EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
AMONG
PROXYMED, INC.
AND
MDIP, INC.
JULY 30, 2002
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
July 30, 2002 ("Effective Date") among PROXYMED, INC., a Florida corporation
("Buyer"); MDIP, INC., a South Dakota corporation (the "Company"); and XX XXXXXX
and XXXX XXXXXX (each a "Shareholder" and together the "Shareholders") (The
"Company" and "Shareholders" collectively referred to as the "Sellers").
RECITALS
A. The Shareholders own all of the issued and outstanding shares of
capital stock of the Company. The Company desires to sell, and the Shareholders
desire that the Company sells, its assets and business to Buyer, and Buyer
desires to purchase such assets and business, on the terms and subject to the
conditions set forth in this Agreement.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the following terms shall have the
following meanings:
"Acquisition" means the acquisition by Buyer from the Company of the
Purchased Assets.
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations promulgated under the Securities Exchange Act of
1934, as amended and in effect on the Effective Date.
"Assigned Contracts" means all of the Contracts specifically described
on SCHEDULE 4.22.
"Breach" means any breach of, or any inaccuracy in, any representation
or warranty or any breach of, or failure to perform or comply with, any covenant
or obligation, in or of this Agreement or any other Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute such
a breach, inaccuracy or failure.
"Buyer Assignee" means one or more subsidiaries of Buyer to which Buyer
assigns all or any portion of its rights to acquire the Purchased Assets and
delegates all or any portion of its obligations to fulfill the Assumed
Liabilities pursuant to SECTION 11.5 of this Agreement.
"Contract" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment agreement,
license, instrument, purchase and sales order, commitment, undertaking or
obligation, in each case, whether written or oral, express or implied.
"Employee Benefit Plan" means each employee benefit plan or
arrangement, including but not limited to employee pension benefit plans, as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), multi-employer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA,
plans intended to qualify under Code Section 401(a) or 403(a) ("Qualified
Plans"), deferred compensation plans, stock option plans, bonus plans, stock
purchase plans, hospitalization, disability and other insurance plans, severance
or termination pay plans and policies, whether or not described in Section 3(3)
of ERISA, in which employees, their spouses or dependents participate.
2
"Environmental Law" means any Legal Requirement that relates to
pollution, protection of the environment, public health and safety, air
emissions, water discharges, hazardous or toxic substances, solid or hazardous
waste or occupational health and safety, as any of these terms are or may be
defined in such Legal Requirements, including: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, 42 X.X.X.xx. 9601, ET SEQ.
(collectively "CERCLA"); the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 X.X.X.xx. 6901, ET SEQ. (collectively
"RCRA"); the Hazardous Materials Transportation Act, as amended, 49
U.S.C.ss.1801, ET SEQ.; the Clean Water Act, as amended, 33 U.S.C.ss.1311, ET
SEQ.; the Clean Air Act, as amended, 42 U.S.C.ss.ss.7401-7642; the Toxic
Substances Control Act, as amended, 15 U.S.C.ss.2601, ET SEQ.; the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C.ss.ss.136-136y
("FIFRA"); the Emergency Planning and Community Right-to-Know Act of 1986, as
amended, 42 U.S.C.ss.11001, ET SEQ. (Title III of XXXX) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.ss.651, ET SEQ.
("OSHA").
"Excluded Assets" shall have the meaning given in SECTION 2.1(A).
"Familial Affiliate" means any person related by blood or marriage to
any officer, director or shareholder of the Company and any entity in which any
officer, director, shareholder or such person owns any beneficial interest.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Knowledge"--an individual will be deemed to have Knowledge of a
particular fact or other matter if:
(a) that individual is actually aware of that fact or
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of that fact or matter in the
course of conducting a reasonably comprehensive
investigation regarding the accuracy of any
representation or warranty contained in this
Agreement.
A Person (other than an individual) will be deemed to have
Knowledge of a particular fact or other matter if any individual who is serving,
or who has at any time served, as a director, officer, partner, executor or
trustee of that Person (or in any similar capacity) has, or at any time had,
Knowledge of that fact or other matter (as set forth in (a) and (b) above), and
any such individual (and any individual party to this Agreement) will be deemed
to have conducted a reasonably comprehensive investigation regarding the
accuracy of the representations and warranties made herein by that Person or
individual.
"Legal Requirement" means any governing (or which purports to govern)
federal, state, local, municipal, foreign, international, multinational or other
constitution, law, ordinance, principle of common law, statute, code,
regulation, order, injunction, decree, or treaty, as amended, or any judicial or
administrative interpretation thereof.
"Liability" means with respect to any Person, any liability,
indebtedness or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued, disputed
or undisputed, liquidated or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested, executory, determined,
determinable or otherwise, and whether or not the same is required to be accrued
on the Financial Statements of such Person.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, but not limited to, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the Uniform Commercial
3
Code or comparable law of any jurisdiction in connection with such mortgage,
pledge, security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or effect) in
financial condition, properties, assets, Liabilities, rights, operations,
business or prospects which change (or effect) individually or in the aggregate,
is materially adverse to such condition, properties, assets, Liabilities,
rights, operations, business or prospects.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint venture,
Governmental Authority or other entity, of whatever nature.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
judicial or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator, including any appeal
thereof.
"Purchased Assets" shall have the meaning given in SECTION 2.1.
"Record" means information that is inscribed on a tangible medium or
that is stored in an electronic or other medium and is retrievable in
perceivable form.
"SEC" means the Securities and Exchange Commission.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form or other document or information filed
with or submitted to or required to be filed with or submitted to any
Governmental Authority in connection with or with respect to the determination,
assessment, collection or payment of any Taxes.
"Taxes" means all taxes, including, but not limited to, income, excise,
property, sales, franchise, intangible, withholding, social security and
unemployment taxes, levies, assessments, tariffs, duties (including customs
duties), deficiencies or other fees, imposed, assessed or collected by or under
the authority of any Governmental Authority, or payable pursuant to any tax
sharing agreement or other Contract relating to the sharing or payment of any
such taxes, levies, assessments, tariffs, duties (including customs duties),
deficiencies or other fees, and any related charges or amounts, including, but
not limited to, any fines, penalties, interests or additional taxes.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
4
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE OF THE PURCHASED ASSETS. (a) Subject to the terms and
conditions of this Agreement, the Company shall at Closing sell, convey,
transfer, assign and deliver to Buyer, and Buyer shall at Closing purchase,
acquire and accept from the Company, free and clear of any Liens other than
those Liens set forth on SCHEDULE 2.1(A), all of Company's right, title and
interest in and to all of the Company's property and assets, tangible and
intangible, of every kind and description, wherever located, including the
following assets (the "Purchased Assets"):
(i) all Fixed Assets set forth in SCHEDULE 4.14(B);
(ii) all Assigned Contracts and all outstanding offers or
solicitations made by or to Company to enter into any Contract
as set forth in SCHEDULE 4.22;
(iii) all data and Records related to the operations of Company,
including client and customer lists and Records, referral
sources, research and development reports and Records,
production reports and Records, service and warranty Records,
equipment logs, operating guides and manuals, financial and
accounting Records, creative materials, advertising materials,
promotional materials, studies, reports, correspondence and
other similar documents and Records and, subject to Legal
Requirements, copies of any applicable personnel Records;
(iv) all of the intangible rights and property of Company,
including Intellectual Property (as defined in SECTION 4.21)
other than as set forth on SCHEDULE 4.21, goodwill and
telephone, telecopy, and e-mail addresses and listings;
(v) all insurance benefits, including rights and proceeds, arising
from or relating to the Purchased Assets or the Assumed
Liabilities prior to the Closing Date, unless expended in
accordance with this Agreement;
(vi) all claims of Company against third parties relating to the
Purchased Assets, whether xxxxxx or inchoate, known or
unknown, contingent or noncontingent; and
(vii) all rights of Company relating to deposits and prepaid
expenses, claims for refunds and rights to offset in respect
thereof, except for those listed as part of the Excluded
Assets.
Notwithstanding the foregoing, the transfer of the Purchased Assets
pursuant to this Agreement shall not include the assumption of any Liability
related to the Purchased Assets unless Buyer expressly assumes that Liability
pursuant to SECTION 2.3.
2.2 EXCLUDED ASSETS. (a) Notwithstanding anything to the contrary
contained in SECTION 2.1 or elsewhere in this Agreement, the following assets of
the Company (collectively, the "Excluded Assets") are not part of the Purchased
Assets and shall remain the property of Company after the Closing:
(i) all cash, cash equivalents and short-term investments;
(ii) all minute books, stock Records and corporate seals;
(iii) the shares of capital stock of Company;
(iv) those rights relating to deposits and prepaid expenses and
claims for refunds and rights to offset in respect thereof
listed in SCHEDULE 2.2 (A)(IV);
(v) all insurance policies and rights thereunder (except to the
extent specified in SECTION 2.1);
(vi) all of the Contracts listed in SCHEDULE 2.2 (A)(VI);
(vii) all personnel Records and other Records that Company is
required by Legal Requirements to retain in its possession;
(viii) all claims for refund of Taxes and other governmental charges
of whatever nature;
(ix) all rights in connection with and assets of the Employee Plans
(as defined in SECTION 4.15);
(x) the property and assets expressly designated in SCHEDULE
2.2(A)(X); AND
(xi) All Accounts Receivable.
2.3 ASSUMPTION OF ASSUMED LIABILITIES. (a) Subject to the terms and
conditions of this Agreement, Buyer shall at Closing assume and agree to pay,
discharge and perform when lawfully due only the following Liabilities of
Company (the "Assumed Liabilities"):
5
(i) any Liability of warranty given to Company's customers under
any Assigned Contract prior to the Effective Date (other than
any Liability arising out of or relating to a Breach thereof
that occurred prior to the Closing Date);
(ii) any Liability arising after the Closing Date under the
Assigned Contracts (other than any Liability arising under the
Assigned Contracts described on SCHEDULE 2.3(A)(II) or arising
out of or relating to a Breach thereof that occurred prior to
the Closing Date);
(iii) any Liability of Company arising after the Closing Date under
any Assigned Contract that is entered into by Company after
the Effective Date in accordance with the provisions of this
Agreement (other than any Liability arising out of or relating
to a Breach that occurred prior to the Closing Date); and
(iv) any Liability of Company described in SCHEDULE 2.3 (A)(IV).
2.4 RETAINED LIABILITIES. The Retained Liabilities shall remain the
sole responsibility of and shall be retained, paid, performed and discharged
solely by Company. "Retained Liabilities" shall mean every Liability of Company,
including any Liabilities of the Company or Shareholders relating to Employee
Benefit Plans, excluding the Assumed Liabilities.
2.5 NO EXPANSION OF THIRD PARTY RIGHTS. The transfer by the Company of
the Assumed Liabilities and the assumption thereof by Buyer shall in no way
expand the rights or remedies of any third party against the Company or the
Buyer, as compared to the rights and remedies which such third parties would
have had against the Company had Buyer not assumed such Liabilities. Without
limiting the generality of the preceding sentence, the assumption by Buyer of
the Assumed Liabilities shall not create any third party beneficiary rights.
2.6 PAYMENT OF THE ASSET PURCHASE PRICE. The aggregate purchase price
to be paid by the Buyer to the Company on account of and as consideration for
the Purchased Assets (the "Purchase Price") shall equal to TWO MILLION FOUR
HUNDRED THOUSAND DOLLARS (US$2,400,000.00), which shall be paid by Buyer to the
Company on the Closing Date by wire transfer of immediately available funds to
an account designated by the Company to Buyer in writing, plus the assumption by
Buyer of the Assumed Liabilities. In accordance with SECTION 8.3, at the
Closing, the Purchase Price shall be delivered by Buyer to Company as follows:
(a) TWO MILLION ONE HUNDRED AND FIFTY THOUSAND DOLLARS (US$2,150,000.00) by wire
transfer and (b) TWO HUNDRED AND FIFTY THOUSAND DOLLARS (US$250,000.00) paid to
the escrow agent pursuant to the escrow agreement attached hereto as EXHIBIT "A"
(the "Escrow Agreement").
2.7 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
among the Purchased Assets for tax purposes only as set forth on SCHEDULE 2.7.
The parties agree that all Tax Returns (including IRS Form 8594) shall be
consistent with the allocation set forth on SCHEDULE 2.7 and they shall not take
any position which is inconsistent therewith. If, contrary to the intent of the
parties hereto as expressed in this Section, any taxing authority makes or
proposes an allocation of the consideration paid hereunder different from that
agreed upon pursuant to this Section, the parties shall cooperate with each
other in good faith to contest such taxing authority's allocation (or proposed
allocation).
2.8 THE CLOSING. Subject to the terms and conditions of this Agreement,
the consummation of the Acquisition (the "Closing") shall take place July 31,
2002 (and in any event within five (5) business days) after satisfaction or
waiver of the conditions set forth in ARTICLES 7 and 8, at the offices of Buyer,
0000 Xxxxx Xxxx, Xxxxx 000X, Xxxx Xxxxxxxxxx, Xxxxxxx, or such other time and
place, or in such manner, as the parties may otherwise agree (the "Closing
Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Shareholders and the Company to enter
into this Agreement and to consummate the transactions contemplated hereby,
Buyer makes the following representations and warranties to the Shareholders and
the Company:
6
3.1 STATUS. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida and has the requisite
corporate power and authority to own or lease its respective properties and to
carry on its respective businesses as now being conducted. There is no pending
or threatened Proceeding for the dissolution, liquidation, insolvency or
rehabilitation of Buyer.
3.2 CORPORATE POWER AND AUTHORITY. Buyer has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. Subject to
approval by the Board of Directors of Buyer in the form of a corporate
resolution, a copy which shall be provided to Sellers on or before Closing,
Buyer has taken all actions necessary to authorize the execution and delivery of
this Agreement, the performance of its obligations hereunder and the
consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. Subject to approval by the Board of Directors of
Buyer, this Agreement has been duly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
Proceeding at law or in equity.
3.4 NO VIOLATION. Except as set forth in SCHEDULE 3.4, the execution
and delivery of this Agreement by Buyer, the performance by Buyer of its
obligations hereunder and the consummation by Buyer of the transactions
contemplated by this Agreement will not (i) contravene any provision of the
Restated Articles of Incorporation, as amended, or By-Laws of Buyer, (ii)
violate or conflict with the Legal Requirements of any Governmental Authority or
of any arbitration award which is either applicable to, binding upon or
enforceable against Buyer, (iii) conflict with, result in any Breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any material Contract which
is applicable to, binding upon or enforceable against Buyer, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any of
the property or assets of Buyer, or (v) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except any SEC and other
filings required to be made by Buyer.
3.5 NO COMMISSIONS. Buyer has not incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby, other than fees which will
be paid by, and are the sole obligation of, Buyer.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Sellers , jointly and
severally, make the following representations and warranties to Buyer:
4.1 CORPORATE STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of South
Dakota and has the requisite corporate power and authority to own or lease its
respective properties and to carry on its respective businesses as now being
conducted. Shareholders, from its inception, validly elected to have the Company
be taxed as an S corporation pursuant to Section 1361, ET SEQ., of the Internal
Revenue Code of 1986, as amended (the "Code"). No such elections have been
revoked, and nothing has occurred that would cause the Company to fail to
qualify as an S corporation. The Company is legally qualified to transact
business as a foreign corporation, and is in good standing as such, in each
jurisdiction in which the nature of its respective properties and/or the conduct
of its respective business requires such qualification. SCHEDULE 4.1 sets forth
all jurisdictions in which the Company is qualified to conduct business as a
foreign corporation. SCHEDULE 4.1 sets forth a list of all names under which the
Company has at any time done business. The Company has fully complied with all
of the requirements of any statute governing the use and registration of
fictitious names, and has the legal right to use the names under which it
7
operates its businesses. Except as set forth on SCHEDULE 4.1, the Company has
not changed its name or used any assumed or fictitious name other than those
listed on SCHEDULE 4.1, or been the surviving entity in a merger, acquired any
businesses or changed its principal place of business or chief executive office,
in each case, since the date of its organization. There is no pending or
threatened Proceeding for the dissolution, liquidation, insolvency or
rehabilitation of the Company.
4.2 POWER AND AUTHORITY. The Company has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The Company
has taken all actions necessary to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. Each Shareholder is an individual United
States citizen residing in the State of South Dakota, and has the requisite
competence and authority to execute and deliver this Agreement, to perform his
or her obligations hereunder and to consummate the transactions contemplated
hereby.
4.3 ENFORCEABILITY. This Agreement has been duly executed and delivered
by the Company and each of the Shareholders, and constitutes the legal, valid
and binding obligation of each of them, enforceable against each of them in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a Proceeding at law
or in equity.
4.4 CAPITALIZATION. SCHEDULE 4.4 sets forth (a) the number of
authorized shares of each class of its capital stock, (b) the number of issued
and outstanding shares of each class of its capital stock, and (c) the number of
shares of each class of its capital stock which are held in treasury. All of the
issued and outstanding shares of capital stock of the Company (i) have been duly
authorized and validly issued and are fully paid and non-assessable, (ii) were
issued in compliance with all applicable state and federal securities laws, and
(iii) were not issued in violation of any preemptive rights or rights of first
refusal. There are no outstanding or authorized rights, options, warrants,
convertible securities, subscription rights, conversion rights, exchange rights
or other agreements or commitments of any kind that could require the Company to
issue or sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Company. Except as set forth on SCHEDULE 4.4, there are no
proxies, voting rights or other agreements or understandings with respect to the
voting or transfer of the capital stock of the Company.
4.5 SHAREHOLDERS. SCHEDULE 4.5 sets forth the name, address and federal
taxpayer identification number of, and the number of outstanding shares of each
class of its capital stock owned of record and/or beneficially by, the
shareholder(s) of the Company as of the close of business on the date of this
Agreement. As of the date hereof, the Shareholders are the holders of all issued
and outstanding shares of capital stock of the Company and all issued
outstanding shares of the Company are owned by the Shareholders free and clear
of all Liens, restrictions and claims of any kind.
4.6 NO VIOLATION. Except as set forth in SCHEDULE 4.6, neither the
execution or delivery of this Agreement by the Company or either of the
Shareholders, or the performance by any of them of their respective obligations
hereunder or the consummation by any of them of the transactions contemplated by
this Agreement will (i) contravene any provision of the Articles of
Incorporation or Bylaws of the Company, (ii) violate or conflict with the Legal
Requirements of any Governmental Authority or of any arbitration award which is
either applicable to, binding upon or enforceable against the Company or either
of the Shareholders, (iii) conflict with, result in any Breach of, or constitute
a default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against the Company or either of the
Shareholders, (iv) result in or require the creation or imposition of any Lien
upon or with respect to any of the property or assets of the Company, either of
the Shareholders or any of the Purchased Assets or (v) require the consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, any court or tribunal or any other Person, except any
SEC and other filings required to be made by Company.
4.7 RECORDS OF THE COMPANY. [INTENTIONALLY DELETED].
8
4.8 SUBSIDIARIES AND OTHER ENTITIES. The Company does not own, directly
or indirectly, any outstanding voting securities of or other interests in, or
control, any corporation, partnership, joint venture or other business entity.
The Shareholders are the sole owners of Xxxxxx Properties, which owns the
building that is the subject matter of the real estate lease set forth on
SCHEDULE 4.13(B).
4.9 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 4.9 are (i) the
financial statements of the Company for the seven (7) months ended July 31,
2002, including the notes thereto (collectively, the "Interim Financial
Statements"), (ii) the financial statements of the Company for the years ended
December 31, 1999, 2000 and 2001, including the notes thereto (collectively, the
"Annual Financial Statements")(Collectively, the Interim Financial Statements
and the Annual Financial Statements are known as the "Financial Statements"),
and only in the case of the Interim Financial Statement and the 2001 Annual
Financial Statement, audited or reviewed by the Company's
accountants(collectively, the "Reviewed Financial Statements"). Sellers shall
provide the Buyer with the Reviewed Financial Statements no later than
forty-five (45) days after the Closing. The balance sheet of the Company dated
as of June 30, 2002 included in the Financial Statements is hereinafter
sometimes referred to as the "Current Balance Sheet." The Reviewed Financial
Statements fairly present the financial position of the Company at each of the
balance sheet dates and the results of operations for the periods covered
thereby, and have been prepared in accordance with GAAP consistently applied
throughout the periods indicated. The books and Records of the Company fully and
fairly reflect all of its transactions, properties, assets and Liabilities.
Except as reflected on the Financial Statements, there are no extraordinary or
non-recurring items of income or expense during the periods covered by the
Financial Statements and the balance sheets included in the Financial Statements
do not reflect any write-up or revaluation increasing the book value of any
assets, except as specifically disclosed in the notes thereto. The Financial
Statements reflect all adjustments necessary for a fair presentation of the
financial information contained therein. Any change to the Financial Statements
due to such Financial Statements being reviewed shall not constitute an
indemnifiable event under Article 9 of this Agreement.
4.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth
on SCHEDULE 4.10, since the date of the Current Balance Sheet, the Company has
not (i) issued any capital stock or other securities; (ii) made any distribution
of or with respect to its capital stock or other securities, or purchased or
redeemed any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice; (v) made or obligated itself to make capital expenditures
out of the ordinary course of business consistent with past practice; (vi) made
any payment in respect of its Liabilities other than in the ordinary course of
business consistent with past practice; (vii) incurred any Liabilities or
entered into any transaction or series of transactions involving in excess of
$5,000 in the aggregate out of the ordinary course of business, except for this
Agreement and the transactions contemplated hereby, unless they are paid in full
on or before Closing; (viii) suffered any theft, damage, destruction or casualty
loss, not covered by insurance and for which a timely claim was filed, in excess
of $5,000 in the aggregate; (ix) suffered any extraordinary losses (whether or
not covered by insurance); (x) waived, canceled, compromised or released any
rights having a value in excess of $5,000 in the aggregate; (xi) made or adopted
any change in its accounting practice or policies; (xii) made any adjustment to
its books or Records other than in respect of the conduct of its business
activities in the ordinary course of business consistent with past practice;
(xiii) entered into any transaction with any Affiliate or Familial Affiliate;
(xiv) entered into any employment agreement; (xv) terminated, amended or
modified any Contract involving an amount in excess of $5,000; (xvi) imposed any
security interest or other Lien on any of its assets other than in the ordinary
course of business consistent with past practice; (xvii) if relevant, delayed
paying any accounts payable which are due and payable except to the extent being
contested in good faith; (xviii) made or pledged any charitable contribution in
excess of $1,000; (xix) entered into any other transaction or been subject to
any event which has or may have a Material Adverse Effect on the Company; or
(xx) agreed to do or authorized any of the foregoing.
4.11 LIABILITIES OF THE COMPANY. Except as disclosed on SCHEDULE 4.11
hereto, the Company does not have any Liabilities, except (a) to the extent
reflected on the Current Balance Sheet and not heretofore paid or discharged,
(b) Liabilities incurred in the ordinary course of business consistent with past
practice since the date of the Current Balance Sheet (none of which relates to
Breach of Contract, Breach of warranty, tort, infringement or violation of law,
or which arose out of any Proceeding), and (c) Liabilities set forth on SCHEDULE
4.11 which were incurred in the ordinary course of business prior to the date of
9
the Current Balance Sheet and which, in accordance with GAAP consistently
applied, were not required to be recorded thereon.
4.12 LITIGATION. Except as disclosed on SCHEDULE 4.12 hereto, there is
no Proceeding pending, threatened, anticipated or contemplated against, by or
affecting (a) the Company or any of its properties or assets, or (b) the Company
or the Shareholders which relates to or affects the validity or enforceability
of this Agreement or the transactions contemplated hereby, and there is no basis
for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any Proceeding to which the
Company is or was a party which have not been complied with in full or which
continue to impose any obligations on the Company.
4.13 REAL ESTATE.
(a) The Company does not own any real property or any interest
therein.
(b) SCHEDULE 4.13(B) sets forth a list of all leases, licenses
or similar agreements (collectively, "Leases") to which the Company is a party
(copies of which have previously been furnished to Buyer), in each case setting
forth (A) the lessor and lessee thereof and the date and term of each of the
Leases, (B) the legal description, including street address, of each property
covered thereby, (C) a brief description (including size and function) of the
principal improvements and buildings thereon (the "Leased Premises"), all of
which are within the property set-back and building lines of the respective
property and (D) a summary of the principal terms thereof, including the term,
any renewal options, the current rental and any rent escalations. The Leases are
in full force and effect and have not been amended, and no party thereto is in
default or Breach under any such Lease. No event has occurred which, with the
passage of time or the giving of notice or both, would cause a Breach of or
default under any of such Leases. There is no Breach or anticipated Breach by
any other party to any Lease. With respect to each of the Leased Premises:
(1) The Company has valid leasehold interests in the
Leased Premises, free and clear of any Liens, covenants and easements or title
defects of any nature whatsoever;
(2) The portions of the buildings located on the
Leased Premises that are used in the business of the Company are each in good
repair and condition, normal wear and tear excepted, and are in the aggregate
sufficient to satisfy the current and reasonably anticipated normal business
activities of the Company as conducted thereat;
(3) It (a) has direct access to public roads or
access to public roads by means of a perpetual access easement, such access
being sufficient to satisfy the current and reasonably anticipated normal
transportation requirement of the businesses of the Company, as applicable, as
presently conducted at such parcel; and (b) is served by all utilities in such
quantity and quality as are sufficient to satisfy the current normal business
activities as conducted at such parcel; and
(4) The Company has not received notice of (a) any
condemnation Proceeding with respect to any portion of the Leased Premises or
any access thereto, and no such Proceeding is contemplated by any Governmental
Authority; or (b) any special assessment which may affect any of the Leased
Premises, and no such special assessment is contemplated by any Governmental
Authority.
4.14 GOOD TITLE TO AND CONDITION OF ASSETS.
(a) Except as set forth on SCHEDULE 4.14(A), the Company has
good and marketable title to all of the Purchased Assets, free and clear of any
Liens or restrictions on use.
(b) The Fixed Assets included in the Purchased Assets
currently in use or necessary for the business and operations of the Company are
in good operating condition, normal wear and tear excepted, and have been
maintained substantially in accordance with all applicable manufacturer's
specifications and warranties.. SCHEDULE 4.14(B) lists all of the Company's
Fixed Assets that are part of the Purchased Assets.
10
4.15 COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 4.15, the Company is and
has been in compliance with all Legal Requirements for its properties and assets
(in each case, owned or used by it now or in the past) and its business and
operation (as conducted by it now and in the past). Except as set forth on
SCHEDULE 4.15, the Company has not been cited, fined or otherwise notified of
any asserted past or present failure to comply with any Legal Requirements and
no Proceeding with respect to any such violation is pending or threatened.
(b) Neither of the Sellers, nor any of their respective
employees or agents, have made any payment of funds in connection with the
business of the Company which is prohibited by law, and no funds have been set
aside to be used in connection with the business of the Company for any payment
prohibited by law.
(c) The Sellers are and at all times have been in full
compliance with the terms and provisions of the Immigration Reform and Control
Act of 1986, as amended (the "Immigration Act"). With respect to each Employee
(as defined in 8 C.F.R. 274a.1(f) of such entity for whom the compliance with
the Immigration Act is required), the Company has on file a true, accurate and
complete copy of (i) each Employee's Form I-9 (Employment Eligibility
Verification Form) and (ii) all other Records, documents or other papers
prepared, procured and/or retained pursuant to the Immigration Act. The Company
has not been cited, fined, served with a Notice of Intent to Fine or with a
Cease and Desist Order, nor has any Proceeding been initiated or threatened
against the Company by the Immigration and Naturalization Service by reason of
any actual or alleged failure to comply with the Immigration Act.
(d) To the best of the Shareholders' Knowledge, the Company is
and has at all times been in full compliance with all Environmental Laws
governing its business, operations, properties and assets.
(e) With respect to each Employee Benefit Plan, the Company is
and has at all times been in full compliance with all applicable laws,
including, but not limited to, ERISA and the Code and has administered each
Employee Benefit Plan in all material respects in accordance with its terms; all
material reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and no "prohibited transaction" has occurred within
the meaning of the applicable provisions of ERISA or the Code. Moreover, in
connection with all Qualified Plans, the Internal Revenue Service has issued a
favorable determination letter; such plans are qualified and exempt from federal
income taxes; and no such determination letter has been revoked nor has
revocation been threatened, nor has any amendment or other action or omission
occurred with respect to any Qualified Plan since the date of its most recent
determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its costs. Finally,
none of the Employee Benefit Plans obligates the Company to pay separation,
severance, termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of control"
(as such term is defined in Section 280G of the Code); (ii) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or as
of the Closing Date shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of the
Company as of the Closing Date; and (iii) none of the Employee Benefit Plans has
any unfunded Liabilities which are not reflected on the Current Balance Sheet or
the books and records of the Company.
(f) The Company is not subject to any Contract, decree or
injunction which restricts the continued operation of any business of the
Company or the expansion thereof to other geographical areas, customers and
suppliers or lines of business.
(g) HIPAA READINESS. The Sellers represent and warrant that
the Company has processed test claim files on its processing system, has
submitted these test files to ClarEdi for HIPAA compliance review, and ClarEdi
certifies that the specific capabilities represented in the data stream are in
compliance with the HIPAA implementation guides. ClarEdi has issued to company
certification through level 6 for Medical, Dental, and Institutional claims. As
11
of the Effective Date, all internal programming necessary to achieve ClarEdi's
level 6 certification status has in fact been completed. However, as of the
Effective Date, the Company does not have any client submitting HIPAA-compliant
837 transactions nor do any of our existing payer connections accept a
HIPAA-compliant 837 transaction; therefore, the Sellers are not able at this
time to warrant that no additional programming to the processing system will be
required in order for such processing system to process HIPAA-compliant claims
once the Company's clients are ready to be or are in full production with the
ANSI 837 HIPAA-compliant transactions.
4.16 LABOR AND EMPLOYMENT MATTERS. SCHEDULE 4.16 sets forth the name,
address, social security number and current rate of compensation of each of the
employees of the Company. The Company is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor union, and
there has been no effort by any labor union during the 24 months prior to the
date hereof to organize any employees of the Company into one or more collective
bargaining units. There is no pending or threatened labor dispute, strike or
work stoppage which affects or which may affect the business of the Company or
which may interfere with its continued operations. Neither the Company nor any
agent, representative or employee thereof has within the last 24 months
committed any unfair labor practice as defined in the National Labor Relations
Act, as amended, and there is no pending or threatened charge or complaint
against the Company by or with the National Labor Relations Board or any
representative thereof. There has been no strike, walkout or work stoppage or
threat of union activity involving any of the employees of the Company during
the 24 months prior to the date hereof. Neither the Company nor the Shareholders
are aware that any executive or employee has any plans to terminate his or her
employment with the Company as a result of the Acquisition or otherwise. The
Company has complied with applicable laws, rules and regulations relating to
employment, civil rights and equal employment opportunities, including but not
limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, the
Americans with Disabilities Act, as amended, and the Immigration Reform and
Control Act of 1986, as amended.
4.17 TAX MATTERS. All Tax Returns required to be filed on or prior to
the date hereof with respect to the Company, or any of its respective income,
properties, franchises or operations, have been timely filed where required to
be filed;, each such Tax Return has been prepared in compliance with all
applicable laws and regulations; and all such Tax Returns are true and accurate
in all respects. Except as set forth on SCHEDULE 4.17, all Taxes due and payable
by or with respect to the Company have been fully and timely paid and adequate
reserves or accruals for Taxes have been provided in the Current Balance Sheet
with respect to any period for which Tax Returns have not yet been filed or for
which Taxes are not due and payable. Except as set forth on SCHEDULE 4.17: (i)
with respect to each taxable period of the Company, either such taxable period
has been audited by the relevant taxing authority or the time for assessing or
collecting Taxes with respect to each such taxable period has closed and such
taxable period is not subject to review by any relevant taxing authority; (ii)
no deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority against the Company; (iii) the Company has not consented to extend the
time in which any Taxes may be assessed or collected by any taxing authority;
(iv) the Company has not requested or been granted an extension of the time for
filing any Tax Return to a date later than the Closing Date; (v) there is no
Proceeding for refund now in progress, nor pending or threatened against or with
respect to the Company regarding Taxes; (vi) the Company has not made an
election or filed a consent under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign law) on or prior to the
Closing Date; (vii) there are no Liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of the Company; (viii) the Company will
not be required (A) as a result of a change in method of accounting for a
taxable period ending on or prior to the Closing Date, to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of state, local
or foreign law) in taxable income for any taxable period (or portion thereof)
beginning after the Closing Date or (B) as a result of any "closing agreement,"
as described in Section 7121 of the Code (or any corresponding provision of
state, local or foreign law), to include any item of income or exclude any item
of deduction from any taxable period (or portion thereof) beginning after the
Closing Date; (ix) the Company has not been a member of an affiliated group (as
defined in Section 1504 of the Code) or filed or been included in a combined,
consolidated or unitary income Tax Return; (x) the Company is not a party to or
bound by any tax allocation or tax sharing agreement or has any current or
12
potential contractual obligation to indemnify any other Person with respect to
Taxes; (xi) no taxing authority will claim or assess any additional Taxes
against the Company for any period for which the Tax Returns have been filed;
(xii) the Company has not made any payments, or will not become obligated (under
any Contract entered into on or before the Closing Date) to make any payments,
that will be non-deductible under Sections 162(m) or 280G of the Code (or any
corresponding provision of state, local or foreign law); (xiii) the Company has
not been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code (or any corresponding provisions of state, local
or foreign law) during the applicable period specified in Section
897(c)(1)(a)(ii) of the Code (or any corresponding provision of state, local or
foreign law); (xiv) no claim has ever been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that such company is or
may be subject to Taxes assessed by such jurisdiction; (xv) the Company does not
have any permanent establishment in any foreign country, as defined in the
relevant tax treaty between the United States of America and such foreign
country; (xvi) true, correct and complete copies of (A) all income and sales Tax
Returns filed by or with respect to the Company for the past three years and (B)
any audit report issued within the last five years, have been furnished or made
available to Buyer, and all material tax elections of the Company are clearly
set forth on such Tax Returns; (xvii) the Company will not be subject to any
Taxes for the period ending at the Closing Date or any period for which a Tax
Return has not been filed imposed pursuant to Section 1374 or Section 1375 of
the Code (or any corresponding provision of state, local or foreign law);
(xviii) no sales or use tax, non-recurring intangible tax, documentary stamp tax
or other excise tax (or comparable tax imposed by any Governmental Authority)
will be payable by Buyer by virtue of the transactions contemplated by this
Agreement; and (xix) no issue has been raised by any taxing authority in any
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
4.18 INSURANCE. The Company is covered by valid, outstanding and
enforceable policies of insurance covering its respective properties, assets and
business against risks of the nature normally insured against by corporations in
the same or similar lines of business and in coverage amounts typically and
reasonably carried by such corporations (the "Insurance Policies"). Such
Insurance Policies are in full force and effect, and all premiums due thereon
have been paid. As of the Closing Date, each of the Insurance Policies will be
in force and effect. None of the Insurance Policies will lapse or terminate as a
result of the transactions contemplated by this Agreement. The Company has
complied with the provisions of such Insurance Policies. SCHEDULE 4.18 contains
(i) a complete and correct list of all Insurance Policies (copies of which have
been provided to Buyer) and (ii) a detailed description of each pending claim
under any of the Insurance Policies for an amount in excess of $10,000 that
relates to loss or damage to the properties, assets or businesses of the
Company. The Company has not failed to give, in a timely manner, any notice
required under any of the Insurance Policies necessary to preserve its rights
thereunder and the Company and the Shareholders have no Knowledge of any
uninsured claims or losses.
4.19 LICENSES AND PERMITS. The Company possesses all licenses and
required governmental or official approvals, permits or authorizations (the
"Permits") for its businesses and operations, including with respect to the
operation of each of the Leased Premises, and SCHEDULE 4.19 contains a true and
complete list of all such Permits. All such Permits are valid and in full force
and effect, and the Company is in compliance in all material respects with the
respective requirements thereof and no Proceeding is pending or threatened to
revoke or amend any of them. None of the Permits is or will be impaired or in
any way affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
4.20 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. The Purchased Assets and Leased Premises
constitute, in the aggregate, all of the assets and properties necessary for the
conduct of the business of the Company in the manner in which and to the extent
to which such business is currently being conducted. Since the date of the
Current Balance Sheet, there has existed no actual or threatened termination or
cancellation of, or adverse change to, the business relationship of the Company
with such customers whose sales individually or in the aggregate are material to
the Company, and there exists no present condition or state of facts or
circumstances involving the Company's customers which are reasonably likely to
prevent the conduct of the Company's business after the consummation of the
transactions contemplated by this Agreement in essentially the same manner in
which such business has heretofore been conducted. No current supplier to the
Company of items essential to the conduct of its business has threatened to
terminate such current supplier's business relationship with the Company for any
reason. Except as set forth on SCHEDULE 4.20, (a) the Company does not have any
direct or indirect interest in any customer, supplier or competitor of the
13
Company, or in any person from whom or to whom the Company leases real or
personal property, and (b) no officer, director or shareholder of the Company,
nor any Familial Affiliates, is a party to any Contract or transaction with the
Company or has any direct or indirect interest in any property used by the
Company.
4.21 INTELLECTUAL PROPERTY. The Company has full legal right, title and
interest in and to all trademarks, service marks, trade names, copyrights,
know-how, patents, trade secrets, proprietary computer software, data bases and
compilations, licenses (including licenses for the use of computer software
programs, including off-the-shelf computer software programs), and other
intellectual property used in the conduct of its business that constitutes part
of the Purchased Assets (the "Intellectual Property"). The business of the
Company as presently conducted, and the unrestricted use and exploitation of the
Intellectual Property does not infringe on or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the Intellectual
Property. No payments are required for the continued use of the Intellectual
Property. None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any Proceeding for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or the like. Except as set forth in SCHEDULE 4.21, Buyer is purchasing,
acquiring and accepting all of the Company's Intellectual Property. Except as
set forth in SCHEDULE 4.21, the Company has a license for each copy of
third-party Intellectual Property that is part of the Purchased Assets.
4.22 CONTRACTS. SCHEDULE 4.22 sets forth, with respect to the Company,
a list of each Contract to which it is a party or by which it or its properties
and assets are bound or which is material to its business, assets, properties or
prospects (the "Assigned Contracts"). True and correct copies of each written
Assigned Contract have been provided to Buyer and true and correct summaries of
each oral Assigned Contract are set forth on SCHEDULE 4.22. The copy of each
written Assigned Contract and the summary of each oral Assigned Contract
furnished to Buyer is a true and complete copy or summary, as the case may be,
of the document it purports to represent and reflects all amendments thereto
made through the date of this Agreement. SCHEDULE 4.22 also specifically
identifies Contracts that require the consents of third parties to the
transactions contemplated hereby. The Company has not violated any of the
material terms or conditions of any Assigned Contract or any term or condition
which would permit termination or material modification of any Assigned
Contract, and all of the covenants to be performed by any other party thereto
have been fully performed and there are no claims for Breach or indemnification
or notice of default or termination under any Assigned Contract. No event has
occurred which constitutes, or after notice or the passage of time, or both,
would constitute, a default by the Company under any Assigned Contract, and no
such event has occurred which constitutes or would constitute a default by any
other party. The Company is not subject to any Liability or payment resulting
from renegotiation of amounts paid to it or required to be paid to it under any
Assigned Contract.
4.23 ACCURACY OF INFORMATION FURNISHED BY THE COMPANY OR THE
SHAREHOLDERS. No representation, statement or information made or furnished by
the Company or the Shareholders to Buyer or any of Buyer's representatives,
including those contained in this Agreement and the various Schedules attached
hereto and the other information and statements referred to herein and
previously furnished by the Company or the Shareholders, contains or shall
contain any untrue statement of a material fact or omits or shall omit any
material fact necessary to make the information contained therein not
misleading. The Company and the Shareholders have provided Buyer with true,
accurate and complete copies of all documents listed or described in the various
Schedules attached hereto, and such documents have not been amended, canceled or
otherwise modified.
4.24 BANK ACCOUNTS; BUSINESS LOCATIONS. [INTENTIONALLY DELETED].
4.25 NO COMMISSIONS. Neither of Sellers has incurred any obligation for
any finder's or broker's or agent's fees or commissions or similar compensation
in connection with the transactions contemplated hereby other than fees which
may be paid by, and are the sole responsibility of, the Shareholders or the
Company.
4.26 INVENTORY; PRODUCT WARRANTIES.
(a) Except as set forth on SCHEDULE 4.26(A), the inventories
of the Company conform to customary trade standards for such inventory and, in
the case of finished goods, are of a quality saleable in the ordinary course of
14
business and, in the case of all other inventories, are of a quality useable in
the ordinary course of business. Except as set forth on SCHEDULE 4.26(A), each
of the products or services manufactured, sold or delivered by the Company has
conformed with all applicable contractual commitments and all express and
implied warranties and the Company has no Liability for replacement thereof or
other damages in connection therewith.
(b) The Company has no Liability arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold or delivered by the Company.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE ACQUISITION
5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE ACQUISITION. The
Company covenants and agrees that, between the date of this Agreement and the
Closing Date the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of business,
consistent with past practice. The Company shall use its best efforts to
preserve intact its business organization, to keep available the services of the
current officers, employees and consultants, and to preserve present
relationships of the Company with customers, suppliers and other persons with
which it has significant business relations. By way of amplification and not
limitation, the Company shall not, between the date of this Agreement and the
Closing Date, directly or indirectly, do or propose or agree to do any of the
following without the prior written consent of Buyer:
(a) amend or otherwise change its Article of Incorporation or
Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber or lease, or
authorize the issuance, sale, pledge, disposition or lease of, or grant of an
encumbrance on, (i) any shares of its capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest, of it, or
(ii) any of its assets, tangible or intangible, except in the ordinary course of
business consistent with past practice and in transactions not exceeding
US$5,000 in the aggregate;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including for cash or shares of stock, by
merger, consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership or other business organization or division thereof, or
make any investment either by purchase of stock or securities, contributions of
capital or property transfer, or, purchase any property or assets of any other
Person, (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any Person, or make any loans or
advances, (iii) to the extent not prohibited by any other provision of this
SECTION 5.1, enter into any Contract other than in the ordinary course of
business, consistent with past practice and providing for payments not exceeding
US$5,000 in the aggregate over the term of such Contract, (iv) make capital
expenditures exceeding US$5,000 or purchases of inventories exceeding US$5,000,
in each case in the aggregate, or (v) engage in any transaction with an
Affiliate or Familial Affiliate of the Company.
(f) increase the compensation payable or to become payable to
its officers or employees, or, except as presently bound to do, grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its directors, officers or other employees, or establish,
adopt, enter into or amend or take any action to accelerate any rights or
benefits under which any collective bargaining, bonus, profit sharing, trust,
15
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers or
employees;
(g) take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or procedures;
(h) pay, discharge or satisfy any existing claims,
Liabilities, other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
Liabilities reflected or reserved against in its Financial Statements, as
appropriate, or Liabilities incurred after the date hereof in the ordinary
course of business and consistent with past practice;
(i) increase or decrease prices charged to its customers,
except for previously announced price changes, or take any other action which
might reasonably be expected to result in any material increase in the loss of
customers through non-renewal or termination of Contracts or other causes; or
(j) agree, in writing or otherwise, to take or authorize any
of the foregoing actions or any action which would make any representation or
warranty in ARTICLE 4 untrue or incorrect.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
6.2 COMPLIANCE WITH COVENANTS. The Shareholders shall cause the Company
to comply with all of the respective covenants of the Company under this
Agreement.
6.3 COOPERATION- GENERAL. Each of the parties agrees to use its best
efforts to cooperate with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or deemed advisable
pursuant to any law, rule or regulation, and to use their respective best
efforts to agree jointly on a method to overcome any objections by any
Governmental Authority to the transactions hereunder.
6.4 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
the Company shall cause its directors, officers, employees, auditors, and
counsel to afford Buyer, and its respective officers, employees, auditors,
counsel and agents access to the Company's properties, offices and other
facilities, to its officers and employees and to all books and Records, and
shall furnish such persons with all financial, operating and other data and
information regarding the Company or the Shareholders as may be requested.
Neither the due diligence investigation made by Buyer in connection with the
Acquisition nor the information provided to or obtained by Buyer shall affect
any representation or warranty contained in this Agreement.
6.5 NOTIFICATION OF CERTAIN MATTERS. The Company and the Shareholders
shall give prompt notice to Buyer of the occurrence or non-occurrence of any
event which would likely cause any representation or warranty contained herein
to be untrue or inaccurate, or any covenant, condition, or agreement contained
herein not to be complied with or satisfied. Buyer shall give prompt notice to
the Shareholders of the occurrence or non-occurrence of any event of which Buyer
has Knowledge which would likely cause any representation or warranty contained
herein to be untrue or inaccurate, or any covenant, condition, or agreement
contained herein applicable to it not to be complied with or satisfied in any
material respect.
6.6 NONCOMPETITION; NON-SOLICITATION AND NONDISPARAGEMENT. (a) In order
to assure that Buyer realizes the benefits of the Acquisition, the Sellers agree
that for the period commencing on the Closing Date and ending on the fifth
anniversary of the Closing Date, each Seller shall not, anywhere in the
continental United States of America, directly or indirectly invest in, own,
manage, operate, finance, control, advise, render services to or guarantee the
obligations of any Person engaged in or planning to become engaged in the
processing of electronic financial and administrative transactions as defined
under the Health Insurance Portability and Accountability Act of 1996, as
16
amended, and all regulations thereunder ("HIPAA") between healthcare providers
and healthcare payers ("Competing Business"); provided, however, that each
Seller may purchase or otherwise acquire up to (but not more than) one percent
(1%) of any class of the securities of a Competing Business (but may not
otherwise participate in the activities of such Competing Business) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended. As used herein, the term "Competing Business" shall not include a
Service Bureau as that term is defined in XX Xxxxxx'x Employment Agreement of
even date.
(b) In order to assure that Buyer realizes the benefits of the
Acquisition, each Seller agrees that for the period commencing on the Closing
Date and ending on the third anniversary of the Closing Date, the Sellers shall
not, directly or indirectly, (i) solicit the business of any Person who is a
customer of Buyer; (ii) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, or other business relation
of Buyer to cease doing business with Buyer, to deal with any competitor of
Buyer or in any way interfere with its relationship with Buyer; (iii) cause,
induce or attempt to cause or induce any customer, supplier, licensee, licensor,
franchisee, or other business relation of the Company on the Closing Date or
within the year preceding the Closing Date to cease doing business with Buyer,
to deal with any competitor of Buyer or in any way interfere with its
relationship with Buyer; or (iv) hire, retain or attempt to hire or retain, or
knowingly permit any company or business directly or indirectly controlled by
any of the Sellers to hire, retain or attempt to hire or retain, any employee or
independent contractor of Buyer who was employed by the Buyer or the Company at
the Closing Date or within the immediately prior six (6) months, or in any way
interfere with the relationship between Buyer and any of its employees or
independent contractors.
(c) After the Closing Date, Sellers will not disparage Buyer
or any of Buyer's products, services, shareholders, directors, officers,
employees or agents.
(d) If a final judgment of a court or tribunal of competent
jurisdiction determines that any term or provision contained in Section 6.6(a)
through (c) is invalid or unenforceable, then the parties agree that the court
or tribunal will have the power to reduce the scope, duration or geographic area
of the term or provision, to delete specific words or phrases or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision. This SECTION 6.6 will be enforceable
as so modified after the expiration of the time within which the judgment may be
appealed. This SECTION 6.6 is reasonable and necessary to protect and preserve
Buyer's legitimate business interests and the value of the Purchased Assets and
to prevent any unfair advantage conferred on the Sellers.
6.7 CERTAIN ACKNOWLEDGMENTS. The Sellers agree and acknowledge that the
restrictions contained in SECTION 6.6 are reasonable in scope and duration and
are necessary to protect the Buyer after the Closing Date. If any provision of
SECTION 6.6 as applied to any party or to any circumstance is adjudged by a
court to be invalid or unenforceable, the same will in no way affect any other
circumstance or the validity or enforceability of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The parties agree and acknowledge that the Breach of SECTION 6.6 will
cause irreparable damage to the Buyer and upon Breach of any provision of
SECTION 6.6, the Buyer shall be entitled to injunctive relief, specific
performance or other equitable relief; PROVIDED, HOWEVER, that, this shall in no
way limit any other remedies which the Buyer may have (including the right to
seek monetary damages). The Sellers hereby agree that Buyer may assign, without
limitation, the covenants set forth in SECTION 6.6 to any successor to of Buyer,
or Buyer Assignee.
6.8 CONFIDENTIALITY; PUBLICITY. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the Buyer.
6.9 NO OTHER DISCUSSIONS. From the Effective Date until the Closing
Date, the Sellers and their respective Affiliates, employees, agents and
representatives will not (a) solicit, encourage, consider or accept any offers
to acquire all or any portion of the assets or any interest in the Company or
any of the Purchased Assets from any Person, (b) participate in any negotiations
17
or discussions with any other person concerning the sale of all or any portion
of the assets of or any interest in the Company or any of the Purchased Assets,
(c) provide any non-public information about the Company or any of the Purchased
Assets (other than to Buyer and its agents and consultants as provided herein),
(d) enter into any agreement or commitment (whether or not binding) with respect
to any of the foregoing, or (e) otherwise cooperate in any way with, or assist,
facilitate or encourage any effort by any other person seeking to acquire all or
any portion of the assets of or interests in the Company or any of the Purchased
Assets. The Sellers shall immediately notify Buyer in writing of any such
inquiry or proposal which any of the Sellers may receive with respect to the
foregoing transactions, including the terms and identity of the inquiror or
offeror.
6.10 DUE DILIGENCE REVIEW. Buyer shall be entitled to have conducted
prior to Closing a due diligence review of the assets, properties, books and
Records of the Company.
6.11 SHAREHOLDERS VOTE. The Shareholders, in executing this Agreement,
consent as the sole shareholders of the Company to the Acquisition and the
transactions contemplated hereby, and waive notice of any meeting in connection
therewith, and hereby release and waive all rights with respect to the
Acquisition and the transactions contemplated hereby under the Articles of
Incorporation and/or Bylaws of the Company, applicable state law, and any
agreements relating to the sale, purchase or voting of any capital stock of the
Company.
6.12 BULK SALES. The Company shall, and the Shareholders shall cause
the Company to, promptly upon executing this Agreement, take all required or
appropriate actions to effectuate compliance with all applicable statutory
provisions regarding the transfer of goods in bulk. Such actions shall include,
without limitation, the delivery of such information regarding the Company's
creditors and property as Buyer may reasonably request, and the filing with the
appropriate Governmental Authorities in South Dakota of all instruments
necessary to avoid Buyer becoming liable for any tax obligations of the Company
under South Dakota laws regarding the transfer of goods in bulk.
6.13 TRANSITIONAL SERVICES AGREEMENT. The parties hereby agree to
utilize best efforts to execute a transitional services agreement within the
next thirty (30) days on terms and conditions to be negotiated by the parties
for the continuation by Company for or on behalf of Buyer or Buyer Assignee of
certain obligations of the Company under certain agreements.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to effect the Acquisition shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions, any
or all of which may be waived in whole or in part in writing by Buyer:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Sellers contained in this
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed on any schedule to this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date. Each of the
Sellers shall have performed and complied with them all of their respective
obligations required by this Agreement to be performed by them or complied with
by them at or prior to the Closing Date. Each of the Sellers shall have
delivered to Buyer a certificate, dated as of the Closing Date, duly signed (in
the case of the Company, by its President), certifying that such representations
and warranties are true and correct and that all such obligations have been
complied with and performed.
7.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between the
date hereof and the Closing Date, (i) there shall have been no Material Adverse
Change to any of the Purchased Assets, (ii) there shall have been no adverse,
federal, state or local legislative or regulatory change affecting in any
18
material respect the services, products or business of the Company, and (iii)
none of the properties or assets of the Company or the Purchased Assets shall
have been damaged by fire, flood, casualty, act of God or the public enemy or
other cause (regardless of insurance coverage for such damage), which damages
may have a Material Adverse Effect thereon, and there shall have been delivered
to Buyer a certificate to that effect, dated the Closing Date and signed by or
on behalf of each of the Sellers.
7.3 CORPORATE CERTIFICATE. The Sellers shall have delivered to Buyer
(i) copies of resolutions adopted by the Board of Directors and Shareholders of
the Company, authorizing the transactions contemplated by this Agreement, and
(ii) a certificate of good standing for the Company issued by the Secretary of
State of the State of South Dakota as of a date not more than ten days prior to
the Closing Date, certified in the case of subsection (i) of this Section as of
the Closing Date by the Secretary of the Company as being true, correct and
complete.
7.4 OPINION OF COUNSEL. Buyer shall have received an opinion dated as
of the Closing Date from counsel for the Company and the Shareholders, in form
and substance acceptable to Buyer, to the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of South Dakota and is
authorized to carry on the business now conducted by it and to own or lease the
properties now owned or leased by it;
(b) The Company has obtained all necessary authorizations and
consents of its Board of Directors and the shareholders to effect the
Acquisition;
(c) All issued and outstanding shares of capital stock of the
Company are owned as set forth on SCHEDULE 4.4 hereto;
(d) Such counsel does not know or have reason to believe that
there is any Proceeding, pending or threatened which might result in any
Material Adverse Effect on any of the Company or the Purchased Assets, or which
questions the validity of this Agreement;
(e) Such counsel does not know or have reason to believe that
any event has occurred or state of facts exists would constitute a Breach of any
of the representations and warranties set forth in ARTICLE 4 of this Agreement;
(f) The execution and delivery of this Agreement by each of
the Sellers , the performance by each of the Company and the Shareholders of
their respective obligations hereunder and the consummation by each of them of
the transactions contemplated by this Agreement will not (a) contravene any
provision of the Articles of Incorporation or Bylaws of the Company, (b) violate
or conflict with any applicable law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment or order of any Governmental Authority or any
arbitration award which is either applicable to, binding upon or enforceable
against the Company or the Shareholders, (c) conflict with, result in a Breach
of, or constitute a default (or event which would, with the passage of time or
the giving of notice or both, constitute a default) under or give rise to a
right of payment or right to terminate, amend, modify, abandon or accelerate any
Contract which is applicable to, binding upon or enforceable against the Company
or the Shareholders, (d) result in or require the creation or imposition of any
Lien upon or with respect to any of the Purchased Assets, (e) give to any
individual or entity a right or claim against any of the Company or the
Shareholders, or (f) require the consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person; and
(g) This Agreement is a valid and binding obligation of each
of the Sellers and is enforceable against the Sellers in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or general equitable principles.
19
7.5 CONSENTS. Each of the Sellers shall have received consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any rights or obligations of any of the Sellers from any Person from whom such
consent or waiver is required, including from any Governmental Authority or
under any Assigned Contract or other law or regulation which shall not have been
revoked or modified as of the Closing Date, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Assigned Contracts, either by the terms thereof or as a matter of law.
7.6 LICENSES. Buyer and the Buyer Assignee shall have received all
approvals, permits and licenses that are necessary to own and operate the
Purchased Assets and the businesses of the Company as currently being conducted,
including a license from the Company to Buyer (i) for the use of the MDIP, Inc.
and Medical Data Insurance Processing trade names in connection with enrollment
forms and with contracts for which assignment or novation is not practical; and
(ii) for the provision of a temporary link between the Company's website and
that of the Buyers or Buyer Assignee, each for a period of six (6) months, or as
otherwise agreed to by the parties.
7.7 NO ADVERSE LITIGATION. There shall not be pending or threatened any
Proceeding by or before any court or other Governmental Authority which shall
seek to restrain, prohibit, invalidate or collect damages arising out of the
Acquisition or any other transaction contemplated hereby, and which, in the
judgment of Buyer, makes it inadvisable to proceed with the Acquisition and
other transactions contemplated hereby.
7.8 APPROVAL. The Board of Directors of Buyer shall have authorized and
approved this Agreement, the Acquisition and the transactions contemplated
hereby.
7.9 DUE DILIGENCE REVIEW. Buyer shall be satisfied, in its sole and
absolute discretion, with the results of its due diligence review regarding the
Purchased Assets, and the Company and its operations, financial condition,
prospects, Contracts, customers and vendors. Due Diligence shall be completed by
July 26, 2002, unless otherwise extended by the parties in writing.
7.10 UCC FILINGS. A search of the UCC records as of the Closing Date,
with respect to the Company and the Purchased Assets shall not disclose any
active filings other than filings with respect to the Liens identified on
SCHEDULE 4.14(A) hereto.
7.11 DELIVERY OF PURCHASED ASSETS. At the Closing, the Company shall
duly execute and deliver to Buyer a Xxxx of Sale and Assignment and such other
instruments of transfer of title as are necessary in the opinion of Buyer to
transfer to Buyer good and marketable title to the Purchased Assets (in each
case, in form and substance satisfactory to Buyer), and shall deliver to Buyer
immediate possession of the Purchased Assets.
7.12 BULK SALES. Compliance (or exemption therefrom) by the Company
with all applicable laws relating to bulk sales.
7.13 EMPLOYMENT AGREEMENTS. The Buyer shall use best efforts to get
each employee to continue it's employment with Buyer after closing. The Buyer
and the following individual(s) shall have entered into a written Employment
Agreement(s) at the annual salary specified next to each individual:
(a) XX Xxxxxx $100,000
(b) Xxxx Xxxxxx: $75,000
(c) Xxxxx Xxxxxxx: $75,000
20
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF
THE SHAREHOLDERS AND THE COMPANY
The obligation of the Sellers to effect the Acquisition shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part in writing by
the Sellers:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Buyer contained in this
Agreement shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date. Buyer shall have
performed and complied with all of its obligations required by this Agreement to
be performed by Buyer or complied with at or prior to the Closing Date. Buyer
shall have delivered to the Shareholders a certificate, dated as of the Closing
Date, and signed by an executive officer, certifying that such representations
and warranties are true and correct and that all such obligations have been
complied with and performed.
8.2 CORPORATE CERTIFICATE. Buyer shall have delivered to the
Shareholders(i) copies of resolutions adopted by the Board of Directors of Buyer
authorizing the transactions contemplated by this Agreement, and (ii) a
certificate of status of Buyer issued by the Secretary of State of the State of
Florida as of a date not more than ninety days prior to the Closing Date,
certified in the case of subsections (i) of this Section as of the Closing Date
by the Secretary of Buyer as being true, correct and complete.
8.3 PURCHASE PRICE. Buyer shall have paid the Purchase Price to the
Shareholders.
8.4 NO ORDER OR INJUNCTION. No court of competent jurisdiction or other
Governmental Authority shall have issued or entered any order or injunction
restraining or prohibiting the transactions contemplated hereby, which remains
in effect at the time of Closing.
ARTICLE 9
INDEMNIFICATION
9.1 AGREEMENT BY SELLERS TO INDEMNIFY. The Sellers , jointly and
severally, agree to indemnify and hold Buyer, the Buyer Assignee and each of
their respective officers, directors, employees, attorneys and Affiliates (each
a "Buyer Indemnified Party" and together the "Buyer Indemnified Parties")
harmless from and against the aggregate of all expenses, losses, costs,
deficiencies, Liabilities and damages (including related counsel and paralegal
fees and expenses) incurred or suffered by any of the Buyer Indemnified Parties
arising out of or resulting from (i) any Breach of a representation or warranty
made by any of the Sellers in or pursuant to this Agreement, (ii) any Breach of
a covenant or agreement made by any of the Sellers in or pursuant to this
Agreement, (iii) any inaccuracy in any certificate, instrument or other document
delivered by any of the Sellers pursuant to or in connection with this
Agreement, (iv) any tax Liability of any of the Sellers arising from or relating
to any period occurring on or prior to the Closing Date, (v) any regulatory and
licensing obligations of any of the Sellers arising on or prior to the Closing
Date, (vi) the Company's ownership of the Purchased Assets prior to Closing, or
(vii) any claims of any third parties arising from or relating to any facts,
circumstances or events occurring on or prior to the Closing Date with respect
to the Company or the Purchased Assets or any of the foregoing, whether or not
disclosed to Buyer herein or in any schedule hereto (collectively, "Buyer
Indemnifiable Damages"). Without limiting the generality of the foregoing, with
respect to the measurement of Indemnifiable Damages, Buyer shall have the right
to be put in the same pre-tax consolidated financial position as it would have
been in had each of the representations and warranties of each of the Sellers
hereunder been true and correct and had the covenants and agreements of each of
the Sellers hereunder been performed in full. Notwithstanding the foregoing
provisions, no claim for Buyer Indemnifiable Damages shall be asserted by the
Buyer Indemnified Parties until the aggregate of all Buyer Indemnifiable Damages
exceeds US$25,000.00 (the "Buyer Indemnification Threshold"), at which time the
Buyer Indemnified Parties may assert claims for the full amount of Buyer
Indemnified Damages. Notwithstanding anything to the contrary set forth herein,
the total Buyer Indemnifiable Damages for which the Sellers shall be
collectively liable hereunder shall not exceed an amount equal to the Purchase
Price (the Buyer Indemnification Cap"). Notwithstanding anything to the contrary
set forth herein, the Buyer Indemnification Cap shall not apply to and there
shall be no limitation or restriction whatsoever on the Liability of the Sellers
21
under this ARTICLE 9 for Buyer Indemnifiable Damages with respect to or arising
from any one or more of the following and no Buyer Indemnifiable Damages arising
from any of the following shall be included in determining whether the Buyer
Indemnification Cap or the Buyer Indemnification Threshold has been met: (a) a
Breach of any one or more of the representations and warranties set forth in the
first or last sentence of SECTION 4.1, or in SECTION 4.2, SECTION 4.3, SECTION
4.4, SECTION 4.5, SECTION 4.15, and SECTION 4.19; (b) any Buyer Indemnifiable
Damages arising under subsection (iv) of SECTION 9.1 above; (c) any willful or
intentional Breach of any representation, warranty, covenant or agreement made
in or pursuant to this Agreement (including in the Schedules and Exhibits
attached hereto) or in any certificate, instrument or other document delivered
by any of the Sellers pursuant to this Agreement; and (d) any act of fraud or
act in the nature of fraud in connection with the execution, delivery or
performance of this Agreement, including any fraudulent representation or
warranty made in or pursuant to this Agreement (including in the Schedules and
Exhibits attached hereto) or in any certificate, instrument or other document
delivered by the Sellers pursuant to or in connection with this Agreement.
9.2 AGREEMENT BY BUYER TO INDEMNIFY. Buyer agrees to indemnify and hold
the Sellers and their respective heirs and personal representatives (each a
"Seller Indemnified Party" and together the "Sellers Indemnified Parties")
harmless from and against the aggregate of all expenses, losses, costs,
deficiencies, Liabilities and damages (including related counsel and paralegal
fees and expenses) incurred or suffered by any of the Sellers Indemnified
Parties arising out of or resulting from (i) any Breach of a representation or
warranty made by Buyer in or pursuant to this Agreement, (ii) and any Breach of
a covenant or agreement made by Buyer in or pursuant to this Agreement, (iii)
any inaccuracy in any certificate, instrument or other document delivered by
Buyer pursuant to or in connection with this Agreement (collectively, "Sellers
Indemnifiable Damages"). Notwithstanding the foregoing provisions, no claim for
Sellers Indemnifiable Damages shall be asserted by the foregoing Sellers
Indemnified Parties until the aggregate of all Sellers Indemnifiable Damages
exceeds US$25,000 (the "Sellers Indemnification Threshold"), at which time the
foregoing Sellers Indemnified Parties may assert claims for the full amount of
the Sellers Indemnifiable Damages. Notwithstanding anything to the contrary set
forth herein, the total Sellers Indemnifiable Damages for which Buyer shall be
liable hereunder shall not exceed an amount equal to the Purchase Price (the
"Sellers Indemnification Cap"). Notwithstanding anything else to the contrary
set forth herein, the Sellers Indemnification Cap shall not apply to and there
shall be no limitation or restriction whatsoever on the Liability of Buyer under
this ARTICLE 9 for Sellers Indemnifiable Damages with respect to any claim
relating to or arising from any one or more of the following and no Sellers
Indemnifiable Damages arising from any of the following shall be included in
determining whether the Sellers Indemnification Cap or the Sellers
Indemnification Threshold has been met: (a) a Breach of any one or more of the
representations and warranties set forth in SECTION 3.1, SECTION 3.2 and SECTION
3.3; (b) any willful or intentional Breach of any representation, warranty,
covenant or agreement made in or pursuant to this Agreement (including in the
Schedules attached hereto) or in any certificate, instrument or other document
delivered by Buyer pursuant to this Agreement; and (c) any act of fraud or act
in the nature of fraud in connection with the execution, delivery and
performance of this Agreement, including any fraudulent representation or
warranty made in or pursuant to this Agreement (including in the Schedules and
Exhibits attached hereto) or in any certificate, instrument or other document
delivered by Buyer pursuant to or in connection with this Agreement.
9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Sellers and Buyer in this Agreement
or pursuant hereto shall survive the closing of the transactions contemplated
hereby for a period of two (2) years following the Closing Date; PROVIDED,
HOWEVER, that (i) the representations and warranties set forth in SECTION 3.1,
SECTION 3.2, SECTION 3.3, the first or last sentence of SECTION 4.1, or in
SECTION 4.2, SECTION 4.3, SECTION 4.4, SECTION 4.5, and the first sentence of
SECTION 4.14 shall survive indefinitely, and (ii) the representations and
warranties set forth in SECTION 4.13, SECTION 4.15, and SECTION 4.18 shall
expire at the time the latest applicable statute of limitations expires for the
enforcement by an applicable Governmental Authority or any other Person of any
remedy with respect to a violation of or the subject matter covered by such
22
representations and warranties. No claim for the recovery of any Buyer
Indemnifiable Damages or Sellers Indemnifiable Damages with respect to the
representations and warranties in this Agreement may be asserted by any of the
parties after such representations and warranties shall expire in accordance
with the terms of this Agreement; PROVIDED, HOWEVER, that claims for Buyer
Indemnifiable Damages or Sellers Indemnifiable Damages first asserted within the
applicable period shall not thereafter be barred. Notwithstanding any Knowledge
of facts, each party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any other documents or papers delivered in connection herewith.
Each representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement.
9.4 SECOND AND THIRD PARTY ACTIONS.
(a) For the purpose of this SECTION 9.4, the term
"Indemnifiable Damages" means the Buyer Indemnifiable Damages or the Sellers
Indemnifiable Damages, as the context requires, the term "Indemnified Party"
means the Buyer Indemnified Parties or the Sellers Indemnified Parties, as the
context requires, and the term "Indemnifying Party" means the party (Buyer, on
the one hand, or the Sellers , on the other hand) against whom a claim for
Indemnifiable Damages is to be made.
(b) With respect to any action commenced by a third party
which could give rise to Indemnifiable Damages, the Indemnifying Party shall
have the right to participate in, and, to the extent that it may wish, jointly
or individually, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party; PROVIDED, that prior to the assumption of
such defense the Indemnifying Party must acknowledge in writing to the
Indemnified Party that the Indemnifying Party shall be fully responsible (with
no reservation of rights) for all Indemnifiable Damages relating to such claim;
PROVIDED, FURTHER, if the defendants in any action include both the Indemnified
Party and the Indemnifying Party and there is a conflict of interest as
reasonably determined by the Indemnified Party or by counsel for the
Indemnifying Party which would prevent such counsel from also representing the
Indemnified Party, then the Indemnified Party shall have the right to select
separate counsel to participate in the defense of such action on behalf of the
Indemnified Party (at the expense of the Indemnifying Party). After notice from
the Indemnifying Party to the Indemnified Party of its election to so assume the
defense thereof, the Indemnifying Party will not be liable to the Indemnified
Party pursuant to the provisions of SECTION 9.1 for the related counsel and
paralegal fees and expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the Indemnified Party shall have employed counsel in
accordance with the provisions of the preceding sentence; (ii) the Indemnifying
Party shall not have employed counsel satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of the
commencement of the action, or (iii) the Indemnifying Party has authorized the
employment of counsel for the Indemnified Party at the expense of the
Indemnifying Party. Notwithstanding anything to the contrary in this SECTION
9.4(B), the Indemnifying Party shall have no right to settle or compromise any
action for which they have assumed the defense to the extent the settlement or
compromise provides for any injunctive or other equitable relief against the
Indemnified Party or otherwise provides for any continuing obligations of any
nature against the Indemnified Party or loss of rights of the Indemnified Party,
and nothing stated in this SECTION 9.4(B) shall otherwise affect the
Indemnifying Party's obligation to pay the Indemnified Party all Indemnifiable
Damages (other than such related counsel and paralegal fees and expenses)
pursuant to SECTION 9.1. With respect to any such third party action assumed by
the Indemnifying Party, the parties agree to provide each other with all
material information that they request relating to the handling of such matter.
(c) In the event any Indemnified Party should have a claim for
Indemnifiable Damages against any Indemnifying Party hereunder that does not
involve a third party claim (for example, but without limitation, a claim for
Indemnifiable Damages resulting from a breach of a representation, warranty or
covenant), the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of the Indemnifiable Damages, specifying the nature and
specific basis for such Indemnifiable Damages and the indemnity claim and the
amount or the estimated amount thereof to the extent then feasible and enclosing
a copy of all papers (if any) served with respect to the claim (the "Claim
Notice"). If the Indemnifying Party does not notify the Indemnified Party within
30 days from the date the Claim Notice is given that it disputes such Claim, the
amount of such Claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
9.5 RIGHT OF OFFSET. Subject to the Buyer Indemnification Threshold, if
applicable, the Buyer shall have the right at its option to offset against any
Escrowed Fund (whether payable by the Buyer or the Buyer Assignee) due to any
Seller under the Escrow Agreement, any and all amounts due, after giving effect
23
to the tax consequences affecting Buyer as a result of the matter in question
(in each case as determined in the reasonable judgment of Buyer), the Buyer or
the Buyer Assignee for any and all Buyer Indemnifiable Damages owed by the
Sellers , jointly or severally, pursuant to this Article 9.
ARTICLE 10
TERMINATION
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of all of the parties hereto at
any time prior to the Closing; or
(b) by Buyer in the event of a material Breach by any of the
Sellers of any provision of this Agreement which Breach is not cured within
fifteen (15) days of the Sellers' receipt of written notice thereof from Buyer
or which Breach by its nature cannot be cured prior to Closing; or
(c) by the Company and the Shareholders in the event of a
material Breach by Buyer of any provision of this Agreement which Breach is not
cured within fifteen (15) days of Buyer's receipt of written notice thereof from
the Shareholders or which Breach, by its nature cannot be cured prior to
Closing; or
(d) if the Closing shall not have occurred by July 31, 2002.
10.2 EFFECT OF TERMINATION.
(a) Subject to the remainder of this SECTION 10.2 below,
except for the provisions of ARTICLE 9 hereof, which shall survive any
termination of this Agreement, in the event of termination of this Agreement
pursuant to SECTION 10.1 (or pursuant to any other provision hereof expressly
permitting termination), this Agreement shall forthwith become void and of no
further force and effect and the parties shall be released from any and all
Liabilities hereunder; PROVIDED, HOWEVER, that nothing herein shall relieve any
party from Liability for fraud or any act in the nature of fraud committed in
connection with any of its representations, warranties, covenants or agreements
set forth in this Agreement.
ARTICLE 11
GENERAL PROVISIONS
11.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
IF TO BUYER:
ProxyMed, Inc.
0000 Xxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxx, President (or successor)
Facsimile: 000-000-0000
WITH A COPY TO:
ProxyMed, Inc.
0000 Xxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx, In-House Counsel
(or successor)
Facsimile: 000-000-0000
24
IF TO THE COMPANY AND
THE SHAREHOLDERS:
MDIP, Inc.
X.X. Xxxxxx
0000 Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxx, XX 00000
Facsimile: 000-000-0000
WITH A COPY TO:
Xxxxx, Xxxxx & Xxxxxx, P.C.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxxx
Telecopy: 000-000-0000
Notice shall be deemed given on the date sent if sent by facsimile transmission
and on the date delivered (or the date of refusal of delivery) if sent by
overnight delivery, or certified or registered mail.
11.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto), the other documents signed by the parties which are
delivered contemporaneously herewith, and other documents delivered at the
Closing or after Closing pursuant hereto, contain the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings (oral or written) between or among the parties with respect
to such subject matter. The Exhibits and Schedules constitute a part hereof as
though set forth in full above.
11.3 EXPENSES. Except as otherwise provided herein, (i) the
Shareholders shall pay their own and the Company's fees and expenses, including
accounting and counsel fees, incurred in connection with this Agreement or any
transaction contemplated hereby, and (ii) Buyer shall pay its own fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
11.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any Breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
Breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
11.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective heirs, executors, personal representatives, trustees, guardians,
attorneys-in-fact, successors and assigns. Nothing expressed or implied herein
shall be construed to give any other person any legal or equitable rights
hereunder. Except as expressly provided herein, the rights and obligations of
this Agreement may not be assigned or delegated by any of the parties hereto
without the prior written consent of the non-assigning or non-delegating
parties. The parties acknowledge that Buyer may assign its rights under this
Agreement to purchase the Purchased Assets and delegate its obligations under
this Agreement to pay or discharge the Assumed Liabilities to one or more Buyer
Assignees, and upon such assignment, the Buyer Assignees shall have full rights
25
under this Agreement as if they were parties hereto and shall be deemed third
party beneficiaries with respect to all rights and remedies provided to Buyer
hereunder or otherwise provided by law or in equity provided that in such event
Buyer agrees to guarantee the performance of all of Buyer Assignee's obligations
to the Shareholders under this Agreement.
11.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
11.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Time shall be of the essence in this Agreement.
11.8 SEVERABILITY. If any word, phrase, sentence, clause, section,
subsection or provision of this Agreement as applied to any party or to any
circumstance is adjudged by a court to be invalid or unenforceable, the same
will in no way affect any other circumstance or the validity or enforceability
of any other word, phrase, sentence, clause, section, subsection or provision of
this Agreement. If any provision of this Agreement, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby or otherwise, the parties agree that the court making such
determination shall have the power to reduce the duration and/or area of such
provision, and/or to delete specific words or phrases, and in its reduced form,
such provision shall then be enforceable and shall be enforced.
11.9 GOVERNING LAW. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Florida.
11.10 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly agrees
that (a) before executing this Agreement, said party has fully informed itself
of the terms, contents, conditions and effects of this Agreement; (b) said party
has relied solely and completely upon its own judgment in executing this
Agreement; (c) said party has had the opportunity to seek and has obtained the
advice of counsel before executing this Agreement; (d) said party has acted
voluntarily and of its own free will in executing this Agreement; (e) said party
is not acting under duress, whether economic or physical, in executing this
Agreement; and (f) this Agreement is the result of arm's length negotiations
conducted by and among the parties and their respective counsel.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
26
NOW THEREFORE, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
PROXYMED, INC.
By: /s/ XXXXXX X. XXXXXX
--------------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: EVP, Chief Financial Officer and Treasurer
MDIP, INC.
By: /s/ XXXXXXXX X. XXXXXX
--------------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President
27
