AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
among
4HEALTH, INC.
XXXXX NATURALS
and
XXXX XXXXX
April 2, 1998
TABLE OF CONTENTS
ARTICLE I
MERGER
SECTION 1.01. The Merger. . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Closing; Closing Date; Effective Time . . . . . . . . . . 2
SECTION 1.03. Effect of the Merger. . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Articles of Incorporation; Bylaws . . . . . . . . . . . . 3
SECTION 1.05. Directors and Officers. . . . . . . . . . . . . . . . . . 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Merger Consideration; Conversion and Cancellation
of Securities . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02. Exchange and Surrender of Certificates. . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IN AND XXXXX
SECTION 3.01. Organization and Qualification; Subsidiaries. . . . . . . 6
SECTION 3.02. Articles of Incorporation and Bylaws. . . . . . . . . . . 7
SECTION 3.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.05. No Conflict; Required Filings and Consents. . . . . . . . 8
SECTION 3.06. Permits; Compliance . . . . . . . . . . . . . . . . . . . 9
SECTION 3.07. Financial Statements; Financial Results.. . . . . . . . . 9
SECTION 3.08. Absence of Certain Changes or Events. . . . . . . . . . . 10
SECTION 3.09. Absence of Litigation . . . . . . . . . . . . . . . . . . 10
SECTION 3.10. Employee Benefit Plans; Labor Matters.. . . . . . . . . . 11
SECTION 3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.12. Tax and Accounting Matters. . . . . . . . . . . . . . . . 16
SECTION 3.13. Certain Business Practices. . . . . . . . . . . . . . . . 17
SECTION 3.14. Environmental Matters . . . . . . . . . . . . . . . . . . 17
SECTION 3.15. Vote Required . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.18. Properties. . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.19. Certain Contracts and Restrictions. . . . . . . . . . . . 21
SECTION 3.20. Futures Trading and Fixed Price Exposure. . . . . . . . . 21
SECTION 3.21. Information Supplied. . . . . . . . . . . . . . . . . . . 21
SECTION 3.22. Securities Laws Representations . . . . . . . . . . . . . 21
SECTION 3.23. Intellectual Property . . . . . . . . . . . . . . . . . . 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF 4HEALTH
SECTION 4.01. Organization and Qualifications; Subsidiaries . . . . . . 23
SECTION 4.02. Articles of Incorporation and Bylaws. . . . . . . . . . . 24
SECTION 4.03. Capitalization. . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.04. Authority . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.05. No Conflict: Required Filings and Consents. . . . . . . . 25
SECTION 4.06. Permits; Compliance . . . . . . . . . . . . . . . . . . . 26
SECTION 4.07. Financial Statements. . . . . . . . . . . . . . . . . . . 26
SECTION 4.08. Absence of Certain Changes or Events. . . . . . . . . . . 27
SECTION 4.09. Absence of Litigation . . . . . . . . . . . . . . . . . . 28
SECTION 4.10. Employee Benefit Plans; Labor Matters . . . . . . . . . . 28
SECTION 4.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.12. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.13. NSM Listing . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.14. Certain Business Practices. . . . . . . . . . . . . . . . 33
SECTION 4.15. Environmental Matters . . . . . . . . . . . . . . . . . . 33
SECTION 4.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.18. Properties. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.19. Certain Contracts and Restrictions. . . . . . . . . . . . 35
SECTION 4.20. Easements . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.21. Futures Trading and Fixed Price Exposure. . . . . . . . . 36
SECTION 4.22. Information Supplied. . . . . . . . . . . . . . . . . . . 36
SECTION 4.23. Intellectual Property . . . . . . . . . . . . . . . . . . 36
SECTION 4.24. Pooling of Interests. . . . . . . . . . . . . . . . . . . 36
SECTION 4.25. Exempt Transaction. . . . . . . . . . . . . . . . . . . . 36
SECTION 4.26. No Violation of Securities Laws . . . . . . . . . . . . . 37
SECTION 4.27. No Investigation. . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.28. No Convictions. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.29. No Restraint. . . . . . . . . . . . . . . . . . . . . . . 37
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ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants of IN . . . . . . . . . . . . . . . 37
SECTION 5.02. Negative Covenants of IN. . . . . . . . . . . . . . . . . 38
SECTION 5.03. Affirmative Covenants and Consent of Xxxxx. . . . . . . . 41
SECTION 5.04. Affirmative and Negative Covenants of 4Health.. . . . . . 42
SECTION 5.05. Access and Information. . . . . . . . . . . . . . . . . . 45
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholder Approvals.. . . . . . . . . . . . . . . . . . 46
SECTION 6.02. Registration Statement; Information.. . . . . . . . . . . 47
SECTION 6.03. Appropriate Action; Consents; Filings;
Indemnification.. . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.04. Tax and Accounting Treatment. . . . . . . . . . . . . . . 53
SECTION 6.05. Public Announcements. . . . . . . . . . . . . . . . . . . 53
SECTION 6.06. NSM Listing . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.07. Stock Resale Agreement. . . . . . . . . . . . . . . . . . 53
SECTION 6.08. No Interference . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.09. Form D Filing . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party Under This
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.02. Additional Conditions to Obligations of 4Health . . . . . 54
SECTION 7.03. Additional Conditions to Obligations of IN. . . . . . . . 56
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . 59
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.04. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.05. Fees, Expenses and Other Payments . . . . . . . . . . . . 59
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.03. Certain Definitions . . . . . . . . . . . . . . . . . . . 61
SECTION 9.04. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.05. Severability. . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.06. Entire Agreement. . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.07. Assignment. . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.08. Parties in Interest . . . . . . . . . . . . . . . . . . . 63
SECTION 9.09. Failure or Indulgence Not Waiver;
Remedies Cumulative . . . . . . . . . . . . . . . . . . . 63
SECTION 9.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 63
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SCHEDULES
Schedule 1.04 Changes to 4Health Articles and Bylaws
Schedule 1.05 Directors and Officers of Surviving Corporation
IN DISCLOSURE SCHEDULE
Schedule 3.01 Subsidiaries
Schedule 3.03(a) Reservation of IN Common Stock
Schedule 3.03(b)(iii) Investments
Schedule 3.03(b)(iv) Revenue Sharing Agreements
Schedule 3.03(c) Outstanding Stock Awards
Schedule 3.05 Conflicts
Schedule 3.06 Notifications from Governmental Entities
Schedule 3.07 Contingent Liabilities
Schedule 3.08 Certain Changes
Schedule 3.09 Litigation
Schedule 3.10(d) Severance Agreements
Schedule 3.11(a) Tax Exceptions
Schedule 3.11(b) Tax Proceedings
Schedule 3.11(c) Tax Elections and Consents, etc.
Schedule 3.14 Environmental Matters
Schedule 3.16 Brokers
Schedule 3.17 Insurance
Schedule 3.18 Properties
Schedule 3.19 Material Contracts
Schedule 3.23 Intellectual Property
4HEALTH DISCLOSURE SCHEDULE
Schedule 4.01 Subsidiaries
Schedule 4.03(a) Reservation of 4Health Common Stock
Schedule 4.03(b)(i) Options, Warrants and Rights
Schedule 4.03(b)(ii) Repurchase and Redemption Obligations, etc.
Schedule 4.03(b)(iii) Investments
Schedule 4.03(b)(iv) Revenue Sharing Agreements
Schedule 4.03(b)(v) Voting Trusts, Proxies
Schedule 4.03(c) Outstanding Stock Awards
Schedule 4.05 Conflicts
Schedule 4.06 Notifications from Governmental Entities
Schedule 4.08 Certain Changes
Schedule 4.09 Litigation
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Schedule 4.10(a) Employee Benefit Plans
Schedule 4.10(b) Employee Benefit Liabilities
Schedule 4.10(c) Labor Matters
Schedule 4.10(d) Employment Agreement
Schedule 4.10(e) Medical Benefits
Schedule 4.10(f) Multiemployer Plans
Schedule 4.10(g) Changes to Benefit Plans
Schedule 4.11 Taxes
Schedule 4.15 Environmental Matters
Schedule 4.16 Brokers
Schedule 4.17 Insurance
Schedule 4.19 Material Contracts
Schedule 4.23 Intellectual Property
COVENANTS
Schedule 5.02(a) Employee Matters
Schedule 5.02(b) Distributions
Schedule 5.02(f) Asset Dispositions
Schedule 5.02(k) Obligations
Schedule 5.02(p) Affiliate Transactions
Schedule 5.02(q) Commitments
Schedule 5.03(b)(v) Asset Dispositions
Schedule 5.03(b)(xiv) Affiliate Transactions
Schedule 5.04(b)(i) Increase in Benefits
Schedule 5.04(b)(vi) Asset Sales
Schedule 5.04(b)(xi) Obligations
Schedule 5.04(b)(xvi) Affiliate Transactions
Schedule 5.04(b)(xvii) Commitments
Schedule 6.02(a) Plan of Distribution
EXHIBITS
Exhibit A Articles of Merger
Exhibit B Stock Legend
Exhibit C Form of Sale Restriction Agreements
Exhibit D Form of Note
Exhibit E Form of Indemnity Agreement
Exhibit F Xxxxxx Employment Agreement
Exhibit G Xxxxx Employment Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, effective as of April 2, 1998 (this
"Agreement"), amending and restating the Agreement and Plan of Merger dated
as of December 24, 1997, by and among 4Health, Inc., a Utah corporation
("4Health"), Xxxxx Naturals, a California corporation ("IN") and Mr. Xxxx
Xxxxx, an individual resident in California and the Chief Executive Officer
and a principal shareholder of IN ("Xxxxx").
RECITALS
IN, upon the terms and subject to the conditions of this Agreement
and in accordance with the Revised Business Corporation Act of the State of
Utah ("Utah Law"), will merge with and into 4Health (the "Merger"), and
pursuant thereto, the shares of common stock, no par value per share of IN
("IN Common Stock"), issued and outstanding immediately prior to the
Effective Time (as defined herein) of the Merger, not owned directly or
indirectly by IN or 4Health or their respective subsidiaries, will be
converted at the Effective Time into the right to receive an aggregate of
15,750,000 shares of common stock, par value $.01 per share, of 4Health
("4Health Common Stock"), subject to the right of holders of such shares of
IN Common Stock (each a "Dissenting IN Stockholder") to seek an appraisal of
the fair value thereof as provided in Section 1300 of the General Corporation
Law of the State of California ("California Law").
The Board of Directors of IN has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of IN
and is fair to, and in the best interests of, IN and its stockholders and has
approved and adopted the Merger, this Agreement, and the other transactions
contemplated hereby, and has recommended approval of this Agreement by the
stockholders of IN.
The Board of Directors of 4Health has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of
4Health and is fair to, and in the best interests of, 4Health and its
stockholders and has approved and adopted this Agreement and
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the transactions contemplated hereby, and has recommended approval of this
Agreement by its stockholders.
For federal income tax purposes, it is intended that the Merger
qualify as a tax-free reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986 as amended (the "Code").
It is intended that the Merger qualify for the "pooling of
interests" method of accounting as provided in Accounting Principles Board
Opinion No. 16 of the American Institute of Certified Public Accountants and
the interpretations issued thereunder as presently in effect.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confirmed, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Utah Law, at the
Effective Time, IN shall be merged with and into 4Health (each a "Constituent
Corporation"). As a result of the Merger, the separate corporate existence
of IN shall cease and 4Health shall continue as the surviving corporation of
the Merger (the "Surviving Corporation"). Certain terms used in this
Agreement are defined in Section 9.03 hereof.
SECTION 1.02. CLOSING; CLOSING DATE; EFFECTIVE TIME. Unless this
Agreement shall have been terminated pursuant to Section 8.01, and subject to
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the consummation of the Merger and the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of IN at 00000 Xxxx Xxxxxxxxx Xxxxxxxxx, Xxxxxx Xxxx, XX
00000 as soon as practicable (but in any event within two business days)
after the satisfaction or, if permissible, waiver of the conditions set forth
in Article VII, or at such other date, time and place as 4Health and IN may
agree. The date on which the Closing takes place is referred to herein as
the "Closing Date". As promptly as practicable on the Closing Date, the
parties hereto shall cause the Merger to be consummated by executing and
filing Articles of Merger, in substantially the form of Exhibit A attached
hereto, with the Division of Corporations and Commercial Code of the State of
Utah (the date and time of such filing, or such later date or time agreed
upon by 4Health and IN and set forth therein, being the "Effective Time").
For all tax purposes, the Closing shall be effective at the end of the day on
the Closing Date.
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SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, to the full
extent provided under Utah Law, the Surviving Corporation shall possess all
the rights, privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and any and all rights,
privileges, powers and franchises of each of the Constituent Corporations,
and all property, real, personal and mixed, and all debts due to either of
the Constituent Corporations on whatever account, as well as stock
subscriptions and all other things in action belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation; and
all property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth
attach to the Surviving Corporation and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
SECTION 1.04. ARTICLES OF INCORPORATION; BYLAWS. At the Effective
Time, the articles of incorporation of 4Health, as amended by the Articles of
Merger attached hereto as Exhibit A to make the amendments set forth on
Schedule 1.04 attached hereto, shall be the articles of incorporation of the
Surviving Corporation and thereafter shall continue to be its articles of
incorporation until amended as provided therein and pursuant to Utah Law.
The bylaws of 4Health, as amended by the Articles of Merger to make the
changes set forth in Schedule 1.04 attached hereto, shall be the bylaws of
the Surviving Corporation and thereafter shall continue to be its bylaws
until amended as provided therein and in the articles of incorporation and
pursuant to Utah Law.
SECTION 1.06. DIRECTORS AND OFFICERS. Immediately after the Effective
Time, the directors of the Surviving Corporation shall be the four
individuals identified in Schedule 1.05, classified as set forth opposite
their names and a fifth individual who shall be classified as a Class III
director with a one year term of office and who will be designated by IN and
4Health no later than the date on which definitive Proxy Materials (as such
term is hereinafter defined) are first filed with the Commission (as
hereinafter defined) for its review. The officers of the Surviving
Corporation shall be the individuals identified in Schedule 1.05, each of the
directors and officers to hold office in accordance with the articles of
incorporation and bylaws of the Surviving Corporation, in each case until his
successor is duly elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF
SECURITIES. At the Effective Time, by virtue of the Merger and without any
action on the part of 4Health, IN, or their respective stockholders:
(a) Subject to the other provisions of this Article II, each share
of IN Common Stock issued and outstanding immediately prior to the Effective
Time (excluding any IN Common Stock described in Section 2.01(c) of this
Agreement and shares held by any Dissenting IN Stockholder shall be converted
into the right to receive 241.37931 shares of 4Health Common Stock (the
"Exchange Ratio"). Notwithstanding the foregoing, if between the date of
this Agreement and the Effective Time the outstanding shares of IN Common
Stock or 4Health Common Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend, subdivision,
reclassification, conversion, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, conversion,
recapitalization, split, combination or exchange of shares.
(b) Notwithstanding any provision of this Agreement to the
contrary, each share of IN Common Stock and held in the treasury of IN, and
each share of IN Common Stock, owned by 4Health or any direct or indirect
wholly owned subsidiary of 4Health immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no
payment shall be made with respect thereto.
(c) Subject to the provisions of Section 2.01(e), all shares of IN
Common Stock, shall cease to be outstanding and shall automatically be
canceled and retired, and each certificate previously evidencing IN Common
Stock, immediately prior to the Effective Time (other than IN Common Stock,
described in Section 2.01(b) of this Agreement) (the "Converted Shares" or
"Converted Share Certificates," as the case may be) shall thereafter
represent the right to receive, subject to Section 2.02(d) of this Agreement,
that number of shares of 4Health Common Stock determined pursuant to Section
2.01(a) hereof (the "Merger Consideration"). The holders of Converted Share
Certificates shall cease to have any rights with respect to such Converted
Shares except as otherwise provided herein or by law. Such Converted Share
Certificates shall be exchanged for certificates evidencing whole shares of
4Health Common Stock upon the surrender of such Converted Share Certificates
in accordance with the provisions of Section 2.02 of this Agreement, without
interest.
(d) All shares of 4Health Common Stock issued to holders of IN
Common Stock, in the Merger shall be issued in a transaction intended to
qualify for the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended (the "Securities
4
Act") and Regulation D promulgated thereunder ("Regulation D") and shall be
deemed "restricted securities" as defined in Rule 144 promulgated under the
Securities Act.
(e) Notwithstanding anything in this Agreement to the contrary,
any issued and outstanding shares of capital stock of IN held by a Dissenting
IN Stockholder, who has not voted in favor of nor consented to the Merger and
who complies with all the provisions of California Law concerning the right
of holders of such stock to dissent from the Merger and require appraisal of
their shares, shall not be converted as described in Section 2.01(a) but
shall become, at the Effective Time, by virtue of the Merger and without any
further action, the right to receive such consideration as may be determined
to be due to such Dissenting IN Stockholder pursuant to California Law;
PROVIDED, HOWEVER, that shares of IN Common Stock outstanding immediately
prior to the Effective Time and held by a Dissenting IN Stockholder, who
shall, after the Effective Time, withdraw his demand for appraisal or lose
his right of appraisal, in either case pursuant to California Law shall be
deemed to be converted as of the Effective Time, into the right to receive
4Health Common Stock.
SECTION 2.02. EXCHANGE AND SURRENDER OF CERTIFICATES.
(a) Immediately after the Effective Time, 4Health shall deliver to
each registered holder of a Converted Share Certificate against delivery by
such holder of all of his Converted Share Certificates representing issued
and outstanding shares of IN Common Stock a certificate representing that
number of whole shares of 4Health Common Stock which such holder has the
right to receive in exchange for the Converted Share Certificates surrendered
pursuant to the provisions of this Article II (after taking into account all
Converted Shares then held by such holder), and the Converted Share
Certificates so surrendered shall forthwith be canceled. The certificate
representing the 4Health Common Stock shall bear a restrictive legend in the
form set forth in Exhibit B. Until surrendered as contemplated by this
Section 2.02, each Converted Share Certificate shall be deemed at any time
after the Effective Time to represent only the 4Health Common Stock into
which the Converted Shares represented by such Converted Share Certificate
have been converted as provided in this Article II.
(b) After the Effective Time, there shall be no further
registration of transfers of IN Common Stock. If, after the Effective Time,
certificates representing shares of IN Common Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration provided for in this Agreement in accordance with the
procedures set forth herein.
(c) Any portion of the Merger Consideration that remains unclaimed
by the holders of shares of IN Common Stock, one year after the Effective
Time shall be returned to the Surviving Corporation, upon demand, and any
such holder who has not exchanged its shares of IN Common Stock in accordance
with this Section 2.02 prior to that time shall thereafter look only to the
Surviving Corporation for payment of the Merger Consideration in respect of
its
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shares of IN Common Stock. Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to any holder of Converted Shares for any
amount paid to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(d) No dividends, interest or other distributions with respect to
shares of 4Health Common Stock shall be paid to the holder of any
unsurrendered Converted Share Certificates unless and until such Converted
Share Certificates are surrendered as provided in this Section 2.02. Upon
such surrender, 4Health shall pay, without interest, all dividends and other
distributions payable in respect of such shares of 4Health Common Stock on a
date subsequent to, and in respect of a record date after, the Effective Time.
(e) No fractional shares or certificates or scrip evidencing
fractional shares of 4Health Common Stock shall be issued in the Merger or
upon the surrender for exchange of Converted Share Certificates, and the
Exchange Ratio shall be appropriately adjusted if necessary so that only
whole shares of 4Health Common Stock are issued in the Merger to holders of
Converted Share Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IN AND XXXXX
IN and Xxxxx, jointly and severally hereby represent and warrant to
4Health that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of IN
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted and
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the ownership or leasing
of its properties makes such qualification necessary, other than where the
failure to be so duly qualified and in good standing would not have an IN
Material Adverse Effect. The term "IN Material Adverse Effect" as used in
this Agreement shall mean any change or effect that, individually or when
taken together with all other such changes or effects, would be reasonably
likely to be materially adverse to the assets, liabilities, financial
condition, results of operations or current or future business of IN and its
subsidiaries, taken as a whole. Schedule 3.01 of the disclosure schedule to
be delivered to 4Health by IN and attached hereto and made a part hereof (the
"IN Disclosure Schedule") as provided in Section 7.02(i) hereof, sets forth,
as of the date hereof, a true and complete list of all IN's directly or
indirectly owned subsidiaries, together with (A) the jurisdiction of
incorporation or organization of each subsidiary and the percentage of each
subsidiary's outstanding capital stock or other equity interests owned by IN
or another subsidiary of IN, and (B) an indication of whether each such
subsidiary is a "Significant Subsidiary" as defined in Section 9.03(g) of
this Agreement. Except as set forth in Schedule 3.01 to the IN Disclosure
Schedule, neither IN nor
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any of its subsidiaries nor Xxxxx owns an equity interest in any other
partnership or joint venture arrangement or other business entity that is
material to the assets, liabilities, financial condition, results of
operations or current or future business of IN and its subsidiaries, taken as
a whole. IN is the registered and beneficial owner of all of the issued and
outstanding shares of voting capital stock of Applied Nutrition Inc. and
Xxxxx Naturals International, Inc.
SECTION 3.02. ARTICLES OF INCORPORATION AND BYLAWS to 4Health complete
and correct copies of the articles of incorporation and the bylaws or the
equivalent organizational documents as presently in effect of IN and each of
its subsidiaries. Neither IN nor any of its subsidiaries is in violation of
any of the provisions of its articles or any material provision of its bylaws
(or equivalent organizational documents).
SECTION 3.03. CAPITALIZATION.
(a) The authorized capital stock of IN consists of One Hundred
Thousand (100,000) shares of IN Common Stock, of which Sixty Five Thousand
Two Hundred Fifty (65,250) shares are issued and outstanding, and Thirty Four
Thousand Seven Hundred Fifty (34,750) shares are held in treasury by IN. No
shares of capital stock of IN are reserved for any purpose. Each of the
outstanding shares of capital stock of, or other equity interests in, each of
IN and its subsidiaries is duly authorized, validly issued, and, in the case
of shares of capital stock, fully paid and nonassessable, and has not been
issued in violation of (nor are any of the authorized shares of capital stock
of, or other equity interests in, such entities subject to) any preemptive or
similar rights created by statute, the charter or bylaws (or the equivalent
organizational documents) of IN or any of its subsidiaries, or any agreement
to which IN or any of its subsidiaries is a party or bound, and such
outstanding shares or other equity interests owned by IN or a subsidiary of
IN are owned free and clear of all security interests, liens, claims,
pledges, agreements, limitations on IN's or such subsidiaries' voting rights,
charges or other encumbrances of any nature whatsoever.
(b) There are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any
character to which IN or any of its subsidiaries or Xxxxx is a party relating
to the issued or unissued capital stock of IN or any of its subsidiaries or
obligating IN or any of its subsidiaries or Xxxxx to grant, issue or sell any
shares of the capital stock of IN or any of its subsidiaries, by sale, lease,
license or otherwise. There are no obligations, contingent or otherwise, of
IN or any of its subsidiaries or Xxxxx to (i) repurchase, redeem or otherwise
acquire any shares of IN Common Stock or other capital stock of IN, or the
capital stock or other equity interests of any subsidiary of IN; or (ii)
provide material funds to, or make any material investment in (in the form of
a loan, capital contribution or otherwise), or provide any guarantee with
respect to the obligations of, any subsidiary of IN or any other person.
Except as described in Schedule 3.03(b)(iii) to the IN Disclosure Schedule,
neither IN nor any of its subsidiaries or Xxxxx (x) directly or indirectly
owns, (y) has agreed to purchase or otherwise acquire or (z) holds any
interest convertible into or exchangeable or
7
exercisable for, 5% or more of the capital stock of any corporation,
partnership, joint venture or other business association or entity (other
than the subsidiaries of IN set forth in Schedule 3.01 to the IN Disclosure
Schedule). Except as set forth in Schedule 3.03(b)(iv) to the IN Disclosure
Schedule, there are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of IN or any of its subsidiaries. Except
as contemplated hereby, there are no voting trusts, proxies or other
agreements or understandings to which IN or any of its subsidiaries or Xxxxx
is or will be a party or by which IN or any of its subsidiaries or Xxxxx is
or will be bound with respect to the voting of any shares of capital stock of
IN or any of its subsidiaries.
SECTION 3.04. AUTHORITY. IN and Xxxxx each have all requisite
corporate power and authority and legal capacity, respectively, to execute
and deliver this Agreement, to perform its and his obligations hereunder and
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by IN and the consummation by IN of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action and no other corporate proceedings on the part of IN are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
IN and Xxxxx, and, assuming the due authorization, execution and delivery
thereof by 4Health, constitutes the legal, valid and binding obligation of IN
and Xxxxx enforceable against IN and Xxxxx in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by IN and Xxxxx
does not, and the consummation of the transactions contemplated hereby in
accordance with its terms will not (i) conflict with or violate the articles
of incorporation or bylaws, or the equivalent organizational documents, in
each case as amended or restated, of IN or any of its subsidiaries, (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "Laws")
applicable to IN or any of its subsidiaries or Xxxxx or by or to which any of
their respective properties is bound or subject or (iii) except as described
in Schedule 3.05 to the IN Disclosure Schedule, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require payment under, or
result in the creation of a lien or encumbrance on any of the properties or
assets of IN or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which IN or any of its subsidiaries or
Xxxxx is a party or by or to which IN or any of its subsidiaries or Xxxxx or
any of their respective properties is bound or subject, except for
8
any such conflicts or violations described in clause (ii) or breaches,
defaults, events, rights of termination, amendment, acceleration or
cancellation, payment obligations or liens or encumbrances described in
clause (iii) that would not have an IN Material Adverse Effect.
(b) The execution and delivery of this Agreement by IN and Xxxxx
does not, and consummation of the transactions contemplated hereby will not,
require IN or Xxxxx to obtain any consent, license, permit, approval, waiver,
authorization or order of, or to make any filing with or notification to, any
governmental or regulatory authority, domestic or foreign (collectively,
"Governmental Entities"), except (i) for filing appropriate merger documents
as required by California and Utah Laws; and (ii) where the failure to obtain
such consents, licenses, permits, approvals, waivers, authorizations or
orders, or to make such filings or notifications, would not, either
individually or in the aggregate, materially interfere with IN's performance
of its obligations under this Agreement and would not have an IN Material
Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of IN and its subsidiaries
and, to IN's and Xxxxx'x knowledge, each third party operator of any of IN's
properties, is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted (collectively, the "IN
Permits"), and there is no action, proceeding or investigation pending or, to
the knowledge of IN or Xxxxx, threatened regarding suspension or cancellation
of any of the IN Permits, except where the failure to possess, or the
suspension or cancellation of, such IN Permits would not have an IN Material
Adverse Effect. Neither IN nor any of its subsidiaries is in conflict with,
or in default or violation of (a) any Law applicable to IN or any of its
subsidiaries or by or to which any of their respective properties is bound or
subject, including, without limitation, the provisions of the Dietary
Supplemental Health Education Act of 1994, all consumer product safety Laws,
all product labeling Laws and all truth in advertising Laws, or (b) any of
the IN Permits, except for any such conflicts, defaults or violations that
would not have a IN Material Adverse Effect. During the period commencing on
September 30, 1997 and ending on the date hereof, neither IN nor any of its
subsidiaries has received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of
Laws, except as set forth in Schedule 3.06 of the IN Disclosure Schedule and
except for written notices relating to possible conflicts, defaults or
violations that would not have an IN Material Adverse Effect.
SECTION 3.07. FINANCIAL STATEMENTS; FINANCIAL RESULTS. (a) IN's audited
consolidated financial statements (including the related notes thereto) for
the fiscal years ended December 31, 1995 and December 31, 1996 and the nine
months ended September 30, 1997 (the "IN Financial Statements") to be
furnished to 4Health pursuant to Section 5.01(d) will (i) have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved ("GAAP") (except (A) to the
extent required by changes in generally accepted accounting principles and
(B) as may be indicated in the notes thereto) and (ii) fairly present the
financial position of IN as of the respective dates thereof and the result of
operations
9
and cash flows for the periods indicated (including reasonable estimates of
normal and recurring year-end adjustments), except that (x) any interim
financial statements were or will be subject to normal and recurring year-end
adjustments and (y) any pro forma financial information contained in such
financial statements will not necessarily be indicative of the financial
position of IN as of the respective dates thereof and the results of
operations and cash flows for the periods indicated. Except as set forth in
Schedule 3.07 of the IN Disclosure Schedule, IN has no liabilities or
obligations that will be of any nature (whether known or unknown and whether
accrued or contingent) except for liabilities or obligations reflected or
reserved against in the audited balance sheet dated as of September 30, 1997
including the notes thereto (the "IN Balance Sheet") to be furnished to
4Health pursuant to Section 5.01(d) and current liabilities incurred in the
ordinary course of business consistent with past practice since the date of
the IN Balance Sheet.
(b) IN's gross revenues, calculated in accordance with GAAP, earned
during the twenty-one (21) month period ended September 30, 1997 exceeded
$22,000,000 in the aggregate.
(c) The sum of (i) IN's earnings before income taxes, depreciation and
amortization charges, calculated in accordance with GAAP, plus (ii) any
amounts paid by IN to its officers as salary, in each case during the
twenty-one (21) month period ended September 30, 1997, exceeded $4,500,000.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
contemplated by this Agreement or as set forth in Schedule 3.08 to the IN
Disclosure Schedule, since September 30, 1997 IN and its subsidiaries have
conducted their respective businesses only in the ordinary course and in a
manner consistent with past practice and there has not been: (i) any material
damage, destruction or loss (whether or not covered by insurance) with
respect to any material assets of IN or any of its subsidiaries; (ii) any
material change by IN or any of its subsidiaries in their accounting methods,
principles or practices; (iii) any declaration, setting aside or payment of
any dividends or distributions in respect of shares of IN Common Stock or the
shares of stock of, or other equity interests in, any subsidiary of IN, or
any redemption, purchase or other acquisition by IN or any of its
subsidiaries of any of IN's securities or any of the securities of any
subsidiary of IN; (iv) any increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or any increase in the compensation payable or to
become payable to directors, officers or employees of IN or its subsidiaries;
(v) any revaluation by IN or any of its subsidiaries of any of their assets,
including the writing down of the value of inventory or the writing down or
off of notes or accounts receivable, other than in the ordinary course of
business and consistent with past practices; (vi) any entry by IN or any of
its subsidiaries into any commitment or transaction material to IN and its
subsidiaries, taken as a whole (other than this Agreement and
10
the transactions contemplated hereby); (vii) any material increase in
indebtedness for borrowed money; or (viii) an IN Material Adverse Effect.
SECTION 3.09. ABSENCE OF LITIGATION. Except as set forth in Schedule
3.09 to the IN Disclosure Schedule, there is no claim, action, suit,
litigation, proceeding, arbitration or, to the knowledge of IN or Xxxxx,
investigation of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or, to the knowledge of IN or
Xxxxx, threatened against IN or any of its subsidiaries or any properties or
rights of IN or any of its subsidiaries (except for claims, actions, suits,
litigation, proceedings, arbitrations or investigations which would not have
an IN Material Adverse Effect), and neither IN nor any of its subsidiaries is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of IN or Xxxxx,
continuing investigation by, any Governmental Entity, or any judgment, order,
writ, injunction, decree or award of any Government Entity or arbitrator,
including, without limitation, cease-and-desist or other orders, except for
matters that would not have an IN Material Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Neither IN nor any member of any ERISA Group has maintained or
contributed to any employee benefit plan (as such term is defined in ERISA
Section 3(3)) during the past five years and neither IN nor any member of its
ERISA Group has any liability under Sections 4063, 4069, 4212(c) or 4204 of
ERISA with respect to any such employee benefit plan, and IN does not
maintain and has not contributed to any other retirement, pension, stock
option, stock appreciation rights, profit sharing, incentive compensation,
deferred compensation, savings, thrift, vacation pay, severance pay,
insurance, health, welfare or other employee compensation or benefit plan,
agreement, practice, or arrangement, whether written or unwritten, whether
or not legally binding (collectively, the "IN Benefit Plans"). For purposes
of this Agreement, "ERISA Group" means a controlled or affiliated group
within the meaning of Code Section 414(b), (c), (m), or (o) of which IN is or
may be a member.
(b) No event has occurred and, to the knowledge or IN or Xxxxx,
there exists no condition or set of circumstances, in connection with which
IN or any member of its ERISA Group could be subject to any liability under
the terms of any IN Benefit Plans, ERISA, the Code or any other applicable
Law which would have an IN Material Adverse Effect.
(c) Neither IN nor any member of its ERISA Group, including,
without limitation, any of its subsidiaries, is or has ever been a party to
any collective bargaining or other labor union contracts. No collective
bargaining agreement is being negotiated by IN or any of its subsidiaries.
There is no pending or threatened labor dispute, strike or work stoppage
against IN or any of its subsidiaries which may interfere with the respective
business activities of IN or any of its subsidiaries. None of IN, any of its
subsidiaries or any of their respective representatives or employees has
committed any unfair labor practices in connection with the operation of the
respective businesses of IN or its subsidiaries, and there is no pending or
threatened charge or
11
complaint against IN or any of its subsidiaries by the National Labor
Relations Board or any comparable state agency. IN and its subsidiaries are
in compliance with all applicable wage and hours Laws, age, race, religious
and gender anti-discrimination Laws, employee health and safety Laws and all
immigration Laws as regards their respective employees and, there is no
pending or, to IN's and Xxxxx'x knowledge, threatened claim, investigations
or proceeding involving any alleged violation of any such Law.
(d) Neither IN nor any of its subsidiaries is a party to or is
bound by any severance agreements, programs or policies. Schedule 3.10(d) to
the IN Disclosure Schedule sets forth, and IN has made available to 4Health
true and correct copies of, (i) all employment agreements with officers or IN
or its subsidiaries; (ii) all agreements with consultants of IN or its
subsidiaries obligating IN or any subsidiary to make annual cash payments in
an amount exceeding $25,000; (iii) all non-competition agreements with IN or
a subsidiary executed by officers of IN; and (iv) all plans, programs,
agreements and other arrangements of IN or its subsidiaries with or relating
to its directors.
(e) Neither IN nor any member of its ERISA Group provides retiree
medical or retiree life insurance benefits to any person and (y) neither IN
nor any of its subsidiaries is contractually or otherwise obligated (whether
or not in writing) to provide any person with life insurance or medical
benefits upon retirement or termination of employment, other than as required
by the provisions of Sections 601 through 608 of ERISA and Section 4980B of
the Code and each such IN Benefit Plan or arrangement may be amended or
terminated by IN or its subsidiaries at any time without liability.
(f) Neither IN nor any member of its ERISA Group including,
without limitation, any of its subsidiaries, contributes to or has an
obligation to contribute to, and has not within six years prior to the date
of this Agreement contributed to or had an obligation to contribute to or has
any secondary liability under ERISA Section 4204 to, a multiemployer plan
within the meaning of Section 3(37) of ERISA.
SECTION 3.11. TAXES. Except when a failure of any representation made
in this Section 3.11 to be true and correct would not result in a liability
to IN in excess of (i) $10,000 in the case of a representation known to IN or
Xxxxx to be untrue or incorrect or (ii) $25,000 in the case of a
representation not known to IN or Xxxxx to be untrue or incorrect:
(a) Except as set forth in Schedule 3.11(a) of the IN Disclosure
Schedule:
(1) Except to the extent that the applicable statute of
limitations has expired, all Returns required to be filed by or on behalf of
IN have been duly filed on a timely basis with the appropriate Governmental
Entities and such Returns (including all attached statements and schedules)
are true, correct and complete. Except to the extent that the applicable
statute of limitations with respect thereto has expired, all Taxes (as
defined in (f) below) have been paid in full on a timely basis, and no other
Taxes are payable by IN with respect thereto for items or
12
periods covered by such Returns (whether or not shown on or reportable on
such Returns) or with respect to any period prior to the Effective Time;
(2) IN has complied in all respects with all applicable Laws
relating to the payment and withholding of Taxes (including any estimated
Taxes and withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under foreign laws) and has, within the time and in the
manner prescribed by Law, withheld from employee wages and paid over all
amounts withheld under applicable Laws;
(3) IN has disclosed on its income tax returns all positions
taken therein that could give rise to a substantial understatement penalty
within the meaning of Code Section 6662;
(4) There are no liens on any of the assets of IN with
respect to Taxes, other than liens for Taxes not yet due and payable for
Taxes that are being contested in good faith through appropriate proceedings
and for which appropriate reserves have been established;
(5) IN does not have any liability under Treasury Regulation
Section 1.1502-6 or any analogous state, local or foreign law by reason of
having been a member of any consolidated, combined or unitary group, other
than in the current affiliated group of which IN is the common parent
corporation;
(6) Except to the extent that the applicable statute of
limitations has expired, IN has made available to 4Health complete copies of:
(i) all federal, state and local, as well as any other taxing authority,
income tax, sales and use tax, employment tax and franchise tax returns of IN
for all periods since the formation of IN (or any predecessor in interest)
and all such tax returns of Xxxxx with respect to the business of IN for
periods prior to the formation of IN, and (ii) all tax audit reports, work
papers statements of deficiencies, closing or other agreements received by
Xxxxx (with respect to the business of IN) or IN or on its behalf or relating
to Taxes; and
(7) IN does not do business in or derive income from any
state, local, territorial or foreign taxing jurisdiction so as to be subject
to Return filing requirements of such jurisdiction, other than those for
which Returns have been furnished to 4Health.
(b) Except as disclosed in Schedule 3.11(b) of the IN Disclosure
Schedule:
(1) There is no audit of any Returns of IN or Xxxxx (with
respect to the business of IN by a governmental or taxing authority in
process, pending or, to the knowledge of IN or Xxxxx, threatened (formally or
informally) and no Governmental Entity of any jurisdiction in which IN does
not file a Return has claimed that IN is or may be subject to tax in that
jurisdiction;
13
(2) Except to the extent that the applicable statute of
limitations has expired and except as to matters that have been resolved, no
deficiencies exist or have been asserted (either formally or informally) or
are expected to be asserted with respect to Taxes of Xxxxx (with respect to
the business of IN) or IN, and no notice (either formally or informally) has
been received by Xxxxx or IN that he or it has not filed a Return or paid
Taxes required to be filed or paid by it;
(3) IN is not a party to any pending action or proceeding for
assessment or collection of Taxes, nor has such action or proceeding been
asserted or threatened (either formally or informally) against it or any of
its assets, except to the extent that the applicable statute of limitations
has expired and except as to matters that have been resolved;
(4) No waiver or extension of any statute of limitations is
in effect with respect to Taxes or Returns of IN;
(5) No action has been taken that would have the effect of
deferring any liability for Taxes for IN from any period prior to the
Effective Time to any period after the Effective Time;
(6) There are no requests for rulings, subpoenas or requests
for information pending with respect to the Taxes of IN;
(7) No power of attorney has been granted by IN, with respect
to any matter relating to Taxes;
(8) IN is not and has never been included in an affiliated
group of corporations, within the meaning of Section 1504 of the Code;
(9) IN is not (nor has it ever been) a party to any tax
allocation or sharing agreement between affiliated corporations; and
(10) The amount of liability for unpaid Taxes of IN for all
periods ending on or before the Effective Time will not, in the aggregate,
materially exceed the amount of the liability accruals for Taxes reflected on
the IN Balance Sheet.
(c) Except as disclosed on Schedule 3.11(c) of the IN Disclosure
Schedule:
(1) IN is not required to treat any of its assets as owned by
another person for federal income tax purposes or as tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of the
Code;
(2) IN has not issued or assumed any corporate acquisition
indebtedness that is subject to Sections 279(a) and (b) of the Code;
14
(3) IN has not entered into any compensatory agreements with
respect to the performance of services under which payment would result in a
nondeductible expense pursuant Section 280G of the Code or an excise tax to
the recipient of such payment pursuant to Section 4999 of the Code;
(4) No election has been made under Section 338 of the Code
with respect to IN and no action has been taken that would result in any
income tax liability to IN as a result of a deemed election within the
meaning of Section 338 of the Code;
(5) No consent under Section 341(f) of the Code has been
filed with respect to IN;
(6) IN has not agreed, nor is it required to make, any
adjustment under Code Section 481(a) by reason of a change in accounting
method or otherwise;
(7) IN has not disposed of any property that is presently
being accounted for under the installment method;
(8) IN is not a party to any interest rate swap or currency
swap;
(9) IN has not participated in any international boycott as
defined in Code Section 999;
(10) IN is not subject to any joint venture, partnership or
other arrangement or contract that is treated as a partnership for federal
income tax purposes;
(11) IN has not made any of the foregoing elections and is not
required to apply any of the foregoing rules under any comparable state,
local or foreign income tax provisions; and
(12) IN does not have and has never had a permanent
establishment in any foreign country, as defined in any applicable tax treaty
or convention between the United States and such foreign country.
(d) The books and records of IN, including the Returns of IN made
available to 4Health, contain accurate and complete information with respect
to:
(1) All material tax elections in effect with respect to IN;
(2) The current tax basis of the assets of IN;
(3) The current and accumulated earnings and profits of IN,
if any;
15
(4) The net operating losses of IN by taxable year, if any;
(5) The net capital losses of IN by taxable year, if any;
(6) The tax credit carry overs of IN, if any; and
(7) The overall foreign losses of IN under Section 904(f) of
the Code that are subject to recapture, if any.
(e) The Returns provided by IN to 4Health contain accurate and
complete information with respect to any net operating losses and net
operating loss carry forwards, if any, and other tax attributes of IN, and
the extent to which they are subject to any limitation under Code Sections
381, 382, 383, or 384, or any other provision of the Code or the federal
consolidated return regulations (or any predecessor provision of any Code
Section or the regulations) and, apart from any such limitations and apart
from any limitation that would be imposed as a result of the Merger, there is
nothing that would prevent IN from utilizing these net operating losses, net
operating loss carry forwards or other tax attributes, if any, as so limited
if it has sufficient income.
(f) (1) For purposes of this Agreement the term "Taxes" shall
mean all taxes, however, denominated, including any interest, penalties or
other additions to tax that may become payable in respect thereof, imposed by
any federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income or profit taxes,
payroll and employee withholding taxes, unemployment insurance, social
security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation, Pension Benefit Guaranty Corporation
premiums and other governmental charges, and other obligations of the same or
of a similar nature to any of the foregoing, required to be paid, withheld or
collected.
(2) For the purposes of this Agreement, the term "Returns"
shall mean all reports, estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed in connection
with, any Taxes, including information returns or reports with respect to
backup withholding and other payments to third parties.
(3) All references to "IN" in this Section 3.11 shall include
all subsidiaries of IN and where appropriate in this Section 3.11, the
singular shall include the plural.
16
SECTION 3.12. TAX AND ACCOUNTING MATTERS.
(a) Neither IN nor, to the knowledge of IN or Xxxxx, any of its
affiliates has taken or agreed to take any action that would prevent the
Merger from constituting a tax-free reorganization qualifying under the
provisions of Section 368(a) of the Code.
(b) IN has no plan or intention to acquire the 4Health Common
Stock issued in the Merger.
(c) Subject to Section 8.05(a), IN and the holders of IN Common
Stock will each pay their respective expenses, if any, incurred in connection
with the Merger.
(d) There is no intercorporate indebtedness existing between IN
and 4Health that was issued, acquired or will be settled at a discount.
(e) IN is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of the Code.
(f) Except as contemplated by this Agreement, IN will take no
action prior to the Effective Time to cease operations or, except in the
ordinary course of business, dispose of any of its assets of any of its
subsidiaries or current lines of business.
(g) Neither IN nor any of its subsidiaries or affiliates has taken
in the last two years or will take any action prior to the Effective Time
which will adversely affect or invalidate the ability of 4Health to account
for the Merger using the pooling of interests method of accounting as
provided in Accounting Principles Board Opinion No. 16 of the American
Institute of Certified Public Accountants and the interpretations issued
thereunder as presently in effect ("APB 16").
SECTION 3.13. CERTAIN BUSINESS PRACTICES. To the best of its
knowledge, none of IN, any of its subsidiaries or any directors, officers,
agents or employees of IN or any of its subsidiaries has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
SECTION 3.14. ENVIRONMENTAL MATTERS.
(a) Except for matters disclosed in Schedule 3.14 to the IN
Disclosure Schedule and except for matters that would not have or are
reasonably not likely to have an IN Material Adverse Effect, to the best
knowledge of IN or Xxxxx:
17
(i) The properties, operations and activities of IN and
its subsidiaries are in compliance with all applicable Environmental Laws and
there are no circumstances which could reasonably be expected to prevent or
interfere with their continued compliance with applicable Environmental Laws.
(ii) IN and its subsidiaries and the properties and
operations of IN and its subsidiaries are not subject to any existing,
pending, or, to IN's knowledge, threatened civil, criminal or administrative
action, suit, claim, notice of violation, investigation, notice of potential
liability, request for information, inquiry, demand or proceeding under
applicable Environmental Laws.
(iii) IN and its subsidiaries have not agreed, whether by
contract or by consent agreement with Governmental Entities or private
persons, to undertake investigation, clean up, or remedial activities.
(iv) All notices, permits, licenses, or similar
authorizations required to be obtained or filed by IN or any of its
subsidiaries under any Environmental Laws in connection with any aspect of
the business of IN or any of its subsidiaries, including without limitation
those relating to the treatment, storage, disposal or discharge of Hazardous
Materials, have been duly obtained or filed and will remain valid and in
effect after the Merger, and IN and its subsidiaries are in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations.
(v) IN and its subsidiaries have not received any notice of
noncompliance with respect to any financial responsibility requirements
applicable to their operations and imposed by any Governmental Entity under
any Environmental Laws.
(vi) There are no physical or environmental conditions
existing on any leased property of IN or its subsidiaries or resulting from
IN's or such subsidiaries' operations or activities, past or present, at any
location, including without limitation, releases and disposal of Hazardous
Materials, that would give rise to any on-site or off-site investigation,
reporting, or remedial obligations or other Environmental Liability.
(vii) To the extent required by applicable Environmental
Laws, all Hazardous Materials generated by IN and its subsidiaries have been
transported only by persons authorized under applicable Environmental Laws to
transport such materials, and disposed of only at treatment, storage and
disposal facilities authorized under applicable Environmental Laws to treat,
store or dispose of such Hazardous Materials.
(viii) There has been no exposure of any person or property
to Hazardous Materials or any release of Hazardous Materials into the
environment by IN or its present or prior subsidiaries or in connection with
their present or prior properties or operations that could reasonably be
expected to give rise to any Environmental Liability.
18
(ix) No release or clean up of Hazardous Materials has
occurred at IN and its subsidiaries' leased properties which could reasonably
be expected to result in the assertion or creation of any lien on the
properties by any governmental body or agency or other Governmental Entity
with respect thereto, nor has any such lien been asserted or made by any
governmental body, agency or entity with respect thereto.
(x) The operations of each third party operator of any of IN
or its subsidiaries' properties are in compliance with the terms of this
Section 3.14.
(b) IN and its subsidiaries have made available to 4Health all
internal and external environmental audits, studies, documents and
correspondence on environmental matters in the possession of IN or its
subsidiaries relating to any of the present or prior properties or operations
of IN and its subsidiaries.
(c) For purposes of this Agreement, the following terms shall be
defined as follows:
(i) "Environmental Laws" shall mean any and all laws,
statutes, ordinances, rules, regulations or orders of any Governmental Entity
pertaining to pollution, health, safety, or the environment, including,
without limitation, the Clean Air Act, the Comprehensive Environmental,
Response, Compensation, and Liability Act ("CERCLA"), the Clean Water Act,
the Occupational Safety and Health Act, the Resource Conservation and
Recovery Act, the Solid Waste Disposal Act, the Emergency Planning and
Community Right-To-Know Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Hazardous Materials Transportation Act, the Oil
Pollution Act, all as amended, any state laws implementing the foregoing
federal laws, any state laws pertaining to, health, safety and waste
management including, without limitation, the handling of asbestos, medical
waste or disposable products, hydrocarbon products, PCBs or other Hazardous
Materials or processing or disposing of wastes or the use, maintenance and
closure of pits and impoundments, all other federal, state or local
environmental conservation or protection and health and safety laws, and any
common law creating liability for environmental conditions. Environmental
Laws shall include, without limitation, all restrictions, conditions,
standards, limitations, prohibitions, requirements, guidelines, obligations,
schedules and timetables contained in Environmental Laws or contained in any
regulation, plan, code, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(ii) "Hazardous Materials" shall mean any materials that are
regulated by or form the basis of liability under Environmental Laws, and
include, without limitation, asbestos, wastes, including, without limitation,
medical wastes or disposable products, hazardous substances, pollutants or
contaminants, hazardous or solid wastes, hazardous constituents, hazardous
materials, toxic substances, petroleum, including crude oil or any fraction
thereof, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel (or mixtures of natural gas and such synthetic
gas).
19
(iii) "Environmental Liability" shall mean liabilities,
fines, penalties, obligations, consequential damages, responsibilities,
response costs, natural resource damages, corrective action costs,
reclamation costs, and costs and expenses, known or unknown, absolute or
contingent, past, present or future, resulting from any requirement, claim or
demand under Environmental Laws or contract.
SECTION 3.15. VOTE REQUIRED. The only vote or written consent of the
holders of any class or series of IN capital stock necessary to approve the
Merger and adopt this Agreement is the affirmative vote or written consents
from the holders of at least a majority of the outstanding shares of IN
Common Stock.
SECTION 3.16. BROKERS. Except as set forth in Schedule 3.16 to the IN
Disclosure Schedule and the Notes payable to the order of Messrs. Xxxxxxx
Xxx, Xxx Xxxxxx and Xxx Xxxxxx, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of IN. IN has made or will make available prior to
Closing to 4Health a complete and correct copy of all agreements referenced
in Schedule 3.16 to the IN Disclosure Schedule pursuant to which such firm or
individual will be entitled to any payment relating to the transactions
contemplated by this Agreement.
SECTION 3.17. INSURANCE. Schedule 3.17 to the IN Disclosure Schedule
will set forth a true and complete listing of all material policies currently
in force, and all other policies under which a claim could be made as of the
date hereof (I.E., all occurrence-based policies), for fire, products and
environmental or pollution control liability, general liability, vehicle,
workers' compensation, directors and officers' liability, title and other
insurance owned or held by or covering IN or any of its property, assets, or
activities, past or present. As of the date hereof, all of such policies are
in full force and effect, and IN has not received any outstanding notice of
cancellation or termination with respect to any policy of fire, products or
environmental or pollution control liability, general liability, vehicle,
workers' compensation, directors' and officers' liability, title and other
insurance owned or held by or covering IN or any of its property, assets, or
activities, past or present. To the knowledge of IN or Xxxxx, neither the
Merger nor any of the transactions contemplated hereby shall cause the
termination or may form the basis for terminating any such insurance policies
or insurance coverages presently maintained by IN.
SECTION 3.18 PROPERTIES. Except as set forth in Schedule 3.18 to the
IN Disclosure Schedule, except for liens arising in the ordinary course of
business after the date hereof and assets disposed of in the ordinary course
of business after the date of the IN Balance Sheet, IN and its subsidiaries
have good and marketable title free and clear of all liens, the existence of
which would have an IN Material Adverse Effect, to all their material assets,
whether tangible or intangible, personal or mixed, reflected in the IN
Balance Sheet as being owned by IN and its subsidiaries as of the date
thereof or purported to be owned on the date hereof. All buildings, and all
fixtures, equipment and other property and assets which are material to its
business on a
20
consolidated basis held under leases by any of IN or its subsidiaries, are
held under valid instruments enforceable by IN or its subsidiaries in
accordance with their respective terms. Substantially all of IN's and its
subsidiaries' equipment in regular use has been well maintained and is in
good and serviceable condition, reasonable wear and tear excepted. Neither
IN nor any of its subsidiaries own any real property and all of IN's and its
subsidiaries' interests in real property are subject to valid and binding
leases, all of which are in full force and effect, are not in breach by IN or
its subsidiaries or, to IN's or Xxxxx'x knowledge, by the lessor thereunder.
SECTION 3.19. CERTAIN CONTRACTS AND RESTRICTIONS. Other than
agreements, contracts or commitments listed elsewhere in the IN Disclosure
Schedule, Schedule 3.19 to the IN Disclosure Schedule lists, as of the date
hereof, each agreement, contract or commitment (including any amendments
thereto) to which IN or any of its subsidiaries is a party or by which IN or
any of its subsidiaries is bound (i) involving consideration during the next
twelve months in excess of $10,000 or (ii) which is otherwise material to the
assets, liabilities, financial condition, results of operations or current or
future business of IN and its subsidiaries, taken as a whole. As of the date
of this Agreement and except as indicated on the IN Disclosure Schedule, (i)
IN has fully complied with all material terms and conditions of all
agreements, contracts and commitments listed in the IN Disclosure Schedule
and all such agreements, contracts and commitments are in full force and
effect, (ii) IN and Xxxxx have no knowledge of any defaults thereunder or any
cancellations or modifications thereof, and (iii) such agreements, contracts
and commitments are not subject to any memorandum or other written document
or understanding permitting cancellation.
SECTION 3.20. FUTURES TRADING AND FIXED PRICE EXPOSURE. Neither IN nor
any of its subsidiaries is presently engaged in any futures or options
trading or is a party to any price, interest rate or currency swaps, xxxxxx,
futures or other derivative instruments.
SECTION 3.21. INFORMATION SUPPLIED. Without limiting any of the
representations and warranties contained herein, the representations and
warranties of IN contained in this Agreement and the information set forth in
the IN Disclosure Schedule is complete and accurate and does not contain any
untrue statement of material fact, or omit a material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which such statements are or were made, not misleading.
SECTION 3.22. SECURITIES LAWS REPRESENTATIONS. Without limiting any of
the representations and warranties of 4Health contained herein, Xxxxx hereby
acknowledges and agrees with 4Health that he is familiar with 4Health's
assets, business, financial condition, results of operations, and prospects.
He is aware of the risks attendant to an investment in the 4Health Common
Stock. He has relied solely upon the independent investigations made by him
and his representatives and 4Health's representations and warranties set
forth herein in making a decision to approve the Merger and to acquire the
4Health Common Stock nad has a full understanding and appreciation of the
risks inherent in such a speculative investment. In connection with such
21
investigation, he and his advisors, if any, have had the opportunity to ask,
to the extent he considered necessary, questions of, and have received
answers from, officers of 4Health concerning the affairs of 4Health and have
had access to reports filed by 4Health with the Commission (as hereinafter
defined), all documents, records, books and additional information which he
has deemed necessary to make an informed investment decision to acquire the
4Health Common Stock. He recognizes that the offer and sale by 4Health to
him of the 4Health Common Stock has not been registered under the Securities
Act or any other domestic or foreign securities laws (the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
such other applicable domestic and foreign securities laws are hereinafter
collectively referred to herein as the "Securities Laws") and, except as set
forth in 6.02 hereof, will not be registered under any such Securities Laws,
in reliance upon exemptions from the registration requirements thereof. He
is acquiring the 4Health Common Stock solely for his own account for
investment and not with a view to, or for offer or resale in connection with,
a distribution thereof in violation of any Securities Laws. He understands
that the effect of such representations and warranties is that such Stock
must be held indefinitely unless the sale or transfer thereof is subsequently
registered under applicable Securities Laws or an exemption from such
registration is available at the time of the proposed sale or transfer
thereof. Except as provided in Section 6.02 hereof, 4Health is under no
obligation to file a registration statement under the Securities Act covering
the sale or transfer of the 4Health Common Stock or otherwise to register
such Stock for sale under applicable Securities Laws. Xxxxx represents and
warrants that he has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of approving the
Merger and investing in the 4Health Common Stock; he is an "accredited
investor" as defined in Rule 501 of Regulation D; and that the statements
contained in this Section 3.23 are true, correct and complete in all material
respects and do not omit any material fact necessary to make such statements
not misleading. Xxxxx shall make no sale or other disposition of his 4Health
Common Stock unless (a) 4Health shall have received an opinion of counsel
satisfactory in form and substance to it that the sale or other disposition
may be made without registration under the then applicable provisions of the
Securities Laws and the rules and regulations promulgated thereunder, or (b)
such Stock is included in a currently effective registration statement under
the Securities Act. Neither Xxxxx, his wife nor any holder of a Converted
Share has been convicted of any felony or misdemeanor in connection with the
purchase and sale of any security or involving the making of any false filing
with the Securities and Exchange Commission ("Commission"). Neither Xxxxx,
his wife nor any holder of a Converted Share nor IN or any subsidiary of IN,
nor any officer, director and/or shareholder of IN or any subsidiary of IN,
is subject to any order, judgment or decree of any court of competent
jurisdiction, temporarily or preliminarily restraining or enjoining, or
subject to any order, judgment or decree of any court of competent
jurisdiction, permanently restraining or enjoining, such person from engaging
in or continuing any conduct or practice in connection with the purchase and
sale of any security or involving the making of any false filing with the
Commission. Xxxxx agrees to secure and furnish to 4Health prior to the
Effective Time investment representation letters from his wife and any other
holder of Converted Shares, if any, addressed to 4Health containing the same
representations and warranties made by Xxxxx in this Section 3.23.
22
SECTION 3.23. INTELLECTUAL PROPERTY. Schedule 3.23 lists all the
registered patents, trademarks, service marks, copyrights, trade names and
applications for any of the foregoing owned by IN or any to its knowledge,
its subsidiaries as of the date of this Agreement (the "Registered
Intellectual Property"). To its knowledge, IN has good and marketable title
to the Registered Intellectual Property and has good and marketable title to,
or valid licenses or rights to use, all patents, copyrights, trademarks,
trade names, brand names, proprietary and other technical information,
technology and software (collectively, "Intellectual Property") which are
used in the operation of its business as presently conducted, free from any
liens and free from any requirement of any past, present or future royalty
payments, license fees, charges or other payments or conditions or
restrictions, whatsoever, except as set forth on Schedule 3.23. Immediately
after the Effective Time, the Surviving Corporation will own or will have the
right to use all Intellectual Property free from liens and on the same terms
and conditions as in effect prior to the Effective Time. Except as set forth
in Schedule 3.23, there are no claims or proceedings pending or, to IN's or
to Xxxxx'x knowledge, threatened, against IN asserting that IN or any of its
subsidiaries is infringing or engaging in the unauthorized use of any
Intellectual Property of any other person or entity. Schedule 3.23 sets forth
all agreements and arrangements (i) pursuant to which IN or any of its
subsidiaries has licensed Intellectual Property to, or the use of
Intellectual Property in other areas permitted (through non-assertion,
settlement or similar agreements or otherwise) by, any other person and (ii)
pursuant to which IN or any of its subsidiaries has had Intellectual Property
licensed to it, or has otherwise been permitted to use Intellectual Property
(through non-assertion, settlement or similar agreements or otherwise). All
of the agreements or arrangements to the extent set forth on Schedule 3.23
(w) are in full force and effect in accordance with their terms and neither
IN nor Xxxxx is aware that any default exists thereunder by IN or any of its
subsidiaries or by any other party thereto; (x) are free and clear of liens;
and (y) do not contain any change of control or other terms or conditions
that will become applicable or inapplicable as a result of the consummation
of the Merger and the transactions contemplated by this Agreement. IN has
delivered to 4Health true and complete copies of all agreements and
arrangements set forth on Schedule 3.23. There are no royalties, license
fees, charges or other amounts payable by, or on behalf of IN or any of its
subsidiaries in respect of any Intellectual Property other than as set forth
on Schedule 3.23.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF 4HEALTH
4Health hereby represents and warrants to IN and Xxxxx that:
SECTION 4.01. ORGANIZATION AND QUALIFICATIONS; SUBSIDIARIES. 4Health
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Utah and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of the business
conducted by it or the ownership or
23
leasing of its properties makes such qualification necessary, other than
where the failure to be so duly qualified and in good standing would not have
a 4Health Material Adverse Effect. The term "4Health Material Adverse
Effect" as used in this Agreement shall mean any change or effect that,
individually or when taken together with all such other changes or effects,
would be reasonably likely to be materially adverse to the assets,
liabilities, financial condition, results of operations or current or future
business of 4Health and its subsidiaries, taken as a whole. Except as set
forth in Schedule 4.01 to the disclosure schedule to be delivered to IN by
4Health and which is attached hereto and is made a part hereof (the "4Health
Disclosure Schedule") as provided in Section 7.03(g), 4Health does not own an
equity interest in any other corporation, partnership or joint venture
arrangement or other business entity that is material to the assets,
liabilities, financial condition, results of operations or current or future
business of 4Health and its subsidiaries, taken as a whole.
SECTION 4.02. ARTICLES OF INCORPORATION AND BYLAWS. 4Health has
heretofore furnished to IN a complete and correct copy of the articles of
incorporation and bylaws or the equivalent organizational documents as
presently in effect of 4Health. 4Health is not in violation of any of the
provisions of its articles or any material provision of its bylaws.
SECTION 4.03. CAPITALIZATION.
(a) Except as set forth in Schedule 4.03(a) or as contemplated by
this Agreement, the authorized capital stock of 4Health consists of
30,000,000 shares of 4Health Common Stock as of the date hereof, of which
11,911,658 shares are issued and outstanding, 50,000 shares are held in
treasury by 4Health and up to 2,139,323 shares are reserved for future
issuance pursuant to stock options and warrants; and (ii) 5,000,000 shares of
series preferred stock, par value $1.00 per share, none of which are issued
and outstanding. Except as described in this Section 4.03 or Schedule
4.03(a) of the 4Health Disclosure Schedule, no shares of capital stock of
4Health are reserved for any purpose. Each of the outstanding shares of
capital stock of, or other equity interests in 4Health is duly authorized,
validly issued, and, in the case of shares of capital stock, fully paid and
nonassessable, and has not been issued in violation of (nor are any of the
authorized shares of capital stock of, or other equity interests in, such
entities subject to) any preemptive or similar rights created by statue, the
charter or bylaws (or the equivalent organizational documents) of 4Health, or
any agreement to which 4Health is a party or bound, and such outstanding
shares or other equity interests owned by 4Health are owned free and clear of
all security interests, liens, claims, pledges, agreements, limitations on
4Health's voting rights, charges or other encumbrances of any nature
whatsoever.
(b) Except as set forth in Schedule 4.03(b)(i) to the 4Health
Disclosure Schedule, there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments of
any character to which 4Health is a party relating to the issued or unissued
capital stock of 4Health or obligating 4Health to grant, issue or sell any
shares of the capital stock of 4Health, by sale, leases, license or
otherwise. Except as set forth in Schedule 4.03(b)(ii) to the 4Health
Disclosure Schedule, there are no obligations, contingent or
24
otherwise, of 4Health to (i) repurchase, redeem or otherwise acquire any
shares of 4Health Common Stock or other capital stock of 4Health; or (ii)
provide material funds to, or make any material investment in (in the form of
a loan, capital contribution or otherwise), or provide any guarantee with
respect to the obligations of any other person. Except as described in
Schedule 4.03(b)(iii) to the 4Health Disclosure Schedule, 4Health (x) does
not directly or indirectly own, (y) has not agreed to purchase or otherwise
acquire or (z) does not holds any interest convertible into or exchangeable
or exercisable for, 5% or more of the capital stock of any corporation,
partnership, joint venture or other business association or entity. Except
as set forth in Schedule 4.03(b)(iv) to the 4Health Disclosure Schedule,
there are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any person is or may be entitled
to receive any payment based on the revenues or earnings or calculated in
accordance therewith, of 4Health. Except as set forth in Schedule
4.03(b)(v), there are no voting trusts, proxies or other agreements or
understanding to which 4Health is a party or by which 4Health is bound with
respect to the voting of any shares of capital stock of 4Health.
(c) 4Health has made available to IN complete and correct copies
of (i) its Long Term Stock Incentive Plan (The "4Health Option Plan") and the
forms of options issued pursuant to the 4Health Option Plan, including all
amendments thereto and (ii) all options and warrants that are not in the form
specified under clause (i) above. Schedule 4.03(c) to the 4Health Disclosure
Schedule sets forth a complete and correct list of all outstanding warrants
and options, restricted stock or any other stock awards and shares of stock
reserved for issuance under such stock options, the form thereof provided
under clause (i) above. Schedule 4.03(c) to the 4Health Disclosure Schedule
sets forth a complete and correct list of all outstanding warrants and
options, restricted stock or any other stock awards (the "4Health Stock
Awards") granted under the 4Health Option Plan or otherwise, setting forth as
of the date hereof (i) the number of type of 4Health Stock Awards, (ii) the
exercise price of each outstanding stock option or warrants, and (iii) the
number of stock options and warrants presently exercisable.
SECTION 4.04 AUTHORITY. 4Health has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by 4Health and the consummation by
4Health of the transactions contemplated hereby have been duly authorized by
all necessary corporate action and, except for securing the approval of
4Health's stockholders, no other corporate proceedings on the part of 4Health
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
4Health and, assuming the due authorization, execution and delivery thereof
by IN and Xxxxx, constitutes the legal, valid and binding obligation of
4Health enforceable against 4Health in accordance with its terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect. affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
25
SECTION 4.05. NO CONFLICT: REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Schedule 4.05 to the 4Health Disclosure
Schedule, the execution and delivery of this Agreement by 4Health does not,
and the consummation of the transaction contemplated hereby will not (i)
conflict with or violate the articles of incorporation or bylaws, or the
equivalent organizational documents, in each case as amended or restated, of
4Health, (ii) conflict with or violate any Laws applicable to 4Health or by
which any of its properties is bound or subject, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of
4Health pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which 4Health is a party or by or to which 4Health or any of
its properties is bound or subject, except for any such conflicts or
violations described in clause (ii) or breaches, defaults, events, rights of
termination, amendment, acceleration or cancellation, payments obligations or
liens or encumbrances described in clause (iii) that would not have a 4Health
Material Adverse Effect.
(b) The execution and delivery of this Agreement by 4Health does
not, and consummation of the Merger will not, require 4Health to obtain any
consent, license, permit, approval, waiver, authorization or order of, or to
make any filing with or notification to, any Governmental Entity, except (i)
for filing appropriate merger documents as required by California and Utah
Laws; (ii) for filing Proxy Materials (as defined herein) and Form D with the
Commission; (iii) if required by the National Association of Securities
Dealers, Inc. ("NASD"), a listing application listing the shares of 4Health's
Common Stock on the NASDAQ National Stock Market ("NSM"); and (iv) where the
failure to obtain such consents, licenses, permits, approvals, waivers,
authorizations or orders, or to make such filings or notifications, would
not, either individually or in the aggregate, materially interfere with
4Health's performance of its obligations under this Agreement and would not
have a 4Health Material Adverse Effect.
SECTION 4.06. PERMITS; COMPLIANCE. 4Health and, to 4Health's
knowledge, each third party operator of any of 4Health's properties, is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents. certificates, approvals and
orders necessary to won, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "4Health Permits"),
and there is no action, proceeding or investigation pending or, to the
knowledge of 4Health, threatened regarding suspension or cancellation of any
of the 4Health Permits, except where the failure to possess, or the
suspension or cancellation of, such 4Health Permits would not have a 4Health
Material Adverse Effect. Except as set forth in Schedule 4.06 to the 4Health
Disclosure Schedule, 4Health has not received from any Governmental Entity
any written notification with respect to possible conflicts, defaults or
violations of Laws, except for written notices relating to possible
conflicts, defaults or violations that would not have a 4Health Material
Adverse Effect.
26
SECTION 4.07. FINANCIAL STATEMENTS.
(a) Since March 31, 1991, 4Health and its subsidiaries have filed
(i) all forms, reports, statements and other documents required to be filed
with (A) the Commission including, without limitation, (1) all Registration
Statements filed under the Securities Act, (2) all Annual Reports on Form
10-K, (3) all Quarterly Reports on Form 10-Q, (4) all proxy statements
relating to meetings of stockholders (whether annual or special), (5) all
Current Reports on Form 8-K and (6) all other reports, schedules,
registration statements or other documents (collectively referred to as the
"4Health Commission Reports") and (B) any applicable state securities
authorities and (ii) all forms, reports, statements and other documents
required to be filed with any other applicable federal or state regulatory
authorities, except where the failure to file any such forms, reports,
statements or other documents would not have a 4Health Material Adverse
Effect (all such forms, reports, statements and other documents in clauses
(i) and (ii) of this Section 3.07(a) being referred to herein, collectively,
as the "4Health Reports"). The 4Health Reports, including all 4Health
Reports filed after the date of this Agreement and prior to the Effective
Time, (x) were or will be prepared in accordance with the requirements of
applicable Law (including, with respect to 4Health Commission Reports, the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such 4Health
Commission Reports) and (y) did not at the time they were filed, or will not
at the time they are filed, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they are made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in 4Health Commission Reports
filed prior to the Effective Time, (i) have been or will be prepared in
accordance with the published rules and regulations of the Commission and
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except (a) to the extent required by changes
in generally accepted accounting principles; (b) with respect to 4Health
Commission Reports filed prior to the date of this Agreement, as may be
indicated in the notes thereto; and (c) with respect to interim financial
statements as may be permitted by Article 10 of Regulation S-X) and (ii)
fairly present or will fairly present the consolidated financial position of
4Health and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated
(including reasonable estimates of normal and recurring year-end
adjustments), except that (x) any unaudited interim financial statements were
or will be subject to normal and recurring year-end adjustments and (y) any
pro forma financial statements contained in such consolidated financial
statements are not necessarily indicative of the consolidated financial
position of 4Health and its subsidiaries as of the respective dates thereof
and the consolidated results of operations and cash flows for the periods
indicated.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the 4Health Commission Reports, or in the 4Health Disclosure
Schedule or as contemplated by this
27
Agreement or as set forth in Schedule 4.08 to the 4Health Disclosure
Schedule, since September 30, 1997, 4Health has conducted its business in the
ordinary course of business consistent with past practice. Since September
30, 1997, there has not been (i) any event, change, or effect (including the
occurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) having or, which would be reasonably likely to have,
individually or in the aggregate, a 4Health Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
4Health or any redemption, purchase or other acquisition by 4Health or any of
4Health's subsidiaries of any of 4Health's securities or any of the
securities of any subsidiary of 4Health; (iii) any revaluation by 4Health of
its assets, including the writing down of the value of inventory or the
writing down or off of notes or accounts receivable, other than in the
ordinary course of business and consistent with past practices; (iv) any
change by 4Health in accounting principles or methods, except insofar as may
be required by a change in generally accepted accounting principles;(v) a
fundamental change in the nature of 4Health's business; or (vi) a 4Health
Material Adverse Effect.
SECTION 4.09. ABSENCE OF LITIGATION. Except as set forth in Schedule
4.09 to the 4Health Disclosure Schedule, there is no claim, suit, litigation,
proceeding, arbitration or, to the knowledge of 4Health, investigation of any
kind, at law or in equity (including actions or proceedings seeking
injunctive relief) pending or, to the knowledge of 4Health, threatened,
against 4Health or any of its properties or rights (except for claims,
actions, suits, litigation, proceedings, arbitrations or investigations which
would not have a 4Health Material Adverse Effect), and 4Health is not subject
to any continuing order of, consent decree, settlement agreement or other
similar written agreement with, or, to the knowledge of 4Health, continuing
investigation by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Government Entity or arbitrator,
including, without limitation, cease-and-desist or other orders, except for
matters that would not have a 4Health Material Adverse Effect.
SECTION 4.10. EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Schedule 4.10(a) to the 4Health Disclosure Schedule sets forth
each employee benefit plan (as such term is defined in ERISA Section 3(3))
maintained or contributed to during the past five years by 4Health or any
member of its ERISA Group or with respect to which 4Health or any member of
its ERISA Group could incur liability under Sections 4063, 4069, 4212(c) or
4204 of ERISA, and any other retirement, pension, stock option, stock
appreciation rights, profit sharing, incentive compensation, deferred
compensation, savings, thrift, vacation pay, severance pay, insurance,
health, welfare or other employee compensation or benefit plan, agreement,
practice, or arrangement, whether written or unwritten, whether or not
legally binding (collectively, the "4Health Benefit Plans"). For purposes of
this Agreement, "ERISA Group" means a controlled or affiliated group within
the meaning of Code Section 414(b), (c), (m), or (o) of which 4Health is a
member. 4Health has made available to IN correct and complete copies of all
4Health Benefit Plans (including a detailed written description of any
4Health Benefit Plan that is unwritten, including a description of
eligibility criteria, participation,
28
vesting, benefits, funding arrangements and assets and any other provisions
relating to 4Health) and, with respect to each 4Health Benefit Plan, a copy
of each of the following, to the extent each is applicable to each 4Health
Benefit Plan: (i) the most recent favorable determination letter, (ii)
materials submitted to the Internal Revenue Service in support of a pending
determination letter request, (iii) the most recent letter issued by the
Internal Revenue Service recognizing tax exemption, (iv) each insurance
contract, trust agreement, or other funding vehicle, (v) the three most
recently filed Forms 5500 plus all schedules and attachments, (vi) the three
most recent actuarial valuations, and (vii) each summary plan description or
other general explanation or communication distributed or otherwise provided
to employees with respect to each 4Health Benefit Plan that describes the
terms of the 4Health Benefit Plan.
(b) With respect to the 4Health Benefit Plans, no event has
occurred and, to the knowledge of 4Health, there exists no condition or set
of circumstances, in connection with which 4Health or any member of its ERISA
Group could be subject to any liability under the terms of such 4Health
Benefit Plans, ERISA, the Code or any other applicable Law which would have
an 4Health Material Adverse Effect. Except as otherwise set forth on
Schedule 4.10(b) to the 4Health Disclosure Schedule:
(i) As to any 4Health Benefit Plan intended to be
qualified under Section 401 of the Code, such 4Health Benefit Plan satisfies
the requirements of such Section and there has been no termination or partial
termination of such 4Health Benefit Plan within the meaning of Section
411(d)(3) of the Code and 4Health has administered all such Plans in
accordance with all applicable Laws;
(ii) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of 4Health, threatened
against, or with respect to, any of the 4Health Benefit Plans or their
assets, any plan sponsor, or any fiduciary (as such term is defined in
Section 3(21) of ERISA), and 4Health has no knowledge of any facts that could
give rise to any actions, suits or claims;
(iii) All contributions required to be made to the 4Health
Benefit Plans pursuant to their terms and provisions have been made timely;
(iv) As to any 4Health Benefit Plan subject to Title IV of
ERISA, there has been no event or condition which presents the material risk
of plan termination, no accumulated funding deficiency, whether or not
waived, within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, no reportable event within the meaning of Section 4043 of
ERISA has occurred, no notice of intent to terminate the 4Health Benefit Plan
has been given under Section 4041 of ERISA, no proceeding has been instituted
under Section 4042 of ERISA to terminate the 4Health Benefit Plan, and no
liability to the Pension Benefit Guaranty Corporation or to the Plan has been
incurred;
29
(v) Neither 4Health nor any party in interest (as such term
is defined in ERISA Section 3(14)) nor any disqualified person has engaged in
any prohibited transaction within the meaning of ERISA Section 406 or Code
Section 4975 that would subject 4Health to any liability; and
(vi) The consummation of the transactions contemplated by
this Agreement will not give rise to any acceleration of vesting of payments
or options, the acceleration of the time of making any payments, or the
making of any payments, which in the aggregate would result in an "excess
parachute payment" within the meaning of Section 280G of the Code and the
imposition of the excise under Section 4999 of the Code.
(c) Except as set forth in Schedule 4.10(c) to the 4Health
Disclosure Schedule, neither 4Health nor any member of its ERISA Group,
including, without limitation, any of its subsidiaries, is or has ever been a
party to any collective bargaining or other labor union contracts. No
collective bargaining agreement is being negotiated by 4Health or any of its
subsidiaries. There is no pending or threatened labor dispute, strike or
work stoppage against 4Health or any of its subsidiaries which may interfere
with the respective business activities of 4Health or any of its
subsidiaries. None of 4Health, any of its subsidiaries or any of their
respective representatives or employees has committed any unfair labor
practices in connection with the operation of the respective businesses of
4Health or its subsidiaries, and there is no pending or threatened charge or
complaint against 4Health or any of its subsidiaries by the National Labor
Relations Board or any comparable state agency. 4Health and its subsidiaries
are in compliance with all applicable wage and hours Laws, age, race,
religious and gender anti-discrimination Laws, employee health and safety
Laws and all immigration Laws as regards their respective employees and,
there is no pending or, to 4Health's knowledge, threatened claim,
investigations or proceeding involving any alleged violation of any such Law.
(d) Except as disclosed in Schedule 4.10(d) to the 4Health
Disclosure Schedule and as contemplated by this Agreement, neither 4Health
nor any of its subsidiaries is a party to or is bound by any severance
agreements, programs or policies. Schedule 4.10(d) to the 4Health Disclosure
Schedule sets forth, and 4Health has made available to IN true and correct
copies of, (i) all employment agreements with officers or 4Health or its
subsidiaries; (ii) all agreements with consultants of 4Health or its
subsidiaries obligating 4Health or any subsidiary to make annual cash
payments in an amount exceeding $25,000; (iii) all non-competition agreements
with 4Health or a subsidiary executed by officers of 4Health; and (iv) all
plans, programs, agreements and other arrangements of 4Health or its
subsidiaries with or relating to its directors.
(e) Except as provided in Schedule 4.10(e) to the 4Health
Disclosure Schedule, (x) no 4Health Benefit Plan provides retiree medical or
retiree life insurance benefits to any person and (y) neither 4Health nor any
of its subsidiaries is contractually or otherwise obligated (whether or not
in writing) to provide any person with life insurance or medical benefits
upon retirement or termination of employment, other than as required by the
provisions
30
of Sections 601 through 608 of ERISA and Section 4980B of the Code and each
such 4Health Benefit Plan or arrangement may be amended or terminated by
4Health or its subsidiaries at any time without liability.
(f) Except as set forth in Schedule 4.10(f) to the 4Health
Disclosure Schedule, neither 4Health nor any member of its ERISA Group
including, without limitation, any of its subsidiaries, contributes to or has
an obligation to contribute to, and has not within six years prior to the
date of this Agreement contributed to or had an obligation to contribute to
or has any secondary liability under ERISA Section 4204 to, a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(g) Except as contemplated by this Agreement or as set forth in
Schedule 4.10(g), 4Health has not amended, or taken any actions with respect
to, any of the 4Health Benefit Plans or any of the plans, programs,
agreements, policies or other arrangements described in Section 4.10(d) of
this Agreement since September 30, 1997.
(h) With respect to each 4Health Benefit Plan that is a "group
health plan" within the meaning of Section 5000(b) of the Code, each such
4Health Benefit Plan complies and has complied with the requirements of Part
6 of Title I of ERISA and Sections 4980B and 5000 of the Code, except where
the failure to so comply would not have a 4Health Material Adverse Effect.
SECTION 4.11 TAXES. Except as set forth in Schedule 4.11 of the
4Health Disclosure Schedule and except as such failure of any representation
or warranty made in this Section 4.11 to be true and correct which would not
have a 4Health Material Adverse Effect:
(a) Except to the extent that the applicable statute of
limitations has expired, all Returns required to be filed by or on behalf of
4Health have been duly filed on a timely basis with the appropriate
Governmental Entities and such Returns are true, correct and complete.
Except to the extent that the applicable statute of limitations with respect
thereto has expired, all Taxes have been duly paid in full or a provision has
been made in accordance with generally accepted accounting principles for the
payment of all Taxes for all periods covered by such Returns or with respect
to any period prior to the Effective Time. 4Health has disclosed on its
income tax returns all positions taken therein which could give rise to a
substantial understatement penalty within the meaning of Code Section 6662.
No waiver or extension of any statute of limitations is in effect with
respect to Taxes or Returns of 4Health.
(b) 4Health has complied in all respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including any estimated Taxes and the withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign
laws) and have, within the time and the manner prescribed by law, withheld
from employee wages and paid over all amounts withheld under applicable laws.
31
(c) There is no audit of any of the Returns of 4Health by a
Governmental Entity in process or threatened and there is no material dispute
or claim concerning any liabilities for Taxes of 4Health either raised or
reasonably expected to be raised by any taxing authority. There are no liens
on any assets of 4Health with respect to Taxes, other than liens set forth in
Schedule 4.11 of the 4Health Disclosure Schedule for Taxes that are being
contested in good faith through appropriate proceedings and for which
appropriate reserves have been established.
(d) 4Health has made available to IN complete copies of (i) all
federal income tax returns of 4Health for all periods open under the statute
of limitations for assessments and (ii) examination reports, and statements
of deficiencies assessed against 4Health.
(e) No consent under Section 341(f) of the Code has been filed
with respect to 4Health.
(f) 4Health has not entered into any compensatory agreements with
respect to the performance of services under which payment would result in a
nondeductible expense pursuant to Section 280G of the Code.
(g) 4Health has not agreed, nor is it required to make, prior to
the Effective Time, any adjustment under Code Section 481(a) by reason of a
change in accounting method or otherwise.
(h) 4Health has not issued or assumed any corporate acquisition
indebtedness that is subject to Sections 279(a) and (b) of the Code.
(i) The amount of liability for unpaid Taxes of 4Health for all
periods ending on or before the Effective Time will not, in the aggregate,
materially exceed the amount of the liability accruals for Taxes reflected on
the balance sheet of 4Health filed in Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997 (the "4Health Balance Sheet").
(j) The tax returns provided by 4Health to IN contain accurate and
complete information with respect to the net operating losses, net operating
loss carryforwards and other tax attributes of 4Health, and the extent to
which they are subject to any limitation under Code Sections 381, 382, 383 or
384, or any other provision of the Code or the federal consolidated return
regulations (or any predecessor provision of any Code section or the
regulations) and, apart from any such limitations and apart from any
limitation that would be imposed as a result of the Merger, there is nothing
that would prevent 4Health from utilizing these net operating losses, net
operating loss carryforwards or other tax attributes as so limited if
sufficient income were realized.
32
(k) 4Health is not required to treat any of its assets as owned by
another person for federal income tax purposes or as tax-exempt bond property
or as tax-exempt use property within the meaning of Section 168 of the Code.
SECTION 4.12. TAX MATTERS. Neither 4Health, nor, to the knowledge of
4Health, any of 4Health's affiliates has taken or agreed to take any action
that would prevent the Merger from constituting a tax-free reorganization
qualifying under the provisions of Section 368(a) of the Code.
SECTION 4.13. NSM LISTING. The 4Health Common Stock is traded in the
NSM, and, 4Health has not received any current notice from the NSM or the
NASD that it intends to delist the 4Health Common Stock from the NSM.
SECTION 4.14. CERTAIN BUSINESS PRACTICES. To the best of 4Health's
knowledge, none of 4Health, or any directors, offices, agents or employees of
4Health has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or (iii) made any other unlawful payment.
SECTION 4.15. ENVIRONMENTAL MATTERS (a) Except as disclosed in
Schedule 4.15 to the 4Health Disclosure Schedule and except for matters that
would not have or are reasonably not likely to have a 4Health Material
Adverse Effect, to the best knowledge of 4Health:
(i) the properties, operations and activities of 4Health
are in compliance with all applicable Environmental Laws and there are no
circumstances which could reasonably be expected to prevent or interfere with
their continued compliance with applicable Environmental Laws;
(ii) 4Health and the properties and operations of 4Health
are not subject to any existing, pending, or, to 4Health's knowledge,
threatened civil, criminal or administrative action, suit, claim, notice of
violation, investigation, notice of potential liability, request for
information, inquiry, demand or proceeding under applicable Environmental
Laws;
(iii) 4Health has not agreed, whether by contract or by
consent agreement with governmental authorities or private persons, to
undertaken investigation, clean up, or remedial activities;
(iv) All notices, permits, licenses, or similar
authorizations required to be obtained or filed by 4Health under any
Environmental Law in connection with any aspect of the business of 4Health,
including without limitation those relating to the treatment, storage,
disposal or discharge of Hazardous Materials, have been duly obtained or
filed and will remain
33
valid and in effect after the Merger, and 4Health is in compliance with the
terms and conditions of all such notices, permits, licenses and similar
authorizations;
(v) 4Health has not received any notice of noncompliance
with respect to any financial responsibility requirements applicable to its
operations and imposed by any Governmental Entity under any Environmental
Laws.
(vi) There are no physical or environmental conditions
existing on any property of 4Health or resulting from 4Health's operations or
activities, past or present, at any location, including without limitation,
releases and disposal of Hazardous Materials, that would give rise to any
on-site or off-site investigation, reporting, or remedial obligations or
other Environmental Liability;
(vii) To the extent required by applicable Environmental
Laws, all Hazardous Materials generated by 4Health have been transported only
by persons authorized under applicable Environmental Laws to transport such
materials, and disposed of only at treatment, storage and disposal facilities
authorized under applicable Environmental Laws to treat, store or dispose of
such Hazardous Materials;
(viii) There has been no exposure of any person or property
to Hazardous Materials or any lease of Hazardous Materials into the
environment by 4Health or in connection with their present or prior
properties or operations that could reasonably be expected to give rise to
any Environmental Liability;
(ix) No release or clean up of Hazardous Materials has
occurred at 4Health's properties which could reasonably be expected to in the
assertion or creation of any lien on the properties by any governmental body
or agency with respect thereto, nor has any such lien been asserted or made
by any governmental body or agency with respect thereto; and
(x) The operations of each third party operator of any of
4Health's properties are in compliance with the terms of this Section 4.15.
(b) 4Health has made available to IN all material internal and
external environmental audits, studies, documents and correspondence on
environmental matters in the possession of 4Health relating to any of the
present or prior properties or operations of 4Health.
SECTION 4.16. BROKERS. Except as set forth in Schedule 4.16 of the
4Health Disclosure Schedule and the Notes payable to the order of Messrs.
Xxxxxxx Xxx, Xxx Xxxxxx and Xxx Xxxxxx, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of 4Health. Prior to the date of this
Agreement, 4Health has made available to IN a complete and correct copy of
all agreements referenced in Schedule 4.16
34
pursuant to which any such firm will be entitled to any payment related to
the transactions contemplated by this Agreement.
SECTION 4.17. INSURANCE. Schedule 4.17 to the 4Health Disclosure
Schedule will set forth a true and complete listing of all material policies
currently in force, and all other policies under which a claim could be made
as of the date hereof (I.E., all occurrence-based policies), for fire,
products and environmental or pollution control liability, general liability,
vehicle, workers' compensation, directors and officers' liability, title and
other insurance owned or held by or covering 4Health or any of its property,
assets, or activities, past or present. As of the date hereof, all of such
policies are in full force and effect, and 4Health has not received any
outstanding notice of cancellation or termination with respect to any policy
of fire, products or environmental or pollution control liability, general
liability, vehicle, workers' compensation, directors' and officers'
liability, title and other insurance owned or held by or covering 4Health or
any of its property, assets, or activities, past or present. To the
knowledge of 4Health, neither the Merger nor any of the transactions
contemplated hereby shall cause the termination or may form the basis for
terminating any such insurance policies or insurance coverages presently
maintained by 4Health.
SECTION 4.18. PROPERTIES. Except for liens arising in the ordinary
course of business after the date hereof and properties and assets disposed
of in the ordinary course of business after the date of the 4Health Balance
Sheet, 4Health has good and marketable title free and clear of all liens, the
existence of which would have a 4Health Material Adverse Effect, to all their
material properties and assets, whether tangible or intangible, real,
personal or mixed, reflected in the 4Health Balance Sheet as being owned by
4Health as of the date thereof or purported to be owned on the date hereof.
All buildings, and all fixtures, equipment and other property and assets
which are material to its business on a consolidated basis, held under leases
by 4Health are held under valid instruments enforceable by 4Health in
accordance with their respective terms. Substantially all of 4Health's
equipment in regular use has been well maintained and is in good and
serviceable condition, reasonable wear an tear excepted.
SECTION 4.19. CERTAIN CONTRACTS AND RESTRICTIONS. Other than
agreements, contracts or commitments listed elsewhere in the 4Health
Disclosure Schedule, Schedule 4.19 to the 4Health Disclosure Schedule lists,
as of the date hereof, each agreement, contract or commitment (including any
amendments thereto) to which 4Health is a party or by which 4Health is bound
(i) involving consideration during the next twelve months in excess of
$10,000 or (ii) which is otherwise material to the assets, liabilities,
financial condition, results of operations or current or future business of
4Health, taken as a whole. As of the date of this Agreement and except as
indicated on the 4Health Disclosure Schedule, (i) 4Health has fully complied
with all material terms and conditions of all agreements, contracts and
commitments that will be listed in the 4Health Disclosure Schedule and all
such agreements, contracts and commitments are in full force and effect, (ii)
4Health has no knowledge of any defaults thereunder or any cancellations or
35
modifications thereof, and (iii) such agreements, contracts and commitments
are not subject to any memorandum or other written document or understanding
permitting cancellation.
SECTION 4.20. EASEMENTS. The business of 4Health has been operated in
a manner that does not violate the material terms of any easements, rights of
way, permits, servitude, licenses and similar rights relating to real
property used by 4Health in its business (collectively, "4Health Easements")
except for violations that have not resulted and will not result in a 4Health
Material Adverse Effect. All material 4Health Easements are valid and
enforceable and grant the rights purported to be granted thereby and all
rights necessary thereunder for the current operation of such business.
SECTION 4.21. FUTURES TRADING AND FIXED PRICE EXPOSURE. 4Health is not
presently engaged in any futures or options trading nor is it a party to any
price, interest rate or currency swaps, xxxxxx, futures or other derivative
instruments.
SECTION 4.22. INFORMATION SUPPLIED. Without limiting any of the
representations and warranties contained herein, no representation or
warranty of 4Health and no statement by 4Health or other information
contained in or documents referred to in the 4Health Disclosure Schedule, as
of the date of such representation, warranty, statement or document, contains
or contained any untrue statement of material fact, or, at the date thereof,
omits or omitted to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements are or were made, not misleading.
SECTION 4.23. INTELLECTUAL PROPERTY. Schedule 4.23 lists all the
registered patents, trademarks, service marks, copyrights, trade names and
applications for any of the foregoing owned by 4Health as of the date of this
Agreement (the "4Health Registered Intellectual Property"). To its
knowledge, 4Health has good and marketable title to the 4Health Registered
Intellectual Property and has good and marketable title to, or valid licenses
or rights to use, all patents, copyrights, trademarks, trade names, brand
names, proprietary and other technical information, technology and software
(collectively, "4Health Intellectual Property") which are used in the
operation of its business as presently conducted, free from any liens and
free from any requirement of any past, present or future royalty payments,
license fees, charges or other payments or conditions or restrictions,
whatsoever, except as set forth on Schedule 4.23. Except as set forth in
Schedule 4.23, there are no claims or proceedings pending or, to the
4Health's knowledge, threatened, against 4Health asserting that 4Health is
infringing or engaging in the unauthorized use of any 4Health Intellectual
Property of any other person or entity. 4Health has delivered to 4Health
true and complete copies of all agreements and arrangements set forth on
Schedule 4.23. There are no royalties, license fees, charges or other
amounts payable by, or on behalf of IN in respect of any 4Health Intellectual
Property other than as set forth on Schedule 4.23.
SECTION 4.24. POOLING OF INTERESTS. Neither 4Health, nor any of its
officers, directors and/or shareholders has taken in the last two years or
will take prior to the Effective Time any
36
action which would interfere with the ability of 4Health to account for the
Merger under the "pooling of interests" method of accounting.
SECTION 4.25. EXEMPT TRANSACTION. Assuming the accuracy and
completeness of IN's and Xxxxx'x representations and warranties hereunder,
and assuming further that IN and IN stockholders have not taken and will not
take any action that would render unavailable the exemption from registration
under the Securities Act provided by Rule 506 of Regulation D and Section
4(2) thereof and applicable state securities laws, the shares of 4Health
Common Stock issued as a result of the Merger will be offered and sold
pursuant to the registration exemption provided by Rule 506 of Regulation D
and Section 4(2) of the Securities Act as a transaction not involving a
public offering and the requirements of the applicable state securities laws
of the State of California and respective rules and regulations thereunder.
SECTION 4.26 NO VIOLATION OF SECURITIES LAWS. No injunction, stop
order, cease and desist order or other judgment, writ, or decree denying,
revoking or suspending the registration of shares of 4Health Common Stock or
prohibiting or restricting the offer or sale of shares of 4Health Common
Stock has been issued and except as disclosed in Schedule 4.09 to the 4Health
Disclosure Schedule, to the knowledge of 4Health, there are no private or
governmental suits, actions, investigations or other proceedings pending or
threatened, seeking such a judgment, order, writ or decree or alleging any
violation of Federal or state securities laws.
SECTION 4.27. NO INVESTIGATION. No formal or informal investigation or
examination by the Commission or by the securities administrator of any state
is pending, or to the knowledge of 4Health, threatened against 4Health, or
any director, officer or shareholder of 4Health, or any of its subsidiaries.
SECTION 4.28. NO CONVICTIONS. Neither 4Health nor any officer,
director or shareholder of 4Health or any of its subsidiaries, has been
convicted of any felony or misdemeanor in connection with the purchase and
sale of any security or involving the making of any false filing with the
Commission.
SECTION 4.29. NO RESTRAINT. Neither 4Health nor any subsidiary of
4Health, nor any officer, director and/or shareholder of 4Health or any
subsidiary of 4Health, is subject to any order, judgment or decree of any
court of competent jurisdiction, temporarily or preliminarily restraining or
enjoining, or subject to any order, judgment or decree of any court of
competent jurisdiction, permanently restraining or enjoining, such person
from engaging in or continuing any conduct or practice in connection with the
purchase and sale of any security or involving the making of any false filing
with the Commission.
37
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF IN. IN hereby covenants and
agrees that, at or prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by 4Health, IN will
and will cause its subsidiaries to:
(a) continue to operate its business in all material respect in
the usual and ordinary course, consistent with prior practice and to use all
reasonable efforts to preserve substantially intact its business
organization, maintain its material rights and franchises, retain the
services of its respective officers and employees and maintain its
relationships with its material customers and suppliers;
(b) maintain and keep its material properties and assets in as
good repair and conditions as at present, ordinary wear and tear excepted,
and maintain supplies and inventories of products in quantities consistent
with its customary business practice;
(c) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(d) furnish to 4Health copies of the IN Financial Statements and
IN Balance Sheet, certified by IN's independent auditors, and the IN
Disclosure Schedule no later than 10 days prior to the Closing Date; and
(e) take all such steps as are commercially reasonable in order to
consummate the Merger and all other transactions contemplated hereby,
including, without limitation, securing all requisite consents thereto.
SECTION 5.02. NEGATIVE COVENANTS OF IN. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by
4Health, from the date of this Agreement until the Effective Time, IN will
not do, and will not permit any of its subsidiaries to do, any of
the foregoing:
(a) (i) except as set forth on in Schedule 5.02(a) to the IN
Disclosure Schedule, increase the compensation payable to or to become
payable to any director or executive officer; (ii) grant any severance or
termination pay to, or enter into or amend any employment or severance
agreement with, any director, officer or employee; (iii) establish, adopt or
enter into any employee benefit plan or arrangement; or (iv) except as may be
required by applicable law, adopt, amend, or take any other actions with
respect to, any IN Benefit Plans or any of the plans, programs, agreements,
policies or other arrangements described in Section 3.10(d) of this Agreement;
38
(b) except as set forth on Schedule 5.02(b) to the IN Disclosure
Schedule, declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, except for dividends by a
direct or indirect wholly owned subsidiary of IN to IN or another wholly
owned subsidiary of IN;
(c) except as contemplated by this Agreement, (i) redeem, purchase
or otherwise acquire any shares of its or any of its subsidiaries' capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its or its subsidiaries' capital stock (other than any such
acquisitions directly from any wholly owned subsidiary of IN in exchange for
capital contributions or loans to such subsidiary), or any options, warrants
or conversion or other rights to acquire any shares of its or its
subsidiaries' capital stock or any such securities or obligations (except in
connection with the exercise of outstanding stock options in accordance with
their terms); (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its or its subsidiaries' capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its or its subsidiaries'
capital stock;
(d) except as contemplated by this Agreement, (i) issue, deliver,
award, grant or sell, or authorize or propose the issuance, delivery, award,
grant or sale (including the grant of any security interests, liens, claims,
pledges, limitations in voting rights, charges or other encumbrances) of, any
shares of any class of its or its subsidiaries' capital stock (including
shares held in treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to
acquire any such shares (except as permitted pursuant to Sections 2.01(a) and
2.01(b) of this Agreement or for the issuance of shares upon the exercise of
outstanding stock options or the vesting of restricted stock in accordance
with the terms of outstanding IN Stock Awards); (ii) amend or otherwise
modify the terms of any such rights, warrants or options the effect of which
shall be to make such terms more favorable to the holders thereof; or (iii)
take any action to accelerate the exercisability of stock options;
(e) acquire or agree to acquire, by merging or consolidating with,
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with past practice);
(f) except as disclosed in Schedule 5.02(f) to the IN Disclosure
Schedule, sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its material assets or any material assets of
any of its subsidiaries, except for the sale of inventory or other
dispositions in the ordinary course;
39
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably
be expected to lead to, any Competing Transaction (as defined below), or
enter into discussions or negotiate with any person or entity in furtherance
of such inquiries or to obtain a Competing Transaction, or agree to or
endorse any Competing Transaction, or authorize or permit any of the
officers, directors or employees of IN or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by IN or any of IN's subsidiaries to take any such
action, and IN shall promptly notify 4Health of all relevant terms of any
such inquiries and proposals received by IN or any of its subsidiaries or by
any such officer, director, investment banker, financial advisor, attorney,
accountant or other representative relating to any of such matters and if
such inquiry or proposal is in writing, IN shall promptly deliver or cause to
be delivered to 4Health a copy of such inquiry or proposal. For purposes of
this Agreement, "Competing Transaction" shall mean any of the following
(other than the transactions contemplated by this Agreement) involving a
party hereto or any of its subsidiaries: (i) any merger, consolidation, share
exchange, business combination or similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20% or more of
the assets of a party hereto and its subsidiaries, taken as a whole, (iii)
any tender offer or exchange offer for 20% or more of the outstanding shares
of capital stock of a party hereto or the filing of a registration statement
under the Securities Act in connection therewith; (iv) any person (other than
stockholders as of the date of this Agreement) having acquired beneficial
ownership of, or any group (as such term is defined under Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder) having
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the outstanding shares of capital stock of a
party hereto; or (v) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the foregoing.
(h) release any third party from its obligations, or grant any
consent, under any existing standstill provision relating to a Competing
Transaction or otherwise under any confidentiality or other agreement, or
fail to enforce any such agreement in all material respects;
(i) adopt or propose to adopt any amendments to its articles of
incorporation or bylaws, which would alter the terms of its capital stock or
would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(j) (A) change any of its methods of accounting in effect at
September 30, 1997, or (B) make or rescind any express or deemed election
relating to Taxes, settle or compromise any claim, action, suit, litigation,
audit or controversy relating to Taxes (except where the amount of such
settlements or controversies, individually or in the aggregate, does not
exceed $10,000), or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ended
December 31, 1996, except in each case, as may be required by Law or
generally accepted accounting principles;
40
(k) except as set forth in Schedule 5.02(k) of the IN Disclosure
Schedule, incur any obligations for borrowed money or purchase money
indebtedness or guarantee, whether or not evidenced by a note, bond,
debenture or similar instrument, except in the ordinary course of business
consistent with past practice and in no event in excess of $10,000 in the
aggregate;
(l) enter into any material arrangement, agreement or contract
with any third party which provides for an exclusive arrangement with that
third party or is substantially more restrictive on IN or substantially less
advantageous to IN than arrangements, agreements or contracts existing on the
date hereof;
(m) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of IN or any of its subsidiaries;
(n) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, disc harge or satisfaction of any such
claims, liabilities or obligations, (x) reflected on, or reserved against in,
or contemplated by, the IN Balance Sheet (including the notes thereto) of IN
and its subsidiaries, (y) incurred in the ordinary course of business
consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied;
(o) knowingly take, or agree to commit to take, any action that
would make any representation or warranty of IN contained herein inaccurate
in any respect at, or as of any time prior to, the Effective Time;
(p) other than between or among wholly-owned subsidiaries of IN
which remain wholly-owned or between IN and its wholly-owned subsidiaries
which remain wholly-owned or except to the extent described in Schedule
5.02(p) of the IN Disclosure Schedule, neither IN nor any of its subsidiaries
will engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of IN's
affiliates, including, without limitation, any transactions, agreements,
arrangements or understanding with any affiliate or other person covered
under Item 404 of Regulation S-K promulgated under the Securities Act, other
than pursuant to such agreement, arrangements or understandings existing on
the date of this Agreement (which are set forth on Section 5.02(p) of the IN
Disclosure Schedule) or as disclosed in writing to 4Health on the date hereof
or which are contemplated under this Agreement; provided, that IN provides
4Health with all information concerning any such agreement, arrangement or
understanding that 4Health may reasonably request;
(q) except as may be set forth in Schedule 5.02(q) to the IN
Disclosure Schedule, agree to or approve any commitment, including any
authorization for expenditure or agreement to acquire property, obligating IN
for an amount in excess of $10,000;
41
(r) engage in any futures or options trading or be a party to any
price or currency swaps, xxxxxx, futures or derivative instruments; or
(s) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03 AFFIRMATIVE COVENANTS AND CONSENT OF XXXXX. In lieu of a
meeting of stockholders, the Merger, this Agreement and the transactions
contemplated hereby shall be approved upon written consent, without a
meeting, in accordance with the provisions of California Law, and the
execution and delivery of this Agreement by Xxxxx shall constitute his
written consent to the Merger, this Agreement and the consummation of the
transactions contemplated hereby for all purposes required by the applicable
provisions of California Law in order to approve and effectuate the Merger.
Xxxxx hereby irrevocably waives any and all rights to assert any dissenters'
rights granted under the provisions of any Law with respect to the Merger,
this Agreement or the transactions contemplated hereby. IN hereby agrees to
secure similar proxies and written consents from all other IN stockholders,
if any, and deliver them to 4Health prior to the Effective Time in sufficient
time to meet all applicable procedural requirements of California Law
regarding stockholder approval of mergers or other business combinations.
SECTION 5.04. AFFIRMATIVE AND NEGATIVE COVENANTS OF 4HEALTH.
(a) 4Health hereby covenants and agrees that, at or prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by IN, 4Health will:
(i) continue to operate its business in all material
respects in the usual and ordinary course, consistent with past practice;
(ii) use all reasonable efforts to preserve substantially
intact its business organization, maintain its material rights and
franchises, retain the services of its respective officers and 4Health
employees and maintain its relationships with its material c
ustomers and suppliers;
(iii) maintain and keep its material properties and assets
in as good repair and condition as at present, ordinary wear and tear
excepted, and maintain supplies and inventories in quantities consistent with
its customary business practice;
(iv) use all reasonable efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to that
currently maintained;
(v) secure the affirmative votes at a duly convened
shareholders meeting, from shareholders of 4Health owning in excess of fifty
percent (50%) of the issued and
42
outstanding shares of 4Health Common Stock approving the Merger, this
Agreement and the transactions contemplated hereby; and
(vi) take all such steps as are commercially reasonable in
order to consummate the Merger and all other transactions contemplated
hereby, including, without limitation, securing all requisite consents
thereto.
(b) Except as expressly contemplated by this Agreement or
otherwise consented to in writing by 4Health, from the date of this Agreement
until the Effective Time, 4Health will not do any of the foregoing:
(i) except as set forth on in Schedule 5.04(b)(i) to the
4Health Disclosure Schedule, increase the compensation payable to or to
become payable to any director or executive officer; 5.(vii) grant any
severance or termination pay to, or enter into or amend any employment or
severance agreement with, any director, officer or employee; 5.(viii)
establish, adopt or enter into any employee benefit plan or arrangement; or
5.(ix) except as may be required by applicable law, adopt, amend, or take any
other actions with respect to, any 4Health Benefit Plans or any of the plans,
programs, agreements, policies or other arrangements described in Section
4.10(d) of this Agreement;
(ii) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(iii) except as contemplated by this Agreement or as
described in Schedule 4.03(b)(ii) to the 4Health Disclosure Schedule, (i)
redeem, purchase or otherwise acquire any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of
its capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its or any such securities or obligations (except in
connection with the exercise of outstanding stock options in accordance with
their terms); (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock;
(iv) except as described in Schedule 4.03(b)(i) to the
4Health Disclosure Schedule or as contemplated by this Agreement, (i) issue,
deliver, award, grant or sell, or authorize or propose the issuance,
delivery, award, grant or sale (including the grant of any security
interests, liens, claims, pledges, limitations in voting rights, charges or
other encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares, or any rights, warrants or
options to acquire any such shares (except as permitted pursuant to Sections
2.01(a) and 2.01(b) of this Agreement or for the issuance of shares upon the
exercise of outstanding stock options or the vesting of restricted stock in
accordance with the terms of outstanding 4Health Stock Awards); (ii) amend or
otherwise modify the terms of any such rights, warrants or options
43
the effect of which shall be to make such terms more favorable to the holders
thereof; or (iii) take any action to accelerate the exercisability of stock
options;
(v) acquire or agree to acquire, by merging or
consolidating with, by purchasing any equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof,
or otherwise acquire or agree to acquire any assets of any other person
(other than pursuant to this Agreement or for the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with
past practice);
(vi) except as discussed in Schedule 5.04(b)(vi) to the
4Health Disclosure Schedule, sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of its material
assets, except for the sale of inventory or other dispositions in the
ordinary course;
(vii) initiate, solicit or encourage (including by way of
furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or that
may reasonably be expected to lead to, any Competing Transaction, or enter
into discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to or endorse
any Competing Transaction, or authorize or permit any of the officers,
directors or employees of 4Health or any investment banker, financial
advisor, attorney, accountant or other representative retained by 4Health to
take any such action, and 4Health shall promptly notify IN of all relevant
terms of any such inquiries and proposals received by 4Health or any of its
subsidiaries or by any such officer, director, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters and if such inquiry or proposal is in writing, 4Health shall promptly
deliver or cause to be delivered to IN a copy of such inquiry or proposal;
(viii) release any third party from its obligations, or
grant any consent, under any existing standstill provision relating to a
Competing Transaction or otherwise under any confidentiality or other
agreement, or fail to enforce any such agreement in all material respects;
(ix) adopt or propose to adopt any amendments to its
articles of incorporation or bylaws, which would alter the terms of its
capital stock or would have an adverse impact on the consummation of the
transactions contemplated by this Agreement;
(x) (A) change any of its methods of accounting in effect at
September 30, 1997, or (B) make or rescind any express or deemed election
relating to Taxes, settle or compromise any claim, action, suit, litigation,
audit or controversy relating to Taxes (except where the amount of such
settlements or controversies, individually or in the aggregate, does not
exceed $10,000), or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for
44
the taxable year ended December 31, 1996, except in each case, as may be
required by Law or generally accepted accounting principles;
(xi) except as set forth in Schedule 5.04(b)(xi) of the
4Health Disclosure Schedule, incur any obligations for borrowed money or
purchase money indebtedness or guarantee, whether or not evidenced by a note,
bond, debenture or similar instrument, except in the ordinary course of
business consistent with past practice and in no event in excess of $10,000
in the aggregate;
(xii) enter into any material arrangement, agreement or
contract with any third party which provides for an exclusive arrangement
with that third party or is substantially more restrictive on 4Health or
substantially less advantageous to 4Health than arrangements, agreements or
contracts existing on the date hereof;
(xiii) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
material reorganization of 4Health;
(xiv) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations, (x) reflected on, or reserved against in,
or contemplated by, the 4Health Balance Sheet (including the notes thereto)
(y) incurred in the ordinary course of business consistent with past practice
or (z) which are legally required to be paid, discharged or satisfied;
(xv) knowingly take, or agree to commit to take, any action
that would make any representation or warranty of 4Health contained herein
inaccurate in any respect at, or as of any time prior to, the Effective Time;
(xvi) except to the extent described in Schedule
5.04(b)(xvi) of the 4Health Disclosure Schedule, 4Health will not engage in
any transaction with, or enter into any agreement, arrangement, or
understanding with, directly or indirectly, any of 4Health's affiliates,
including, without limitation, any transactions, agreements, arrangements or
understanding with any affiliate or other person covered under Item 404 of
Regulation S-K promulgated under the Securities Act, other than pursuant to
such agreement, arrangements or understandings existing on the date of this
Agreement (which are set forth on Schedule 5.03(b)(xvi) of the 4Health
Disclosure Schedule) or as disclosed in writing to IN on the date hereof or
which are contemplated under this Agreement; provided, that 4Health provides
IN with all information concerning any such agreement, arrangement or
understanding that IN may reasonably request;
(xvii) except as may be set forth in Schedule 5.04
(b)(xvii) to the 4Health Disclosure Schedule, agree to or approve any
commitment, including any authorization
45
fee, expenditure or agreement to acquire property, obligating 4Health for an
amount in excess of $10,000;
(xviii) engage in any futures or options trading or be a
party to any price or currency swaps, xxxxxx, futures or derivative
instruments; or
(xix) agree in writing or otherwise to do any of the
foregoing.
SECTION 5.05. ACCESS AND INFORMATION.
(a) IN shall, and shall cause its subsidiaries to, (i) afford
4Health and its officers, directors, employees, accountants, consultants,
legal counsel, agents and other representatives (collectively, the "4Health
Representatives") reasonable access at reasonable times, upon reasonable
prior notice, to the officers, employees, agents, properties, offices and
other facilities of IN and its subsidiaries and to the books and records
thereof and (ii) furnish promptly to 4Health and the 4Health Representatives
such information concerning the business, pro perties, contracts, records and
personnel of IN and its subsidiaries (including, without limitation,
financial, operating and other data and information) as may be reasonably
requested, from time to time, by 4Health or such Representatives.
(b) 4Health shall (i) afford to IN and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "IN Representatives") reasonable access at
reasonable times, upon reasonable prior notice, to the officers, employees,
accountants, agents, properties, offices and other facilities of 4Health and
to its books and records and (ii) furnish promptly to IN and IN
Representatives such information concerning the business, properties,
contracts, records and personnel of 4Health (including, without limitation,
financial, operating and other data and information) as may be reasonably
requested, from time to time, by IN or such Representatives.
(c) Notwithstanding the foregoing provisions of this Section 5.05,
neither party shall be required to grant access or furnish information to the
other party to the extent that such access to or the furnishing of such
information is prohibited by Law. No investigation by the parties hereto
made heretofore or hereafter shall affect the representations and warranties
of the parties which are herein contained and each such representation and
warranty shall survive such investigation.
(d) The information received pursuant to Section 5.05(a) and (b)
shall be deemed to be "Proprietary Information" for purposes of those certain
Letter Agreements dated October 16, 1997 and December 5, 1997, between IN and
4Health (collectively, the "Letter Agreements"), the provisions of which
shall survive the execution, delivery and termination of this Agreement.
46
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDER APPROVALS.
(a) IN and 4Health each shall, promptly after the date hereof,
take all actions necessary in accordance with California and Utah Laws,
respectively, and their respective articles of incorporation and bylaws to
convene a special meeting of stockholders or, in IN's case, to solicit
written consents of stockholders, to act on this Agreement. IN and 4Health
shall solicit from stockholders of IN and 4Health, respectively, proxies or,
in IN's case written consents, in favor of the approval and adoption of this
Agreement and to secure the vote of stockholders required by California and
Utah Laws and their respective articles of incorporation and bylaws to
approve and adopt this Agreement, the Merger and the consummation of the
transactions contemplated hereby.
(b) 4Health shall, promptly after the date hereof, prepare a proxy
statement and proxy (the "Proxy Materials") and file them with the Commission
and comply with the requirements of Regulation 14A under the Exchange Act.
IN will cooperate with 4Health in connection with the preparation of the
Proxy Materials and will furnish 4Health for insertion in the Proxy Materials
all such information regarding IN and its subsidiaries and their respective
businesses and financial condition as is required to be contained in the
Proxy Materials under the provisions of Regulation 14A and the rules
promulgated thereunder. Promptly upon clearance of the Proxy Materials by
the Staff of the Commission, 4Health shall mail or cause to be mailed to
4Health's stockholders, the Proxy Materials, including a notice of special
meeting of stockholders, and take all actions necessary in accordance with
Utah Law and its articles of incorporation and bylaws to convene a special
meeting of 4Health's stockholders to act on this Agreement and the
transactions contemplated hereby.
SECTION 6.02. REGISTRATION STATEMENT; INFORMATION.
(a) As promptly as practicable after the receipt of a written
demand from Xxxxx (provided he continues to hold beneficially at least 10% of
the issued and outstanding shares of Common Stock and such shares are not
freely transferable under Rule 144 without any discount in price due to the
volume or other limitations imposed by such Rule), 4Health shall prepare and
file with the Commission a registration statement on Form X-0, X-0 or S-3
(the "Registration Statement") registering the shares of 4Health Common Stock
issued in connection with the Merger. 4Health shall use its best efforts to
cause such Registration Statement to be declared effective by the Commission
as promptly as practicable and shall furnish each holder of 4Health Common
Stock whose shares are being registered (a "Selling Stockholder") with a
reasonable number of copies of the prospectus included in such Registration
Statement for use in connection with any sales of its Stock as soon as
practicable after such Registration Statement is declared effective by the
Commission. 4Health agrees to bear all of the costs associated with the
47
preparation and filing of such Registration Statement, including all filing
fees, legal, accounting and printing costs but shall not be required to pay
the legal or accounting costs or underwriting fees and expenses, if any,
incurred by any Selling Stockholder. If such Registration Statement is on
Form S-1 or S-2, 4Health shall prepare and file with the Commission all
Post-Effective Amendments necessary to keep such Registration Statement
current for the period ending on the earlier of (i) the sale of all the
shares of 4Health Common Stock included in such Registration Statement or
(ii) the second anniversary of the Effective Time. The inclusion of any such
shares of 4Health Common Stock in such Registration Statement shall be
contingent upon the receipt from the Selling Stockholder all such information
required to be disclosed in a registration statement under the Securities Act
by selling stockholders pursuant to applicable rules and regulations
promulgated by the Commission. In the event that such shares of 4Health
Common Stock are to be included in an underwritten offering by 4Health, the
amount of shares that may be included in such offering shall be subject to a
pro rata reduction if, in the opinion of the managing underwriter, such
reduction is advisable in order to permit an orderly distribution, but not
below 25% of the total number of shares comprising such underwritten
offering. Xxxxx shall be entitled to make no more than three such demands
for registration, provided that all of the shares sought to be registered
under the first such demand were not sold as provided in such Registration
Statement within the time provided therefor. At Xxxxx'x election any
Prospectus to be included in any such Registration Statement shall contain
the disclosure set forth in Schedule 6.02(a) attached hereto.
(b) 4Health hereby represents and warrants to IN and Xxxxx that
the information contained in the Registration Statement, the Proxy Materials
(other than information to be furnished by IN or the Selling Stockholders)
shall not, at the time the Registration Statement is declared effective by
the Commission and the Proxy Materials are mailed to 4Health stockholders
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that 4Health is responsible for filing with
the Commission in connection with the transactions contemplated herein shall
comply as to form in all material respects with the applicable requirements
of the Securities Act and the rules and regulations thereunder and the
Exchange Act and the rules and regulations thereunder.
(c) IN and Xxxxx jointly and severally represent and warrant to
4Health that the information to be supplied by IN and Xxxxx for inclusion in
the definitive Proxy Materials, at the time the Proxy Materials are mailed to
4Health stockholders and by Xxxxx for inclusion in the Registration
Statement, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) 4Health agrees to indemnify and hold harmless, to the full
extent permitted by law, IN, its officers, directors, stockholders
(including, without limitation, Xxxxx), employees, agents, attorneys,
investment advisers and underwriters, and each Person who controls IN within
48
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by, IN,
together with the partners, officers, directors, stockholders, employees and
agents of such controlling Person (collectively, the "Indemnified Persons"),
from and against all losses, claims, damages, liabilities and expenses
(including without limitation any legal or other fees and expenses incurred
by an Indemnified Person in connection with defending or investigating any
action or claim in respect thereof) (collectively, the "Damages") to which an
Indemnified Person may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such Damages (or proceedings in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement of
material fact contained in any Registration Statement (or any amendment
thereto) including, without limitation, any Prospectus or Supplement thereto
contained therein, pursuant to which any 4Health Common Stock issued in the
Merger was registered under the Securities Act, or in any Proxy Materials
furnished to 4Health stockholders in connection herewith and any supplements
or amendments thereto, including all documents incorporated therein by
reference, or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as
such Damages arise out of or are based upon any such untrue statement or
omission based upon information furnished in writing to 4Health by the
Indemnified Person expressly for use therein; PROVIDED, HOWEVER, that 4Health
shall not be liable to the Indemnified Person under this Section 6.02(d) to
the extent that any such Damages were caused by the fact that the Indemnified
Person sold 4Health Common Stock to a person as to whom it shall be
established that there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus as then amended or
supplemented if, and only if, 4Health has previously furnished copies of such
amended or supplemented Prospectus to such Indemnified Person.
(e) IN and Xxxxx, jointly and severally, agree to indemnify and
hold harmless 4Health, its directors, officers, stockholders, agents,
attorneys and investment advisers and each person, if any, who controls
4Health within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from 4Health to the Indemnified Persons, but only with reference to
information relating to the Indemnified Persons furnished to 4Health in
writing by any Indemnified Person expressly for use in any Registration
Statement, Prospectus or Proxy Materials (or any amendment or supplement
thereto); PROVIDED, HOWEVER, that the Indemnified Persons shall not be
obligated to provide such indemnity to the extent that such Damages result
from the failure of 4Health to promptly amend or take action to correct or
supplement any such Registration Statement, Prospectus, or Proxy Materials on
the basis of corrected or supplemental information provided in writing by the
Indemnified Person to 4Health expressly for such purpose.
(f) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (d) or (e) above, such
person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the " indemnifying party") in writing and
the
49
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceedings and shall pay the fees and disbursements of such counsel relating
to such proceeding. In any such proceeding, any indemnified party shall have
the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel, or (ii) the indemnifying party fails promptly
to assume the defense of such proceeding or fails to employ counsel
reasonably satisfactory to such indemnified party or parties, or (iii) (A)
the named parties to any such proceeding (including any impleaded parties)
include both such indemnified party or parties and any indemnifying party or
an affiliate of such indemnified party or parties or of any indemnifying
party, (B) there may be one or more defenses available to such indemnified
party or parties or such affiliate of such indemnified party or parties that
are different from or additional to those available to any indemnifying party
or such affiliate of any indemnifying party and (C) such indemnified party or
parties shall have been advised by such counsel that there may exist a
conflict of interest between or among such indemnified party or parties or
such Affiliate of such indemnified party or parties and any indemnifying
party or such affiliate of any indemnifying party, in which case, if such
indemnified party or parties notifies the indemnifying party or parties in
writing that it elects to employ separate counsel of its choice at the
expense of the indemnifying parties, the indemnifying parties shall not have
the right to assume the defense thereof and such counsel shall be at the
expense of the indemnifying parties, it being understood, however, that
unless there exists a conflict among indemnified parties, the indemnifying
parties shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for such indemnified party or
parties. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party or parties from and against
any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is a party, and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
SECTION 6.03 APPROPRIATE ACTION; CONSENTS; FILINGS; INDEMNIFICATION.
(a) IN and 4Health shall each use, and IN shall cause each of its
subsidiaries to use, all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the transactions contemplated by this
Agreement, (ii) obtain from any Governmental Entities any consents, licenses,
permits, waivers, approvals, authorizations or
50
orders requir ed to be obtained or made by 4Health or IN or any of its
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the Merger, (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act and the
Exchange Act and the rules and regulations thereunder, and any other
applicable federal or state securities laws, and (B) any other applicable
Law; provided that 4Health and IN shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the nonfiling party and its advisors prior to such
filings and, if requested, shall accept all reasonable additions, deletions
or changes suggested in connection therewith. IN and 4Health shall furnish
all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law (including,
without limitation, all information required to be included in the
Registration Statement and the Proxy Materials) in connection with the
transactions contemplated by this Agreement.
(b) 4Health and IN agree to cooperate with respect to, and shall
cause each of their respective subsidiaries to cooperate with respect to, and
agree to use all reasonable efforts vigorously to contest and resist, any
action, including legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") of any
Governmental Entity that is in effect and that restricts, prevents or
prohibits the consummation of the Merger or any other transactions
contemplated by this Agreement, including, without limit ation, by
vigorously pursuing all available avenues of administrative and judicial
appeal and all available legislative action. Each of 4Health and IN also
agree to take any and all actions, including, without limitation, the
disposition of assets or the withdrawal from doing business in particular
jurisdictions, required by regulatory authorities as a condition to the
granting of any approvals required in order to permit the consummation of the
Merger or as may be required to avoid, lift, vacate or reverse any
legislative or judicial action which would otherwise cause any condition to
Closing not to be satisfied; provided, however, that in no event shall
4Health be required to take any action that would or could reasonably be
expected to have a 4Health Material Adverse Effect, and IN shall not be
required to take any action which would or could reasonably be expected to
have an IN Material Adverse Effect.
(c) (i) Each of IN and 4Health shall give (or IN shall cause
its subsidiaries to give) any notices to third parties, and use, and cause
their respective subsidiaries to use, all reasonable efforts to obtain any
third party consents (A) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, (B) otherwise required under any
contracts, licenses, leases or other agreements in connection with the
consummation of the transactions contemplated hereby or (C) required to
prevent an IN Material Adverse Effect from occurring prior to the Effective
Time or a 4Health Material Adverse Effect from occurring after the Effective
Time.
51
(ii) In the event that any party shall fail to obtain any
third party consent described in subsection (c)(i) above, such party shall
use all reasonable efforts, and shall take any such actions reasonably
requested by the other party, to limit the adverse effect upon 4Health and IN
and its subsidiaries, and their respective businesses resulting or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
(d) Each of 4Health and IN shall promptly notify the other of (w)
any material change in its current or future business, assets, liabilities,
financial condition or results of operations, (x) any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any Governmental Entities with respect to its business or
the transactions contemplated hereby, (y) the institution or the threat of
material litigation involving it or any of its subsidiaries or (z) any event
or condition that might reasonably be expected to cause any of its
representations, warranties, covenants or agreements set forth herein not to
be true and correct at the Effective Time. As used in the preceding
sentence, "material litigation" means any case, arbitration or adversary
proceeding or other matter which would have been required to be disclosed on
the IN Disclosure Schedule pursuant to Section 3.09 or the 4Health Disclosure
Schedule pursuant to Section 4.09, as the case may be, if in existence on the
date hereof, or in respect of which the legal fees and other costs (i) to IN
(or its subsidiaries) might reasonably be expected to exceed $10,000 over the
life of the matter or (ii) to 4Health (or its subsidiaries) might reasonably
be expected to exceed $10,000 over the life of the matter.
(e) (i) In the event of any threatened, pending or completed
claim, action, suit, investigation or any legal, administrative or other
proceeding ("proceeding") by any governmental entity or other person which
questions the validity or legality of the transactions contemplated by this
Agreement or seeks to enjoin, restrain or prohibit such transactions, or
seeks damages in connection therewith, whether before or after the Effective
Time of the Merger, 4Health and IN agree, to the fullest extent permissible
by law, to vigorously defend and respond thereto.
(ii) 4Health as the Surviving Corporation agrees (1) not
to change for seven (7) years from the Effective Time, the provisions of its
articles of incorporation and bylaws or applicable indemnification agreements
in effect on the Effective Time in each case relating to indemnification of
each existing officer and director (and their respective successors) of
4Health and the Surviving Corporation (together, with any successor by
operation of law, referred to in this Section as, individually, an
"Indemnified Party" and collectively, "Indemnified Parties") in a manner
which adversely affects the rights of such Indemnified Party to
indemnification thereunder, and (ii) to perform its obligations thereunder,
or exercise any discretionary authority thereunder, to the fullest extent
permissible by law to provide such Indemnified Party with all rights to
indemnification available thereunder. Notwithstanding the foregoing, nothing
in this Agreement shall constitute a waiver of, or otherwise operate to
adversely affect, the existing rights of the Indemnified Parties under the
articles or bylaws of 4Health or IN in effect on the date hereof and the
indemnification agreements relating to the indemnification of any Indemnified
Party.
52
(iii) 4Health agrees that, for seven (7) years after the
Effective Time, 4Health shall maintain officers' and directors' liability
insurance policies indemnifying and holding harmless the Indemnified Parties
with respect to any actions or omissions occurring prior to the Effective
Time, providing at least $10,000,000 insurance coverage on terms no less
advantageous to the Indemnified Parties than 4Health's existing policy;
provided that in the event any claim is asserted or made within such seven
year period, coverage under such insurance shall be continued in respect
thereof until final disposition of such claim.
(iv) In the event the foregoing indemnities or insurance
policies referred to in clauses (ii) and (iii) above become unavailable or
unenforceable for any reason, 4Health agrees to indemnify and hold harmless
the Indemnified Parties to the same extent as if such indemnities and
insurance were available and in full force and effect.
(v) The provisions of this Section 6.03(e) shall survive
the consummation of the transactions contemplated hereby.
SECTION 6.04. TAX AND ACCOUNTING TREATMENT. Each party hereto shall
use all reasonable efforts to cause the Merger to qualify, and shall not
take, and shall use all reasonable efforts to prevent any affiliate of such
party from taking, any actions that could prevent the Merger from qualifying,
as a reorganization under the provisions of section 368(a) of the Code or
from qualifying for the "pooling of interests" method of accounting as
provided in APB 16.
SECTION 6.05. PUBLIC ANNOUNCEMENTS. Neither party shall issue any
press release or otherwise make any public statements with respect to the
Merger without the approval of the other.
SECTION 6.06. NSM LISTING. Each party hereto shall use all reasonable
efforts to cause the shares of 4Health Common Stock to be issued in the
Merger to be approved for listing (subject to official notice of issuance) on
the NSM or other national sec urities exchange prior to the Effective Time.
SECTION 6.07. STOCK RESALE AGREEMENT. IN agrees to deliver, on or prior
to the Effective Time, the agreement, in substantially the form of Exhibit C
attached hereto, of Xxxxxxxxxx Xxxxx not to effect any sales of the 4Health
Common Stock except in compliance with Rule 144 and upon her shares becoming
registered under the Securities Act not in excess of the volume limitations
specified in Rule 145(d) promulgated under the Securities Act. Thereafter,
affiliates of the IN will continue to be subject to the requirements of Rule
145 and Rule 144 as provided therein.
53
SECTION 6.08. NO INTERFERENCE. Pending the Closing, neither party
shall take any action which would unreasonably be expected to interfere with
the business or operations of the other.
SECTION 6.09. FORM D FILING. At or immediately after the Closing,
4Health shall file with the Commission an appropriately completed, dated and
executed Form D reflecting the issuance of the Merger Consideration.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions, any
or all of which may be waived in writing by the parties hereto, in whole or
in part, to the extent permitted by applicable Law:
(a) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect
and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(b) SECURITIES LAWS. The Proxy Materials shall have been cleared
by the Staff of the Commission for mailing to 4Health stockholders.
(c) STOCKHOLDER APPROVAL. The Merger, this Agreement and the
consummation of the transactions contemplated hereby shall have been approved
and adopted upon written consent or by the requisite vote of the stockholders
of IN and 4Health, respectively.
(d) GOVERNMENTAL APPROVALS. All approvals, waivers and/or
consents required to be issued by any Governmental Entity or otherwise
respecting the Merger, this Agreement and the consummations of the
transactions contemplated hereby shall have been timely obtained.
(e) PROMISSORY NOTES. 4Health shall have executed and delivered
three substantially identical promissory notes each in the principal amount
of $210,000 and each substantially in the form of Exhibit D hereto payable to
the respective or der of Messrs. Xxxxxxx Xxx, Xxx Xxxxxx and Xxx Xxxxxx.
54
(f) INDEMNITY AGREEMENTS. The officers and directors of 4Health
who shall be in office immediately after the Closing shall each receive an
Indemnity Agreement executed and delivered by 4Health and dated the Closing
Date, each in substantially the form of Exhibit E.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF 4HEALTH. The
obligations of 4Health to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in writing by 4Health, in whole or in part, to the extent permitted by
applicable law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of IN and Xxxxx contained in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties specifically relate
to an earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date). 4Health shall have received a
certificate of the President and the Chief Financial Officer of IN and Xxxxx,
dated the Closing Date, to such effect.
(b) AGREEMENTS AND COVENANTS. IN and Xxxxx shall have performed
or complied with all agreements and covenants required by this Agreement to
be performed or complied with by it on or prior to the Closing Date,
including, without limitation, the receipt of the approval and adoption by
the requisite vote of the IN stockholders of the Merger, this Agreement and
the consummation of the transactions contemplated thereby. 4Health shall
have received a certificate of the President and the Chief Financial Officer
of IN and Xxxxx, dated the Closing Date, to such
effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the current or
future business, assets, liabilities, financial condition or results of
operations of IN or any of its subsidiaries having or reasonably likely to
have, individually or in the aggregate, an IN Material Adverse Effect.
4Health shall have received a certificate of the President and the Chief
Financial Officer of IN, dated the Closing Date, to such effect.
(d) ABSENCE OF REGULATORY CONDITIONS. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, by any Governmental Entity in
connection with the grant of a regulatory approval necessary, in the
reasonable business judgment of 4Health, to the continuing operation of the
current or future business of IN, which imposes any condition or restriction
upon 4Health or the business or operations of IN which, in the reasonable
business judgment of 4Health, would be materially burdensome in the context
of the transactions contemplated by this Agreement.
(e) IN COUNSEL'S OPINION. 4Health shall have received from Gay X.
Xxxxxx, Esq., counsel to IN, a favorable opinion dated the Closing Date in
form and substance reasonably satisfactory to 4Health and its counsel.
55
(f) WITHHOLDING. IN must not have determined to withhold any
amount from the Merger Consideration pursuant to the tax withholding
provisions of section 3406 of the Code, or of Subchapter A of Chapter 3 of
the Code, or of any other provision of law.
(g) COMFORT LETTER. 4Health shall have received a letter from
Xxxxxx Xxxxxxxx LLP, dated as of a date within five days of the Closing Date
and in a form reasonably satisfactory to 4Health, stating that they are
independent public accountants, within the meaning of the Securities Act and
the rules and regulations thereunder and that on the basis of a reading of
the financial statements prepared by IN and inquiries of officers of IN
responsible for financial and accounting matters and such other procedures
and inquiries as may be specified in such letter, nothing has come to their
attention which gives them reason to believe that (i) the financial
statements furnished to 4Health in connection herewith were not prepared in
accordance with generally accepted accounting principles and practices
applied on a consistent basis, (ii) during the period from September 30, 1997
to a specified date not more than five days prior to the Closing Date, there
was any change in the capital stock or increase in the indebtedness for
borrowed money of IN, and (iii) the Merger should not qualify for the
"pooling of interests" method of accounting as provided in APB 16.
(h) DISSENTERS' RIGHTS. No dissenters' rights have been asserted
by any IN stockholders.
(i) IN FINANCIAL STATEMENTS AND BALANCE SHEET. IN shall have
furnished 4Health with the IN Financial Statements and IN Balance Sheet, each
certified by IN's independent auditors, and the IN Disclosure Schedule at
least 10 days prior to the Closing Date which shall be reasonably
satisfactory in form and substance to 4Health.
(j) EMPLOYMENT AGREEMENT. 4Health shall have executed and
delivered to R. Xxxxxxx Xxxxxx at the Closing an Employment Agreement, dated
the Closing Date, in substantially the form of Exhibit F.
(k) NSM LISTING. The shares of Common Stock issued in the Merger
shall have been listed for trading on the NSM.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF IN. The
obligations of IN to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in writing by IN, in whole or in part, to the extent permitted by applicable
law:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of 4Health contained in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties specifically relate
to an earlier date, in which case such representations and warranties
56
shall be true and correct as of such earlier date). IN shall have received a
certificate of the President and the Chief Financial Officer of 4Health,
dated the Closing Date, to such effect.
(b) AGREEMENTS AND COVENANTS. 4Health shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. IN shall
have received a certificate of the President and the Chief Financial Officer
of 4Health, dated the Closing Date, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no change, occurrence or circumstance in the current or
future business, assets, liabilities, financial condition or results of
operations of 4Health or any of its subsidiaries having or reasonably likely
to have, individually or in the aggregate, a 4Health Material Adverse Effect.
IN shall have received a certificate of the President and the Chief
Financial Officer of 4Health, dated the Closing Date, to such effect.
(d) ABSENCE OF REGULATORY CONDITIONS. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, by any Governmental Entity in
connection with the grant of a regulatory approval necessary, in the
reasonable business judgment of IN, to the continuing operation of the
current or future business of 4Health, which imposes any condition or
restriction upon IN or the business or operations of 4Health which, in the
reasonable business judgment of IN, would be materially burdensome in the
context of the transactions contemplated by this Agreement.
(e) SSB&B OPINION. IN shall have received from Messrs. Xxxxxxxxx
Xxxxxxxx Xxxxx & Xxxxx LLP, counsel to 4Health, a favorable opinion dated the
Closing Date, in form and substance reasonably satisfactory to IN and its
counsel. In rendering their opinion, Messrs. Xxxxxxxxx Xxxxxxxx Xxxxx &
Xxxxx LLP shall be entitled to rely on the o pinion of Utah counsel as to
matters involving Utah Law.
(f) COMFORT LETTER. IN shall have received a letter from Xxxxxx
Xxxxxxxx LLP, dated as of a date within five days of the Closing Date and in
a form reasonably satisfactory to IN. stating that they are independent
public accountants, within the meaning of the Securities Act and the rules
and regulations thereunder, and that on the basis of a reading of the
unaudited interim financial statements prepared by 4Health and inquiries of
officers of 4Health responsible for financial and accounting matters and such
other procedures and inquiries as may be specified in such letter, nothing
has come to their attention which gives them reason to believe that (i) the
unaudited financial statements included in 4Health's Quarterly Report on Form
10-Q for the third quarter ended September 30, 1997 were not prepared in
accordance with the related requirements under the Securities Act or Exchange
Act and generally accepted accounting principles and practices applied on a
basis substantially consistent with those followed in the preparation of the
audited financial statements included in 4Health's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and (ii) except as may have been
disclosed in the 4Health Disclosure Schedule, during the period from
September 30, 1997 to a specified date not more
57
than five days prior to the Closing Date, there was any change in the capital
stock or incr ease in the indebtedness for borrowed money of 4Health.
(g) 4HEALTH DISCLOSURE SCHEDULE. 4Health shall have furnished IN
with the 4Health Disclosure Schedule which shall be reasonably satisfactory
in form and substance to IN.
(h) EMPLOYMENT AGREEMENT. 4Health shall have executed and
delivered to Xxxx Xxxxx at the Closing an Employment Agreement, dated the
Closing Date, in substantially the form of Exhibit G.
(i) NSM LISTING. The shares of Common Stock issued in the Merger
shall have been listed for trading on the NSM.
(j) RESIGNATIONS. 4Health shall have received the resignations of
Xxxxxx Xxxxxxx, Xxxxxx X. Xxxxxxx and Xxxxxxxx Xxxxxxxx as directors of
4Health, effective on or prior to the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of this
Agreement and the Merger by the stockholders of IN and 4Health:
(a) by mutual consent of 4Health and IN;
(b) by 4Health, upon a material breach of any representation,
warranty, covenant or agreement on the part of IN set forth in this
Agreement, or if any representation or warranty of IN shall have become
untrue, in either case such that the conditions set forth in Section 7.02(a)
or Section 7.02(b) of this Agreement, as the case may be, would be incapable
of being satisfied by February 15, 1998 (or as otherwise extended as
described in Section 8.01(e)); provided, that in any case, a willful breach
shall be deemed to cause such condition as to be incapable of being
satisfied for purposes of this Section 8.01(b);
(c) by IN, upon a material breach of any representation, warranty,
covenant or agreement on the part of 4Health set forth in this Agreement, or
if any representation or warranty of 4Health shall have become untrue, in
either case such that the conditions set forth in Section 7.03, (a) or
Section 7.03(b) of this Agreement, as the case may be, would be incapable of
being satisfied by February 15, 1998 (or as otherwise extended as described
in Section 8.01(e)); provided, that in any case, a willful breach shall be
deemed to cause such conditions to be incapable of being satisfied for
purposes of Section 8.01(c);
58
(d) by either 4Health or IN, if there shall be any Order which is
final and nonappealable preventing the consummation of the Merger, except if
the party relying on such Order to terminate this Agreement has not complied
with its obligations under Section 6.03(b) of this Agreement; or
(e) by either 4Health or IN, if the Merger shall not have been
consummated before February 15, 1998; provided, however, that this Agreement
may be extended by written notice of either 4Health or IN to a date not later
than March 6, 1998, if the Merger shall not have been consummated as a direct
result of IN or 4Health having failed by February 15, 1998 to receive all
required regulatory approvals or consents with respect to the Merger;
(f) by 4Health or IN, if this Agreement and the Merger shall fail
to be approved and adopted by the requisite numbers of stockholders of IN and
4Health in accordance with California and Utah Laws and the requirements of
the NSM or NASD.
The right of any party hereto to terminate this Agreement pursuant
to this Section 8.01 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person contr olling any such party or any of their respective officers,
directors, repre sentatives or agents, whether prior to or after the
execution of this Agreement.
SECTION 8.02. EFFECT OF TERMINATION. Except as provided in Section
8.05 or Section 9.01 of this Agreement, in the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, there shall be no liability on the part of 4Health or IN to the
other and all rights and obligations of any party hereto shall cease, except
that nothing herein shall relieve any party of any liability for (i) any
material breach of such party's covenants or agreements contained in this
Agreement, or (ii) any willful breach of such party's representations or
warranties contained in this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto at any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the stockholders of IN and 4Health, (i) no
amendment, which under paplicable Law may not be made without the approval of
the stockholders of IN or 4Health, may be made without such approval, and
(ii) no amendment, which under the applicable rules of the NSM or NASD, may
not be made without the approval of the stockholders of IN or 4Health, may be
made without such approval. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any such extension or
59
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
SECTION 8.05. FEES, EXPENSES AND OTHER PAYMENTS.
(a) Except as provided in Section 8.05(c) of this Agreement, in
the event the Merger is not consummated all Expenses (as defined in paragraph
(b) of this Section 8.05) incurred by the parties hereto shall be borne
solely and entirely by the party that has incurred such Expenses; PROVIDED,
HOWEVER, in the event the Merger is consummated, all Expenses incurred in
connection with the Merger and the trans actions contemplated thereby will
be paid by 4Health.
(b) "Expenses" as used in this Agreement shall include all
out-of-pocket expenses (including, without limitation, all fees and expenses
of counsel, accountants, investment ba nkers, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the solicitation of stockholder
approvals and all other matters related to the consummation of the
transactions contemplated hereby.
(c) IN agrees that if this Agreement is terminated pursuant to:
(i) Section 8.01(b) and such termination is the result of a
willful breach of any representation, warranty, covenant or agreement of IN
contained herein; or
(ii) Section 8.01(f) and such termination is the result of the
failure of IN to secure the requisite stockholder consent to the Merger and
this Agreement; then IN shall pay to 4Health as liquidated damages an amount
equal to $200,000, which amount is inclusive of all of 4Health's Expenses.
(d) 4Health agrees that if this Agreement is terminated pursuant
to Section 8.01(c) and s uch termination is the result of a willful breach of
any representation, warranty, covenant or agreement of 4Health contained
herein; then 4Health shall pay to IN as liquidated damages an amount equal to
$200,000, which amount is inclusive of all of IN's Expenses.
(e) Any payment required to be made pursuant to Section 8.05(c) or
Section 8.05(d) of this Agreement shall be made as promptly as practicable
but not later than three business days after termination of this Agreement,
and shall be made by wire transfer of immediately available funds to an
account designated by IN or 4Health, as the case may be.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth in Section 9.01(b) of this Agreement, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any other party hereto, any person controlling any such
party or any of their officers, directors, representatives or agents, whether
prior to or after the execution of this Agreement.
(b) The representations, warranties and agreements in this
Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Article VIII, except that the agreements set forth
in Articles I and II and V and Sections 3.23, 6.02, 6.04 and 6.07 shall
survive the Effective Time and those set forth in Sections 5.05(d), 8.02 and
8.05 and Article IX hereof shall survive termination.
SECTION 9.02. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given upon receipt, if delivered personally or by air courier, or mailed
by registered or certified mail (postage prepaid, return receipt requested),
to the parties at the following addresses (or at such other address for a
party as shall be specified by like changes of address) or sent by facsimile
transmission to the telecopier number specified below (to be followed
promptly by personal or air courier delivery or mailing as hereinafter
provided):
(a) If to 4Health, to:
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: R. Xxxxxxx Xxxxxx, President
Facsimile Number: (000) 000-0000
with copy to: Xxxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
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(b) If to IN or Xxxxx, to:
00000 X. Xxxxxxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Attn: Mr. Xxxx Xxxxx
Facsimile Number: (000) 000-0000
with copy to: Law Offices of Gay X. Xxxxxx
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Gay X. Xxxxxx, Esq.
Facsimile Number: (000) 000-0000
SECTION 9.03. CERTAIN DEFINITIONS. For the purposes of this Agreement,
the term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) a person shall be deemed a "beneficial owner" of or to have
"beneficial ownership" of IN Common Stock or 4Health Common Stock, as the
case may be, in accordance with the interpretation of the term "beneficial
ownership" as defined in Rule 13d-3 under the Exchange Act, as in effect on
the date hereof; provided that a person shall be deemed to be the beneficial
owner of, and to have beneficial ownership of, IN Common Stock or 4Health
Common Stock, as the case may be, that such person or any affiliate of such
person has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise.
(c) "business day" means any day other than a day on which banks
in the State of Colorado and/or the State of California are authorized or
obligated to be closed;
(d) "control" (including the terms "controlled," "controlled by"
and "under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management or policies of a person, whether through the ownership of
stock or as trustee or executor, by contract or credit arrangement or
otherwise;
(e) "knowledge" or "known" shall mean, with respect to any matter
in question, if an executive officer of IN or 4Health, as the case may be,
has actual knowledge of such matter;
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(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act);
(g) "Significant Subsidiary" means any subsidiary of person that
would constitute a Significant Subsidiary of such party within the meaning of
Rule 1-02 of Regulation S-X of the SEC; and
(h) "subsidiary" or "subsidiaries" of IN, 4Health, or any other
person, means any corporation, partnership, joint venture or other legal
entity of which IN, 4Health or any such other person, as the case may be
(either alone or through or together with any other subsidiary), owns,
directly or indirectly, currently or in the past, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other xxxx rning body of such
corporation or other legal entity.
SECTION 9.04. HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Section references herein are, unless the
context otherwise requires, references to sections of this Agreement.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 9.06. ENTIRE AGREEMENT. Except as provided in that certain
Agreement respecting a dietary supplement product entitled "PhenSafe", this
Agreement (together with the Exhibits, the IN Disclosure Schedule and the
4Health Disclosure Schedule) constitutes the entire agreement of the parties,
and supersedes all prior agreements and undertakings, including that certain
Letter of Intent dated October 13, 1997, both written and oral, among the
parties or between any of the m, with respect to the subject matter hereof.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied (other than as contemplated by Section
6.07 or Section 6.09), is intended to or shall confer upon
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any other person any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
SECTION 9.09. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 9.10. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Utah, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed as of the date first written above by their respective
officers thereunto duly authorized.
4HEALTH, INC.
By:/s/R. Xxxxxxx Xxxxxx
--------------------
Name R. Xxxxxxx Xxxxxx
Title: President
By:/s/Xxxx Xxxxx
-------------
Name: Xxxx Xxxxx
Title: President
/s/Xxxx Xxxxx
-------------
Xxxx Xxxxx
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