, subject to
the limitations and other provisions of Article X and this Article XI, the
Indemnitor shall within ten (10) days after agreement on the amount of Losses or
the occurrence of a final non-appealable determination of such amount payable to
the Indemnitee the amount of such Losses. Anything in this Article XI to the
contrary notwithstanding, the Indemnitor shall not, without the Indemnitee's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
Indemnitee, which restricts the Indemnitee's ability to conduct its business and
as a result would have a material adverse effect on the Indemnitee, or which
does not include, as an unconditional term thereof, the giving by the claimant
or plaintiff to the Indemnitee, a release from all liability in respect of such
claim. In the event that (x) the Indemnitor and a third party agree to the
settlement of a claim which solely involves a payment by the Indemnitor, (y) the
Indemnitee does not consent to such settlement and (z) thereafter the final
non-appealable determination of the amount payable to such third party is in
excess of the proposed settlement amount, then the Indemnitee shall be liable
for the payment to such third party of any such excess.
(c) The remedies for claims for indemnification under this Article
XI shall be the sole and exclusive remedy for the recovery of monetary damages
for such claims by the Purchaser against the Sellers and the Stockholders (but
shall in no event preclude the commencement of any action or other proceeding to
assert or enforce any indemnification obligations under this Article XI in
accordance with the terms hereof or the assertion of any equitable right or the
seeking of any equitable relief and further shall in no event restrict any claim
involving fraud, willful misconduct or bad faith).
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ARTICLE XII
TERMINATION
-----------
Section 12.01 Right to Terminate. Notwithstanding anything to the
contrary set forth in this Agreement, this Agreement may be terminated and the
transactions contemplated herein abandoned at any time prior to the Closing:
(i) by mutual consent of the Purchaser, on the one hand, and the
Sellers, on the other;
(ii) by the Purchaser or the Seller if the Closing shall not have
occurred by October 15, 1998, provided, however, that the
right to terminate this Agreement under this Section 12.01
shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on or
before such date;
(iii) by the Purchaser or the Sellers if a court of competent
jurisdiction shall have issued an order, decree or ruling
permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become
final and nonappealable;
(iv) by the Sellers if the Purchaser (x) breaches its
representations and warranties in any material respect, or
(y) fails to comply in any material respect with any of its
covenants or agreements contained herein; or
(v) by the Purchaser if the Sellers (x) breach their
representations and warranties in any material respect, or
(y) fail to comply in any material respect with any of its
covenants or agreements contained herein.
Section 12.02 Obligations to Cease. Subject to the next succeeding
sentence, in the event that this Agreement shall be terminated pursuant to
Section 12.01 hereof, all obligations of the parties hereto under this Agreement
shall terminate and there shall be no liability of any party hereto to any other
party except for (i) the obligations with respect to confidentiality contained
in Section 6.06 hereof and (ii) the obligations with respect to costs contained
in Section 14.02 hereof, provided, however, that in the event of a termination
of this Agreement by reason of either clause (iv) or (v) of Section 12.01
hereof, the non-terminating party(ies) shall reimburse the terminating
party(ies) for its (their) reasonable out-of-pocket expenses (which shall
include legal and accounting fees, etc.), incurred relative to this Agreement
and the transactions contemplated herein.
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ARTICLE XIII
OBLIGATIONS AFTER THE CLOSING
-----------------------------
Section 13.01 Tax Returns; Tax Periods Ending on or Before the Closing
Date. Each Seller shall prepare or cause to be prepared and file or cause to be
filed (at its expense) its Tax Returns with respect to the Business, Facilities
and Assets for all periods ending on or prior to the Closing Date which are to
be filed after the Closing Date. Such Tax Returns shall be prepared in a manner
consistent with the Tax Returns (including amended Tax Returns) of the
respective Seller filed on or prior to the Closing Date for prior fiscal
periods. Each Seller shall pay, or cause to be paid, all Taxes shown as due (or
required to be shown as due) on such Tax Returns.
Section 13.02 Employees and Employee Benefits. The Sellers shall be
solely responsible for the satisfaction of all claims for benefits brought by or
in respect of any person who was an employee of the Sellers or who performed
services at the Facilities prior to the Closing under any Plan or any
government-mandated benefits (worker's compensation and unemployment
compensation) or otherwise, which claims are based on occurrences prior to the
Closing, or as a result of the transactions contemplated herein, regardless of
when notices of such claims were filed. Except as expressly provided herein, the
Sellers shall have no responsibility to provide benefits or government-mandated
benefits to Facilities Employees employed by the Purchaser and/or the Facilities
after the Closing for claims arising out of events that occurred after the
Closing; however, the Sellers shall remain liable for any claims arising out of
events that occurred prior to and at the Closing.
Section 13.03 Tax Audits. Each party shall have the right, at its own
expense, to control any audit or determination by any Governmental Authority,
initiate any claim for refund or amended return, and contest, resolve and defend
against any assessment, notice of deficiency, or other adjustment or proposed
adjustment of Taxes for any taxable period for which that party is charged with
responsibility for filing a Tax Return under this Agreement (collectively, "Tax
Actions"); provided, however, that the Sellers, on the one hand, and the
Purchaser, on the other, shall not have the right to agree to any assessment,
deficiency, settlement, or other adjustment or proposed adjustment of Taxes that
would adversely affect the interests of the other without such other party's
written consent, which consent shall not be unreasonably withheld, and,
provided, further, that the Purchaser shall have the right, at the expense of
the Sellers, to assume Tax Actions in the event the Sellers shall fail to take
Tax Actions reasonably available to them. The Sellers shall notify the
Purchaser, and the Purchaser shall notify the Sellers, as the case may be, if
any taxing authority shall, upon audit or otherwise, propose in writing an
adjustment to tax items which could give rise to a claim against or by the
Purchaser.
Section 13.04 Further Assurances and Cooperation. Subject to the terms
and conditions hereof, the Sellers agree that after the Closing they each will
execute and deliver such documents to the Purchaser as the Purchaser may
reasonably request in order to consummate the transactions contemplated hereby,
at the Purchaser's sole cost and expense. Each of the parties hereto shall
provide the other parties with such assistance and information as may reasonably
be requested by
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any of them in connection with the transactions contemplated by this Agreement
(including in connection with any claim arising under this Agreement), at the
sole cost and expense of the requesting party.
Section 13.05 Access. The Purchaser hereby agrees that, after the
Closing, the Sellers and the Stockholders (or their respective representatives)
shall have reasonable access to any business records included in the Assets
which may be necessary for the Sellers' or the Stockholders' tax purposes or
other legitimate business purposes (including, without limitation, in connection
with malpractice and other lawsuits) upon reasonable prior notice at reasonable
times during regular business hours. Such access shall include an opportunity to
make photocopies of such records (at the requesting party's expense). The
Sellers and the Stockholders shall maintain the confidentiality of the contents
of such records, and such information may only be used by any such party for
such legitimate business purposes and may not be disclosed other than to any
such party's Representatives who need to know such information solely for
legitimate business purposes of the Sellers and the Stockholders. Such
confidential information shall otherwise be accorded the protections set forth
in Section 6.06.
Section 13.06 Consent of the Sellers' Accountants. After the Closing,
the Sellers agree to use their reasonable efforts to obtain the consent of the
Sellers' Accountants with respect to the inclusion of the 1996 Financial
Statements and the 1997 Financial Statements within any periodic report,
registration statement, proxy or information statement or other similar report
or statement filed by the Company with any Governmental Authority, including,
without limitation, the Securities and Exchange Commission.
Section 13.07 Closing Period Financial Statements. As promptly as
practicable after the Closing Date (but in no event later than thirty (30) days
after the Closing Date), the Sellers will deliver to the Purchaser (i) the
Closing Period Financial Statements and (ii) the Closing Date A/R Amount
Certificate.
Section 13.08 Stockholders' Meeting.
(a) As soon as practicable after the Closing, (i) the Purchaser will
take all action necessary in accordance with applicable law and its charter and
by-laws to convene a meeting of its stockholders for the purpose of approving
and ratifying the issuance of the Series D Stock (the "Meeting"); (ii) the
Purchaser will use all commercially reasonable efforts to obtain approval and
ratification of such issuance, and (iii) the Purchaser will use all commercially
reasonable efforts to hold the Meeting as soon as practicable after the Closing
Date and to file the preliminary proxy statement for the Meeting with the
Securities and Exchange Commission no later than November 1, 1998.
(b) In connection with the foregoing, each Seller and Stockholder
will supply to the Purchaser (and be responsible for) such information related
to such Person as is required to be included in the proxy statement for the
Meeting. If at any time prior to the Meeting, any event with
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respect to any such Person or with respect to other information supplied by any
such Person for inclusion in such proxy statement shall occur which is required
to be described in an amendment of, or a supplement to, such proxy statement,
such Person will provide written notice thereof to the Purchaser and such event
will be so described, and such amendment or supplement will be promptly filed
with the Securities and Exchange Commission and, as required by applicable law,
disseminated to the Purchaser's stockholders. Each Seller and Stockholder
further represents and warrants that all information provided by such Person for
inclusion in such proxy statement will be true, complete and correct and shall
not contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not false or misleading in light of the circumstances under which they
were made.
(c) Each Seller and Stockholder agrees (and shall cause any
permitted transferee of the Series D stock, as a condition to such transfer, to
agree) to vote all of its voting securities of the Purchaser in favor of all
proposals presented to the Purchasers' stockholders at the Meeting as more fully
described on Schedule 13.08.
Section 13.09 Change of Name. As soon as practicable after the Closing
(but in any event within ten days), the Sellers shall (and the Stockholders
shall cause the Sellers to) change their corporate (or partnership, as
applicable) names thereafter to new names bearing no resemblance to their
present names and which will not interfere in any jurisdiction with the use by
the Purchaser (either alone or in conjunction with other words) of all or any
part of such names. From and after the Closing, the Sellers shall (and the
Stockholders shall cause the Sellers to) cease and desist from using their
present names (or words resembling or likely to be confused with their present
names) in the conduct of business, or otherwise, and shall execute or obtain
such consents and documents as the Purchaser may reasonably require in order to
enable the Purchaser to use such names as it may desire. Notwithstanding the
foregoing, the Sellers may use the name "Xxxxx" (alone and not in conjunction
with any other portion of any Seller's current name) in connection with their
dissolution and/or liquidation and in no event in a commercial manner.
Section 13.10 Transfer Restrictions on Series D Stock. The Sellers
agree not to sell, transfer, pledge, assign or otherwise dispose of the Series D
Stock, the Common Stock issuable upon conversion thereof or any interest therein
prior to March 1, 1999 without the prior written consent of the Purchaser.
Section 13.11 Recoupment Claims. Notwithstanding the provisions of
Section 11.03, the Purchaser agrees that, at its sole cost and expense, the
Purchaser shall take all action it may deem necessary, desirable and appropriate
to defend and settle any Recoupment Claim, other than those for which payment
has been received by the Sellers, the Facilities or the Practice, as applicable,
prior to the Closing. The Purchaser further agrees to promptly respond to any
reasonable inquiries made by any Seller or Stockholder as to the status of any
such Recoupment Claim.
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ARTICLE XIV
MISCELLANEOUS
-------------
Section 14.01 Publicity. Each Seller and the Purchaser agrees not to
issue any announcement, press release, public statement or other information to
the press or any third party with respect to the Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
parties hereto (which approval shall not be unreasonably withheld or delayed);
provided, however, that nothing contained herein shall prevent any party hereto,
at any time, from furnishing any required information to any Governmental
Authority or from issuing any announcement, press release, public statement or
other information to the press or any third party with respect to the Agreement
or the transaction contemplated hereby (after consulting with the other parties
hereto at least one (1) day prior to furnishing such information or issuing such
announcement, press release or public statement) if required by Law.
Section 14.02 Costs. Except as expressly provided herein, the
Purchaser, the Sellers and the Stockholders shall pay their own costs and
expenses, including any accounting fees, legal fees, brokerage fees, commissions
or finder's fees incurred by such party, in connection with the negotiation and
preparation of this Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
Section 14.03 Headings. Subject headings are included for convenience
only and shall not affect the interpretation of any provisions of this
Agreement.
Section 14.04 Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service, if personally served or sent by
telecopy; on the business day after notice is delivered to a courier or mailed
by express mail, if sent by courier delivery service or express mail for next
day delivery; and on the third day after mailing, if mailed to the party to whom
notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
If to the Sellers or the Stockholders, to:
Xxxxxxx Xxxxx
0000 Xxxxxxx Xxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxx, Esq.
Blank Rome Comisky & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
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Fax: (000) 000-0000
If to the Purchaser, to:
Xxxxxxx X. Xxxxxx, Esq.
c/o Healthcare Imaging Services, Inc.
000 Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Section 14.05 Assignment and Successors. Prior to the Closing, none of
the parties hereto may assign any rights or delegate any duties hereunder
without the prior written consent of the other parties hereto. At or after the
Closing, the Purchaser may assign its rights under this Agreement to its lenders
as security for its obligations. Notwithstanding the foregoing, at any time
prior to, at or after the Closing, the Purchaser may assign its rights, but may
not delegate its duties, hereunder to any subsidiary or affiliate thereof.
Section 14.06 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the parties.
Section 14.07 Governing Law; Forum; Process. This Agreement shall be
construed in accordance with, and governed by, the Laws of the State of New
Jersey as applied to contracts made and to be performed entirely in the State of
New Jersey without regard to principles of conflicts of Law. Each of the parties
hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the State of New Jersey or any federal court
sitting in the State of New Jersey for purposes of any suit, action or other
proceeding arising out of this Agreement (and agrees not to commence any action,
suit or proceedings relating hereto except in such courts). Each of the parties
hereto agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, which is brought by or against it, in the courts of the State
of New Jersey or any federal court sitting in the State of New Jersey and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
- 60 -
Section 14.08 Entire Agreement. This Agreement, including the exhibits
and schedules hereto, sets forth the entire understanding and agreement and
supersedes any and all other understandings, negotiations or agreements between
the Sellers and/or the Stockholders and the Purchaser relating to the
transactions contemplated herein.
Section 14.09 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
Section 14.10 Severability. In the event that any one or more of the
immaterial provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the parties.
Section 14.11 No Prejudice. This Agreement has been jointly prepared by
the parties hereto and the terms hereof shall not be construed in favor of or
against any party on account of its participation in such preparation.
Section 14.12 Parties in Interest. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any Person
other than the parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
Section 14.13 Amendment and Modification. This Agreement may be amended
or modified only by written agreement executed by all of the parties hereto.
Section 14.14 Waiver. At any time prior to the Closing, the Purchaser,
on the one hand, or the Sellers and the Stockholders, on the other, may (i)
extend the time for the performance of any of the obligations or other acts of
the other, (ii) waive any inaccuracies in the representations and warranties of
the other contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions of the other
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party granting such waiver but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
future failure.
Section 14.15 Knowledge. References herein to a Seller's knowledge
shall include the knowledge of such Seller and every director, officer,
Stockholder and general partner, as the case may be, of such Seller.
Section 14.16 Consents. Except as set forth on Schedule 14.16, no
notice to, filing with, or Consent of, any Person is necessary for the
consummation by the Purchaser of the transactions contemplated by this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
HEALTHCARE IMAGING SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
THE ESTATE OF XXXXXX X. XXXXX
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx
Title:
/s/ Xxxxxxx Xxxxx
---------------------------------------
Xxx. Xxxxxxx Xxxxx
/s/ Xxx Xxxxx, M.D.
---------------------------------------
Xxx Xxxxx, M.D.
ECHELON MRI, P.C.
By: /s/ Xxx Xxxxx, M.D.
---------------------------------------
Name: Xxx Xxxxx, M.D.
Title:
MAINLAND IMAGING CENTER, P.C.
By: /s/ Xxx Xxxxx, M.D.
---------------------------------------
Name: Xxx Xxxxx, M.D.
Title:
NORTH JERSEY IMAGING MANAGEMENT
ASSOCIATES, L.P.
By: /s/ Xxx Xxxxx, M.D.
---------------------------------------
Name: Xxx Xxxxx, M.D.
Title:
BLOOMFIELD IMAGING ASSOCIATES, P.A.
By: /s/ Xxx Xxxxx, M.D.
---------------------------------------
Name: Xxx Xxxxx, M.D.
Title:
- 62 -
XXXXXX X. XXXXX M.D, P.A.
By: /s/ Xxx Xxxxx, M.D.
---------------------------------------
Name: Xxx Xxxxx, M.D.
Title:
- 63 -