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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
PER-SE TECHNOLOGIES, INC.,
HEALTH DATA SERVICES, INC.,
PATIENT ACCOUNT MANAGEMENT SERVICES, INC., AND
XXXX XXXXXXXXX, XXXXXXX XXXXXXXXX,
XXXXXXX XXXXX, AND XXXXX XXXX
DATED DECEMBER 8, 2000
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS.............................................................................................. 1
2. ACQUISITION OF STOCK OF HEALTH DATA SERVICES, INC. AND PATIENT ACCOUNT MANAGEMENT SERVICES, INC.......... 8
2.1. Purchase and Sale of Shares..................................................................... 8
2.2. Stock Purchase Consideration.................................................................... 8
2.3. Payment of Stock Purchase Consideration......................................................... 8
2.4. Surrender of Certificates for Shares............................................................ 9
2.5. Time and Place of Closing....................................................................... 9
2.6. Deliveries at the Closing....................................................................... 9
2.7. Minimum Net Working Capital Adjustment to Stock Purchase Consideration.......................... 10
2.8. Allocation of Stock Purchase Consideration...................................................... 11
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS....................................................... 11
3.1. Organization and Good Standing.................................................................. 11
3.2. Authority; No Conflict.......................................................................... 11
3.3. Capitalization.................................................................................. 12
3.4. Financial Statements............................................................................ 13
3.5. Books and Records............................................................................... 13
3.6. Title to Properties; Encumbrances............................................................... 14
3.7. Condition and Sufficiency of Assets............................................................. 14
3.8. Accounts Receivable............................................................................. 14
3.9. No Undisclosed Liabilities...................................................................... 15
3.10. Taxes........................................................................................... 15
3.11. No Material Adverse Change...................................................................... 16
3.12. Employee Benefits............................................................................... 16
3.13. Compliance with Legal Requirements; Governmental Authorizations................................. 19
3.14. Legal Proceedings; Orders....................................................................... 20
3.15. Absence of Certain Changes and Events........................................................... 21
3.16. Contracts; No Defaults.......................................................................... 22
3.17. Insurance....................................................................................... 24
3.18. Environmental Matters........................................................................... 25
3.19. Employees....................................................................................... 26
3.20. Labor Relations; Compliance..................................................................... 27
3.21. Intellectual Property........................................................................... 27
3.22. Certain Payments................................................................................ 30
3.23. Disclosure...................................................................................... 30
3.24. Relationships with Related Persons.............................................................. 30
3.25. Brokers or Finders.............................................................................. 31
3.26. Charter Provisions, Etc......................................................................... 31
3.27. HSR Compliance.................................................................................. 31
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................................................... 31
4.1. Organization and Good Standing.................................................................. 31
4.2. Authority; No Conflict.......................................................................... 31
4.3. Certain Proceedings............................................................................. 32
4.4. Brokers or Finders.............................................................................. 32
5. COVENANTS................................................................................................ 32
5.1. Access and Investigation........................................................................ 32
5.2. Operation of the Business of the Companies...................................................... 32
5.3. Negative Covenant............................................................................... 33
5.4. Permitted Distribution.......................................................................... 33
5.5. Xxxxxxxxx Lease................................................................................. 33
5.6. Required Approvals.............................................................................. 33
5.7. Indebtedness of Related Persons................................................................. 33
5.8. No Negotiation.................................................................................. 34
5.9. Best Efforts.................................................................................... 34
5.10. Confidentiality................................................................................. 34
5.11. Books and Records; Cooperation.................................................................. 34
6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.................................................. 35
6.1. Accuracy of Representations..................................................................... 35
6.2. Performance of Companies and Shareholders....................................................... 35
6.3. Consents........................................................................................ 36
6.4. Additional Documents............................................................................ 36
6.5. Minimum Cash of the Companies................................................................... 37
6.6. No Proceedings.................................................................................. 37
6.7. No Claim Regarding Ownership or Sale Proceeds................................................... 37
6.8. No Prohibition.................................................................................. 37
6.9. Due Diligence................................................................................... 37
6.10. Section 338(h)(10) Election..................................................................... 37
7. CONDITIONS PRECEDENT TO THE COMPANIES' AND THE SHAREHOLDERS' OBLIGATION TO CLOSE......................... 38
7.1. Accuracy of Representations..................................................................... 38
7.2. Purchaser's Performance......................................................................... 38
7.3. Additional Documents............................................................................ 38
7.4. No Injunction................................................................................... 38
8. TERMINATION.............................................................................................. 39
8.1. Termination Events.............................................................................. 39
8.2. Effect of Termination........................................................................... 39
9. INDEMNIFICATION; REMEDIES................................................................................ 39
9.1. Survival........................................................................................ 39
9.2. Indemnification and Payment of Damages by the Companies and the Shareholders.................... 40
9.3. Indemnification and Payment of Damages by Purchaser............................................. 41
9.4. Time Limitations................................................................................ 41
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9.5. Limitations on Amount - Shareholders............................................................ 41
9.6. Limitations on Amount - Purchaser............................................................... 42
9.7. Procedure for Indemnification -- Third Party Claims............................................. 43
9.8. Procedure for Indemnification -- Other Claims................................................... 44
9.9. Transaction Escrow.............................................................................. 44
10. GENERAL PROVISIONS....................................................................................... 44
10.1. Expenses........................................................................................ 44
10.2. Public Announcements............................................................................ 44
10.3. Notices......................................................................................... 45
10.4. Jurisdiction; Service of Process................................................................ 46
10.5. Further Assurances.............................................................................. 46
10.6. Waiver.......................................................................................... 46
10.7. Entire Agreement and Modification............................................................... 46
10.8. Disclosure Schedule............................................................................. 47
10.9. Assignments, Successors, and No Third-Party Rights.............................................. 47
10.10. Severability.................................................................................... 47
10.11. Section Headings; Construction.................................................................. 47
10.12. Time of Essence................................................................................. 47
10.13. Governing Law................................................................................... 48
10.14. Counterparts.................................................................................... 48
10.15. Shareholder Representative...................................................................... 48
10.16. Dispute Resolution and Arbitration.............................................................. 49
EXHIBITS
Exhibit A Purchase Price Allocation
Exhibit B Permitted Distribution
Exhibit C Form of Employment Agreement
Exhibit D Form of Noncompetition and Assignment and Inventions Agreement
Exhibit E Form of Escrow Agreement
Exhibit F Required Consents
Exhibit G Form of Opinion of Kahn, Kleinman, Xxxxxxxx & Xxxxxx Co., L.P.A.
Exhibit H Form of Landlord Estoppel Certificate
Exhibit I Form of Opinion of Powell, Goldstein, Xxxxxx & Xxxxxx LLP
Exhibit J Form of Opinion of Xxxxxx X. Xxxxx, Xx.
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of December
8, 2000, by and among PER-SE TECHNOLOGIES, INC., a Delaware corporation
("Purchaser"), HEALTH DATA SERVICES, INC., an Ohio corporation ("Health Data"),
PATIENT ACCOUNT MANAGEMENT SERVICES, INC., an Ohio corporation ("Patient Account
Management") (Health Data and Patient Account Management are singularly referred
to herein as a "Company", and are collectively referred to herein as the
"Companies"), XXXX XXXXXXXXX, an individual resident of the State of Ohio
("Xxxxxxxxx"), XXXXXXX XXXXXXXXX, an individual resident of the State of Ohio
("XxxXxxxxx"), XXXXXXX XXXXX, an individual resident of the State of Ohio
("Xxxxx"), and XXXXX XXXX, an individual resident of the State of Ohio ("Xxxx")
(Xxxxxxxxx, DelBrocco, Moore, and Xxxx are each a "Shareholder" and
collectively, the "Shareholders"). The Purchaser, the Companies, and the
Shareholders are collectively referred to herein as the "Parties".
RECITALS
Health Data is in the business of providing a service through which
hospitals may electronically submit medical claims to insurance companies and
other applicable payors, and Patient Account Management is in the business of
providing a service which assists hospitals in the outsourcing of their billing
and collection functions.
Saltzberg, DelBrocco, and Xxxxx are the holders of all of the issued
and outstanding capital stock of Health Data, and the Shareholders are the
holders of all of the issued and outstanding capital stock of Patient Account
Management.
This Agreement contemplates a transaction in which the Purchaser shall
purchase one hundred percent (100%) of the capital stock of each of the
Companies from the Shareholders, and in connection therewith, the Shareholders
will receive consideration in the form of cash.
AGREEMENT
In consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACCOUNTANTS" - as defined in Section 2.7(b).
"ACCOUNTS RECEIVABLE" - as defined in Section 3.8.
"ADJUSTMENT SCHEDULE" - as defined in Section 2.7(b).
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"APPLICABLE CONTRACT" -- any Contract (a) under which either of the
Companies has or may acquire any rights, (b) under which either of the Companies
has or may become subject to any obligation or liability, or (c) by which either
of the Companies or any of the Assets owned or used by either of the Companies
is or may become bound.
"ASSETS" shall mean all of the assets, properties and rights of each of
the Companies used directly or indirectly in the conduct of, or generated by or
constituting, the Business of each respective Company.
"AUDITED BALANCE SHEET" -- as defined in Section 3.4.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BUSINESS" shall mean, with respect to Health Data, the business of
providing a service through which hospitals may electronically submit medical
claims to insurance companies and other applicable payors, and shall mean, with
respect to Patient Account Management, the business of providing a service which
assists hospitals in the outsourcing of their billing and collection functions.
"CERTIFICATES" - as defined in Section 2.4.
"CLOSING" -- as defined in Section 2.5.
"CLOSING BALANCE SHEET" - as defined in Section 2.7(b).
"CLOSING DATE" -- as defined in Section 2.5.
"COMPANY GROUP" as defined in Section 3.12(a).
"COMPANY PLAN" -- as defined in Section 3.12(b).
"COMPANY QUALIFIED PLANS" - as defined in Section 3.12(c).
"CONFIDENTIAL INFORMATION" -- (a) confidential data and confidential
information relating to the business of any Party (the "PROTECTED PARTY") which
is or has been disclosed to another Party (the "RECIPIENT") or of which the
Recipient became aware as a consequence of or through its relationship with the
Protected Party and which has value to the Protected Party and is not generally
known to its competitors and which is designated by the Protected Party as
confidential or otherwise restricted; and (b) information of the Protected
Party, without regard to form, including, but not limited to, Intellectual
Property Assets, technical or nontechnical data, algorithms, formulas, patents,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product or service plans or lists of customers
or suppliers which is not commonly known or available to the public and which
information (i) derives economic value from not being generally known to, and
not being readily ascertainable by proper means by, other Persons who can obtain
economic value from its disclosure or use, and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Notwithstanding anything to the contrary contained herein, Confidential
Information
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shall not include any data or information that (v) has been voluntarily
disclosed to the public by the Protected Party, (w) has been independently
developed and disclosed to the public by others, (x) otherwise enters the public
domain through lawful means, (y) was already known by Recipient prior to such
disclosure (as evidenced by written documentation) or was lawfully and
rightfully disclosed to Recipient by another Person, or (z) that is required to
be disclosed by law or order without the availability of applicable protective
orders or treatment.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including but not limited to (a) the acquisition of the Health
Data Shares and the Patient Account Management Shares from the Shareholders, and
the payment of the Stock Purchase Consideration therefor; (b) the execution,
delivery, and performance of each Employment Agreement, each Noncompetition
Agreement, and the Escrow Agreement; (c) the performance by Purchaser, the
Companies, and the Shareholders of their respective covenants and obligations
under this Agreement; and (d) Purchaser's ownership of the Assets, and exercise
of control over the Business, of each of the Companies.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"COPYRIGHTS" - as defined in Section 3.21(a).
"DAMAGES" -- as defined in Section 9.2.
"DISCLOSURE SCHEDULE" - as defined in Section 3.
"EMPLOYEES" - as defined in Section 3.12(b).
"EMPLOYMENT AGREEMENT" -- as defined in Section 6.2(b)(i).
"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law, including fines,
penalties, financial responsibility for cleanup costs, corrective action,
removal, remedial actions and response actions, and any other compliance,
corrective, investigative, or remedial measures required under Environmental Law
or Occupational Safety and Health Law. The terms "removal," "remedial," and
"response
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action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates
to releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions that could have significant impact on
the Environment; preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment; reducing
the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated; reducing to acceptable levels the
risks inherent in the transportation of hazardous substances, pollutants, oil,
or other potentially harmful substances; cleaning up pollutants that have been
released, preventing the threat of release, or paying the costs of such clean up
or prevention; or making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA" - as defined in Section 3.12(b)(i).
"ESCROW AGREEMENT" - means that certain Escrow Agreement by and among
the Purchaser, the Shareholders, and SunTrust Bank as Escrow Agent (the "ESCROW
AGENT"), substantially in the form of Exhibit E hereto.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by either of the Companies and any
buildings, plants, structures, or equipment (including motor vehicles and
trucks) currently or formerly owned or operated by either of the Companies.
"GAAP" -- United States generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign,
or other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HEALTH DATA SHARES" -- shall mean the shares of common stock of Health
Data, no par value.
"HSR ACT" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
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"INDEMNIFIED PERSON" - as defined in Section 9.2.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.21.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonable investigation concerning the existence of such fact or other
matter.
"Knowledge" with respect to the Companies shall mean the Knowledge of
each of the Shareholders.
"LEASED REAL PROPERTY" - all real property leased to the Companies.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MARKS" - as defined in Section 3.21(a).
"MATERIAL CONTRACT" as defined in Section 3.16(a).
"NET WORKING CAPITAL" - as defined in Section 2.7(a).
"NONCOMPETITION AGREEMENTS" -- as defined in Section 6.2(b)(ii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
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"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any trust agreement adopted in connection with any trust; and
(e) any amendment to any of the foregoing.
"PATENTS" - as defined in Section 3.21(a).
"PATIENT ACCOUNT MANAGEMENT SHARES" - shall mean the shares of common
stock of Patient Account Management, no par value.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE ADJUSTMENT" - as defined in Section 2.7(a).
"PURCHASE PRICE ALLOCATION" - as defined in Section 2.8.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
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(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a
Material Interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
voting securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"XXXXXXXXX LEASE" - as defined in Section 5.5.
"SECTION 338(H)(10) ELECTION" - as defined in Section 6.10.
"SECURITIES ACT" - the Securities Act of 1933, as amended, and the
regulations and rules pursuant to the same.
"SECURITY INTEREST" -- means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens incurred in the Ordinary Course of Business not yet due and
payable, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"SHARES" - means, collectively, the Health Data Services Shares and the
Patient Account Management Shares.
"STOCK PURCHASE CONSIDERATION" - as defined in Section 2.2.
"TAX" -- shall mean all tax (including income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax or estate tax), levy
assessment, tariff, duty (including customs
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duty), deficiency or other fee and any related charge or amount (including fine,
penalty and interest) imposed, assessed or collected by or under the authority
of any Governmental Body.
"TAX RETURN" -- 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
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made or any notice has been given, or if any other event has occurred or any
other circumstances exist, that would lead a prudent Person to conclude that
such a claim, Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
"TRADE SECRETS" - as defined in Section 3.21(a).
"TRANSACTION ESCROW" - as defined in Section 9.9.
2. ACQUISITION OF STOCK OF HEALTH DATA SERVICES, INC. AND PATIENT ACCOUNT
MANAGEMENT SERVICES, INC.
2.1. Purchase and Sale of Shares.
On the terms and subject to the conditions set forth in this Agreement,
at the Closing, the Purchaser will purchase, acquire and accept from the
Shareholders, and the Shareholders will sell, assign, convey, and deliver to the
Purchaser, all of their right, title, and interest in and to the Shares, free
and clear of any Encumbrance.
2.2. Stock Purchase Consideration.
At Closing, all of the Shares shall represent the right to receive in
the manner provided in Section 2.3 below, Twenty Five Million Thirty Nine
Thousand Seven Hundred Seventeen Dollars ($25,039,717.00), subject to
post-Closing adjustment as provided in Section 2.7 below (the "Stock Purchase
Consideration").
2.3. Payment of Stock Purchase Consideration.
At Closing, the Stock Purchase Consideration shall be reduced or paid
as follows:
(a) Seven Hundred Sixty Two Thousand Five Hundred Dollars
($762,500.00) shall be paid to Xxxxxxxxx & Company, Inc., in satisfaction of the
brokerage fee referenced in Section 3.25 hereof;
(b) One Million Two Hundred Thousand Dollars
($1,200,000.00) shall be paid to the Companies, for payment of certain
employee/consultant bonuses, as reflected upon the November 30, 2000, GAAP
financial statements of the Companies as accrued bonuses;
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(c) Three Million Dollars ($3,000,000.00) shall be paid
to the Shareholder Representative, who shall immediately pay the same to the
Escrow Agent pursuant to the terms of the Escrow Agreement, to be held and
disbursed as provided in Section 9.9 below and the Escrow Agreement; and
(d) The balance of the Stock Purchase Consideration shall
be paid to a bank or other accounts designated by the Shareholder Representative
in writing to the Purchaser at least two business days prior to the Closing Date
by wire transfer or other immediately available funds, which amount shall be
allocated and paid to the Shareholders, as set forth on Schedule 2.3(d).
2.4. Surrender of Certificates for Shares.
At the Closing, each Shareholder shall deliver an executed letter of
transmittal, in a form reasonably satisfactory to the Purchaser, together with
those original certificates that immediately prior to the Closing Date
represented the Shares held by the Shareholders, or a duly executed affidavit of
lost certificate and indemnity for any certificate which has been lost, stolen,
seized or destroyed (the "Certificates"), to the Purchaser. Upon the surrender
of Certificates to the Purchaser, the Shareholders shall be entitled to receive
in exchange therefor the Stock Purchase Consideration in accordance with the
provisions of this Agreement.
2.5. Time and Place of Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Powell, Goldstein, Xxxxxx & Xxxxxx
LLP, 000 Xxxxxxxxx Xxxxxx, XX, 00xx Xxxxx, Xxxxxxx, Xxxxxxx 00000, no later than
9:00 a.m. on December 8, 2000, or such other date and time, or in such other
manner, as the Parties may agree (the "Closing Date"). Subject to the provisions
of Section 8, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.5 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.6. Deliveries at the Closing.
At the Closing, the Companies and the Shareholders will deliver to the
Purchaser the various certificates, instruments, and documents referred to in
Section 6 below; the Purchaser will deliver to the Companies and the Shareholder
Representative the various certificates, instruments, and documents referred to
in Section 7 below; the Companies and the Shareholders will execute, acknowledge
(if appropriate), and deliver to the Purchaser such documents as the Purchaser
and its counsel may reasonably request; the Purchaser will execute, acknowledge
(if appropriate), and deliver to the Companies and the Shareholder
Representative such documents as the Companies, the Shareholder Representative,
and their counsel reasonably may request; and the Purchaser will deliver Stock
Purchase Consideration in accordance with Section 2.3 above.
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2.7. Minimum Net Working Capital Adjustment to Stock Purchase
Consideration.
(a) The Stock Purchase Consideration shall be reduced on
a dollar-for-dollar basis to the extent that the "Net Working Capital" (as
hereafter defined) of the Companies, on a consolidated basis, as of November 30,
2000, is less than $2,390,000.00. The term "Net Working Capital" means the
excess of the current assets over the sum of its current liabilities (excluding
from the calculation "accrued bonuses" in the amount of $1,200,000.00, and
$70,000 of transaction expenses reflected in accounts payable, each of which
shall be paid by the Shareholders from the proceeds of the Purchase Price, each
as reflected on the November 30, 2000, GAAP financial statements of the
Companies) and all indebtedness (whether classified as short-term or long-term
indebtedness) of the Companies on a consolidated basis as of November 30, 2000,
determined in accordance with GAAP applied on a basis consistent with the
Financial Statements and without adjustments with respect to any of the
transactions contemplated by this Agreement. Any increase or decrease in the
Stock Purchase Consideration pursuant to this Section 2.7 shall be referred to
as a "Purchase Price Adjustment".
(b) As soon as practicable after the Closing Date, but
not later than sixty (60) days after the Closing Date, the Purchaser shall
prepare and deliver to the Shareholder Representative a combined balance sheet
of the Companies as of November 30, 2000 ("Closing Balance Sheet"), together
with a separate certificate calculating the Net Working Capital on November 30,
2000, determined in accordance with this Agreement, and showing any calculations
with respect to any necessary Purchase Price Adjustment (the "Adjustment
Schedule"). Within thirty (30) days of the Shareholder Representative's receipt
of the Closing Balance Sheet and Adjustment Schedule, Shareholder Representative
may deliver written notice to the Purchaser of any objections, and the basis
therefor, which Shareholder Representative may have to the contents of the
Closing Balance Sheet or Adjustment Schedule. The failure of the Shareholder
Representative to deliver such notice within the prescribed time period will
constitute the Shareholders' acceptance of the adjustments indicated. If
Purchaser and Shareholder Representative are unable to resolve any disagreement
with respect to the Purchase Price Adjustment within fifteen (15) days following
Purchaser's receipt of Shareholder Representative's notice of dispute, then the
items in dispute will be referred to Ernst & Young LLP (the "Accountants") for
final determination within thirty (30) days after such referral, which
determination shall be final and binding on the Parties. If the Accountants are
unable or unwilling to serve, then the matter shall be referred to another
nationally recognized firm of accountants not affiliated with any of the Parties
as mutually agreed or as reasonably determined by the Purchaser and the
Shareholder Representative. The fees and expenses of the Accountants shall be
borne by the losing party, or to the extent each party prevails in part, each
party shall pay the fees and expenses to the extent it is the losing party, as
determined by the Accountants.
(c) If, based on the Adjustment Schedule as finally
determined, there is a Purchase Price Adjustment, the net amount shall be paid
to the Purchaser or the Shareholders, as applicable. Final amounts due hereunder
shall be paid no later than five (5) business days following the Shareholder
Representative's agreement with the Purchaser's calculation of the Purchase
Price Adjustment, or in the event of a disagreement, following the resolution of
such disagreement by written agreement by the Purchaser and the Shareholder
Representative, or the determination of the Accountants pursuant to Section
2.7(b) above. Purchaser shall have the
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option, but shall not be obligated, to obtain the amount of any Purchase Price
Adjustment due to it out of the amounts held under the Escrow Agreement.
2.8. Allocation of Stock Purchase Consideration.
The Stock Purchase Consideration will be allocated for all purposes
(including Tax and financial accounting purposes) as set forth (or in accordance
with the methodology set forth) in Exhibit A hereto (the "Purchase Price
Allocation"). Each of the Parties hereto will not take a position on any Tax
Return, before any Governmental Body charged with the collection of any Tax, or
in any Proceeding, that is in any way inconsistent with the Purchase Price
Allocation and will cooperate with each other in timely filing consistent with
such allocation on applicable forms with the IRS.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to the
Purchaser that the statements contained in this Section 3 are true, correct and
complete as of the date hereof, and will be true, correct and complete as of the
Closing Date, except as specified to the contrary in the corresponding section
of the disclosure schedule prepared by the Companies and the Shareholders
accompanying this Agreement and initialed by the Purchaser and the Shareholder
Representative (the "Disclosure Schedule"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3.
3.1. Organization and Good Standing.
(a) Schedule 3.1 contains a complete and accurate list of
the jurisdictions of incorporation of each of the Companies and other
jurisdictions in which each of the Companies is authorized to do business. Each
of the Companies is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts.
(b) Each of the Companies is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(c) Each of the Companies has delivered to Purchaser true
and correct copies of its Organizational Documents, minute books, stock records
and related documents, as currently in effect.
3.2. Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of each of the Companies and each Shareholder, enforceable
against each of the Companies and each Shareholder in accordance with its terms.
Upon the execution and delivery by each of the Companies and each Shareholder
of, the Noncompetition Agreements and the Escrow
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Agreement, and by Xxxxxxxxx, DelBrocco, Moore, and Xxxx of each of the
Employment Agreements (collectively, the "Company Closing Documents"), the
Company Closing Documents to which the Companies and the Shareholders are a
party will constitute the legal, valid, and binding obligations of each of the
Companies and each Shareholder, enforceable against each of the Companies and
each Shareholder in accordance with their respective terms. The boards of
directors of each of the Companies and all of the shareholders of each of the
Companies have approved and authorized this Agreement and the Contemplated
Transactions, in each case without condition, limitation or restriction. Each of
the Companies and each Shareholder has the respective right, power, authority,
and capacity to execute and deliver this Agreement and the Company Closing
Documents to which it is a party and to perform each of their obligations under
this Agreement and the Company Closing Documents to which it is a party.
(b) Except as set forth in Schedule 3.2(b), neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of either of the Companies, or (B) any resolution adopted by
the board of directors or the stockholders of either of the
Companies;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any material Governmental
Authorization that is held by either of the Companies;
(iv) cause either of the Companies to become
subject to, or to become liable for the payment of, any
material Tax;
(v) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Material Contract; or
(vi) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by either of the Companies.
3.3. Capitalization.
The authorized equity securities of Health Data Services consist of 500
shares of common stock, no par value, of which 100 shares are issued and
outstanding and constitute the Health Data Services Shares, and are held as set
forth in Schedule 3.3. The authorized equity securities of Patient Account
Management consist of 850 shares of common stock, no par value,
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of which 175 shares are issued and outstanding and constitute the Patient
Account Management Shares, and are held as set forth in Schedule 3.3. The
Shareholders are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances. No legend
or other reference to any purported Encumbrance appears upon any certificate
representing the Shares. Except as set forth on Schedule 3.3, there are no
Contracts relating to the issuance, sale, or transfer of any equity securities
or other securities of either of the Companies. None of the outstanding equity
securities or other securities of either of the Companies was issued in
violation of the Securities Act or any other Legal Requirement. Neither of the
Companies owns, or has any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
3.4. Financial Statements.
The Companies have delivered to the Purchaser: (a) audited combined
balance sheets of the Companies as at December 31, 1999, and December 31, 1998,
and the related audited combined statements of income, retained earnings, and
cash flows for each of the fiscal years then ended, together with the report
thereon of Xxxxxxx & Xxxxxx LLP, independent auditors (the "Audited Balance
Sheet"), and (b) an unaudited combined balance sheet of the Companies as at
September 30, 2000 (the "Interim Balance Sheet") and the related unaudited
combined statements of income, retained earnings and cash flows and
supplementary data for the nine months then ended. Such financial statements and
notes fairly present the financial condition and the results of operations and
cash flows of the Companies as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP, subject,
in the case of the Interim Balance Sheet, to normal recurring year-end
adjustments (the effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented, would not
differ materially from those included in the last audited statement); the
financial statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods involved.
Neither of the Companies has been advised by any attorney representing it that
there are any "loss contingencies" (as defined in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board of
March, 1975), which would be required to be disclosed or accrued in financial
statements of the Companies were such statements prepared as of the date hereof.
No financial statements of any Person other than the Companies are required by
GAAP to be included in the consolidated financial statements of the Companies.
3.5. Books and Records.
The books of account, minute books, stock record books, and other
records of the Companies are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Companies are true
and complete in all material respects and neither of the Companies have taken
any action not reflected in the minutes which would have a material adverse
effect on the Companies.
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3.6. Title to Properties; Encumbrances.
Neither of the Companies owns any real property. Schedule 3.6 contains
a list of all Leased Real Property or other interests therein owned or leased by
the Companies. The Companies own all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that each of the
Companies purports to own or reflected as owned in the books and records of each
of the Companies, including all of the properties and assets reflected in the
Audited Balance Sheet and the Interim Balance Sheet (except for assets held
under capitalized leases disclosed in Schedule 3.6 and personal property sold
since the date of the Audited Balance Sheet and the Interim Balance Sheet, as
the case may be, in the Ordinary Course of Business and consistent with past
practice), and all of the properties and assets purchased or otherwise acquired
by the Companies since the date of the Audited Balance Sheet (except for
personal property acquired and sold since the date of the Audited Balance Sheet
in the Ordinary Course of Business and consistent with past practice). All
properties and assets reflected in the Audited Balance Sheet and the Interim
Balance Sheet are free and clear of all Encumbrances and are not, in the case of
the Leased Real Property, subject to any restrictions set forth in the leases
for such Leased Real Property, rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the Audited Balance Sheet or the Interim Balance Sheet as securing
specified liabilities or obligations, with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(b) mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, and (c) liens for current Taxes not
yet due.
3.7. Condition and Sufficiency of Assets.
Those aspects of the buildings, facilities, structures, and equipment
of and used by the Companies for which the Companies are responsible, and to the
Knowledge of the Companies and the Shareholders, those aspects of the buildings,
facilities, structures, and equipment of and used by the Companies for which
other Persons other than the Companies are responsible, are in good operating
condition and repair, and are adequate for the uses to which they are being put,
and none of such buildings, facilities, structures or equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The buildings, facilities, structures and
equipment of the Companies are sufficient for the continued conduct of the
Business of each respective Company after the Closing in substantially the same
manner as conducted prior to the Closing.
3.8. Accounts Receivable.
All accounts receivable of the Companies that are reflected on the
Audited Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the
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Closing Date current and collectible, without setoff, net of the respective
reserves shown on the Audited Balance Sheet or the Interim Balance Sheet or on
the accounting records of the Companies as of the Closing Date (which reserves
are adequate and calculated consistent with past practice and, in the case of
the reserve as of the Closing Date, will not represent a greater percentage of
the Accounts Receivable as of the Closing Date than the reserve reflected in the
Interim Balance Sheet represented of the Accounts Receivable reflected therein
and will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging).
3.9. No Undisclosed Liabilities.
Except as set forth in Schedule 3.9, neither of the Companies has any
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Audited Balance Sheet or the
Interim Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.10. Taxes.
(a) Since their inception, each of the Companies have had
in effect valid and binding elections to be treated as an "S Corporation" within
the meaning of IRC Sections 1361 et. seq. for federal income tax purposes.
(b) Each of the Companies has filed or caused to be filed
all Tax Returns that are or were required to be filed by or with respect to each
of them pursuant to applicable Legal Requirements. Each of the Companies has
delivered to Purchaser copies of, and Schedule 3.10(b) contains a complete and
accurate list of, all filings prepared by each of the Companies with respect to
income for federal income tax purposes since December 31, 1995. Each of the
Companies has paid, or made provision for the payment of, all Taxes that have or
may have become due pursuant to Tax Returns or otherwise, or pursuant to any
assessment received by either of the Companies, except such Taxes, if any, as
are listed in Schedule 3.10(b) and are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been provided
in the Audited Balance Sheet and the Interim Balance Sheet.
(c) The United States federal and state income Tax
Returns of each of the Companies subject to such Taxes have been audited by the
IRS or relevant state tax authorities or are closed by the applicable statute of
limitations for all taxable years through December 31, 1995. Schedule 3.10(c)
contains a complete and accurate list of all audits of all Tax Returns from
December 31, 1995, through such period, including a description of the nature
and outcome of each audit. All deficiencies proposed as a result of such audits
have been paid, reserved against, settled, or, as described in Schedule 3.10(c),
are being contested in good faith by appropriate proceedings. Schedule 3.10(c)
describes all adjustments to the United States federal income Tax Returns filed
by the Companies or any group of corporations including the Companies for all
taxable years since 1995, and the resulting deficiencies proposed by the IRS.
Except as described in Schedule 3.10(c), neither of the Companies has given or
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other
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Person) of any statute of limitations relating to the payment of Taxes of the
Companies or for which either of the Companies may be liable.
(d) The charges, accruals, and reserves with respect to
Taxes on the books of the Companies are adequate (determined in accordance with
GAAP). There exists no proposed tax assessment against either of the Companies
except as disclosed in the Audited Balance Sheet or in Schedule 3.10(d). No
consent to the application of Section 341(f)(2) of the IRC has been filed with
respect to any property or assets held, acquired, or to be acquired by either of
the Companies. All Taxes that the Companies are or were required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
(e) All Tax Returns filed by the Companies are true,
correct, and complete. There is no tax sharing agreement that will require any
payment by the Companies after the date of this Agreement.
3.11. No Material Adverse Change.
Since the date of the Audited Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, working capital or condition of the Companies, and no event has occurred
or circumstance exists that may result in such a material adverse change.
3.12. Employee Benefits.
(a) Except as disclosed on Schedule 3.12(a), no other
corporation, trade, business, or other entity, other than the Companies, would
now or in the past constitute a single employer within the meaning of Section
414 of the IRC. Each of the Companies and any other entities which now or in the
past constitute a single employer within the meaning of IRC Section 414 are
hereinafter collectively referred to as the "Company Group."
(b) Schedule 3.12(b) contains a true and complete list of
all the following agreements or plans which are presently in effect or which
have previously been in effect and which cover employees of any member of the
Company Group ("Employees"), and indicating, with respect to each, the plans for
which each of the Companies currently maintains or contributes to on behalf of
each of their employees:
(i) Any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and any trust or other funding
agency created thereunder, or under which any member of the
Company Group, with respect to Employees, has any outstanding,
present, or future obligation or liability, or under which any
Employee or former Employee has any present or future right to
benefits which are covered by ERISA; or
(ii) Any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability,
hospitalization, medical, life insurance, split dollar or
other
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employee benefit plan, program, policy, or arrangement,
whether written or unwritten, formal or informal, which any
member of the Company Group maintains or to which any member
of the Company Group has any outstanding, present or future
obligations to contribute or make payments under, whether
voluntary, contingent or otherwise.
The plans, programs, policies, or arrangements described in
subparagraph (i) or (ii) above are hereinafter collectively referred to as the
"Company Plans." Each of the Companies has delivered to Purchaser true and
complete copies of all written plan documents and contracts evidencing the
Company Plans, as they may have been amended to the date hereof, together with
(A) all documents, including without limitation, Forms 5500, relating to any
Company Plans required to have been filed prior to the date hereof with
governmental authorities for each of the three most recently completed plan
years; (B) attorney's response to an auditor's request for information for each
of the three most recently completed plan years; and (C) financial statements
and actuarial reports, if any, for each Company Plan for the three most recently
completed plan years.
(c) Except as to those plans identified on Schedule
3.12(c) as tax-qualified Company Plans (the "Company Qualified Plans"), no
member of the Company Group maintains or previously maintained a Company Plan
which meets or was intended to meet the requirements of IRC Section 401(a). The
Internal Revenue Service has issued favorable determination letters to the
effect that each Company Qualified Plan qualifies under IRC Section 401(a) and
that any related trust is exempt from taxation under IRC Section 501(a), and
such determination letters remain in effect and have not been revoked. Copies of
the most recent determination letters and any outstanding requests for a
determination letter with respect to each Company Qualified Plan have been
delivered to Purchaser. Except as disclosed on Schedule 3.12(c), no Company
Qualified Plan has been amended since the issuance of each respective
determination letter. The Company Qualified Plans currently comply in form with
the requirements under IRC Section 401(a), other than changes required by
statutes, regulations and rulings for which amendments are not yet required. No
issue concerning qualification of the Company Qualified Plans is pending before
or is threatened by the Internal Revenue Service. The Company Qualified Plans
have been administered according to their terms (except for those terms which
are inconsistent with the changes required by statutes, regulations, and rulings
for which changes are not yet required to be made, in which case the Company
Qualified Plans have been administered in accordance with the provisions of
those statutes, regulations and rulings) and in accordance with the requirements
of IRC Section 401(a). No member of the Company Group or any fiduciary of any
Company Qualified Plan has done anything that would adversely affect the
qualified status of the Company Qualified Plans or the related trusts. Any
Company Qualified Plan which is required to satisfy IRC Section 401(k)(3) and
401(m)(2) has been tested for compliance with, and has satisfied the
requirements of, IRC Section 401(k)(3) and 401(m)(2) for each plan year ending
prior to the Closing Date.
(d) Each member of the Company Group is in compliance
with the requirements prescribed by any and all statutes, orders, governmental
rules and regulations applicable to the Company Plans and all reports and
disclosures relating to the Company Plans required to be filed with or furnished
to any governmental entity, participants or beneficiaries
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prior to the Closing Date have been or will be filed or furnished in a timely
manner and in accordance with applicable law.
(e) Except as expressly identified on Schedule 3.12(e),
no termination or partial termination of any Company Qualified Plan has occurred
nor has a notice of intent to terminate any Company Qualified Plan been issued
by a member of the Company Group.
(f) No member of the Company Group maintains or has
maintained an "employee benefit pension plan" within the meaning of ERISA
Section 3(2) that is or was subject to Title IV of ERISA.
(g) Except as listed in Schedule 3.12(g), any Company
Plan can be terminated on or prior to the Closing Date without liability to any
member of the Company Group or Purchaser, including without limitation, any
additional contributions, penalties, premiums, fees or any other charges as a
result of the termination, except to the extent of funds set aside for such
purpose or reflected as reserved for such purpose on the Audited Balance Sheet.
(h) Each member of the Company Group has made full and
timely payment of, or has accrued pending full and timely payment, all amounts
which are required under the terms of each of the Company Plans and in
accordance with applicable laws and contracts to be paid as a contribution to
each Company Plan. In conformity with GAAP, the Balance Sheet accurately
reflects all obligations for accrued benefits under any non-qualified deferred
compensation or supplemental retirement plans.
(i) No member of the Company Group has any past, present
or future obligation or liability to contribute or has contributed to any
multiemployer plan as defined in ERISA Section 3(37).
(j) No member of the Company Group nor any other
"disqualified person" or "party in interest" (as defined in IRC Section 4975 and
ERISA Section 3(14), respectively) with respect to the Company Plans, has
engaged in any "prohibited transaction" (as defined in IRC Section 4975 or ERISA
Section 406). All members of the Company Group and all "fiduciaries" (as defined
in ERISA Section 3(21)) with respect to the Company Plans, including any members
of the Company Group which are fiduciaries as to a Company Plan, have complied
in all respects with the requirements of ERISA Section 404. No member of the
Company Group and no party in interest or disqualified person with respect to
the Company Plans has taken or omitted any action which could lead to the
imposition of an excise tax under the IRC or a fine under ERISA.
(k) Each member of the Company Group has complied with
the continuation coverage requirements of Section 4980B of the IRC, Section K,
Chapter 100 of the IRC and ERISA Sections 601 through 608 ("COBRA"), and with
the portability, access and renewability provisions of ERISA Sections 701
through 712.
(l) Except as disclosed on Schedule 3.12(l), no member of
the Company Group has made or is obligated to make any nondeductible
contributions to any Company Plan.
(m) No member of the Company Group is obligated,
contingently or otherwise, under any agreement to pay any amount which would be
treated as a "parachute
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payment," as defined in IRC Section 280G(b) (determined without regard to IRC
Section 280G(b)(2)(A)(ii)).
(n) Other than routine claims for benefits, there are no
actions, audits, investigations, suits or claims pending, or threatened against
any Company Plan, any trust or other funding agency created thereunder, or
against any fiduciary of any Company Plan or against the assets of any Company
Plan.
(o) The consummation of the transactions contemplated
hereby will not accelerate or increase any liability under any Company Plan
because of an acceleration or increase of any of the rights or benefits to which
Employees may be entitled thereunder.
(p) Other than health continuation coverage required by
COBRA, no member of the Company Group has any obligation to any retired or
former employee or any current employee of either of the Companies upon
retirement or termination of employment under any Company Plan.
(q) Since the date of the Audited Balance Sheet, no
member of the Company Group has (i) increased the rate of compensation payable
or to become payable to any of the employees of either of the Companies, other
than in the normal course of business and consistent with past practice; (ii)
has not made any commitment and has not incurred any liability to any labor
union; (iii) has not paid or agreed to pay any bonuses or severance pay; (iv)
has not increased any benefits or rights under any Company Plan; and (v) has not
adopted any new plan, program, policy or arrangement, which if it existed as of
the Closing Date, would constitute a Company Plan.
3.13. Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Schedule 3.13(a):
(i) Each of the Companies is, and at all times
since the date of the Audited Balance Sheet, has been, in
compliance with each material Legal Requirement that is or was
applicable to it or to the conduct or operation of each
respective Business of the Companies or the ownership or use
of any of their respective Assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may constitute
or result in a violation by either of the Companies of, or a
failure on the part of either of the Companies to comply with,
any material Legal Requirement; and
(iii) Neither of the Companies has received, at
any time since the date of the Audited Balance Sheet, any
notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or
failure to comply with, any material Legal Requirement.
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(b) Schedule 3.13(b) contains a complete and accurate
list of each material Governmental Authorization that is held by either of the
Companies or that otherwise relates to the Business of, or to any of the Assets
owned or used by, either of the Companies or that is necessary for the conduct
of the Business by each of the respective Companies. Each Governmental
Authorization listed or required to be listed in Schedule 3.13(b) is valid and
in full force and effect. Except as set forth in Schedule 3.13(b):
(i) Each of the Companies is, and at all times
since the date of the Audited Balance Sheet, has been, in
material compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be
identified in Schedule 3.13(b);
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) constitute
or result directly or indirectly in a material violation of or
a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Schedule 3.13(b);
(iii) Neither of the Companies has received, at
any time since the date of the Audited Balance Sheet, any
notice or other communication (whether oral or written) from
any Governmental Body regarding any actual, alleged, possible,
or potential violation of or failure to comply with any term
or requirement of any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or
required to be listed in Schedule 3.13 have been duly filed on
a timely basis with the appropriate Governmental Bodies, and
all other filings required to have been made with respect to
such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
3.14. Legal Proceedings; Orders.
(a) Except as set forth in Schedule 3.14, there is no
pending Proceeding:
(i) that has been commenced by or against either
of the Companies or that could impair either of the Companies'
use of any of their respective Assets; or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
To the Knowledge of the Companies and the Shareholders, (1) no such
Proceeding has been Threatened in writing, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. The Proceedings listed in Schedule 3.14
will not have a material adverse effect on the operations, Assets, condition, or
prospects of the Business of either of the Companies.
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(b) Except as set forth in Schedule 3.14:
(i) there is no material Order to which either
of the Companies, or any of the Assets owned or used by either
of the Companies, is subject; and
(ii) to the Knowledge of Companies and the
Shareholders, no officer, director, agent, or employee of
either of the Companies is subject to any Order that prohibits
such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
Business of either of the Companies.
3.15. Absence of Certain Changes and Events.
Except as set forth in Schedule 3.15, since the date of the Audited
Balance Sheet, the Companies have conducted each of their respective Businesses
only in the Ordinary Course of Business and there has not been any:
(a) change in either of the Companies' authorized or
issued capital stock; grant of any stock option or right to purchase shares of
capital stock of either of the Companies; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by either of the Companies of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of either
of the Companies;
(c) payment or increase by either of the Companies of any
bonuses, salaries, or other compensation to any stockholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee, except for year-end bonuses to any such individual to the extent
accrued in the financial statements referenced in Section 3.4 hereof;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of either of the Companies;
(e) damage to or destruction or loss of any asset or
property of either of the Companies, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of either of the Companies;
(f) entry into, termination of, or receipt of notice of
termination of any material license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement;
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any material asset or
property of either of the Companies or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of either of the
Companies;
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(h) cancellation or waiver of any material claims or
rights;
(i) change in the accounting methods used by either of
the Companies; or
(j) agreement, whether oral or written, by either of the
Companies to do any of the foregoing.
3.16. Contracts; No Defaults.
(a) Schedule 3.16(a) contains a complete and accurate
list, and the Companies have delivered to Purchaser true and complete copies, of
(or with respect to those items which are not in writing, a description of the
parties and material terms of each such item):
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
either of the Companies of an amount or value in excess of
$37,500;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
either of the Companies of an amount or value in excess of
$37,500;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that
involves expenditures or receipts of either of the Companies
in excess of $37,500;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $37,500 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with former
employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets but excluding standard nondisclosure
agreements and licenses of commercially available software;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by either of the
Companies with any other Person;
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(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business
activity of either of the Companies or any Shareholder or
limit the freedom of either of the Companies or any
Shareholder to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods and other than
commission arrangements with sales employees of either of the
Companies entered into in the Ordinary Course of Business;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract for capital
expenditures;
(xii) each written warranty, guaranty, and or
other similar undertaking with respect to contractual
performance extended by either of the Companies other than in
the Ordinary Course of Business; and
(xiii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing
Contracts, identified or required to be identified ((i) -
(xiii) are collectively, the "Material Contracts").
(b) Except as set forth in Schedule 3.16(b), no
Shareholder (and no Related Person of any Shareholder) has or may acquire any
rights under, or has or may become subject to any obligation or liability under,
any Applicable Contract that relates to the Business of, or any of the Assets
owned or used by, either of the Companies.
(c) Except as set forth in Schedule 3.16(c), each
Material Contract is in full force and effect and is valid and enforceable
against the Companies, and to the Knowledge of the Companies and the
Shareholders, against the other parties thereto, in accordance with its terms.
(d) Except as set forth in Schedule 3.16(d):
(i) Each of the Companies is, and at all times
since the date of the Audited Balance Sheet, has been, in
compliance with all applicable terms and requirements of each
Material Contract under which either of the Companies has or
had any obligation or liability;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
either of the Companies, or to the Knowledge of the Companies
and the Shareholders, any other Person, the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, reprice,
or modify, any Material Contract; and
(iii) Neither of the Companies has given to or
received from any other Person, at any time since the date of
the Audited Balance Sheet, any written
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notice or other written communication regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any Material Contract.
(e) The Companies represent that all requests from
customers for remedial or similar corrective actions since Jan. 1, 1999, are
documented in the written or electronic records of the Companies, which evidence
that the requests were initiated by the customers. Such records shall also
reflect the actions taken by the Companies in response to such requests. To the
Knowledge of the Companies and the Shareholders, no such requests remain
outstanding, which have a reasonable probability, individually or in the
aggregate, of resulting in a material adverse change on the Business of the
Companies.
(f) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to either of the Companies under current or completed Material Contracts
with any Person and to the Knowledge of the Companies and the Shareholders no
such Person has made written demand for such renegotiation.
3.17. Insurance.
(a) Each of the Companies has delivered to Purchaser true
and complete copies of all policies of insurance to which each of the Companies
is a party or under which each of the Companies, or any director of either of
the Companies, is or has been covered at any time since December 31, 1998.
Schedule 3.17(a) describes the material terms of each such policy of insurance
and the coverages provided for thereunder.
(b) Schedule 3.17(b) describes:
(i) any self-insurance arrangement by or
affecting either of the Companies, including any reserves
established thereunder; and
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk
by either of the Companies.
(c) Schedule 3.17(c) sets forth, by year, for the current
policy year and each of the two preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $37,500; and
(iii) a statement describing the loss experience
for all claims that were self-insured, including the number
and aggregate cost of such claims.
(d) Except as set forth on Schedule 3.17(d):
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(i) All policies to which either of the
Companies is a party or that provide coverage to either of the
Companies or any director or officer of either of the
Companies:
(A) are valid, outstanding, and
enforceable;
(B) to the Knowledge of the Companies
and the Shareholders, are issued by an insurer that
is financially sound and reputable; and
(C) do not provide for any
retrospective premium adjustment or other
experienced-based liability on the part of either of
the Companies.
(ii) Neither of the Companies has received (A)
any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(iii) Each of the Companies has paid all premiums
due, and has otherwise performed all of its respective
obligations, under each policy to which either of the
Companies is a party or that provides coverage to either of
the Companies or any director thereof.
(iv) Each of the Companies has given notice to
the insurer of all claims that may be insured thereby.
3.18. Environmental Matters.
Except as set forth in Schedule 3.18:
(a) Each of the Companies is, and at all times has been,
in compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Neither of the Companies has any basis to expect, nor has
either of the Companies or any other Person for whose conduct it is or may be
held to be responsible received, any actual or Threatened order, notice, or
other communication from (i) any Governmental Body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which either of the Companies has had an interest, or
with respect to any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
either of the Companies or any other Person for whose conduct it is or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of the
Companies or the Shareholders, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any
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Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets in which either of the Companies has or had an
interest.
(c) Neither of the Companies nor the Shareholders have
any Knowledge of any basis to expect, nor has any of them or any other Person
for whose conduct they are or may be held responsible, received, any citation,
directive, inquiry, notice, Order, summons, warning, or other communication that
relates to Hazardous Materials, or any alleged, actual, or potential violation
or failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any other
properties or assets in which either of the Companies had an interest, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by either of
the Companies or any other Person for whose conduct it is or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(d) Neither of the Companies, nor any other Person for
whose conduct it is or may be held responsible, has any Environmental, Health,
and Safety Liabilities with respect to the Facilities or with respect to any
other properties and assets in which either of the Companies (or any
predecessor) had an interest.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities except in compliance with all applicable
Environmental Laws.
(f) There has been no Release of any Hazardous Materials
at or from the Facilities or at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or from or by any other
properties and assets in which either of the Companies had an interest.
(g) Each of the Companies has delivered to Purchaser true
and complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by either of the Companies pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or
concerning compliance by either of the Companies or any other Person for whose
conduct it is or may be held responsible, with Environmental Laws.
3.19. Employees.
(a) Schedule 3.19(a) contains a list of the following
information for each full-time, part-time or temporary employee or director of
each of the Companies, including each employee on leave of absence or layoff
status: name; job title; current employment status and current compensation.
Schedule 3.19(a) also contains a list of all written contracts of employment to
which either of the Companies is a party, except for contracts which can be
terminated without liability upon not more than thirty (30) days notice.
(b) To the Knowledge of the Companies and the
Shareholders, no employee or director of either of the Companies is a party to,
or is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person that in any way adversely affects or
will
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affect (i) the performance of his duties as an employee or director, or (ii) the
ability to conduct the Business of either of the Companies. To the Knowledge of
the Companies and the Shareholders, no director, officer, or other key employee
of either of the Companies intends to terminate his employment.
(c) Schedule 3.19(c) also contains a complete and
accurate list of the following information for each retired employee or director
of each of the Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
3.20. Labor Relations; Compliance.
(a) Neither of the Companies is a party to any collective
bargaining or other labor Contract. There has not been, there is not presently
pending or existing, and to the Knowledge of the Companies and the Shareholders
there is not threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) except as set forth on Schedule 3.20, any
pending proceeding against or affecting either of the Companies relating to the
alleged violation of any legal requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting either of the Companies,
or (c) any application for certification of a collective bargaining agent. No
event has occurred or circumstance exists that could provide the basis for any
work stoppage or other labor dispute. There is no lockout of any employees by
either of the Companies, and no such action is contemplated. Each of the
Companies has complied in all respects with all legal requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar Taxes, occupational safety and health, and plant closing. Neither of the
Companies is liable for the payment of any compensation, damages, Taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing legal requirements, or for any other legal requirement relating
to the employer-employee relationship.
(b) Schedule 3.20 contains a complete list of employment-
related lawsuits and/or governmental administrative proceedings to which either
of the Companies is currently a party. This list includes any employment-related
disputes brought under any applicable federal, state or local laws, as well as
all administrative actions including, but not limited to, those proceedings
before the Equal Employment Opportunity Commission, the National Labor Relations
Board, the Occupational Safety and Health Agency and the Department of Labor,
and any state counterparts to such agencies.
3.21. Intellectual Property.
(a) Intellectual Property Assets--The term "Intellectual
Property Assets" includes:
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(i) The name, all fictional business names,
trade names, styles, logos, domain names, Universal Resource
Locators, registered and unregistered trademarks and service
marks, and applications therefor, including, without
limitation, intent to use applications of each of the
Companies and the goodwill relating thereto (collectively,
"Marks");
(ii) all patents, patent applications, and
inventions and discoveries that may be patentable
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights") and all such
works, including, without limitation, computer programs and
databases; and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, patent applications, unpublished works, process
technology, plans, drawings, and blue prints (collectively,
"Trade Secrets") owned, used, licensed, developed or created
by or for either of the Companies.
(b) Agreements.
(i) Schedule 3.21(b)(i) describes any royalties
paid or received by each of the Companies under all Contracts
relating to the Intellectual Property Assets, except for
licenses for commercial off-the-shelf software programs under
which either of the Companies is the licensee. Neither Company
has granted ownership of or any rights or licenses with
respect to any Intellectual Property Asset except as set forth
on Schedule 3.21(b)(i). There are no outstanding and, to the
Knowledge of the Companies and the Shareholders, no Threatened
disputes or disagreements with respect to any Contract
identified on Schedule 3.21(b)(i).
(ii) Schedule 3.21(b)(ii) lists all contracts,
licenses and agreements between the Companies and any other
Person, including but not limited to customers and suppliers
of the Companies, whereby the Companies have agreed to, or
assumed any material obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or
incur any material obligation or liability or provide a right
of rescission with respect to the infringement or
misappropriation by either of the Companies or such other
Person of the Intellectual Property Assets of any Person other
than the Companies.
(c) Intellectual Property Assets Necessary for the
Business.
The Intellectual Property Assets are all those necessary for
the operation of the Business as currently conducted. Each of the Companies is
the owner of all right, title, and interest in and to each of their respective
Intellectual Property Assets, free and clear of all Encumbrances, and has the
right to use without payment to a third party all of the Intellectual Property
Assets. All Intellectual Property Assets acquired from a third party by either
of the Companies are subject to a valid, written assignment from the creators or
developers of such Intellectual Property Assets, which assignments have been
properly recorded in the appropriate
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U.S. Government offices. To the Knowledge of the Companies and the Shareholders,
no Person is or has infringed or misappropriated any Intellectual Property
Asset.
(d) Patents.
Neither of the Companies owns any Patents. To the Knowledge of
the Companies and the Shareholders, there is no potentially interfering or
blocking patent or patent application of any third party. None of the products
manufactured or sold, nor any process or know how used, by either of the
Companies infringes any patent or proprietary right of any other Person.
(e) Trademarks
(i) Schedule 3.21(e) contains a complete and
accurate list by Xxxx, Registration or Serial Number and
summary description of all Marks registered with or applied
for in the U.S. Patent and Trademark Office. Each of the
Companies is the owner of all right, title, and interest in
and to each of their respective Marks, free and clear of all
Encumbrances.
(ii) To the Knowledge of the Companies and the
Shareholders, there is no potentially interfering trademark or
trademark application of any third party.
(iii) No Xxxx is infringed or, to the Knowledge of
the Companies and the Shareholders, has been challenged or
threatened in any way. None of the Marks used by either of the
Companies infringes or is alleged to infringe any trade name,
trademark, or service xxxx of any third party.
(f) Copyrights
(i) Schedule 3.21(f) contains a complete and
accurate list and summary description of all Copyrights
material to the conduct of the Business. Each of the Companies
is the owner of all right, title, and interest in and to each
of their respective Copyrights, free and clear of all liens,
security interests, charges, encumbrances, equities, and other
adverse claims.
(ii) No Copyright is infringed or, to the
Knowledge of each of the Companies and the Shareholders, has
been challenged or threatened in any way. None of the works
encompassed by the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative
work based on the work of a third party.
(iii) All works encompassed by the Copyrights have
been marked with the proper copyright notice.
(g) Trade Secrets
(i) Each of the Companies has taken all
reasonable precautions to protect the secrecy,
confidentiality, and value of its respective Trade Secrets
material to the conduct of the Business.
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(ii) Each of the Companies has good title and an
absolute right to use its respective Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature,
and, to the Knowledge of the Companies and the Shareholders,
have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or both of the
Companies) or to the detriment of either of the Companies. No
Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
(h) The operation of the Business of the Companies as such
business is currently conducted does not infringe or misappropriate the
Intellectual Property Assets of any Person. Neither of the Companies has
received any notice or claim that the operation of the Business of the Companies
as such is currently conducted infringes or misappropriates the Intellectual
Property Assets of any Person.
3.22. Certain Payments.
Neither of the Companies nor any of their respective directors,
officers, agents, or employees, or any other Person associated with or acting
for or on behalf of either of the Companies, has (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to improperly obtain favorable treatment in securing business,
(ii) to improperly pay for favorable treatment for business secured, (iii) to
improperly obtain special concessions or for special concessions already
obtained, for or in respect of either of the Companies, or (iv) in violation of
any Legal Requirement, (b) established or maintained any fund or asset that has
not been recorded in the books and records of either of the Companies.
3.23. Disclosure.
(a) No representation or warranty of the Shareholders in
this Agreement and no statement in the Disclosure Schedule omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) There is no fact known to either of the Companies or
any Shareholder that is known to have specific application to either the
Business of the Companies (other than general economic or industry conditions)
and that materially adversely affects the Assets, Business, prospects, financial
condition, or results of operations of either of the Companies that has not been
set forth in this Agreement or the Disclosure Schedule.
3.24. Relationships with Related Persons.
Except as set forth in Schedule 3.24, no Related Person of either of
the Companies has, or since the date of the Audited Balance Sheet has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to the Business of the Companies. No
Related Person of either of the Companies is, or since the date of the Audited
Balance Sheet has owned (of record or as a beneficial owner) an equity interest
or any other financial or profit interest in, a Person that has had business
dealings or a material financial interest in any transaction with either of the
Companies.
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3.25. Brokers or Finders.
Except for Xxxxxxxxx & Company, Inc., the fees and expenses of which
shall be paid by the Shareholders, neither of the Companies has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
3.26. Charter Provisions, Etc.
Each of the Companies has taken all action so that the entering into of
this Agreement and the consummation of the Contemplated Transactions do not and
will not result in the grant of any rights to any Person (other than the
Shareholders) under the Organizational Documents of either of the Companies or
restrict the ability of Purchaser to otherwise exercise the rights of the
Shareholders with respect to the Shares.
3.27. HSR Compliance
Neither the Companies nor any of the Shareholders constitute an
"ultimate parent entity" under the HSR Act, or is a person (or included in a
person) that has total assets of $10,000,000 or more, or had net sales during
the last fiscal or calendar year in excess of $10,000,000 as a result of the
conduct of the Business of the Companies or any other business of such
Shareholder, within the meaning of, and determined in accordance with, the HSR
Act. The Companies and the Shareholders have consulted with counsel in making
such representations.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser represents and warrants to the Shareholders as follows:
4.1. Organization and Good Standing.
Purchaser is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware.
4.2. Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Purchaser, enforceable against the Purchaser in accordance
with its terms. Upon the execution and delivery by Purchaser of the Escrow
Agreement and the Employment Agreements (collectively, the "Purchaser's Closing
Documents"), the Purchaser's Closing Documents will constitute the legal, valid,
and binding obligations of the Purchaser, enforceable against Purchaser in
accordance with their respective terms. Purchaser has the right, power, and
authority to execute and deliver this Agreement and the Purchaser's Closing
Documents and to perform its obligations under this Agreement and the
Purchaser's Closing Documents.
(b) Neither the execution and delivery of this Agreement
by Purchaser nor the consummation or performance of any of the Contemplated
Transactions by Purchaser will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to:
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(i) any provision of Purchaser's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Purchaser;
(iii) any Legal Requirement or Order to which
Purchaser may be subject; or
(iv) any material Contract to which Purchaser is
a party or by which Purchaser may be bound.
Purchaser is not required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
4.3. Certain Proceedings.
There is no pending Proceeding that has been commenced against
Purchaser and that challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Purchaser's Knowledge, no such Proceeding has been Threatened.
4.4. Brokers or Finders.
Purchaser and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
5. COVENANTS
5.1. Access and Investigation.
Between the date of this Agreement and the Closing Date, each of the
Companies will, and will cause their Representatives to, (a) afford Purchaser
and its Representatives (collectively, "Purchaser's Advisors") full and free
access to the personnel, properties (including for purposes of subsurface and
other environmental testing), contracts, books and records, and other documents
and data of each of the Companies, (b) furnish Purchaser and Purchaser's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Purchaser may reasonably request, and (c) furnish
Purchaser and Purchaser's Advisors with such additional financial, operating,
and other data and information as Purchaser may reasonably request.
5.2. Operation of the Business of the Companies.
Between the date of this Agreement and the Closing Date, each of the
Companies will:
(a) conduct the Business of each of the Companies only
in the Ordinary Course of Business;
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(b) use its respective Best Efforts to preserve intact
the current business organization, keep available the services of the current
officers, employees, and agents, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with each of the Companies;
(c) confer with Purchaser concerning operational matters
of a material nature; and
(d) otherwise report periodically to Purchaser concerning
the status of the Business, operations, and finances of the Companies.
5.3. Negative Covenant.
Except as otherwise expressly permitted by this Agreement, between
November 30, 2000, and the Closing Date, neither of the Companies will, without
the prior consent of Purchaser, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.15 could occur.
5.4. Permitted Distribution.
Notwithstanding the provisions of Section 5.3, the Companies shall not
make any dividend or other distribution to the Shareholders prior to the Closing
of the tangible and intangible assets and obligations of the Companies, except
as set forth on Exhibit B.
5.5. Xxxxxxxxx Lease.
Xxxxxxxxx covenants and agrees that, with respect to that certain lease
by and between Xxxx Residential Community Indian Hills Apartments and Xxxxxxxxx,
with regard to certain leased real property in Boyton Beach, Florida (the
"Xxxxxxxxx Lease"), that (i) the Xxxxxxxxx Lease will terminate on January 31,
2001, (ii) neither Xxxxxxxxx nor the landlord with respect to the Xxxxxxxxx
Lease have taken any action to renew the Xxxxxxxxx Lease, and (iii) the
Xxxxxxxxx Lease has not been renewed.
5.6. Required Approvals.
As promptly as practicable after the date of this Agreement, each of
the Companies and the Shareholders will make all filings required by Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, each of
the Companies and the Shareholders will cooperate with Purchaser with respect to
all filings that Purchaser elects to make or is required by Legal Requirements
to make in connection with the Contemplated Transactions.
5.7. Indebtedness of Related Persons.
Except as expressly provided in this Agreement, each of the Companies
will cause all indebtedness owed to either of the Companies by any Related
Person to be paid in full prior to or simultaneous with Closing.
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5.8. No Negotiation.
Until such time, if any, as this Agreement is terminated pursuant to
Section 8, neither of the Companies nor any Shareholder will directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Purchaser) relating to any transaction involving the sale of the Business
or Assets (other than in the Ordinary Course of Business) of either of the
Companies, or any of the capital stock of either of the Companies, or any
merger, consolidation, business combination, or similar transaction involving
either of the Companies.
5.9. Best Efforts.
Between the date of this Agreement and the Closing Date, each of the
Parties will use their respective Best Efforts to cause the conditions in
Sections 6 and 7 to be satisfied.
5.10. Confidentiality.
Each Shareholder will treat and hold as confidential all of the
Confidential Information, refrain from using any of the Confidential Information
and deliver promptly to the Purchaser or destroy, at the request and option of
the Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in his possession. In the event that any Shareholder is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Shareholder will
notify the Purchaser promptly of the request or requirement so that the
Purchaser may seek an appropriate protective order or waive compliance with the
provisions of this Section 5.10. If, in the absence of a protective order or the
receipt of a waiver hereunder, such Shareholder is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, such Shareholder may disclose the Confidential Information
to the tribunal; provided, however, that such Shareholder shall use its
reasonable efforts to obtain, at the reasonable request of the Purchaser and at
the Purchaser's sole expense, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Purchaser shall designate. The provisions of
this Section 5.10 shall also apply to the Companies and their Representatives
during the period prior to the Closing.
5.11. Books and Records; Cooperation.
(a) In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, the
Shareholders and the Purchaser will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request. The Shareholders acknowledge and agree that from
and after the Closing the Purchaser will have the right to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to the Companies in this Agreement; provided, however,
that for a period of five (5) years following the Closing Date, the Purchaser
shall retain, and the Shareholders shall have the right to obtain access, to
such documents, books, records (including Tax records), agreements, and
financial
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data to the extent related to the period prior to the Closing and make
photocopies thereof (at the sole cost and expense of such Shareholder) for a
proper purpose, such as in connection with the preparation of their Tax Returns.
(b) Following the Closing, in the event and for so long
as any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction relating to
the period on or prior to the Closing Date involving the Companies or the
Shareholders, each of the other Parties will reasonably cooperate with the
contesting or defending Party and his or its counsel in the contest or defense,
make available his or its personnel, and provide such testimony and access to
his or its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor hereunder). Notwithstanding the foregoing, costs and
expenses for salary and incidental expenses of employees cooperating will not be
reimbursable unless the time commitment with respect to such cooperation is
material.
6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
Purchaser's obligation to effect the Closing and to take the other
actions required to be taken by Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Purchaser, in whole or in part):
6.1. Accuracy of Representations.
The representations and warranties of the Shareholders in this
Agreement must have been accurate in all material respects as of the date of
this Agreement, and must be accurate in all material respects as of the Closing
Date as if made on the Closing Date.
6.2. Performance of Companies and Shareholders.
(a) The covenants and obligations that each of the
Companies and the Shareholders are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing must have been duly
performed and complied with in all material respects.
(b) The Companies and the Shareholder Representative
must have delivered each of the following executed documents:
(i) an Employment Agreement among Parent, and
each of Xxxxxxxxx, DelBrocco, Moore, and Xxxx, in the form of
Exhibit C (each, an "Employment Agreement");
(ii) a Noncompetition and Assignment of
Inventions Agreement with a term of five (5) years, in the form of
Exhibit D, executed by each Shareholder (each, a "Noncompetition
Agreement");
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(iii) proprietary information agreements, executed
by the Companies and Xxxxx Xxxxx, with regard to the Intellectual
Property Assets of the Companies, in form and substance reasonably
satisfactory to the Purchaser;
(iv) the Escrow Agreement;
(v) a certificate executed by the Shareholder
Representative representing and warranting to the Purchaser that each
of the Shareholders' representations and warranties in this Agreement
was accurate in all material respects as of the date of this Agreement
and is accurate in all material respects as of the Closing Date as if
made on the Closing Date.
6.3. Consents.
Each of the Consents identified in Exhibit F must have been obtained
and must be in full force and effect.
6.4. Additional Documents.
Each of the following documents shall have been delivered to Purchaser:
(a) an opinion of Kahn, Kleinman, Xxxxxxxx & Xxxxxx Co.,
L.P.A. dated the Closing Date, in the form of Exhibit G;
(b) an estoppel certificate executed on behalf of the
landlord of the facilities located at (i) 000-X Xxxxx Xxxxx, Xxxxxxxx
Xxxxxxx, Xxxx, (xx) 000-X & X Xxxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxx,
(xxx) 000-X Xxxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxx, and (iv) 000-X Xxxxx
Xxxxx, Xxxxxxxx Xxxxxxx, Xxxx, dated as of a date not more than twenty
(20) days prior to the Closing Date, each in the form of Exhibit H; and
(c) a certificate of the Secretary of each of the
Companies as to the incumbency of each of its officers, a copy of a
certificate evidencing the incorporation and good standing of each of
the Companies in each state where each such Company is qualified, a
copy of the articles and bylaws of each of the Companies, and a copy of
the resolutions adopted by the board of directors and the shareholders
of each of the Companies with respect to the transactions contemplated
by this Agreement;
(d) such other documents as Purchaser may reasonably
request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of
the representations and warranties of the Shareholders, (iii)
evidencing the performance by Companies and the Shareholders of, or the
compliance by the Companies and the Shareholders with, any covenant or
obligation required to be performed or complied with by the Companies
and the Shareholders, (iv) evidencing the satisfaction of any condition
referred to in this Section 6, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
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6.5. Minimum Cash of the Companies.
As of November 30, 2000, the Shareholders shall have caused the
Companies to have cash in an amount which is not less than $1,039,717.00.
6.6. No Proceedings.
Since the date of this Agreement, there must not have been commenced or
Threatened any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, (b) that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions, or (c) that involves any
material claim against either of the Companies.
6.7. No Claim Regarding Ownership or Sale Proceeds.
There must not have been made or Threatened by any Person any claim
asserting that such Person (other than a Shareholder) (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any capital stock of, or any other voting, equity, or ownership
interest in, either of the Companies, or (b) is entitled to all or any portion
of the Stock Purchase Consideration.
6.8. No Prohibition.
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Purchaser or any Person affiliated with Purchaser to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
Governmental Body.
6.9. Due Diligence.
Purchaser's due diligence investigation and review and audit of the
Disclosure Schedule shall not reveal any fact or circumstance which in
Purchaser's judgment exercised in good faith would make the completion of the
Contemplated Transactions inappropriate or inadvisable.
6.10. Section 338(h)(10) Election.
Each of the Companies and the Shareholders shall jointly make and
consent to, as the case may be, and shall deliver to Purchaser at Closing all
forms required to effect, an election under Section 338(h)(10) of the IRC, and
any applicable analogous provision of state or local law (a "Section 338(h)(10)
Election"), with respect to the sale and acquisition of the Shares hereunder.
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7. CONDITIONS PRECEDENT TO THE COMPANIES' AND THE SHAREHOLDERS' OBLIGATION
TO CLOSE
Each of the Companies' and the Shareholders' obligation to effect the
Closing and to take the other actions required to be taken by each of the
Companies and the Shareholders at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by the Companies or the Shareholder Representative, in whole or in
part):
7.1. Accuracy of Representations.
Purchaser's representations and warranties in this Agreement must have
been accurate in all material respects as of the date of this Agreement and must
be accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2. Purchaser's Performance.
(a) The covenants and obligations that Purchaser is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects.
(b) Purchaser must have executed and delivered each of
the Employment Agreements and the Escrow Agreement.
7.3. Additional Documents.
Purchaser must have caused the following documents to be delivered to
the Shareholder Representative:
(a) an opinion of Powell, Goldstein, Xxxxxx & Xxxxxx LLP,
dated the Closing Date, in the form of Exhibit I, and an opinion of Xxxxxx X.
Xxxxx, dated the Closing Date, in the form of Exhibit J; and
(b) such other documents as the Companies or the
Shareholder Representative may reasonably request for the purpose of (i)
enabling their counsel to provide the opinion referred to in Section 6.4(a),
(ii) evidencing the accuracy of any representation or warranty of Purchaser,
(iii) evidencing the performance by Purchaser of, or the compliance by Purchaser
with, any covenant or obligation required to be performed or complied with by
Purchaser, (iv) evidencing the satisfaction of any condition referred to in this
Section 7, or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
7.4. No Injunction.
There must not be in effect any Legal Requirement or any injunction or
other Order that prohibits the Contemplated Transactions.
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8. TERMINATION
8.1. Termination Events.
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Purchaser, or the Companies and the
Shareholder Representative, if a material breach of any provision of this
Agreement has been committed by the other Party and such breach has not been
waived;
(b) (i) by Purchaser if any of the conditions in
Section 6 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Purchaser to comply with its obligations under this Agreement) and Purchaser has
not waived such condition on or before the Closing Date; or (ii) by the
Companies and the Shareholder Representative, if any of the conditions in
Section 7 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of the
Companies or the Shareholders to comply with their obligations under this
Agreement), and neither the Companies nor the Shareholders has waived such
condition on or before the Closing Date;
(c) by mutual consent of Purchaser, and the Companies and
the Shareholder Representative; or
(d) by either Purchaser, or the Companies and the
Shareholder Representative, if the Closing has not occurred (other than through
the failure of any Party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement) on or before December 11, 2000, or
such later date as the parties may agree upon.
8.2. Effect of Termination.
Each Party's right of termination under Section 8.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 8.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
5.10, 10.1, 10.4, 10.13, 10.15, and 10.16 will survive; provided, however, that
if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1. Survival.
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule, the certificate delivered pursuant to
Section 6.2(b)(v), and any other certificate or document delivered pursuant to
this Agreement will survive the Closing. The right
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to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
9.2. Indemnification and Payment of Damages by the Companies and
the Shareholders.
The Companies (prior to the Closing) and the Shareholders, jointly and
severally, will indemnify and hold harmless Purchaser and its Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any breach of any representation or warranty made by
the Shareholders in this Agreement, the Disclosure Schedule, or any other
certificate or document delivered by the Companies or Shareholders pursuant to
this Agreement;
(b) any breach by the Companies or Shareholders of any
covenant or obligation of the Companies or Shareholders in this Agreement;
(c) the operation of the Business of the Companies or the
Assets prior to Closing, including, without limitation, any product shipped or
manufactured by, or any services provided by, the Companies prior to the Closing
Date;
(d) any matter disclosed in Schedule 3.14, including,
without limitation, litigation involving Allegheny Health Education Research
Foundation;
(e) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with the Companies
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; or
(f) any liability or obligation with respect to the
following matters:
(i) any and all income Taxes, sales Taxes or
other Taxes for periods prior to the Closing Date, except to the extent
that sales Taxes have been properly accrued or reserved for on the
Closing Balance Sheet;
(ii) any claim that the operation of the Business
of the Companies or the Assets prior to the Closing Date violated any
Legal Requirement or the rights
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of any third parties (under contract, in tort or otherwise), including,
without limitation, any claims with respect to product liability
(except to the extent adequately reserved on the Closing Balance
Sheet);
(iii) any liability or obligation to any officer,
director or employee of the Companies, for indemnification or
otherwise, arising out of or in connection with the operation or
conduct of the Business of the Companies prior to Closing, including,
without limitation, any indemnification claim arising out of or in
connection with any claim, suit, investigation or other matter pending
against the Companies following the Closing;
(g) any liability or obligation arising as a result of
the failure of the Companies to make proper and timely filings for the Company
Plans on IRS Form 5500.
9.3. Indemnification and Payment of Damages by Purchaser.
Purchaser will indemnify and hold harmless the Shareholders, and will
pay to the Shareholders the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any breach of any representation or
warranty made by Purchaser in this Agreement or in any certificate delivered by
Purchaser pursuant to this Agreement, (b) any breach by Purchaser of any
covenant or obligation of Purchaser in this Agreement, or (c) any claim by any
Person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by such Person
with Purchaser (or any Person acting on its behalf) in connection with any of
the Contemplated Transactions.
9.4. Time Limitations.
If the Closing occurs, Shareholders will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
9.2(a), other than a breach of Sections 3.1, 3.2, 3.3, 3.6, 3.10, 3.12, 3.25,
and 3.27, unless on or before the eighteen (18)-month anniversary of the Closing
Date, Purchaser notifies the Shareholder Representative of a claim specifying
the factual basis of that claim in reasonable detail to the extent then known by
Purchaser; a claim with respect to representations and warranties contained in
Sections 3.1, 3.2, 3.3, 3.6, 3.10, 3.12, 3.25, and 3.27, or any covenant or
obligation to be performed and complied by the Companies or the Shareholders,
may be made at any time.
9.5. Limitations on Amount - Shareholders.
(a) Shareholders will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
9.2(a) (other than a breach of Sections 3.1 (except with respect to Section
3.1(b)), 3.2 (except with respect to Section 3.2(b)(v)), 3.3, 3.6, 3.10, 3.12,
3.25, and 3.27), or with respect to the matters described in Sections 9.2(b),
9.2(c), 9.2(e), 9.2(f)(ii), and 9.2(f)(iii), until the total of all Damages with
respect to such matters exceeds $200,000, and then only for the amount by which
such Damages exceed $200,000. Shareholders will have no liability (for
indemnification or otherwise) with respect to those matters described in Section
9.2(d), 9.2(f)(i), and 9.2(g) until the total of all Damages with respect to
such matters exceeds $30,000, and then only for the amount by which such Damages
exceed $30,000.
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(b) Shareholders' maximum liability for Damages with
respect to a claim for indemnification or reimbursement based upon a breach of
the representations and warranties contained in Article 3 of this Agreement
(other than a breach of Sections 3.1 (except with respect to Section 3.1(b)),
3.2 (except with respect to Section 3.2(b)(v)), 3.3, 3.6, 3.10, 3.12, 3.25, and
3.27) shall be limited to and shall not exceed $3,000,000 in the aggregate. With
regard to claims for indemnification or reimbursement based upon a breach of the
representations and warranties contained in Sections 3.1 (except with respect to
Section 3.1(b)), 3.2 (except with respect to Section 3.2(b)(v)), 3.3, 3.6, 3.10,
3.12, 3.25, and 3.27 of this Agreement, or a claim for indemnification or
reimbursement based upon any other representation or warranty not otherwise
specifically referenced above, or any covenant or obligation to be performed and
complied by the Companies or the Shareholders, Shareholders' maximum liability
for Damages shall not exceed, in the aggregate, the Stock Purchase
Consideration.
(c) No Shareholder shall have any obligation to indemnify
or defend the Purchaser from and against any Damages resulting from, arising out
of, relating to, his indemnification obligations arising under Section 9 of this
Agreement for any amounts in excess of the Stock Purchase Consideration received
by such Shareholder.
(d) The limitations set forth in this Section 9.5 will
not apply to any breach of representations and warranties of which the Companies
or any Shareholder had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional breach by the Companies
or any Shareholder of any covenant or obligation.
9.6. Limitations on Amount - Purchaser.
(a) Purchaser will have no liability (for indemnification
or otherwise) with respect to the matters described in Section 9.3 (other than a
breach of Sections 4.1, 4.2, and 4.4) until the total of all Damages with
respect to such matters exceeds $200,000, and then only for the amount by which
such Damages exceed $200,000.
(b) Purchaser's maximum liability for Damages with
respect to a claim for indemnification or reimbursement based on a breach of
representations and warranties contained in Article 4 (other than a breach of
Sections 4.1, 4.2, and 4.4) of this Agreement shall be limited to and shall not
exceed $3,000,000 in the aggregate. With regard to claims for indemnification or
reimbursement based upon a breach of the representations and warranties
contained in Sections 4.1, 4.2, and 4.4 of this Agreement, or a claim for
indemnification or reimbursement based upon any other representation or warranty
not otherwise specifically referenced above, or any covenant or obligation to be
performed and complied by the Purchaser, Purchaser's maximum liability for
Damages shall not exceed, in the aggregate, the Stock Purchase Consideration.
(c) The limitations set forth in this Section 9.6 will
not apply to any breach of any of Purchaser's representations and warranties of
which Purchaser had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional breach by Purchaser of
any covenant or obligation, and Purchaser will be liable for all Damages with
respect to such breaches.
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9.7. Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 9.2 or 9.3, of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 9.7(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 9 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
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(d) The Companies, the Shareholders, and the Purchaser
hereby consent to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any Indemnified Person for purposes of any claim
that an Indemnified Person may have under this Agreement with respect to such
Proceeding or the matters alleged therein, and agree that process may be served
on such Persons with respect to such a claim anywhere in the world.
9.8. Procedure for Indemnification -- Other Claims.
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
9.9. Transaction Escrow.
As security for the indemnification obligations of the Shareholders
under this Agreement, the Purchaser, the Shareholders, and the Escrow Agent
shall enter into the Escrow Agreement as of the Closing Date, which shall be
funded with Three Million Dollars ($3,000,000) of the Stock Purchase
Consideration otherwise payable to the Shareholders (the "Transaction Escrow").
The amounts held in the Transaction Escrow shall be held for a period of
eighteen (18) months to secure the obligations of the Shareholders under the
indemnification obligations arising under the representations, warranties, and
covenants contained in this Agreement. Amounts held under the Transaction Escrow
shall be a nonexclusive source of indemnification for any representations,
warranties, or covenants under this Agreement, and shall not otherwise limit the
liability of the Stockholders with respect to indemnification under this
Agreement.
10. GENERAL PROVISIONS
10.1. Expenses.
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants, except that the Shareholders shall
pay all expenses of the Companies with respect to the Contemplated Transactions,
including, without limitation, all fees and expenses of attorneys, accountants,
and investment bankers. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
10.2. Public Announcements.
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Purchaser determines. Unless consented to by
Purchaser in advance or required by Legal Requirements, prior to the Closing,
the Companies and each Shareholder shall keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
The Companies and Purchaser will consult with each other concerning the means by
which the employees of the Companies, customers, and suppliers and others having
dealings with the Companies will be
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informed of the Contemplated Transactions, and Purchaser will have the right to
be present for any such communication.
10.3. Notices.
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other Parties):
If to the Shareholders:
Xxxx Xxxxxxxxx
00 Xxxxxx Xxxxx Xxxxx
Xxxxxx Xxxx, Xxxx 00000
Telephone: (000) 000-0000
with a copy to:
Kahn, Kleinman, Xxxxxxxx & Xxxxxx Co., L.P.A.
Xxx Xxxxx xx Xxxxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Purchaser, to:
Per-Se Technologies, Inc.
0000 Xx. Xxxxxxxxx Xxxx.
Xxxxxxx XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. XxXxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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10.4. Jurisdiction; Service of Process.
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in either (i) the courts of the State of Ohio, County of Cuyahoga, or,
if it has or can acquire jurisdiction, in the United States District Court for
the Northern District of Ohio, or (ii) the courts of the State of Georgia,
County of Xxxxxx, or, if it has or can acquire jurisdiction, in the United
States District Court for the Northern District of Georgia, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
10.5. Further Assurances.
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
10.6. Waiver.
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
10.7. Entire Agreement and Modification.
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
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10.8. Disclosure Schedule.
(a) The disclosures in the Disclosure Schedule must
relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate and not to any other representation or
warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Schedule
(other than an exception expressly set forth as such in the Disclosure Schedule
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
(c) No due diligence conducted by Purchaser shall limit or
be used as a defense by the Companies or the Shareholders with respect to any
claim of breach of a representation, warranty or covenant by the Companies or
the Shareholders under this Agreement.
10.9. Assignments, Successors, and No Third-Party Rights.
Neither party may assign any of its rights under this Agreement without
the prior consent of the other Parties, except that Purchaser may assign any of
its rights under this Agreement to any affiliate of Purchaser. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the Parties any legal or equitable right, remedy, or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the Parties and their successors and assigns.
10.10. Severability.
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
10.11. Section Headings; Construction.
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
10.12. Time of Essence.
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
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10.13. Governing Law.
This Agreement will be governed by the laws of the State of Georgia
without regard to conflicts of laws principles.
10.14. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
10.15. Shareholder Representative.
(a) By executing this Agreement, each of the Shareholders
hereby irrevocably constitutes and appoints Xxxx Xxxxxxxxx, acting as
hereinafter provided, as his attorney-in-fact and agent in his name, place and
xxxxx in connection with the transactions contemplated by this Agreement and
matters arising therefrom subsequent to the date hereof, and acknowledges that
such appointment is coupled with an interest. By executing and delivering this
Agreement, Xxxx Xxxxxxxxx hereby (i) accepts his appointment and authorization
as Shareholder Representative to act as attorney-in-fact and agent in the name,
place and stead of each of the Shareholders in accordance with the terms of this
Agreement, and (ii) agrees to perform his duties and obligations hereunder.
(b) Each Shareholder authorizes the Shareholder
Representative in the name and on behalf of such Shareholder:
(i) to give and receive any notice required or
permitted under this Agreement;
(ii) to exercise any rights and to take any
action required or permitted to be taken under this Agreement;
(iii) to negotiate, execute and deliver any amendment to or
modification of this Agreement or any of the provisions hereof
and any waiver or consent hereunder;
(iv) to dispute or to refrain from disputing any
claim made by Purchaser under this Agreement and any other
agreements, instruments and documents to be delivered by or on
behalf of such Shareholder pursuant to this Agreement;
(v) to negotiate and compromise any dispute
which may arise, and to exercise or refrain from exercising
remedies available under this Agreement and the other
agreements, instruments and documents delivered or to be
delivered by or on behalf of such Shareholder pursuant to this
Agreement and to sign any releases or other documents with
respect to any such dispute or remedy; and
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(vi) to give such instructions and to do such
other things and refrain from doing such other things as the
Shareholder Representative shall deem necessary or appropriate
to carry out the provisions of this Agreement and any other
agreements, instruments and documents delivered or to be
delivered by or on behalf of such Shareholder pursuant to this
Agreement.
Each of the Shareholders agrees to be bound by all agreements and
determinations made, and agreements, documents and instruments negotiated,
executed and delivered by the Shareholder Representative under this Agreement.
(c) Each of the Shareholders hereby expressly
acknowledges and agrees that the Shareholder Representative is authorized to act
in his name and on his behalf. Notwithstanding any dispute or disagreement among
the Shareholders and/or the Shareholder Representative, Purchaser shall be
entitled to rely on any and all action taken by the Shareholder Representative
under this Agreement and the other agreements, instruments and documents to be
delivered by or on behalf of the Shareholders pursuant to this Agreement without
any liability to, or obligation to inquire of, any of the Shareholders.
Purchaser is hereby expressly authorized to rely on the genuineness of the
signatures of the Shareholder Representative, and upon receipt of any writing
which reasonably appears to have been signed by the Shareholder Representative,
Purchaser may act upon the same without any further duty of inquiry as to the
genuineness of the writing.
(d) If the Shareholder Representative ceases to function
in such capacity for any reason whatsoever, then Shareholders who prior to the
Contemplated Transactions held (or their successors in interest) a majority of
the Shares may appoint a successor; provided, however, that if for any reason no
successor has been appointed pursuant to the foregoing within thirty (30) days,
then Purchaser shall have the right but not the obligation to petition a court
of competent jurisdiction for appointment of a successor.
(e) The authorization of the Shareholder Representative
shall be effective until such rights and obligations under this Agreement
terminate by virtue of the termination of any and all obligations of the
Shareholders hereunder.
10.16. Dispute Resolution and Arbitration.
(a) If a dispute arises between the Purchaser and the
Shareholders out of or under this Agreement, Xxxxx Xxxxxxx (or his designee) on
behalf of Purchaser, and the Shareholder Representative on behalf of the
Shareholders, will attempt in good faith to resolve the dispute. If those
persons have not agreed to a resolution within thirty (30) days from the date
upon which the dispute was first presented to them, the dispute shall be
resolved as provided in Section 10.16(b) below.
(b) Except as otherwise set forth in this Agreement, all
disputes arising out of or under this Agreement shall be settled by arbitration
in a location in Cleveland, Ohio, mutually acceptable to the Parties before a
single arbitrator pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any of the Parties by giving written
notice to each other than such dispute has been referred to arbitration under
this
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Section 10.16. The arbitrator shall be selected by the joint agreement of the
Parties, but if they do not so agree within twenty (20) days after the date of
receipt of the notice referred to above, the selection shall be made pursuant to
the rules from the panels of arbitrators maintained by the American Arbitration
Association. Any award rendered by the arbitrator shall be conclusive and
binding upon the Parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reason for the
award. This provision for arbitration shall be specifically enforceable by the
Parties and the decision of the arbitrator in accordance herewith shall be final
and binding and there shall be no right of appeal therefrom. The arbitrator
shall assess, as part of his award to the prevailing Party, all or such part as
the arbitrator deems proper of the arbitration expenses of the prevailing Party
(including reasonable attorneys' fees) and of the arbitrator against the Party
that is unsuccessful in such claim, defense or objection.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed, sealed and delivered
this Agreement as of the date first written above.
PURCHASER:
Per-Se Technologies, Inc.
By: /s/ XXXXX X. XXXXXXX
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President,
Corporate Development
COMPANIES:
Health Data Services, Inc.
By: /s/ XXXX XXXXXXXXX
-----------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
Patient Account Management Services, Inc.
By: /s/ XXXX XXXXXXXXX
-----------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President/CEO
SHAREHOLDERS:
/s/ XXXX XXXXXXXXX
--------------------------------------------
Xxxx Xxxxxxxxx
/s/ XXXXXXX XXXXXXXXX
--------------------------------------------
Xxxxxxx XxxXxxxxx
/s/ XXXXXXX XXXXX
--------------------------------------------
Xxxxxxx Xxxxx
/s/ XXXXX XXXX
--------------------------------------------
Xxxxx Xxxx
