EXHIBIT 2.1
MERGER AGREEMENT AND SUPPLEMENTAL AGREEMENT DATED JUNE 17, 1997
AND LETTER OF AMENDMENT DATED JUNE 27, 1997
U.S. Health Management Corporation
000 Xxxxxx Xx., Xxxxxxxx, XX 00000
Tel: 516/000-0000 fax: 526/000-0000
June 27, 1997
Affordable Diagnostics Inc. ("Affordable")
Bronx Diagnostic Imaging, LLC ("Bronx Diagnostic")
Yonkers Diagnostic Imaging, LLC ("Yonkers Diagnostic")
N.E. Medical Billing Services, Inc. ("N.E. Billing")
Magnetic Connections ("Magnetic")
Xxxxxxxx Xxxxxx ("X. Xxxxxx")
Xxxxx Xxxxx ("X. Xxxxx")
Xxxxxxx X. Xxxxx ("X. Xxxxx")
Xxxxxxxx X. Xxxxxx ("X. Xxxxxx")
Xxxxxxx Xxxxxx ("X. Xxxxxx")
c/o Affordable Diagnostics, Inc.
RD 2, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
LETTER OF AMENDMENT
Gentlemen:
This letter, when executed by all appropriate
parties, will serve to confirm their agreement to amend, modify
and supplement, as hereinafter set forth, the Agreement of Merger
dated June 17, 1997 ("Merger Agreement") between Affordable and
HMCM Inc., a Delaware corporation ("HMCM - Delaware") and the
Supplemental Agreement of the same date ("Supplemental Agreement")
among Affordable, Bronx Diagnostic, Yonkers Diagnostic, N.E.
Billing, Magnetic, X. Xxxxxx, X. Xxxxx, X. Xxxxx, X. Xxxxxx and X.
Xxxxxx (hereinafter together sometimes referred to as the "Selling
Parties") and U.S. Health Management Corporation ("HMC") and HMCM
- Delaware.
1. The Merger Agreement and the Supplemental
Agreement are amended to substitute for HMCM - Delaware a New York
corporation of the same name, HMCM Inc. ("HMCM - New York") as the
entity into which Affordable will be merged.
2. Notwithstanding the provisions of Section 4 of
the Supplemental Agreement, Affordable will assume the
indebtedness of Bronx Diagnostic, Yonkers Diagnostic, N.E. Billing
and Magnetic to X. Xxxxxx, X. Xxxxx, X. Xxxxx and X. Xxxxxx, to
the extent such indebtedness is reflected on Exhibit A to the
Supplemental Agreement. All of such indebtedness shall be deemed
fully satisfied upon the effective date, June 30, 1997 ("Effective
Date") of the merger between HMCM - New York and Affordable, and
X. Xxxxxx, X. Xxxxx, X. Xxxxx and X. Xxxxxx expressly release HMCM
- New York and Affordable from all of said indebtedness effective
on the Effective Date.
3. In lieu of the escrow agreement with Xxxxx
Xxxxxx Inc. as escrow agent as contemplated in Section 5 of the
Supplemental Agreement, the parties will enter into a mutually
agreeable alternative arrangement to effectuate as nearly as
possible the intent of the parties reflected in said Section 5 of
the Supplemental Agreement.
4. Supplementing the provision of Section 2,
Section 6(d) and Exhibit K of the Supplemental Agreement,
Affordable, Bronx Diagnostic, Yonkers Diagnostic, N.E. Billing and
Magnetic represent that the shares of Common Stock of Affordable
issued and outstanding immediately prior to the sale of the assets
of Bronx Diagnostic, Yonkers Diagnostic, N.E. Billing and Magnetic
to Affordable were owned by X. Xxxxxx, X. Xxxxx, X. Xxxxx, X.
Xxxxxx and X. Xxxxxx and that the shares of Common Stock of
Affordable issued and outstanding immediately prior to the merger
with HMCM - New York were owned by X. Xxxxxx, X. Xxxxx, X. Xxxxx,
X. Xxxxxx and X. Xxxxxx.
5. Any allocation of the purchase price to the
assets of Affordable which may be required in connection with the
merger of Affordable and HMCM - New York will be determined by
HMCM - New York and HMC in accordance with generally accepted
accounting principles. Any allocation required in connection with
the acquisition by Affordable of the assets of Bronx Diagnostic,
Yonkers Diagnostic, N.E. Billing and Magnetic shall be in
accordance with generally accepted accounting principles and be
mutually agreed upon by the Selling Parties and HMC and HMCM - New
York.
6. The Selling Parties agree they will use their
best efforts to obtain within 30 days of the date hereof any
consents to assignments of leases, contracts and other agreements
which are required, as or may be requested by HMCM, but have not
as of the date hereof been obtained in connection with the
transactions contemplated by the Merger Agreement and Supplemental
Agreement, as amended by the Letter Amendment.
Very truly yours,
U.S. HEALTH MANAGEMENT CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx, President
Xxxxxxx Xxxxxxxx, President
HMCM INC. (Delaware)
By: /s/ Xxxxxxx Xxxxxxxx, President
Xxxxxxx Xxxxxxxx, President
HMCM INC. (New York)
By: /s/ Xxxxxxx Xxxxxxxx, President
Xxxxxxx Xxxxxxxx, President
AGREED:
AFFORDABLE DIAGNOSTICS, INC.
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
BRONX DIAGNOSTIC IMAGING, LLC
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
YONKERS DIAGNOSTIC IMAGING, LLC
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
N.E. MEDICAL BILLING SERVICES, INC.
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
MAGNETIC CONNECTIONS
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
/s/ Xxxxxxxx Xxxxxx
XXXXXXXX XXXXXX
/s/ Xxxxx Xxxxx
XXXXX XXXXX
/s/ Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX
/s/ Xxxxxxxx X. Xxxxxx
XXXXXXXX X. XXXXXX
/s/ Xxxxxxx Xxxxxx
XXXXXXX XXXXXX
AGREEMENT OF MERGER BETWEEN
AFFORDABLE DIAGNOSTICS INC. AND HMCM INC.
AGREEMENT OF MERGER dated as of June 17, 1997, by
and between Affordable Diagnostics Inc., a New York corporation
("ADI"), and HMCM Inc., a Delaware corporation ("Subsidiary"),
said two corporations being herein collectively referred to as the
"Constituent Corporations."
The authorized capital stock of ADI consists of 200
shares of common stock, no par value per share (the "ADI Common
Stock"). As of June 17, 1997, an aggregate of 200 shares of ADI
Common Stock (and no other capital stock, options or other equity
interests in ADI) were issued and outstanding and no shares of ADI
Common Stock were held in the treasury of ADI.
The authorized capital stock of Subsidiary consists
of 1,500 shares of common stock, par value $.01 per share (the
"Subsidiary Common Stock"), all of which shares are issued and
outstanding and are owned by U.S. Health Management Corporation, a
Delaware corporation ("HMC"). HMC is a wholly owned subsidiary of
Fonar Corporation, a Delaware corporation ("Fonar").
The respective Boards of Directors of ADI,
Subsidiary, HMC and Fonar deem the merger of ADI with and into
Subsidiary (the "Merger") pursuant to the terms and conditions of
this Agreement of Merger to be desirable and in the best interests
of their respective shareholders. The Boards of Directors and
shareholders of ADI and Subsidiary have approved this Agreement of
Merger.
Concurrently with the execution and delivery of this
Agreement of Merger ADI, Subsidiary, HMC and other interested
parties are entering into a Supplemental Agreement dated as of the
date hereof (the "Supplemental Agreement") setting forth certain
representations, warranties, covenants and agreements relating to
the Merger provided for herein.
In consideration of the premises and of the mutual
covenants and agreements herein contained, and for the purpose of
prescribing the terms and conditions of the Merger, the mode of
carrying the same into effect, the manner and the basis for
converting the shares of ADI Common Stock into the right to
receive shares of Fonar Common Stock and such other details and
provisions as are deemed necessary or desirable, ADI and
Subsidiary have agreed and do hereby agree, subject to the terms
and conditions hereinafter set forth, as follows:
ARTICLE I
In accordance with the provisions of this Agreement
of Merger , the Delaware General Corporation Law and the New York
Business Corporation Law, ADI shall be merged with and into
Subsidiary, which shall be and is herein sometimes referred to as
the "Surviving Corporation." The Surviving Corporation shall
continue its corporate existence as a Delaware corporation and its
name shall continue to be HMCM Inc.
ARTICLE II
(a) Except as herein specifically set forth or as
otherwise provided by law, the identity, existence, rights,
privileges, powers, immunities, purposes and franchises, both
public and private, of Subsidiary shall continue in effect and be
unimpaired by the Merger and the rights, privileges, powers,
immunities, purposes and franchises, both public and private, of
ADI shall be merged into Subsidiary and Subsidiary shall, as the
Surviving Corporation, be fully vested therewith. The separate
existence and the corporate organization of ADI shall cease when
the Merger shall become effective.
(b) This Agreement of Merger and the Merger shall
become effective when the following actions shall have been
completed: (i) all conditions to the effectiveness of the Merger
contained in this Agreement of Merger, the Supplemental Agreement
or any subsequent agreement between the parties shall have been
satisfied or waived and (ii) Certificates of Merger of ADI and
Subsidiary (the "Certificates of Merger") and any other documents
required by the Delaware General Corporation Law and New York
Business Corporation Law shall have been executed and verified, to
the extent required under applicable law, and filed in the offices
of the Departments of State of the States of Delaware and New York
in accordance with, the Delaware General Corporation Law and New
York Business Corporation Law. Said Certificates of Merger shall
specify that June 30, 1997 (or such other mutually agreeable date)
will be the effective time of the merger. The date and time when
the Merger shall become effective as aforesaid is herein referred
to as the "Effective Time of the Merger."
ARTICLE III
(a) The manner and basis of converting the shares
of ADI Common Stock into the right to receive shares of Fonar
Common Stock shall be as follows:
(i) Each share of Subsidiary Common Stock
which shall be outstanding immediately prior to the Effective Time
of the Merger shall, by virtue of the Merger and without any
action on the part of HMC, the sole shareholder of Subsidiary, be
converted into, and shall become outstanding as, one share of
common stock, par value $0.01 per share, of the Surviving
Corporation.
(ii) The shares of ADI Common Stock which
shall be issued outstanding immediately prior to the Effective
Time of the Merger, shall, by virtue of the Merger and without any
action on the part of the holders thereof, be deemed canceled and
the holders thereof shall cease to have any rights with respect
thereto except the right to receive in the aggregate 2,740,000
shares of Common Stock of Fonar Corporation from the Surviving
Corporation in lieu of the issued and outstanding shares of ADI
Common Stock in the manner hereinafter provided.
(b) After the Effective Time of the Merger, the
holders of the certificates theretofore representing shares of
issued and outstanding ADI Common Stock shall surrender such
certificates to the Surviving Corporation or such disbursing agent
as may be appointed by HMCM or HMC and receive in exchange the
shares of Fonar Common Stock. It shall be a condition of such
exchange that the certificates so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that all
applicable transfer and other taxes shall have been paid. The
shares of Fonar Common Stock shall be issued in accordance with
the terms of the Supplemental Agreement and be subject to the
escrow, contingency and other applicable restrictions, terms and
conditions contained in the Supplemental Agreement.
ARTICLE IV
At the Effective Time of the Merger the separate
existence of ADI shall cease and the Surviving Corporation shall
possess all the rights, privileges, powers, immunities, purposes
and franchises, both public and private, of each of the
Constituent Corporations; all real property and personal property,
tangible and intangible, of every kind and description, belonging
to each of the Constituent Corporations shall be vested in the
Surviving Corporation without further act or deed, and the title
to any real estate, or any interest therein, vested in either
Constituent Corporation shall not revert or be in any way impaired
by reason of such Merger; the Surviving Corporation shall be
liable for all the obligations and liabilities of each of the
Constituent Corporations, and any claim existing or action or
proceeding pending by or against either Constituent Corporation
may be enforced against the Surviving Corporation; and neither the
rights of creditors nor any liens upon or security interests in
the property of either Constituent Corporation shall be impaired
by the Merger.
ARTICLE V
If, at any time after the Effective Time of the
Merger, the Surviving Corporation shall consider or be advised
that any further assignments or assurances in law or any other
things are necessary or desirable to vest, perfect or confirm, on
record or otherwise, in the Surviving Corporation title to or
possession of any property or right of ADI acquired or to be
acquired by reason of, or as a result of, the Merger, or otherwise
to carry out the purpose of this Agreement of Merger, ADI and its
proper officers and directors shall be deemed to have granted to
the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such proper deeds, assignments and
assurances in law and do all things necessary or proper to vest,
perfect or confirm title to and possession of such property or
rights in the Surviving Corporation, or otherwise to carry out the
purpose of this Agreement of Merger, and the proper officers and
directors of the Surviving Corporation shall be fully authorized
in the name of ADI or otherwise to take any and all such action.
ARTICLE VI
For the convenience of ADI and Subsidiary and to
facilitate the execution, acknowledgment and filing of this
Agreement of Merger and of the Certificates of Merger, any number
of counterparts hereof and of the Certificates of Merger may be
executed and each such counterpart shall be deemed to be an
original instrument.
At any time prior to the Effective Time of the
Merger the Constituent Corporations may, by written agreement (a)
extend the time for the performance of any of the obligations or
other acts contained in this Agreement of Merger or in the
Supplemental Agreement, (b) waive any inaccuracies in the
representations or warranties contained in this Agreement of
Merger or in the Supplemental Agreement or in any document
delivered pursuant thereto and (c) waive compliance with any of
the covenants or agreements contained in this Agreement of Merger
or in the Supplemental Agreement. At any time prior to the
Effective Time of the Merger, if authorized by their respective
Boards of Directors and Shareholders, to the extent required by
the Delaware General Corporation Law and New York Business
Corporation Law, the Constituent Corporations may, by written
agreement, amend or supplement any of the provisions of this
Agreement of Merger. Any written instrument or agreement referred
to in this paragraph shall be validly and sufficiently authorized
for the purposes of this Agreement of Merger if signed on behalf
of each of the Constituent Corporations by a person authorized to
sign this Agreement of Merger.
IN WITNESS WHEREOF, each of the Constituent
Corporations has caused this Agreement of Merger to be signed in
its corporate name by its Chairman of the Board or President and
its corporate seal to be affixed hereto all as of the date first
above written.
AFFORDABLE DIAGNOSTICS INC.
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx, President
(Corporate Seal)
Attest:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
HMCM INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx, President
(Corporate Seal)
Attest:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
SUPPLEMENTAL AGREEMENT
AGREEMENT, dated June 17, 1997, between U.S. HEALTH MANAGEMENT
CORPORATION ("HMC"), a Delaware corporation having its principal
place of business in Melville, New York, HMCM INC., a Delaware
corporation wholly owned by HMC ("Subsidiary"), AFFORDABLE
DIAGNOSTIC INC., a New York corporation having its principal place
of business in Brewster, New York ("Affordable"), BRONX DIAGNOSTIC
IMAGING, LLC, a limited liability company having its principal
place of business in the Bronx, New York ("Bronx Diagnostic"),
MAGNETIC CONNECTIONS, a New York General Partnership having its
principal place of business in Brewster, New York ("Magnetic"),
YONKERS DIAGNOSTIC LLC, a New York limited liability company
having its principal place of business in Yonkers, New York
("Yonkers Diagnostic"), N.E. MEDICAL BILLING SERVICE, a New York
corporation having its principal place of business in Riverdale,
New York ("N.E. Billing") and Xxxxxxxx Xxxxxx, Xxxxx Xxxxx,
Xxxxxxx X. Xxxxx, Xxxxxxxx X. Xxxxxx and Xxxxxxx Xxxxxx,
comprising all of the shareholders, members and partners in
Affordable, Bronx Diagnostic, Magnetic Connections, Yonkers
Diagnostic and N.E. Billing (hereinafter sometimes referred to as
the "Affordable Shareholders").
1. Merger and Related Transactions. Affordable Diagnostics
will merge into Subsidiary (the "Merger") pursuant to the terms of
the Agreement of Merger being executed and delivered concurrently
herewith ("Merger Agreement"). On the effective date of the
Merger (the "Effective Date"), the shares of the Common Stock, par
value $.0001 per share ("Fonar Common Stock") of Fonar Corporation
("Fonar") to which the shareholders of Affordable Diagnostic are
entitled pursuant to the terms of the Merger will be delivered to
Xxxxx Xxxxxx Inc., or other mutually agreeable escrow agent, to be
held in escrow pursuant to the terms of this Agreement and the
Escrow Agreement. Prior to the Effective Date, with the exception
only of those assets described in Exhibit A hereto, Bronx
Diagnostic, Yonkers Diagnostic, Magnetic Connections and N.E.
Billing Service (the "Selling Management Companies") will sell,
convey, transfer, assign and deliver to Affordable, and Affordable
will purchase from the Selling Management Companies, all of the
assets and properties of the Selling Management Companies of every
kind and description, real, personal or mixed, tangible or
intangible, wherever situated and the Selling Management
Companies' respective businesses as going concerns, including,
without limitation, the following:
(a) Real Property. The real property of the
Selling Management Companies, wherever located, including, without
limitation, that described in Exhibit B attached hereto, together
with all buildings and improvements thereon.
(b) Machinery, Equipment, Et Cetera. All
machinery, equipment, vehicles, furniture, fixtures, medical
devices, instruments and other tangible personal property owned by
the Selling Management Companies on the closing of the sale to
Affordable ("Affordable Closing") including, without limitation,
all such personal property listed in the schedule attached hereto
as Exhibit C.
(c) Inventories. All inventories and supplies
owned by the Selling Management Companies, wherever located and
whether or not consigned, and not sold, used or otherwise disposed
of by the Selling Management Companies in the ordinary course of
business between the date hereof and the Affordable Closing.
(d) Cash; Accounts Receivable. All cash on hand
and bank deposits owned by the Selling Management Companies and
all accounts receivable owing to the Selling Management Companies
as of the Affordable Closing.
(e) Contracts. All right, title and interest of
the Selling Management Companies in, to and under all executory
contracts and other agreements of the Selling Management
Companies, all leases of real or personal property, including,
without limitation, all those listed in Exhibits E, F-1 and F-2
hereto.
(f) Intangible Assets, Names, Trademarks, Etc. All
intangible assets of the Selling Management Companies, including,
without limitation, the corporate names or designations, all
trademarks, trade names, copyrights and other statutory rights of
the Selling Management Companies and all referring physician
lists, customer lists, patient lists and other business
information and know-how possessed by the Selling Management
Companies.
(g) Claims. All claims of every kind and
description which the Selling Management Companies have, may have,
or be entitled to the benefit of, against any other person or
entity.
(h) Books and Records. All files, books, records
and other documents maintained by the Selling Management Companies
relating to their respective businesses and affairs, including all
financial books and records, referring physician lists, customer
lists and patient files and information.
The Selling Management Companies will deliver to
Affordable such bargain and sale deeds with covenants against
grantor's acts, bills of sale with covenants of warranty,
endorsements, assignments and other instruments as, in the opinion
of HMC's and Affordable's counsel, shall be effective to vest in
Affordable good and marketable title (subject to the mortgages,
assignments, liens and encumbrances, restrictions and defects
disclosed in this Agreement and the Exhibits hereto) to the assets
to be sold to Affordable hereunder. Alternatively, the parties to
this Agreement may effectuate the foregoing acquisition through
another mutually agreeable transaction such as a merger or
exchange of stock.
2. Consideration to Selling Management Companies; Allocation.
The purchase price of the assets to be sold by the Selling
Management Companies to Affordable shall be ___________ shares of
the Common Stock of Affordable to be divided among the Selling
Management Companies as follows: Bronx Diagnostic, ____________
shares; Yonkers Diagnostic, ___________ shares; Magnetic
Connections, ______________ shares; N.E. Billing Service,
____________ shares. [The Selling Management Companies shall
provide these numbers by June 24, 1997.] In addition, Affordable
Diagnostics shall assume certain liabilities as described in
Section 3 below. Any allocation of the purchase price to be made
shall require the agreement of HMC, Subsidiary, Affordable and the
Selling Management Companies to be reached on or before the
Affordable Closing. As soon as possible after the Affordable
Closing, the parties shall each review the allocation made by such
agreement and, if any change in such allocation is deemed by the
parties to be required by reason of events not known at the time
thereof, then the parties shall make any such further adjustment
in such allocation as may be mutually agreed.
3. Assumption of Certain Liabilities and Obligations by
Affordable. Affordable hereby agrees, effective upon the
Affordable Closing, to assume and pay or discharge, to the extent
that they have not been satisfied prior to the Affordable Closing,
the following:
(a) those liabilities and obligations of the
Selling Management Companies which are specified in the list of
liabilities of the Selling Management Companies included on
Schedule A to Exhibit L attached hereto;
(b) those liabilities and obligations of Selling
Management Companies arising in the ordinary conduct of the
business of the Selling Management Companies after the date hereof
and prior to the Affordable Closing which are identified and added
as Schedule B to Exhibit L in accordance with an agreement of the
parties to be reached on or before the Affordable Closing, it
being understood that any such liabilities and obligations to be
added as Schedule B shall have been incurred in compliance with
any restrictions hereinafter provided on the conduct of the
Selling Management Companies' businesses after the date hereof.
4. No General Assumption; Excluded Liabilities. Affordable
will not assume, be bound by or agree to pay, perform or discharge
any liabilities or obligations, fixed or contingent, of the
Selling Management Companies of any kind or nature whatsoever, and
whether incurred, accrued or arising prior to or after the
Affordable Closing, except for those which are expressly assumed
by the Buyer pursuant to the provisions of Section 3 above. All
such liabilities or obligations of the Selling Management
Companies not assumed by Affordable hereunder shall remain the
sole responsibility of the Selling Management Companies.
Furthermore, and notwithstanding any provision of Section 3 to the
contrary, Affordable will assume no liability or obligation in
respect of without limitation:
(a) any contract, lease or agreement as to which
Seller is unable to obtain necessary consents to assignment or
sublease except for those, if any, which Affordable and HMC agree
in writing should be assumed by Affordable the Affordable Closing;
(b) debts, liabilities, contracts, or obligations
of the Selling Management Companies not disclosed to HMC in
writing prior to the Affordable Closing which are required to be
so disclosed by the terms of this Agreement; or
(c) the indebtedness of the Selling Management
Companies to their equity owners, which debt is disclosed on
Exhibit A hereto.
5. Effective Date of Merger. The Effective Date of the
Merger shall be June 30, 1997, or at such other time as HMC and
Affordable may mutually agree in writing.
On the Effective Date:
(a) Surrender of Affordable Stock Certificates.
Each holder of a certificate or certificates representing issued
and outstanding shares of Affordable Common Stock shall surrender
such certificate or certificates to Subsidiary or other disbursing
agent as provided in the Merger Agreement.
(b) Delivery of Fonar Common Stock. Upon receipt
of certificates representing all of the outstanding Affordable
Common Stock, Subsidiary shall deliver certificates representing
the Fonar Common Stock as provided in the Merger to the
shareholders of Affordable in escrow as follows:
(i) Restricted Escrowed Shares. One Million
Seven Hundred Sixty-Four Thousand (1,764,000) shares (the
"Restricted Escrowed Shares"), registered in the names of the
Affordable Shareholders or their assigns as reflected in Exhibit
I-1, will be delivered to Xxxxx Xxxxxx Inc., as escrow agent, or
other mutually agreed upon party (the "Escrow Agent"), and held in
escrow in accordance with the terms hereof and the escrow
agreement to be entered into with the Escrow Agent giving effect
to the applicable provisions of this Agreement (the "Escrow
Agreement"). The Escrow Agreement shall be prepared by counsel to
HMC and be in form satisfactory to the parties thereto. HMC and
Subsidiary shall take all steps required at their sole cost and
expense to register the Restricted Escrowed Shares under the
Securities Act of 1933, as amended ("Securities Act"), as soon as
practicable following the Closing. The Affordable Stockholders
shall cooperate with HMC and Subsidiary and provide them with any
information required from them to so register the Restricted
Escrowed Shares, at HMC's and Subsidiary's expense if any expense
is entailed. Except to the extent that certain shares are to be
held in escrow and subject to offset as provided in Paragraph 15,
after the Restricted Escrowed Shares have been so registered they
may be sold by the Escrow Agent in accordance with the
instructions of the registered owners of the shares at any time,
provided, however, that the aggregate number of Restricted
Escrowed Shares which may be sold on any day shall be limited to
the lesser of 15,000 shares or fifteen percent (15%) of the
trading volume of Fonar's Common Stock (as reported on the NASDAQ
System) on the previous trading day. Upon the sale of any
Restricted Escrowed Shares, the net proceeds of the sale (net of
commissions and fees) shall be distributed to the registered owner
of the shares sold.
(ii) Registered Shares. Four Hundred Thousand
(400,000) shares will be delivered to the Affordable Shareholders
or their assigns as designated on Exhibit I-2 (the "Registered
Shares"). Such shares will be registered under the Securities Act
and may be sold by the registered owners thereof at any time,
provided, however, that the aggregate number of the Registered
Shares and Restricted Escrowed Shares which may be sold on any day
shall be limited to the lesser of 15,000 shares or fifteen percent
(15%) of the trading volume of Fonar's Common Stock (as reported
on the NASDAQ System) on the previous trading day. Each
Affordable Shareholder and his assigns listed on Exhibit I-2 shall
agree prior to Closing to observe such restrictions on the sale of
Fonar Common Stock delivered under this Agreement.
(c) Payment of Contingent Portion of Purchase Price
by Buyer. Upon receipt of certificates representing all of the
outstanding Affordable Common Stock, Subsidiary shall deliver to
the Escrow Agent 576,000 shares of Fonar Common Stock registered
in the name of the Affordable Shareholders or their assigns as set
forth in Exhibit I-3, to be held in accordance with the terms
hereof and the Escrow Agreement (the "Contingent Escrowed
Shares"). Neither the Affordable Shareholders nor their assigns,
however, shall have any rights or interests in the Contingent
Escrowed Shares unless and until certain financial goals are
reached as hereinafter provided. In the event that either the
average monthly cash receipts or average monthly net revenue
(revenue less reserves for bad debt and other adjustments to
revenue made in accordance with generally accepted accounting
principles) generated by the assets and the businesses transferred
by Affordable to the Subsidiary through the Merger hereunder (said
assets shall include the Picker 1.0 mobile unit for defined mobile
routes or fixed sites in which the mobile unit scans) over the
12-month period from July 1, 1997 through June 30, 1998 ("Average
Monthly Performance") is $375,000 or less, all of the Contingent
Escrowed Shares will be returned to the Subsidiary. In the event
that the Average Monthly Performance for both cash receipts and
net revenue is $400,000 or more, none of the Contingent Escrowed
Shares will be returned to Subsidiary. HMC and Subsidiary shall
endeavor to cooperate with and consult with the former management
of the Acquired Companies with respect to issues of billing and
services to patients as they relate specifically to the areas of
Workers Compensation and no fault insurance law. The following
chart shows the number of Contingent Escrowed Shares which will be
returned to Subsidiary at different levels of Average Monthly
Performance between $375,000 and $400,000. Where the Average
Monthly Performance numbers for net revenue and cash receipts are
different, the lesser number shall be determinative of the number
of Contingent Escrowed Shares to be returned to Subsidiary in
accordance with the chart below. Notwithstanding the foregoing
any reduction in the Average Monthly Performance amounts
attributable to the negligence of Subsidiary and HMC in the
billing and collection of accounts shall not be taken into account
in determining the number of Contingent Escrowed Shares to be
returned to Subsidiary.
Average Monthly Performance Number of Shares to be Returned
$375,001 - $377,500 480,000
$377,501 - $380,000 432,000
$380,001 - $382,500 384,000
$382,501 - $385,000 336,000
$385,001 - $387,500 288,000
$387,501 - $390,000 240,000
$390,001 - $392,500 192,000
$392,501 - $395,000 144,000
$395,001 - $399,999 96,000
Except to the extent that certain shares are to be
held in escrow and subject to offset as provided in Paragraph 15,
the Contingent Escrowed Shares remaining in escrow following June
30, 1998 may be sold by the Escrow Agent in accordance with the
instructions of the registered owners of the shares at any time,
provided, however, that the aggregate number of Contingent
Escrowed Shares, Registered Shares and Restricted Escrowed Shares
which may be sold on any day shall be limited to the lesser of
15,000 shares or fifteen percent (15%) of the trading volume (as
reported on the NASDAQ System) of Fonar's Common Stock on the
previous trading day. Upon the sale of any Contingent Escrowed
Shares, the net proceeds of the sale (net of commissions and fees)
shall be distributed to the registered owners of the shares sold.
HMC and Subsidiary shall take all steps required at their sole
cost and expense to register the Contingent Escrowed Shares under
the Securities Act prior to June 30, 1998. The Affordable
Shareholders and their assigns shall cooperate with HMC and
Subsidiary and provide them with any information required from
them to so register the Contingent Escrowed Shares, at HMC and
Subsidiary's expense, if any expense is entailed. HMC and
Subsidiary shall file a registration statement on Form S-3 with
the Securities and Exchange Commission no later than July 15, 1997
covering the Restricted Escrow Shares and Contingent Escrowed
Shares. HMC and Subsidiary shall diligently pursue the
registration and use their best efforts to cause said registration
statement to become effective within three months. HMC and
Subsidiary represent that Fonar Corporation is eligible to utilize
Form S-3.
(d) Increased Maximum. In the event that on any
trading day the trading volume for Fonar Common Stock (as reported
on the NASDAQ System) reaches 500,000 shares, then for that day
the aggregate number of Contingent Escrowed Shares, Registered
Shares and Restricted Escrowed Shares which may be sold shall be
increased to 60,000 shares.
(e) Agreements with Key Persons. Prior to the
Effective Date, the parties listed in Exhibit I-2 and their
assignors shall enter into Consulting Agreements with HMC and
Subsidiary in the form of Exhibit S hereto.
6. Representations and Warranties by Acquired Companies.
Affordable and the Selling Management Companies (hereinafter
sometimes referred to as the "Acquired Companies") jointly and
severally represent and warrant to HMC and Subsidiary as follows:
(a) Organization and Standing of Affordable and the
Selling Management Companies, Etc. Each of Affordable and N.E.
Billing is a corporation duly organized validly existing and in
good standing under the laws of the State of New York and has all
requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
Each of Bronx Diagnostic and Yonkers Diagnostic is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of New York, and has all
requisite power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. Magnetic is a New
York general partnership duly formed, validly existing and in good
standing under the laws of the State of New York and has all
requisite power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby. Complete and
correct copies of each of Affordable's and N.E. Billing's
certificate of incorporation, by-laws, stock books and minute
books have been delivered to HMC and Subsidiary. Complete and
correct copies of each of Bronx Diagnostic's and Yonkers
Diagnostic's articles of organization, operating agreements,
member lists and minute books have been delivered to HMC and
Subsidiary. Complete and correct copies of Magnetic's partnership
agreement have been delivered to HMC and Subsidiary. All
amendments or restatements of the foregoing certificates of
incorporation, articles of organization, partnership agreements,
by-laws, operating agreements and other organizational and
governing instruments as presently in effect have been delivered
to HMC and Subsidiary.
(b) Authorization, Et Cetera. The execution and
delivery of this Agreement and the Merger, sale of assets and all
other transactions contemplated hereby have been duly authorized
by each of the Acquired Companies. Each of the Acquired Companies
will obtain all consents necessary to authorize the transactions
contemplated hereby under any contract, indenture or other
agreement to which such party is a party or by which it is bound.
Each of the Acquired Companies shall also obtain any consents
necessary to the transactions contemplated hereby under any of the
contracts, leases and agreements to be continued by Subsidiary
following the Merger by Subsidiary and make all necessary
governmental and non-governmental registrations, filings and
notifications.
(c) Qualification. Each of the Acquired Companies
is licensed or domesticated and in good standing as a foreign
entity authorized to do business in each State wherein the
character of the properties of the Acquired Company or the nature
of the business transacted by the Acquired Company therein makes
such qualification, licensing or domestication necessary.
(d) Capitalization. Exhibit K sets forth the
authorized shares, issued and outstanding shares and each
shareholder of Affordable and N.E. Billing. In addition, Exhibit
K sets forth all of the members of Bronx Diagnostic and Yonkers
Diagnostic and all of the partners in Magnetic. There are no
securities, notes, bonds, indentures or other instruments
convertible into an equity interest and no options, warrants,
contracts or other obligations to issue an equity interest in any
of the Acquired Companies.
(e) Subsidiaries. No Acquired Company owns any
stock or other equity interest in any corporation, limited
liability company, partnership or other entity.
(f) Financial Statements. The Acquired Companies
have delivered to HMC:
(i) a schedule of liabilities for each of the
Acquired Companies as at May 31, 1997, included as part of Exhibit
M attached hereto.
(ii) a schedule of liabilities for each of
Jenissal, P.C., Intercounty Radiology, P.C., Xxxxxx X. Xxxxxx,
M.D., P.C., Flatbush Radiology, P.C., Balasic Medical, P.C. and
Xxxx X. Xxxxxxx, M.D., P.C. (hereinafter sometimes referred to
collectively as "Managed Companies and individually as a "Managed
Company") as at May 31, 1997, included as part of Exhibit O
attached hereto.
(iii) copies (on computer disk delivered to HMC's
accountants, Xxxx, Xxxxxxxxxx & XxXxxx) of the general ledger
files and all other accounting books and records for each of the
Acquired Companies and Managed Companies for the years ended
December 31, 1995 and December 31, 1996 and for the three-month
period ended April 30, 1997; and
(iv) schedules of accounts receivable as at April
30, 1997 for each of the Managed Companies, together with aged
trial balances and analysis of aged trial balances, included as
Exhibit D.
As soon as practicable, but in no event later than five days prior
to the Effective Date, the Acquired Companies will deliver to HMC
and Subsidiary updated schedules of liabilities of the Acquired
Companies, copies of updated general ledger files and all other
accounting books and records of the Acquired Companies and Managed
Companies and updated schedules of accounts receivable, aged trial
balances and analysis of aged trial balances for the Managed
Companies, in all cases, updated to a date no more than ten (10)
days prior to the Effective Date.
All financial statements, schedules, and accounting records
referred to above are, or will be when delivered, complete and
correct in all material respects, prepared in accordance with
proper accounting principles consistently followed throughout the
periods indicated. The schedules of liabilities disclose or when
delivered, will disclose, all liabilities, contingent or
otherwise, of the Acquired Companies as at the dates thereof.
(g) Absence of Certain Changes. Since April 30,
1997, there has not been:
(i) any change in the business, condition
(financial or otherwise), assets or liabilities of any Acquired
Company or Managed Company, whether or not covered by insurance
and whether or not arising from transactions in the ordinary
course of business, which, individually or in the aggregate, has
been materially adverse;
(ii) any damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting the
business or prospects of any Acquired Company or Managed Company
or any of the assets and properties of any Acquired Company or
Managed Company;
(iii) any increase in the compensation, pensions or
other benefits payable or to become payable by any Acquired
Company or Managed Company to any of its officers or employees or
any bonus payment or arrangement made to or with any thereof;
(iv) any payment to any stockholder, member,
partner, owner, director, officer or employee of any Acquired
Company or Managed Company or member of his or her immediate
family other than payments of salary pursuant to employment
relationships existing prior to April 1, 1997;
(v) any dividend, or distribution of any kind by or
with respect to any Acquired Company or Managed Company,
authorized, declared, paid or effected, or any direct or indirect
redemption, purchase or other acquisition of the outstanding
capital stock or other equity interests of any Acquired Company or
Managed Company;
(vi) any event or condition of any character
materially and adversely affecting the business of any Acquired
Company or Managed Company; and
(vii) the operations and business of the Acquired
Companies and Managed Companies have been conducted in all
respects only in the ordinary course and substantially in the
manner in which they have been conducted since their respective
formation and organization.
(h) Accounts Receivable. All accounts receivable
of the Managed Companies as shown on Schedule D and any schedule
required to be delivered to HMC and Subsidiary prior to the
Effective Date and all accounts receivable of the Acquired
Companies and the Managed Companies as existing immediately prior
to the effectiveness of the Merger constitute or will constitute
bona fide receivables due and payable in the ordinary course of
business, free of any and all defenses, counterclaims or offsets.
(i) Tax Returns and Payments. All tax returns and
reports of the Acquired Companies and Managed Companies required
by law to be filed have been duly filed, and all taxes,
assessments, fees and other governmental charges heretofore levied
upon any properties, assets, income or franchises of the Acquired
Companies and Managed Companies which are due and payable have
been paid, other than those presently payable without penalty or
interest as to which adequate reserves are currently maintained
and reflected on the Acquired Companies' and Managed Companies'
books and records and which have been disclosed to HMC and
Subsidiary. An extension for the filing of the income tax returns
for the Acquired Companies and Managed Companies for calendar year
1996 has been filed, but no income taxes for the Acquired
Companies and the Managed Companies will be due for the 1996
calendar year. The charges, accruals and reserves on the books of
the Acquired Companies and Managed Companies with respect to taxes
for all fiscal periods are adequate and there is no actual or
proposed tax assessment for any fiscal period or of any basis
therefor. No extension of time for the assessment of deficiencies
in any federal or state tax has been requested of or granted by
any of the Acquired Companies or Managed Companies.
(j) Real Property. The Acquired Companies own no
real property. Exhibit F-1 attached hereto contains a summary
description of all leases of any real property held by the
Acquired Companies. All real property used by the Acquired
Companies and the Managed Companies or any one of them in the
conduct of their respective businesses is leased by one or more of
the Acquired Companies. The Acquired Companies have delivered to
HMC and Subsidiary copies of leases for all real property leased
by the Acquired Companies. The Acquired Companies and Managed
Companies enjoy peaceful and undisturbed possession under all of
said leases. None of said leases contains any unusual or
burdensome provision which might materially and adversely affect
the operation or use of the property so leased. All of such
leases are valid and subsisting and none of them is in default.
All real property leased and referred to in Exhibit F-1 and the
operation thereof conform in all material respects with all
applicable ordinances, regulations and building, zoning and other
laws which may affect the use of the property. No toxic,
medically hazardous or radioactive materials are used in or
produced by any operations of the Acquired Companies and Managed
Companies and no such materials are disposed of or stored on any
properties owned or leased by the Acquired Companies or the
Managed Companies.
(k) Personal Property. All personal properties
and assets used, or held for use, in the Acquired Companies' and
Managed Companies' respective businesses are reflected in Exhibit
C and are included among the assets and properties to be
transferred to Subsidiary pursuant to the Merger except for those
assets specifically excluded and set forth in Exhibit A hereto.
One or more of the Acquired Companies has good and marketable
title to each of said items of personal property and assets, in
each case subject to no mortgage, pledge, lien, conditional sale
agreement, encumbrance or charge, except as set forth in Exhibit C
attached hereto. None of said personal properties or assets is
held by an Acquired Company as lessee under or subject to any
lease or as conditional vendee under any conditional sale or other
title retention agreement, except as set forth in Exhibit F-2.
All accounts and notes receivable (after provision for bad debts
reflected thereon) have been collected or are and will be good and
collectible at the aggregate recorded amounts thereof, subject to
no counterclaims or set-offs, and can reasonably be anticipated to
be paid within ninety (90) days of the date incurred except where
otherwise indicated on the schedule of accounts receivable
attached hereto as Exhibit D. All inventory and supplies are
usable on a normal basis in the existing businesses of the
Acquired Companies and the Managed Companies. There have been no
acquisitions or dispositions of any inventory or supplies since
April 30, 1997 except in the ordinary course of business.
(l) Energy and Materials. No Acquired Company or
Managed Company has received any notice or other communication,
whether formal or informal, from any supplier of gas, oil or
electric power or of supplies or other materials used in its
business or operations to the effect that any such energy source,
supplies or material will become unavailable to an extent which
might impair the continued conduct of its business or operations
at the greater of their current or historic levels.
(m) Insurance. All property and operations of the
Acquired Companies and Managed Companies are adequately insured
with responsible insurers against all risks normally insured
against by companies in similar lines of business. The insurance
policies currently maintained by the Acquired Companies and
Managed Companies are listed on Exhibit N hereto and each is fully
paid for periods extending in all cases beyond the Effective Date.
(n) Disclosure. Neither this Agreement nor any
certificate, list or other instrument purporting to disclose facts
germane to the businesses of the Acquired Companies and Managed
Companies delivered or to be delivered to HMC or Subsidiary by or
on behalf of the Acquired Companies and Managed Companies pursuant
hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact.
There is no fact directly related to the Acquired Companies' and
Managed Companies' businesses known to them which materially and
adversely affects the business, properties, operations, condition
or prospects, financial or otherwise, of any one or more of them,
which has not been set forth in this Agreement or in the other
documents, certificates and statements already furnished to HMC
and Subsidiary by or on behalf of the Acquired Companies and
Managed Companies in connection with the transactions contemplated
hereby.
(o) Contracts. With the exception of those
contracts and commitments listed in Exhibits E, F-1, F-2 and N, no
Acquired Company or Managed Company is a party to any contract or
commitment, whether written or oral, other than:
(i) Turnkey License Agreements between
Yonkers Diagnostic and Balasic Medical, P.C., Affordable and
Xxxxxx X. Xxxxxxx, M.D., P.C., Bronx Diagnostic and Balasic
Medical, P.C., Affordable and Intercounty Radiology, P.C., Bronx
Diagnostic and Xxxx X. Xxxxxxx, M.D., P.C. and Yonkers Diagnostic
and Flatbush Radiology, P.C., complete and correct copies of which
have been delivered or will be delivered to HMC and Subsidiary;
(ii) orders for the purchase of supplies
entered into in the ordinary course of business not involving
commitments to suppliers in the aggregate of more than One
Thousand United States Dollars (U.S. $1,000); and
(iii) requests for scans, x-rays, other diagnostic
procedures or other services requested and scheduled by patients
or referring physicians, independently of any other agreement or
contract.
The Acquired Companies and Managed Companies have delivered to HMC
and Subsidiaries complete and correct copies of all written
contracts or commitments listed in Exhibits E, F-1, F-2 and N.
Each of the Acquired Companies and Managed Companies has complied
fully with all the provisions of its outstanding agreements,
contracts and commitments and is not in default under any of the
terms thereof.
(p) Patents, Trademarks, Et Cetera. The names or
designations, all patents, trademarks, trade names, copyrights and
other statutory rights of the Acquired Companies and Managed
Companies are listed in Exhibit G. The Acquired Companies and the
Managed Companies have all franchises, permits, licenses and other
authority as are necessary to enable them to conduct their
respective businesses as now being conducted and as proposed to be
conducted, and none of them is in default under any of such
franchises, permits, licenses or other authority. No Acquired
Company or Managed Company has licensed any other person to use,
or to have access to for any reason, any such rights.
(q) Compliance with Law and Government Regulations.
The Acquired Companies and Managed Companies are in compliance
with all applicable statutes, regulations, decrees, orders,
restrictions, guidelines and standards, imposed by the United
States of America, and state, county, municipality or agency of
any thereof, and any foreign country or government to which they
or any of their respective operations may be subject, in respect
of the conduct by them of their respective businesses as currently
conducted and the ownership and operation of their respective
properties.
(r) Compensation. Attached hereto as Exhibit O is
a true and complete list of all officers, and of all salaried
persons employed by or for the account of the Acquired Companies
and Managed Companies specifying the rate of compensation
(including bonuses and commissions, if any) and position held by
each such person.
(s) Employee Stock Ownership Plan, Pension and
Profit-Sharing Obligations. No Acquired Company or Managed
Company has any pension, retirement pay, profit-sharing plan,
incentive plan or other obligation for deferred compensation
applicable to persons employed by it, whether or not such
obligations are of a legally binding nature or in the nature of
informal understandings, including, without limitation, any
Employee Stock Ownership Plan and Trust.
(t) Employee Benefit Plans. No Acquired Company or
Managed Company has any employee benefit plans, except for health
insurance for some individuals which will be prior to the
Effective Date of the Merger without liability.
(u) Labor Contracts, Et Cetera. No Acquired
Company or Managed Company is a party to any collective bargaining
or other labor union contract applicable to any persons employed
by it. The Acquired Companies and Managed Companies know of no
activities or proceedings of any labor union (or representatives
thereof) to organize any of their employees, or of any threats of
strikes or work stoppages by any of their employees.
(v) Litigation. There is no litigation,
arbitration, proceeding or investigation pending or threatened
which might, either individually or collectively, result in any
material adverse change in the business or condition (financial or
otherwise) of any of the Acquired Companies or the Managed
Companies or in any of their respective properties or assets, or
in any material liability on the part of any of them, or in any
material change in any of their methods of doing business, or
which questions the validity of this Agreement or of any action
taken or to be taken pursuant to or in connection with the
provisions of this Agreement and, to the best of their knowledge,
there is no basis for any such litigation, arbitration,
condemnation, proceeding or investigation. Each litigation,
arbitration, proceeding or investigation which is pending or
threatened with respect to any Seller is referred to in Exhibit P
hereto.
(w) Compliance with Other Instruments, Et Cetera.
No Acquired Company or Managed Company is bound by any agreement
or instrument or subject to any charter or other restriction which
materially and adversely affects its business, properties,
operations or condition, financial or otherwise. Neither the
execution and delivery of this Agreement nor the carrying out of
the transactions contemplated hereby will result in any violation,
or be in conflict with any term, of the certificate of
incorporation, articles of organization, partnership agreement or
other organizational instrument or the By-Laws, operating
agreements or other governing documents of any Acquired Company or
Managed Company. The Acquired Companies and the Managed Companies
warrant that the consummation of the transactions contemplated
hereby will not result in any violation of or be in conflict with
any contract or other instrument to which any of them is a party,
or by which it is otherwise bound.
(x) Governmental Consent, Et Cetera. No consent,
approval, authorization or order of, or registration,
qualification, designation, declaration or filing with, any
governmental authority on the part of any Acquired Company or
Managed Company is required in connection with the execution and
delivery of this Agreement or the carrying out of any transactions
contemplated hereby.
(y) Banks, Et Cetera. Attached hereto as Exhibit Q
is a true and complete list of each bank in which funds of any
Acquired Company or Managed Company are on deposit or in which any
of them has a safety deposit box.
(z) No Broker. No Acquired Company or Managed
Company has employed any finder, broker, agent or other
intermediary in connection with the negotiation or consummation of
this Agreement or any of the transactions contemplated hereby, and
the Acquired Companies will indemnify HMC and Subsidiary and hold
them harmless against all liabilities, expenses, costs, losses and
claims, if any, arising from the employment by, or services
rendered to, any Acquired Company or Managed Company (or any
allegation of any such employment by, or services rendered to any
of them) of any finder, broker, agent or other intermediary in
such connection.
(aa) Conveyance of Entire Business. Upon the
consummation of the Merger on the Effective Date, all of the
assets and properties owned by or utilized in the conduct of the
respective businesses of the Acquired Companies and the Managed
Companies will be owned by Subsidiary, except for (i) the accounts
receivable of the Managed Companies, which are subject to a first
lien and security interest in favor of one or more of the Acquired
Companies and (ii) any assets or properties specifically excluded
as set forth on Schedule A. All such assets and properties will
be free and clear of any mortgage, pledge, lien, conditional sale
agreement, encumbrance or charge except as set forth in Exhibit C
and none will be held by Subsidiary as lessee under or subject to
any lease or as conditional vendee under any conditional sale or
other title retention agreement, except as set forth in Exhibit
F-2.
7. Representations and Warranties of HMC and Subsidiary. HMC
and Subsidiary represent and warrant as follows:
(a) Organization and Standing. Each of HMC and
Subsidiary is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
(b) Litigation, Et Cetera. There is no litigation,
proceeding or investigation pending or threatened against HMC or
Subsidiary which questions the validity of this Agreement or of
any action taken or to be taken pursuant to or in connection with
the provisions of this Agreement.
(c) Compliance with Other Instruments. Neither the
execution and delivery of this Agreement nor the carrying out of
the transactions contemplated hereby will result in any violation
of or be in conflict with any term of the Certificate of
Incorporation or By-Laws of HMC or Subsidiary or of any contract
or other instrument to which either of them is a party, or of any
judgment, decree, order, statute, rule or regulation applicable to
either HMC or Subsidiary.
(d) Broker. Neither HMC nor Subsidiary has
employed any finder, broker, agent or other intermediary in
connection with the negotiation or consummation of this Agreement
or any of the transactions contemplated hereby, and HMC and
Subsidiary will indemnify the Acquired Companies and hold them
harmless against all liabilities, expenses, costs, losses and
claims, if any, arising from the employment by, or services
rendered to, HMC or Subsidiary (or any allegation of any such
employment by, or services rendered to, HMC or Subsidiary) of any
finder, broker, agent or other intermediary in such connection.
8. Covenants of the Acquired Companies. The Acquired
Companies and the Managed Companies covenant and agree with HMC
and Subsidiary as follows:
(a) Access, Information and Documents. The
Acquired Companies and Managed Companies will give to HMC and
Subsidiary and their counsel, accountants and other authorized
representatives, full access during normal business hours to all
of the assets and properties of the Acquired Companies and Managed
Companies hereunder, to each of their key personnel and persons
with whom any of them does business and to all books, contracts,
commitments and records of the Acquired Companies and the Managed
Companies and will deliver to HMC and Subsidiary all such
documents and copies of documents (certified, if requested) and
information with respect to such properties and such businesses as
HMC or Subsidiary from time to time may reasonably request.
Without limiting the generality of the foregoing, each Acquired
Company and Managed Company shall afford the representatives of
(i) Messrs. Xxxx, Xxxxxxxxxx & XxXxxx, P.C., or other accountants
appointed by HMC or Subsidiary such access and assistance as such
accountants may reasonably request. The parties and their
respective representatives mutually shall endeavor to conduct such
examinations and appraisals in a manner designed to be at once the
most efficient and the least disruptive of the Acquired Companies'
and Managed Companies' conduct of business as is possible
consistent with the due accomplishment of such examinations.
(b) Transition of Business Pending Effective Date.
It is the intention of the parties that the following principles
shall govern the conduct of the businesses of the Acquired
Companies and Managed Companies.
(i) Conduct of Business Pending Closing.
Between the date hereof and the Closing:
(A) The Acquired Companies will keep HMC and
Subsidiary informed as to their and the Managed Companies' affairs
and will consult with HMC and Subsidiary on all important matters
pertaining to the businesses of the Acquired Companies and Managed
Companies;
(B) Each of the Acquired Companies and Managed
Companies will continue to conduct its business diligently and
only in the ordinary course and, except as otherwise requested by
HMC or Subsidiary, will not take any action which will cause any
change in the business or in the assets and properties any of the
Acquired Companies and Managed Companies other than changes in the
ordinary course of business;
(C) The Acquired Companies and the Managed
Companies will not enter into any contract or commitment relating
to their respective businesses without the prior approval of HMC
and Subsidiary, except for normal short-term commitments and
purchases in the ordinary course of business not involving payment
by or other liability or obligation on the part of any of them
exceeding One Thousand United States Dollars (U.S. $1,000) in the
aggregate; and
(D) The Acquired Companies and Managed Companies
will not increase the rates of pay or the size of normal bonuses
of any personnel employed by any of them without the consent of
HMC and Subsidiary, except for increases required under existing
employment agreements, copies of which have been provided to HMC
and Subsidiary prior to the date hereof.
(ii) Business Organization, Et Cetera. Except
as otherwise requested by HMC and Subsidiary, each Acquired
Company and Managed Company will use its best efforts to (without
making any commitment on behalf of HMC or Subsidiary) to preserve
intact its business organization, including all of its personnel
described in subparagraph (iii) below, and the goodwill of its
customers, referring physicians, suppliers and others having
relations with the Acquired Company or Managed Company.
(iii) Transfer of Personnel. The Acquired
Companies shall use their best efforts to ensure that all
supervisory personnel, technicians, accounting and marketing
personnel, and, all executive personnel employed by the Acquired
Companies shall become employees of Subsidiary as of the Effective
Date, and Subsidiary will assume full responsibility for the
payment of all salaries and wages accruing to such personnel
during such periods after the Effective Date as such personnel
shall be employed by Subsidiary, it being understood that
Subsidiary shall not be under any obligation to continue any of
such personnel in its employment.
(iv) Sellers' Names. From and after the Effective
Date, Subsidiary shall become entitled to the use of the
corporate, partnership and other company names of the Acquired
Companies. The Acquired Companies shall immediately after the
Effective Date cease to use such names and shall execute all
consents, assignments or other documents as may be required by
Subsidiary in order to register its entitlement to such names in
all jurisdictions in which Subsidiary may seek such registration.
(c) Books and Records. At or immediately after the
Effective Date, the Acquired Companies will turn over to
Subsidiary, all customers' lists, physician lists, books of
account, patient files and records, inventory records, personnel
records and other books and records, including without limitation
tax records and returns. The personnel of the Acquired Companies
will cooperate in Subsidiary's obtaining necessary data in any
manner which HMC and Subsidiary may reasonably request.
(d) Non-Competition. For a period of five (5)
years from and after the Effective Date, no Affordable Shareholder
or Selling Management Company will directly or indirectly own,
manage, operate, join, control or participate in the ownership,
management, operation or control of, or be connected in any manner
with, any business anywhere in New York, Florida or New Jersey, or
within a ten (10) mile radius of any MRI facility owned, operated
or managed by HMC, Subsidiary, Xxxxxxx X. Xxxxxxxx, M.D. MR
Scanning Centers Management Company or any affiliate of any of
them in any other jurisdiction (i) involving the performance of
any MRI scans, CAT scans, x-rays, other diagnostic tests, physical
therapy or any other services of the type currently performed and
sold by any Acquired Company or Managed Company, (ii) involving
the operation or management of any center or other facility
providing any such scans, tests, therapy, procedures or services,
or (iii) otherwise directly competitive with the business of HMC
or Subsidiary as the same may from time to time be conducted. The
Affordable Shareholders and Selling Management Companies agree
that the remedy at law for any breach by any of them of the
foregoing covenant would be inadequate and that HMC and Subsidiary
would be entitled to injunctive relief in the case of any such
breach. Should it be held at any time that the restriction placed
upon Sellers by this Section 8(d) is too onerous and is not
necessary for the protection of HMC and Subsidiary, the Affordable
Shareholders and Selling Management Companies agree that any court
of competent jurisdiction may impose any lesser restriction which
such court may consider to be necessary or appropriate properly to
protect HMC and Subsidiary. Each of the owners, directors,
officers and employees of the Acquired Companies listed in Exhibit
R hereto and shall enter into agreements with Buyer, which shall
include individual non-competition covenants, in the form of
Exhibit S hereto.
(e) Collection of Accounts Receivable. After the
Closing, the Selling Management Companies shall assist Subsidiary
and HMC in the collection of the accounts receivable of the
Acquired Companies and Managed Companies as existing on the
Effective Date in such manner as Subsidiary and HMC may from time
to time request, at Subsidiary's and HMC's expense if any expense
is entailed. Without limiting the generality of the foregoing,
the Selling Management Companies shall permit Subsidiary and HMC
to exercise the same rights as the Selling Management Companies
could have if they had retained ownership of such accounts
receivable and Subsidiary may endorse, deposit and collect any and
all checks, drafts, money orders and instruments for the payment
of money payable to any Acquired Company or Managed Company which
is tendered in payment of any such accounts receivable. On or
before the Effective Date, the Selling Management Companies will
execute and deliver to Subsidiary such powers of attorney as
Subsidiary may request to enable Subsidiary to effectuate the foregoing.
(f) Audited Financial Statements. Following the
Effective Date, the Affordable Shareholders and Selling Management
Companies will provide Subsidiary and its accountants with all
information in their possession as may be requested by Subsidiary
and such accountants and provide all assistance as may be
reasonably requested by Subsidiary and such accountants in
connection with the preparation by Subsidiary, HMC and Fonar
Corporation of such certified and other financial statements as
they may be required to prepare and file with the Securities and
Exchange Commission, NASDAQ and other governmental,
quasi-governmental or regulatory agencies.
(g) Liability of Affordable and Other Acquired
Companies to Equity Owners. In consideration of the Merger and
other transactions contemplated by this Agreement the Affordable
Shareholders expressly release Affordable from any and all
indebtedness and other liabilities and obligations owing to them
effective on the Effective Date. From the date hereof until the
Effective Date no Acquired Company shall pay any cash or
distribute any of its assets or properties to satisfy any
indebtedness, liability or obligation owing to any of its
shareholders, members, partners or other equity owners. Under no
circumstances will Subsidiary, through the Merger or otherwise,
assume any liability or obligation of any of the Acquired
Companies' to shareholders, members, partners or other equity
owners.
(h) Further Assurances. From time to time, at
Subsidiary's or HMC's request (whether on or after the Effective
Date) and without further consideration, the Affordable
Shareholders and Selling Management Companies, at Subsidiary's and
HMC's expense, will execute and transfer and will take such other
action as Subsidiary and HMC may reasonably request in order more
effectively to give effect to the transactions contemplated
hereby.
9. Covenant of HMC and Subsidiary. HMC and Subsidiary
covenant and agree with the Acquired Companies and Affordable
Shareholders as follows:
(a) Books and Records; Access to Facilities. After
the Effective Date, Subsidiary and HMC will permit the Selling
Management Companies and Affordable Shareholders and their
respective representatives, at such reasonable times as they may
request, to inspect and make extracts from any books and records
turned over by the Acquired Companies to Subsidiary and HMC on the
Effective Date for the purpose of preparing any tax returns,
liquidating or complying with other governmental requirements.
(b) HMC or Subsidiary shall make available on a
bi-weekly or more frequent basis to the Affordable Shareholder or
their respective representatives records of billing, accounts
receivable and cash receipts for the purposes of determining
Average Monthly Performance.
10. Conditions of HMC's and Subsidiary's Obligations. The
obligations of HMC and Subsidiary under this Agreement are subject
to the fulfillment to their reasonable satisfaction, prior to or
at the Effective Date, of each of the following conditions:
(a) Representations and Warranties True at Closing.
The representations and warranties made by the Affordable
Shareholders and the Acquired Companies in this Agreement and in
any certificate or document delivered pursuant to the provisions
hereof shall be true as of the Effective Date as though such
representations and warranties were made at and as of such time.
(b) Performance. The Affordable Shareholders,
Acquired Companies and Management Companies shall have performed
and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or on
the Effective Date or such other time as may be specifically
required by this Agreement.
(c) No Government Opposition. No governmental
entity shall have made known, formally or informally, any
opposition to, or questioning of, the consummation of the
transactions contemplated hereby.
(d) No Private Opposition. No private party shall
have commenced an action or filed suit against any of the parties
hereto questioning in any way the validity of this Agreement or
the transactions contemplated hereby.
(e) Compliance Certificate. The Acquired Companies
shall have delivered to HMC and Subsidiary a certificate or
certificates dated the Effective Date, of the appropriate
executive officers of each of the Acquired Companies, certifying,
in form satisfactory to HMC's and Subsidiary's counsel, to the
fulfillment of the conditions specified in Sections 10(a) and
10(b).
(f) Consents. The Acquired Companies shall have
obtained all consents and approvals for the transactions
contemplated hereby under the terms of any agreements of any
Acquiring Company including the leases referred to in Exhibits F-1
and F-2 and all consents and approvals otherwise necessary to the
operation by Subsidiaries of the businesses of the Acquired
Companies after the Effective Date substantially as such
businesses are presently operated, and the Acquired Companies
shall have duly complied with all applicable provisions of law
relating to such transfer.
(g) Opinion of Seller's Counsel. HMC and
Subsidiary shall have received a favorable opinion of the Acquired
Company's counsel dated the Effective Date, and satisfactory to
HMC and Subsidiary, covering the following matters:
(i) Representations and Warranties. The matters
referred to in Sections 6(a), 6(b), 6(c), 6(d), 6(e), 6(i), 6(j)
(with respect to title), 6(k) (with respect to title), 6(o) (with
respect to compliance and defaults), 6(q) (to counsel's best
knowledge), 6(v) (to counsel's best knowledge), 6(w) (with respect
to conflicts) and 6(x).
(ii) Proceedings. All corporate and other proceedings required
by law or by the provisions of this Agreement to be taken by Seller in
connection with the due consummation of the Merger and other transactions
contemplated hereby have been duly and validly taken.
(h) Agreements with Certain Officers of Acquired
Companies. The individuals named in Exhibit I-2 and Exhibit R
shall have entered into the agreements required.
(i) Condition of Assets. The tangible assets of
the Acquired Companies shall be in good operating condition and in
a state of good maintenance and repair and shall have suffered no
loss or damage, whether by reason of causes within or without the
control of the parties and whether covered by insurance or not.
(j) Proceedings and Documents. All proceedings in
connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be
satisfactory in legal substance and form to HMC's and Subsidiary's
counsel, and HMC and Subsidiary shall have received all such
counterpart originals or certified or other copies of such
documents as HMC and Subsidiary may reasonably request.
(k) Signatories on Managed Companies Accounts;
Ownership and Control of Managed Companies. The signatories on all
bank accounts of the Managed Companies shall be changed as
requested by HMC and Subsidiary, and the ownership and control of
the Managed Companies shall be changed as requested by HMC and
Subsidiary.
11. Conditions of Acquired Companies' Obligations. The
obligations of the Affordable Shareholders and Acquired Companies
under this Agreement are subject to the fulfillment to their
reasonable satisfaction, prior to or at the Effective Date, of
each of the following conditions:
(a) Representations and Warranties True at Closing.
The representations and warranties made by HMC and Subsidiary in
this Agreement and in any certificate or document delivered
pursuant to the provisions hereof shall be true at and as of the
time of the Effective Date as though such representations and
warranties are made at and as of such time.
(b) Performance. HMC and Subsidiary shall have
performed and complied with all agreements and conditions required
by this Agreement to be performed or complied with by it prior to
or at the Effective Date.
(c) Compliance Certificate. HMC and Subsidiary
shall have delivered to the Affordable Shareholders and the
Acquired Companies a certificate of appropriate executive officers
of HMC and the Subsidiary, dated the Effective Date, certifying as
to the fulfillment of the conditions specified in Sections 11(a)
and 11(b).
(d) Proceedings and Documents. All proceedings in
connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be
satisfactory in legal substance and form to the Acquired
Companies' counsel, and the Acquired Companies shall have received
all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
12. Expenses. Except as otherwise provided herein, each
party will pay all costs and expenses attributable to its
performance of and compliance with all agreements and conditions
contained in this Agreement to be performed or complied with by it
(including, without limitation, all fees and expenses of counsel).
13. Survival of Representations and Warranties. All
statements, representations and agreements contained in any
certificate or other instrument delivered by officers, employees,
representatives or agents of the Acquired Companies or the
Affordable Shareholders or any of them pursuant to this Agreement,
or otherwise made by them or any of them in writing as a condition
of, or otherwise in connection with, the transactions contemplated
hereby, shall be deemed also to be representations and warranties
by Acquired Companies and the Affordable Shareholders hereunder.
Such statements, representations and agreements and the
representations and warranties made by the Acquired Companies and
Affordable Shareholders in this Agreement shall survive the
Effective Date.
14. Indemnification. The Acquired Companies and the
Affordable Shareholders jointly and severally shall indemnify and
hold harmless HMC and Subsidiary from and against all losses,
liabilities, obligations, claims, lawsuits, judgments, costs and
expenses (including reasonable attorneys' fees) arising from any
misrepresentation, breach of warranty or breach of covenant by any
Affordable Shareholder, Acquired Company or Managed Company under
this Agreement or the failure of any Affordable Shareholder or
Acquired Company or Affordable Shareholder to perform any
obligation required to be performed by any of them hereunder.
15. Offset Against Escrowed Shares. For a period of seven
(7) months following the Effective Date of the Merger, 375,000
shares of the shares of Common Stock of Fonar being held in escrow
pursuant to Paragraph 5(b)(i) of this Agreement shall not be sold
or released from escrow, but shall remain in escrow as security
for the indemnification provided in Paragraph 14 hereof. In the
event that any representations and warranties made by the
Affordable Shareholders, Acquired Companies or Managed Companies
in this Agreement shall be untrue in any material respect and have
an adverse effect on the business or financial condition of
Subsidiary, then HMC and Subsidiary may give notice to the Escrow
Agent to return to Subsidiary such number of shares of Fonar
Common Stock being held in escrow pursuant to Section 5(b)(i)
having a market value equal to the amount of any loss or damage
suffered or incurred by HMC or Subsidiary as a result thereof.
The market value of such shares of Fonar Common Stock to be
returned shall be determined based on the closing price of
$2.34375 ($2 11/16) per share for Fonar Common Stock on May 21,
1997 as reported on the NASDAQ systems. Upon receipt of such
notice the Escrow Agent shall give written notice to the
Affordable Shareholders or their assigns of HMC's and Subsidiary's
demand. If the Affordable Shareholders or their assigns do not
object in writing to HMC's and Subsidiary's demand within 30 days
of the giving of such notice, the Escrow Agent shall return such
number of shares to Subsidiary. If the Affordable Shareholders or
their assigns do object, then the Escrow Agent shall continue to
hold such number of shares in escrow pending resolution of the
dispute by agreement of the parties or appropriate legal
proceedings. The remedy and procedure provided herein shall not
be exclusive, and HMC and Subsidiary may elect to pursue other
remedies available at law, in equity or as provided by this
Agreement in lieu of such remedy or concurrently with such remedy.
16. Assignment. No assignment of rights or obligations
hereunder shall be made by any party without the express written
prior approval of the other parties.
17. Notices, Et Cetera. All notices, consents and other
communications hereunder shall be in writing (except for those
relating to day-to-day transactions in the ordinary course of
business where representatives of the parties may reach a
decision, subsequently to be confirmed in writing) and shall be
deemed to have been given when delivered or mailed by first-class,
registered or certified mail, postage prepaid, addressed (a) if to
any Acquired Company, Managed Company or Affordable Xxxxxxxxxxx,
xx XX 0, Xxxxx 000, Xxxxxxxx, Xxx Xxxx 00000; or at such other
address as shall have been furnished by the giving of notice
thereof, or (b) if to HMC or Subsidiary, at 000 Xxxxxx Xxxxx,
Xxxxxxxx, Xxx Xxxx 00000; Attention: President, or at such other
address as HMC and Subsidiary shall have furnished by the giving
of notice thereof.
18. Publicity; Confidentiality. No party to this Agreement
shall directly or indirectly make or cause to be made any public
announcements or issue any notices in any form (other than as may
be required by law) with respect to this Agreement or the
transactions contemplated hereby without the consent in writing of
the other parties, provided, however, that following the Effective
Date HMC or Subsidiary may issue any such public announcements or
notices. Following the issuance of a public announcement by HMC
or Subsidiary, the other parties hereto may do so as well. In the
event that the transactions contemplated by this Agreement shall
not be consummated, each party shall return all such written
information as it shall have received from the other parties in
connection with this Agreement. Thereafter each party shall
continue to hold the others' information in confidence, according
to such information the same degree of security generally accorded
its own proprietary information.
19. Approval of Shareholders. The Affordable Shareholders
represent and warrant that they are also the shareholders, members
and partners, as the case may be, of the other Acquired Companies
and agree that by their execution of this Agreement they are
approving the Merger and other transactions contemplated hereby in
their capacities as shareholders, members and partners of all of
the Acquired Companies. HMC represents and warrants that it is
the sole stockholder of Subsidiary and that by the execution of
this Agreement it is approving the Merger in its capacity as the
sole stockholder of Subsidiary.
20. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto with
respect to the subject matter hereof, and shall be binding upon
and inure to the benefit of and be enforceable by the successors
and assigns of such parties. This Agreement may be changed,
waived, discharged or terminated only by an instrument in writing
signed by the party against whom enforcement of such change,
waiver, discharge or termination is sought. The remedies herein
provided are cumulative and not exclusive of any remedies provided
by law. The headings of this Agreement are for reference only,
and shall not limit or otherwise affect any of the terms or
provisions hereof. This Agreement may be executed in several
counterparts and may be executed by the respective parties hereto
on separate counterparts, each of which shall be an original but
all of which together shall constitute one and the same
instrument. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in the manner legally
binding upon them as of the date first above written.
U.S. HEALTH MANAGEMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx,
President
[Seal]
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
HMCM INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx,
President
[Seal]
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
BRONX DIAGNOSTIC IMAGING, LLC
[Seal] By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
President
Member/Manager
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Secretary
Member/Manager
AFFORDABLE DIAGNOSTICS, INC.
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
[Seal] President
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Secretary
MAGNETIC CONNECTIONS
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
[Seal] President
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Secretary
YONKERS DIAGNOSTIC, LLC
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
[Seal] President
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Secretary
Member/Manager
N.E. MEDICAL BILLING SERVICE
By: /s/ Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxx
[Seal] President
ATTEST:
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Secretary
/s/ Xxxxxxxx Xxxxxx
XXXXXXXX XXXXXX
/s/ Xxxxx Xxxxx
XXXXX XXXXX
/s/ Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX
/s/ Xxxxxxxx X. Xxxxxx
XXXXXXXX X. XXXXXX
/s/ Xxxxxxx Xxxxxx
XXXXXXX XXXXXX
