EXHIBIT 10.13
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 25th day of August, 2003 by and between XXXXXXX & XXXXXXX HEALTH
CARE SYSTEMS INC., a New Jersey corporation ("HCS") located at 000 Xxxx Xxxx,
Xxxxxxxxxx, XX 00000, and HEALTH FITNESS CORPORATION, a Minnesota corporation
("HFC") located at 0000 Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, XX 00000.
RECITALS:
A. HCS, through its Health & Fitness Services Division, conducts a
business of providing corporate fitness and wellness services and products to
Xxxxxxx & Xxxxxxx affiliated entities and to other companies and entities,
including assessment programs, consulting, operations management, wellness
programs and data analysis services (the "Business"). For purposes of this
Agreement, the term the "Business" does not mean the Integrated Behavioral
Solutions business of HCS (the "Behavioral Solutions Business").
B. HFC and HCS have agreed that HFC shall purchase certain assets of the
Business pursuant to the terms and conditions of this Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Purchase of Assets. Subject to the terms and conditions hereof, HCS
agrees to sell, assign and deliver to HFC, and HFC agrees to purchase
and accept from HCS, at the Closing, all of its right, title and
interest in and to the following assets and properties of HCS (except
any such items that are Excluded Assets) (the "Acquired Assets"):
(a) All furniture, equipment, machinery, trade fixtures, leasehold
improvements and other tangible personal property ("Equipment") listed
on the equipment schedule attached as Schedule 1(a) hereto, and all
other Equipment owned by HCS and used at any of the Business' customer
sites solely for the purpose of conducting the Business;
(b) (i) All tradenames, trademarks or service xxxx registrations and
applications, common law trademarks ("Trademarks") listed on Schedule
1(b)(i), and all other Trademarks relating exclusively to the Business,
including without limitation the "Live for Life" name, subject to
Section 4(e); (ii) all copyrights in any copyrightable materials listed
on Schedule 1(b)(ii) and all other copyrights in any
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copyrightable materials relating exclusively to the Business
("Copyrights"); and (iii) all goodwill associated therewith;
(c) Subject to Section 13(f) below, all promotional materials, product and
service manuals, customer lists and customer information, member lists
and member information ("Customer Materials") identified on Schedule
1(c) and all other Customer Materials relating exclusively to the
Business, whether in written or electronic form, and all goodwill
associated therewith; and all books, ledgers and other business records
to the extent relating to the Business (HCS having the right to retain
copies) whether in written or electronic form;
(d) All know-how, trade secrets, business models and business systems, and
computer programs and telephone numbers, and all documentary evidence
thereof ("Technology") identified on Schedule 1(d), including without
limitation, the INSIGHT health risk assessment software and online
version thereof, including without limitation all such health risk
assessment software and material in a non-English language, and such
other health risk assessment software and online applications and all
books and records relating thereto, as are listed on Schedule 1(d)
hereto, and all other Technology relating exclusively to the Business;
(e) All governmental licenses and permits ("Governmental Licenses")
relating exclusively to the Business, subject to Section 3;
(f) Subject to Section 3, the following contracts of the Business (the
"Contracts"), but only insofar as HFC shall have assumed all
obligations arising from and after the Closing Date with respect to
same;
(i) All contracts identified in Schedule 1(f)(i) hereto
and all other contracts relating exclusively to the
Business pursuant to which HCS provides goods or
services to customers of the Business other than
Affiliates of HCS (the "Customer Contracts");
(ii) All contracts identified in Schedule 1(f)(ii) hereto
and all other contracts for the purchase by HCS of
goods or services relating exclusively to the
Business, but only insofar as HFC has not, prior to
the Closing, determined that HFC will not assume the
obligations thereunder, which determination shall be
in HFC's sole discretion and shall be communicated to
HCS in writing at or prior to the Closing;
(iii) All agreements pursuant to which any person or entity
has agreed not to compete with the Business or
solicit any of its employees, but only to the extent
relating to the Business ("Noncompete Contracts");
(iv) All real estate leases identified in Schedule
1(f)(iv) and all other real estate leases to which
HCS is a party with respect to the premises of any of
the Business' customer sites (other than sites of
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HCS's Affiliates) which HCS uses solely for the
purpose of conducting the Business; and
(v) Except as identified on Schedule 1(f)(v), all
personal property leases to which HCS is a party to
the extent relating to equipment, furniture and other
tangible personal property located on the premises of
any of the Business' customer sites (other than sites
of HCS's Affiliates) solely for the purpose of
conducting the Business.
(g) All other assets and properties of HCS of every kind and description
relating exclusively to the Business as presently conducted by HCS,
wherever located, whether real, personal or mixed, tangible or
intangible.
2. Behavioral Solutions Assets. At the Closing, HCS will grant HFC,
pursuant to a license agreement in the form attached hereto as Exhibit
2 (the "Behavioral Solutions License Agreement"), a worldwide,
irrevocable, paid-up, royalty-free, non-exclusive license to use
certain materials, know-how and methodologies of HCS covered by such
license agreement and relating to weight management programs that HCS
currently markets under the name "Pathways to Change" through the
Behavioral Solutions Business (such materials, know-how and
methodologies are hereinafter referred to as the "Behavioral Solutions
Assets"); provided that such license shall be subject to the terms and
conditions of such Behavioral Solutions License Agreement; and provided
further that in no event shall HFC have any rights to the name
"Pathways to Change" or related logos or marks, if any; and provided,
further, that HFC shall have no right pursuant to such license to use
any of the Behavioral Solutions Assets in connection with any clinical
trials or marketing of any pharmaceutical or surgical products.
3. Assignment of Governmental Licenses and Contracts and Rights.
(a) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or attempted agreement to
assign or transfer any Governmental License or any Contract if an
attempted assignment or transfer, without the consent of the relevant
governmental entity with respect to such Governmental License or the
other party to such Contract, would constitute a breach thereof or in
any material way adversely affect the rights thereunder of HFC (if the
assignment were effective) or of HCS (if the assignment were not
effective), unless and until written consent to such assignment or
transfer is received from such governmental entity or contracting
party, as applicable. Such Governmental Licenses and such Contracts
(other than Customer Contracts) that are not assigned or transferred to
HFC pursuant to this Section 3(a) are referred to as the
"Non-Consenting License/Contracts." In addition, and without limiting
the generality of the foregoing, HCS shall have no obligation to assign
to HFC any real property lease that HCS has entered into in connection
with a Customer Contract unless and until such Customer Contract is
assigned to HFC hereunder.
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(b) Beginning promptly, the parties shall cooperate in the process of
obtaining, in writing, customer consents required for the assignment of
the Customer Contracts (the "Required Customer Consents"). For the
purpose of obtaining such customer consents, the parties agree to
adhere to the following process (the "Assignment Process"):
(i) The parties agree that Xxxxx Xxxxx, the President and
CEO of HFC, and Xxxxxxxx Xxxxx, Vice President of
HCS's Health & Fitness Services division, or their
respective designees (provided that any such designee
is reasonably acceptable to the non-designating
party) (the "Assignment Representatives"), shall be
the respective representatives of each party
responsible for initiating discussions with the
customers party to the Customer Contracts and for
soliciting the Required Customer Consents. Such
discussions and solicitations may be conducted in
person or by phone, as determined by the Assignment
Representatives. Except as provided otherwise in the
Communication Plan (as defined below), all such
discussions and solicitations shall be conducted
jointly by both Assignment Representatives, unless
previously agreed in writing by the party whose
Assignment Representative will not participate in
such discussion or solicitation.
(ii) The parties have mutually developed and agreed upon a
customer communication plan, which is attached hereto
as Exhibit 3(b)(ii) (the "Communication Plan"). The
Communication Plan is designed to be used by the
Assignment Representatives during customer meetings
and in other correspondence with customers in order
to achieve the following objectives:
A. To inform each customer of the general
background of the transaction between the
parties and the general reasons for their
deciding to enter into such transaction;
B. to present the general terms of the
transaction to each customer (but not any
financial or specific terms without the
written consent of both parties);
C. to discuss the process of transferring
ownership of the Business and the conduct of
the Business after the Closing Date;
D. to present each customer with a letter
substantially in the form attached hereto as
Exhibit 3(b)(ii)(D) permitting the
assignment of such customer's Customer
Contract to HFC (the "Consent Letter");
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E. to outline "next steps" for each customer
and identify an appropriate contact person
assigned to assist such customer during the
Assignment Process; and
F. to address any concerns any customer may
raise in connection with any of the
foregoing.
(iii) As soon as practicable after the date hereof, the
Assignment Representatives shall begin conducting
meetings with the Business' customers. The parties
shall cause their respective Assignment
Representatives to pursue the objectives listed above
during such customer meetings. The parties shall
cause their respective Assignment Representatives to
adhere in all material respects to the Communication
Plan during customer meetings.
(c) Neither HFC nor HCS shall at any time, including during visits and
calls to customers and prospective customers of the Business, act (or
permit any of its respective Assignment Representatives, agents,
employees, affiliates, officers or directors to act) in any manner to
disparage the businesses or products of the other party or any
Affiliates of such other party.
(d) Notwithstanding anything herein to the contrary, no Customer Contract
for which a Required Customer Consent is not obtained (each a
"Non-Consenting Customer Contract") will be assigned to HFC at the
Closing. At the Closing, with respect to each Non-Consenting Customer
Contract, HCS will either (i) enter into a subcontract with HFC
containing the terms set forth in paragraph 3(f) below (a
"Subcontract") or provide another arrangement reasonably acceptable to
HFC for HFC to manage the sites included in such Non-Consenting
Customer Contract (each site so managed, whether pursuant to a
Subcontract or otherwise, an "HFC Managed Customer Site") or (ii)
terminate such Non-Consenting Customer Contract (each Customer Contract
so terminated, a "Terminated Contract") as soon as possible in
accordance with its terms by delivering a termination notice to the
relevant customer in the form of Exhibit 3(d)(ii); provided that this
paragraph 3(d) shall not apply to any Non-Consenting Customer Contract
that cannot be terminated by HCS without cause and with respect to
which the parties have not, as of the Closing, agreed upon terms on
which the related customer site would be an HFC Managed Customer Site
despite their good faith efforts to reach such agreement.
(e) HFC shall have no rights, obligations or liabilities under any
Terminated Contract, but shall have the right immediately to solicit a
new contract from the customer party to such Terminated Contract.
(f) HFC will be responsible for all of HCS's obligations under the related
Non-Consenting Customer Contract that applies to each HFC Managed
Customer Site. HCS will continue to record and collect the revenues
under the Non-Consenting Customer Contract that accrue after the
Closing Date (the "Non-Assigned
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Revenues") with respect to each HFC Managed Customer Site. In
consideration of HFC's covenants and other obligations undertaken in
connection with each HFC Managed Customer Site, HCS agrees to pay HFC
an amount equal to the Non-Assigned Revenues associated with such HFC
Managed Customer Site promptly upon receipt thereof. HCS's efforts to
collect the Non-Assigned Revenues with respect to each HFC Managed
Customer Site shall be at a level equal to or greater than its efforts
to collect receivables of the Business prior to the Closing; provided
that, subject to the foregoing, HFC shall bear all credit risk with
respect to receivables accruing after the Closing with respect to the
services performed by HFC at each HFC Managed Customer Site. HCS will,
upon request by HFC at any time after the Closing Date and prior to
receipt of the consent of the customer party thereto to assign a
Non-Consenting Customer Contract covering an HFC Managed Customer Site
to HFC, terminate as soon as possible after such request, in accordance
with the terms thereof, such Non-Consenting Customer Contract. Except
as described in the immediately preceding sentence and except as agreed
in writing by HFC, HCS shall take no action after the Closing to amend,
terminate or waive any of HCS's rights under any Non-Consenting
Customer Contract relating to an HFC Managed Customer Site.
Notwithstanding the foregoing, (i) HCS shall have the right, in its
sole and absolute discretion, to terminate, in accordance with its
terms, each Non-Consenting Customer Contract relating to an HFC Managed
Customer Site, (A) if the customer objects to the fact that HFC is
managing such site, or (B) if the Required Customer Consent for such
contract has not been received as of the three-month anniversary of the
Closing Date, with the termination in the case of this sub-clause (B)
to be effective no earlier than the end of the sixth calendar month
following the month in which the Closing occurs (provided that HCS
shall provide to HFC, and HFC may reasonably object to, the form of any
termination notice related to a termination under this clause (i)), and
(ii) in no event shall HCS be required to extend or renew any Customer
Contract upon its expiration or otherwise. HCS shall have no further
obligation to HFC with respect to any terminated or expired contract
following the effective date of such termination or expiration, or on
account of such termination or expiration, except that in the case of
Customer Contracts with respect to each HFC Managed Customer Site, HCS
shall continue to turn over all Non-Assigned Revenues received by HCS
with respect thereto as provided herein.
(g) With respect to any Non-Consenting License/Contract or any claim, right
or benefit arising thereunder or resulting therefrom (each an
"Interest" and collectively the "Interests"), HCS shall, during the
remaining term of such Interest, use commercially reasonable efforts to
cooperate with HFC in any reasonable and lawful arrangements designed
to provide the benefits of such Interest to HFC, so long as HFC
cooperates with HCS in such arrangements and advances to HCS, or
reimburses HCS for, any and all payments that HCS has notified HFC at
least 3 business days in advance of the due date thereof will be
required from HCS after the Closing Date by the terms of the document
governing such Interest (as the same shall be in effect on the Closing
Date).
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(h) At any time after the Closing, if the relevant governmental entity or
third party to any Non-Consenting License/Contract or any
Non-Consenting Customer Contract (each a "Non-Consenting Right")
consents in writing to the assignment to HFC of such Non-Consenting
Right, (x) the assignment of such Non-Consenting Right shall become
effective immediately as of the date of such consent, and HFC shall
thereafter be entitled to all of the rights, and assume all of the
obligations and liabilities, thereunder and (y) such Non-Consenting
Right shall, for all purposes hereunder (except, with respect to
Terminated Contracts but subject to Section 7(a), in the calculation or
post-Closing recalculation of the Purchase Price), be treated as an
Acquired Asset and an Assumed Liability from and after such effective
date.
(i) The parties agree that their respective obligations to obtain the
Required Customer Consents shall be solely as set forth expressly in
Section 3(b), and that, notwithstanding any other provision of this
Section 3, neither HCS nor HFC shall be required to pay any
consideration to any person or entity in order to obtain any consent to
assign, subcontract or transfer any Contract or Governmental License.
(j) For each Non-Consenting Customer Contract that has not been terminated
as of the Closing Date, HFC shall, for the remaining term of such
Customer Contract, grant HCS a license to any and all Acquired Assets
to the extent the same are needed by HCS to continue to perform its
obligations under such Customer Contract.
4. Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, HFC shall not purchase, acquire or obtain under this
Agreement or the transactions contemplated hereby any right, title or
interest in or to, and HCS shall not and does not agree to sell, assign
or deliver to HFC, any of the following assets or properties ("Excluded
Assets"):
(a) Any bank accounts, or any cash or cash equivalents, including
marketable securities, on hand or on deposit at any bank as of the
Closing Date;
(b) Any furniture, equipment, machinery, trade fixtures, office supplies,
leasehold improvements or other fixed assets owned, held or used by HCS
at its New Jersey headquarters located at 000 Xxxx Xxxx, Xxxxxxxxxx, XX
00000, and any other tangible personal property identified on Schedule
4(b);
(c) Any accounts receivable as of the Closing Date ("Accounts Receivable"),
including without limitation the accounts set forth on Schedule 8(i)(i)
hereto; provided, however, that Schedule 8(i)(ii) sets forth a true and
complete list of all pre-payments that HCS has received with respect to
any services to be provided or products to be sold by the Business
after the Closing Date, the amount of which pre-payments shall be a
reduction in the Purchase Price pursuant to Section 7(a);
(d) Any insurance policies of HCS; provided that any insurance claims or
proceeds under any HCS insurance policy, or other insuring agreement,
to the extent
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relating to loss of or damage to any Acquired Assets occurring after
the date hereof and before the Closing, shall themselves be Acquired
Assets;
(e) Any and all trade names, trademarks, service marks, copyrights, trade
dress, logos, domain names and any similar proprietary rights (i)
containing or resembling the name "Pathways to Change" or, except as
provided in Section 1(b), the names and logos of Xxxxxxx & Xxxxxxx or
any of its Affiliates or (ii) except as provided in Section 1(b), held
by HCS or any of its Affiliates;
(f) Any assets or properties related to, or developed for or used to
conduct the Behavioral Solutions business of HCS; provided that HFC
shall have a right to use certain of such assets, to the extent such
assets are currently used to conduct the Business, pursuant to the
terms of the Behavioral Solutions License Agreement and subject to the
conditions and limitations set forth therein;
(g) All inventory sold or otherwise disposed of in the ordinary course
consistent with past practice from the date hereof until the Closing
Date;
(h) All of HCS's (and its Affiliates') right, title and interest in their
respective Employee Benefit Plans and the related assets;
(i) Any deferred tax asset of the Business;
(j) All claims, credits, causes of action and rights under insurance
policies that result from or arise out of events, facts or
circumstances occurring or existing on or prior to the Closing, except
as provided in Section 4(d);
(k) All books, records, files and papers, whether in hard copy or computer
format, prepared in connection with this Agreement or the transactions
contemplated hereby, or related to any employee that is not a Hired
Employee, and all minute books, tax records, shareholder records and
other similar corporate records (including historical financial
records) of HCS and its Affiliates;
(l) All consideration to be received by HCS hereunder and all other rights
of HCS hereunder; and
(m) The other assets identified in Schedule 4(m) hereto.
5. Assumption of Liabilities.
(a) At the Closing, HFC shall assume and agree to pay, perform and
discharge when due (i) all obligations arising from and after the
Closing Date under any and all Contracts listed on Schedules 1(f)(i),
1(f)(ii) and 1(f)(iv) that are assigned to HFC by HCS ("Assumed
Contracts"); provided however, that other than as described in Section
3, HFC shall not, until assigned to HFC, assume or agree to pay,
perform or discharge when due any obligation arising under any
Contracts that are not assigned to HFC at the Closing, (ii) all trade
payables outstanding as of the Closing Date to the extent relating to
goods or services to be provided to HFC
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after the Closing Date in connection with the Acquired Assets, the
amount of which trade payables shall not exceed in the aggregate
$10,000, and (iii) all liabilities arising out of the marketing, sale
or delivery of any product, program or service by HFC or its Affiliates
after the Closing Date (whether or not such product, program or service
was, or was derived from, any of the Acquired Assets), including,
without limitation, warranty obligations and other product liabilities
with respect to products, programs and services sold by HFC or its
Affiliates after the Closing Date.
(b) HFC hereby acknowledges and agrees that HFC, not HCS, shall have sole
responsibility for any and all debts, liabilities and obligations
arising after the Closing out of the employment relationship between
HFC and any employees or consultants formerly employed or retained by
HCS, specifically excluding any debts, liabilities or obligations
arising out of the termination of such person's employment relationship
with HCS, but specifically including any debts, liabilities and
obligations arising out of any allegation that HFC discriminated
against any person in deciding not to offer employment to such person.
(c) The debts, liabilities and obligations described in the foregoing
clauses (a) and (b) are hereinafter referred to as "Assumed
Liabilities".
6. Excluded Liabilities. HFC does not assume any liabilities, obligations
or undertakings of HCS of any kind or nature whatsoever, whether fixed
or contingent, known or unknown, determined or determinable, due or not
yet due, whether arising out of employment, consulting, management or
other business relationships or other business operations prior to the
Closing Date, or arising out of sale of any of the Acquired Assets
under this Agreement, or otherwise, other than the Assumed Liabilities
(the "Excluded Liabilities"). Without limiting the generality of the
foregoing sentence, the Excluded Liabilities include, and HFC
specifically disclaims assumption of the following, except insofar as
they are Assumed Liabilities: (a) any liabilities or obligations
arising out of negligence, strict liability, product liability or
breach of warranty claims to the extent resulting from or arising out
of the operation of the Business or the Acquired Assets prior to the
Closing Date; (b) any liabilities and obligations to the extent
relating to the Business and arising prior to the Closing Date under
contracts of HCS with the Business' customers, suppliers or licensees;
(c) any claims or liabilities relating to the Business and arising
under any of HCS's payroll, compensation, bonus, employee vacation,
termination, employee benefits, employee tax, severance, sick leave,
tuition reimbursement, pro-rated pension or other employee plans,
programs or policies in connection with the termination of any of HCS's
employees as such, whether as contemplated by this Agreement or
otherwise, or arising prior to the Closing Date with respect to any of
HCS' employees as such under COBRA or federal and state plant
closing/mass layoff laws, if applicable to the transactions
contemplated hereby, or workers compensation obligations relating to
injuries sustained by HCS's employees prior to the Closing Date, or
sexual harassment, OSHA or Equal Employment Opportunity Commission
claims by HCS's employees or former employees, as such, based on acts
or omissions of
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HCS alleged to have occurred prior to the Closing Date during such
person's employment relationship with HCS; (d) any liabilities, claims
or fees payable under contracts between HCS (or its Affiliates) and any
third party staffing organization, such as Xxxxx Services, Inc., or any
other person or entity arising out of or in connection with the
employment of any employee, consultant or contractor of the Business by
HFC, HFC's retention of any such employee, consultant or contractor as
a consultant or contractor or any solicitation by HCS or HFC of any
such employee, consultant or contractor in connection with such
employment or retention; (e) any lease, license and utility payments
with respect to the Business to the extent related to any period prior
to the Closing Date; and (f) any liability of HCS or its predecessors
or Affiliates for income taxes or sales or use taxes arising out of
business operations to the extent attributable to any period prior to
the Closing Date or arising out of the sale of any of the Acquired
Assets under this Agreement. Notwithstanding any other provision of
this Agreement, HCS acknowledges that HFC is under no obligation to HCS
to offer employment to or enter into any employment relationship with
any HCS employee. HCS further acknowledges that neither this Agreement
nor any agreement between HCS (or its Affiliates) and any third party
staffing organization, such as Xxxxx Services, Inc., creates any
obligation on the part of HFC to such third party staffing
organization.
7. Payment for Acquired Assets.
(a) To induce HCS to enter into this Agreement, HFC has caused the sum of
Five Xxxxxxx Xxx Xxxxxxx Xxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars
($5,250,000.00) to be deposited with Xxxxx Fargo Bank Minnesota,
National Association (the "Escrow Agent") to be held in escrow pursuant
to the Escrow Agreement dated as of even date herewith (the "Escrowed
Funds"), a copy of which is attached hereto as Exhibit 7. At the
Closing, in exchange for the Acquired Assets HFC shall pay HCS, or
cause the Escrow Agent to disburse to HCS from the Escrowed Funds, the
foregoing sum plus one half of the Summex Fee (as defined in Section
10(g)) reduced by the amount of prepayments received by HCS for
services to be performed by the Business after the Closing Date, as
indicated in Schedule 8(i)(ii) hereto (the "Purchase Price"); provided
that if the Assigned Nominal Revenue does not equal at least
$14,400,000, then the Purchase Price shall be further reduced as set
forth in the next sentence. The amount of such further reduction (the
"Holdback Amount") shall be $25,000 for each $80,000 by which
$14,400,000 exceeds the Assigned Nominal Revenue; provided that the
Holdback Amount shall in no event exceed $750,000. At the end of each
of the six calendar months following the month in which the Closing
occurs, the Purchase Price shall be recalculated (taking into
consideration all Customer Contracts and Non-Contracted Accounts
assigned to HFC since the Closing) and HFC shall make payment to HCS,
or cause the Escrow Agent to release to HCS Escrowed Funds, in the
amount, if any, by which the Purchase Price as recalculated at such
month-end exceeds the total Purchase Price theretofore paid to HCS. For
purposes of this paragraph, a Non-affiliated Customer Contract or a
Non-Contracted Account shall be deemed to have been assigned to HFC,
regardless of any formal consent
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or assignment document, and even if already terminated, if (i) the
customer shall have executed a contract with HFC for substantially the
same services on terms no less favorable in any material respect to HFC
than as originally provided for under such Non-affiliated Customer
Contract (or, in the case of a Non-Contracted Account, the current
course of dealing between HCS and such customer) or (ii) the customer
shall, other than under any management arrangement contemplated by
Section 3(d) with respect to an HFC Managed Customer Site, have
accepted from HFC and paid HFC for substantially the same services on
terms no less favorable in any material respect to HFC than as
originally provided for under such Non-affiliated Customer Contract
(or, in the case of a Non-Contracted Account, the current course of
dealing between HCS and such customer) and such conduct has continued
for at least three months. The conditions set forth in clauses (i) and
(ii) above shall not be deemed to have failed by virtue of the fact
that the fees or other amounts payable to HFC thereunder are less than
those payable to HCS under the corresponding original Customer Contract
(or, in the case of a Non-Contracted Account, the current course of
dealing between HCS and such customer), provided that, for purposes of
calculating the Assigned Nominal Revenue, only the reduced fees and
amounts shall be counted. For the avoidance of doubt, once a contract
or a Non-Contracted Account has been assigned or deemed to have been
assigned (as described above) to HFC, no subsequent termination of such
contract or relationship, or reduction in fees or other amounts payable
thereunder, shall change the extent to which it shall have been counted
as an assigned contract for purposes of this paragraph. Notwithstanding
anything herein to the contrary, (i) no Terminated Contract shall, at
any time after the Closing, be deemed to have been assigned to HFC
unless such Terminated Contract shall have been assigned or deemed to
have been assigned (as described above) to HFC prior to the six month
anniversary of the Closing Date, and (ii) no management arrangement
contemplated by Section 3(d) with respect to an HFC Managed Customer
Site, and no services provided by HFC pursuant to any such arrangement,
shall itself be deemed to constitute an assignment of the related
Customer Contract. Each payment with respect to the Purchase Price
shall be paid out of the Escrowed Funds to HCS in immediately available
funds by wire transfer to the account designated in writing by HCS
prior to the applicable date of payment.
(b) Subject to HCS' right to all accounts receivable as of the Closing Date
pursuant to Section 4(c), receivables accrued from customers of the
Business, and payables to vendors of the Business, for services,
including rents, utility charges, prepaid service contracts, ad valorem
and personal and real property taxes, and other similar items, relating
to any period that begins prior to the Closing Date and ends after the
Closing Date shall be adjusted ratably as of the Closing Date based on
the number of calendar days in each relevant period, with (i) HCS being
entitled to and liable for such amounts relating to the period prior to
the Closing Date and (ii) HFC being entitled to and liable for such
amounts relating to the period from and after the Closing Date. In the
event that, on or after the Closing Date, either party shall receive
any payments or other funds due to the other pursuant to the terms
hereof or otherwise, then the party receiving such funds shall promptly
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forward such funds to the proper party. With respect to payments
relating to accounts receivable, the party receiving any such payment
shall apply such payment to accounts receivable pursuant to the intent
of the customer making such payment, as such intent is reasonably
determined by the receiving party (i) first by the invoice number or
other identifying information, if any, indicated on the check, (ii)
second by matching the check amount to invoice amounts, and (iii)
finally by inquiry to such customer.
(c) The parties shall use their reasonable efforts to agree upon an
allocation of the Purchase Price among the Acquired Assets (the
"Allocation") promptly following Closing (but in no event later than 60
days following the Closing Date). The Allocation shall be made in
accordance with all applicable provisions of the Internal Revenue Code
and all applicable state or local laws. Each of HFC and HCS agrees to
reflect the allocation of the Purchase Price among the Acquired Assets
upon its respective books for tax reporting purposes in accordance with
the agreed upon Allocation and to file all tax returns in accordance
with and based upon such Allocation.
(d) Neither party shall in any manner pay, compromise, offset or credit any
amount which the other party is responsible for under the provisions of
this Agreement.
8. HCS Representations and Warranties. HFC acknowledges and agrees that
the Acquired Assets are being sold, assigned and delivered "as is" and
"where is" and HFC agrees to accept delivery of the Acquired Assets in
the condition and in the location they are in on the Closing Date based
on its or its representatives' own inspection, examination and
determination with respect to all matters, and without any reliance
upon any express or implied representations or warranties of any nature
made by, on behalf of or imputed to HCS, except as expressly set forth
in this Agreement (including the Schedules hereto and the certificates,
instruments and agreements delivered pursuant to Section 11 hereof.
Without limiting the generality of the foregoing, HFC acknowledges that
HCS (i) makes no representation or warranty with respect to any
forecasts, projections, estimates or budgets delivered or made
available to HFC of future revenues, future results of operations (or
any component thereof), future cash flows or future financial condition
(or any component thereof) of the Business or any future business or
operations conducted with the Acquired Assets and (ii) except as
expressly set forth in this Agreement (including the Schedules hereto
and the certificates, instruments and agreements delivered pursuant to
Section 11 hereof), makes no representation or warranty with respect to
any other information or documents made available with respect to the
Business to HFC or its counsel, financial advisors, accountants,
auditors and other authorized representatives. HFC AGREES THAT THE
REPRESENTATIONS AND WARRANTIES GIVEN HEREIN BY HCS ARE IN LIEU OF, AND
HFC HEREBY EXPRESSLY WAIVES ALL RIGHTS TO, ANY IMPLIED WARRANTIES WHICH
MAY OTHERWISE BE APPLICABLE BECAUSE OF THE PROVISIONS OF THE UNIFORM
COMMERCIAL CODE OR ANY OTHER STATUTE, INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES OF
- 12 -
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Subject to the
foregoing, HCS makes the following representations and warranties to
HFC with the intention that HFC may rely upon the same and with the
understanding that the same are true as of the date hereof and shall
survive the Closing in accordance with Section 12(d).
(a) Organization; Authority; No Consents; No Conflicts.
(i) HCS is a corporation duly organized, validly existing
and in good standing under the laws of the State of
New Jersey, has all requisite power and authority,
corporate, legal and otherwise, to own its properties
and assets and to conduct the Business in all states
where the Business is conducted and has all requisite
power and authority to execute, perform and carry out
the provisions of this Agreement, except for such
authorizations, qualifications and permits the
absence of which would not have a Material Adverse
Effect. HCS has taken all requisite corporate action
authorizing and empowering HCS to enter into this
Agreement and to consummate the transactions
contemplated herein. This Agreement is the legal,
valid and binding obligation of HCS, enforceable in
accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting the
rights and remedies of creditors and general
principles of equity (whether considered in a
proceeding at law or in equity) and the discretion of
the court before which any proceeding therefor may be
brought.
(ii) Neither the execution and delivery of this Agreement
by HCS, nor compliance by HCS with the terms and
provisions of this Agreement, will require the
consent of any person or entity or conflict with or
result in a breach of or a default or an event of
default under or create a right of acceleration,
termination or cancellation or a loss of rights with
respect to (A) any of the terms, conditions or
provisions of the Articles of Incorporation, Bylaws
or other governing instruments of HCS, (B) any
judgment, order, decree or ruling to which HCS is a
party, (C) any injunction of any court or
governmental authority to which HCS is subject, (D)
any Governmental License or any Contract (provided
that HCS makes no representation or warranty as to
HCS's ability to subcontract its obligations, or
otherwise allow HFC to manage any customer sites,
under the Non-Consenting Customer Contracts), or (E)
any laws affecting HCS, any of its subsidiaries or
the Acquired Assets.
(b) Financial Information. A true, correct and complete copy of the
Business' audited financial statements and related notes for the year
ended December 29, 2002 is attached hereto as Schedule 8(b) ("Audited
Financials"). The Audited Financials
- 13 -
have been prepared in accordance with the books and records of HCS and
generally accepted accounting principles. Subject to the following
sentence and the assumptions, conditions and qualifications contained
in the Audited Financials (including in the notes thereto) and in the
accompanying Report of Independent Accountants, the Audited Financials,
except as noted therein and in such Report with respect to
uncertainties regarding cost allocations, present fairly in all
material respects the historical financial performance of the Business
for the periods covered thereby. HFC acknowledges that the assets and
liabilities and revenues and expenses reflected in the Audited
Financials may differ from those that would have resulted had the
Business operated autonomously or as an entity (or as part of another
entity) independent of Xxxxxxx & Xxxxxxx.
(c) No Adverse Changes. As of the date of this Agreement, since December
29, 2002, (i) there has not occurred or arisen (whether or not in the
ordinary course of business) any event, condition or change resulting
in a Material Adverse Effect, and (ii) HCS has conducted the Business
only in the ordinary course and in conformity with past practice.
(d) Acquired Assets. Except as set forth on Schedule 8(d), and except for
Contracts and Governmental Licenses that are not assignable, and
subject to restrictions on the use and disclosure of participants'
personal health information, HCS has good and marketable title to (or
in the case of any leased property, a valid leasehold interest in), or
the right to use and transfer to HFC (in the case of its interests in
certain intangible property), the Acquired Assets, free and clear of
all liens, charges, encumbrances and third party claims or interests of
any kind whatsoever, except for tax liens, mechanic's liens and similar
liens incurred in the ordinary course of business that do not in any
material respect affect the value or use of the relevant Acquired Asset
and that relate to obligations that are not yet due. Except for
Contracts and Governmental Licenses that are not assignable, and
subject to restrictions on the use and disclosure of participants'
personal health information, the Acquired Assets, together with the
Behavioral Solutions Assets, constitute all of the assets that are used
by the Business in its provision of the products and services currently
being provided by the Business to its customers, except as described on
Schedule 8(d) and except for assets that are used by HCS to provide
administrative, information management, human resources and other
overhead services throughout HCS and for which costs are allocated to
the Business as reflected in the Audited Financials.
(e) Contracts. Except as set forth on Schedule 8(e), HCS has provided HFC
with true, complete and correct copies of all Customer Contracts and
all other Contracts that are material to the Business. Neither HCS nor,
to the knowledge of HCS, the other parties thereto are in material
breach of any of the Contracts, nor does HCS have knowledge of any
facts or events, whether existing, pending, threatened or contemplated,
which, after the giving of notice, or the lapse of time, would
constitute or result in a material breach or a material default by HCS
or the other parties to such Contracts. Except as set forth on Schedule
8(e), to the knowledge of HCS, each of the Assumed Contracts is valid
and binding on the
- 14 -
parties to it in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
or affecting the rights and remedies of creditors and general
principles of equity (whether considered in a proceeding at law or in
equity) and the discretion of the court before which any proceeding
therefor may be brought. Except as set forth in Schedule 8(e), none of
such Assumed Contracts requires the consent of any party thereto to
consummate the transaction contemplated by this Agreement; provided
that HCS makes no representation or warranty as to the customer consent
required to assign any Customer Contract, or to subcontract its
obligations, or otherwise allow HFC to manage any customer sites,
thereunder.
(f) Compliance with Laws. HCS has conducted the Business in material
compliance with all applicable federal, foreign, state and local laws,
ordinances, rules and regulations, including without limitation the
Health Insurance Portability and Accountability Act of 1996, as amended
("HIPAA"). At no time during the last three (3) years has any
governmental investigation or inspection relating to the Business
resulted in HCS receiving a citation or being requested by any
governmental authority to take any remedial action under any applicable
health, environmental, safety, labor, employment or other applicable
laws or regulations. There are no ongoing, pending or, to HCS's
knowledge, threatened governmental citations which relate to the
Business. To HCS's knowledge, there are no ongoing, pending or
threatened governmental investigations or inspections which relate to
the Business.
(g) Customers. Schedule 8(g)(i) contains a true and complete list of the
current customers of the Business and the date on which the Customer
Contract, if any, of each such customer expires. Except as described in
Schedule 8(g)(ii), none of the persons identified in Schedule 8(g)(ii)
has been informed during the past year (but prior to the time at which
such customer was informed of the transactions contemplated hereby
pursuant to Section 3) by any of the Business' twenty (20) largest
unaffiliated customers for the 12-month period ended December 31, 2002,
that such customer intends, after the date hereof, to terminate, or not
renew, any contract with HCS, or intends to materially reduce or is
considering a material reduction in the volume of products or services
it purchases from HCS, or is dissatisfied in any material respect with
the Business as conducted by HCS. No refunds or warranty claims are due
any customer of the Business for products or services sold on or before
the Closing Date. Except for communications by HCS to customers as
described in Section 3, HCS has not communicated with or provided any
information to any of the Business' unaffiliated customers regarding
the transactions contemplated by this Agreement or any proposed sale of
the Business.
(h) Intellectual Property. Except as described in Schedule 8(h) and except
for restrictions on the use and disclosure of participants' personal
health information, HCS is entitled to use all of the Copyrights,
Trademarks, Technology and other intellectual property included in the
Acquired Assets and the Behavioral Solutions
- 15 -
Assets (collectively, the "Intellectual Property") free and clear of
any claims or demands of any third person and such use does not require
the consent of any other third person to use any of the Intellectual
Property, except for consents that will have been obtained as of the
Closing. Except as described in Schedule 8(h) and except for
restrictions on the use and disclosure of participants' personal health
information, HCS does not know of any encumbrances on the Intellectual
Property and has no ongoing obligation to pay licensing fees, royalties
or other payments to any third party with respect to any of the
Intellectual Property for the use thereof. Except as described in
Schedule 8(h), and except for restrictions on the use and disclosure of
participants' personal health information, HCS's right to use and
transfer any and all of the Intellectual Property is, or as of the
Closing will be, unlimited in time and unrestricted. HCS has taken
normal and customary measures to protect the confidentiality of all
trade secrets included in the Technology. No person has asserted
against HCS in writing during the last five years any claims to any of
the Intellectual Property which claim that HCS's use thereof infringes
another party's intellectual property rights. Except as described in
Schedule 8(h), HCS has no knowledge that any of the Intellectual
Property is being infringed upon or otherwise used by others, or is
subject to any outstanding judicial order, decree, judgment or
stipulation.
(i) Receivables. Schedule 8(i)(i) sets forth a true and complete schedule
of the aging of all of the receivables related to the Business as of
July 28, 2003, and the names of all customers owing past due amounts.
Such schedule shall be updated by HCS immediately prior to the Closing.
There are no set-offs, counterclaims or disputes asserted by any
customers, and no discount or allowance has been made to any customers,
that would result in a deduction by any customer from receivables
relating to services performed after the Closing Date. Schedule
8(i)(ii) describes and quantifies all prepayments received by HCS for
services to be performed by the Business after the Closing Date,
including without limitation prepayments by fitness center
participants. Such schedule shall be updated by HCS immediately prior
to the Closing.
(j) Employment Matters. Schedule 8(j)(i) hereto identifies all employment
agreements, collective bargaining or other labor agreements, any
agreements containing severance or termination pay arrangements,
deferred compensation arrangements, retainer or consulting
arrangements, and all pension or retirement plans, bonus or
profit-sharing plans, stock option or purchase plans or other plans
providing fringe benefits to employees of the Business, and true,
correct and complete copies of the foregoing have been furnished to
HFC. HCS has performed in all material respects all obligations
required to be performed under all such agreements, plans and
arrangements. All employees of the Business are employed on an at-will
basis. To the knowledge of HCS, the Business is in material compliance
with all employment and labor laws, rules and regulations, including,
but not limited to, OSHA regulations. There are no claims pending or,
to HCS's knowledge, threatened, from present or former employees or
consultants of the Business on account of pay, benefits, discrimination
or termination. Except as set forth in Schedule 8(j)(ii), HCS will
have, effective as of the Closing,
- 16 -
terminated the employment of all of the employees of the Business. HCS
acknowledges that HFC is under no obligation to HCS to offer employment
to or enter into any consultancy agreement with any employee of the
Business or any third party staffing organization, such as Xxxxx
Services, Inc., nor does this Agreement or any agreement between HCS
(or its Affiliates) and any third party staffing organization, such as
Xxxxx Services, Inc., create any such obligation on the part of HFC to
any such third party staffing organization. Except for joint
communications by HFC and HCS to employees or consultants and other
communications that have been approved by HFC, and except as described
on Schedule 8(j)(iii), HCS has not communicated with or provided any
information to any of the Business' employees or consultants regarding
their termination by HCS or, if applicable, their rehire by HFC, in
connection with the transactions contemplated by this Agreement.
(k) Environmental. The operation of the Business and Acquired Assets has
been and is in material compliance with all, and HCS does not have any
liability related to any Acquired Asset under any, applicable laws,
rules, regulations, orders, ordinances, judgments and decrees of all
governmental authorities with respect to the environment.
(l) Litigation and Related Matters. There is no pending or, to the
knowledge of HCS, threatened litigation or proceeding or, to the
knowledge of HCS, any pending or threatened investigation against HCS
related to the Business or the Acquired Assets, nor is HCS subject to
any existing judgment, order, decree or other governmental action
materially affecting the operation of the Business or the Acquired
Assets. No claims for personal injury or harassment have been asserted
against HCS by users of any facilities managed by the Business.
(m) Taxes. HCS has timely filed all material federal and applicable state
and local tax or assessment reports and returns of every kind related
to the Business required to be filed by HCS, and such reports and
returns are complete and accurate in all material respects. HCS has
duly paid all taxes and other charges (including interest and
penalties) related to the Business due to or claimed to be due by any
taxing authorities.
9. HFC Representations and Warranties. HFC makes the following
representations and warranties to HCS, with the intention that HCS may
rely upon the same and with the understanding that the same are true as
of the date hereof and shall survive the Closing in accordance with
Section 12(d).
(a) Organization. HFC is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Minnesota.
(b) Corporate Authority. HFC has all requisite power and authority to
execute, perform and carry out the provisions of this Agreement. HFC
has taken all requisite corporate action authorizing and empowering HFC
to enter into this Agreement and to consummate the transactions
contemplated herein. This
- 17 -
Agreement is the legal, valid and binding obligation of HFC,
enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting
the rights and remedies of creditors and general principles of equity
(whether considered in a proceeding at law or in equity) and the
discretion of the court before which any proceeding therefor may be
brought.
(c) No Consents or Conflicts. Neither the execution and delivery of this
Agreement by HFC, nor compliance by HFC with the terms and provisions
of this Agreement will require the consent of any person or entity or
conflict with or result in a breach of or a default or an event of
default under or create a right of acceleration, termination or
cancellation or a loss of rights with respect to (i) any of the terms,
conditions or provisions of the Articles of Incorporation, Bylaws or
other governing instruments of HFC, (ii) any judgment, order, decree or
ruling to which HFC is a party, (iii) any injunction of any court or
governmental authority to which HFC is subject, (iv) any note,
instrument, agreement, mortgage, lease, license, franchise, permit or
other material authorization, right, restriction or obligation to which
HFC or any of its subsidiaries is a party or by which HFC or any of its
subsidiaries is bound, or (v) any laws affecting HFC or any of its
subsidiaries.
(d) Litigation and Related Matters. There is no pending or, to the
knowledge of HFC, threatened litigation or proceeding or, to the
knowledge of HFC, any pending or threatened investigation against HFC
that would, if adversely determined, have a material adverse effect on
the ability of HFC to perform its obligations hereunder, nor is HFC
subject to any existing judgment, order, decree or other governmental
action materially affecting the ability of HFC to perform its
obligations hereunder.
(e) No Finder's Fees. Other than a fee payable to Xxxxxxxxx, Agio, Xxxxx &
Xxxxxx, LLC for which HCS and its Affiliates will have no liability,
there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of HFC who
might be entitled to any fee or commission from HCS or any of its
Affiliates in connection with the transactions contemplated by this
Agreement.
10. Pre-Closing Obligations.
(a) Operation of Business. At all times prior to the Closing, HCS will,
except as otherwise contemplated by this Agreement or except as
approved by HFC in writing:
(i) operate the Business in the ordinary course of
business;
(ii) not sell or otherwise dispose of, or contract to sell
or otherwise dispose of, any of the Business'
properties or assets other than in the ordinary
course of business;
- 18 -
(iii) except in each case in the ordinary course of
business, not incur any trade payables related to the
Business;
(iv) not (x) increase the compensation payable or to
become payable to the Business' employees or to the
Business' consultants or independent contractors, (y)
increase the benefits to any such persons under any
Employee Benefit Plan, or (z) pay (or offer to pay)
any severance amount to any employee of the Business
prior to receiving notice from HFC that HFC does not
intend to employ or retain such person after the
Closing;
(v) not change in any material respect any contract with
the Business' customers or, except in the ordinary
course of Business and except for price increases in
accordance with the terms of the Customer Contracts,
the prices at which it sells services or goods to its
customers;
(vi) not enter into any other transactions that
individually or in the aggregate are material to the
Business other than in the ordinary course of
business;
(vii) maintain the Business' properties and facilities in
as good working order and condition as at present,
ordinary wear and tear excepted; and
(viii) with respect to the Business, use its normal and
commercially reasonable efforts to maintain and
preserve, in all material respects, its business
organization intact, retain its present employees and
maintain its relationships with independent operators
and others having business relations with it;
provided that nothing in this Agreement shall require
HCS to extend or renew any Contract upon its
expiration or otherwise.
(b) Press Releases and Announcements. Prior to the Closing, neither HCS nor
HFC shall, and they shall cause their respective Affiliates and
representatives not to, issue any press release (or make any other
public announcement) related to this Agreement or the transactions
contemplated hereby without prior approval of the other party hereto;
provided, however, that (i) HFC may, at any time prior to the earlier
of the Closing and the termination of this Agreement, issue a press
release in the form attached hereto as Exhibit 10(b) (the "8-K
Compliant Press Release") and file with the Securities and Exchange
Commission a Current Report on Form 8-K, and any other form, disclosing
the information contained in the 8-K Compliant Press Release, and (ii)
either party may issue any other press release (or make any other
public announcement) regarding this Agreement that is necessary, in the
opinion of counsel to such party, to comply with applicable law (an
"Additional Required Announcement"). The party making any Additional
Required Announcement shall consult with the other party prior to
making such
- 19 -
disclosure and the parties hereto shall use all reasonable efforts,
acting in good faith, to agree upon the text for such disclosure.
(c) Due Diligence Review by HFC. Subject to attorney-client and attorney
work product privileges, prior to the Closing, HCS shall, and shall
cause its Affiliates to, afford to the officers, attorneys, accountants
and other representatives of HFC reasonable access during normal
business hours, and at such times and in such manner as to minimize
disruption of HCS's normal business operations, to the facilities,
assets and books and records of HCS related to the Acquired Assets so
as to afford HFC a reasonable opportunity to make, at its sole cost and
expense, such review, examination and investigation of the ownership,
operation and condition of the Acquired Assets as HFC may desire to
make in its sole discretion. HFC will be permitted to make extracts
from or to make copies of such books and records, to the extent they
relate to the Acquired Assets, as it deems necessary.
(d) No Solicitation of Other Offers. HCS shall not, and shall cause its
Affiliates and representatives not to, directly or indirectly,
initiate, solicit, propose, encourage, pursue, engage in or enter into
any proposals, substantive discussions, negotiations, letters or
statements of intent or agreements (whether preliminary or definite)
with any person or entity of any nature that contemplate or provide for
the sale, transfer, encumbrance or other disposition, directly or
indirectly, of the Business or, except in the ordinary course of
business, any of the Acquired Assets.
(e) Xxxxx Services Information. Promptly after the date hereof and in any
event at least 20 days prior to the Closing, HCS shall provide, or
cause Xxxxx Services, Inc. or any other third-party staffing
organization used in the Business to provide, to HFC the names, rate of
pay, hours per week worked and work sites of all of the Business'
independent contractors retained through Xxxxx Services, Inc. or such
other third-party staffing organization. HCS acknowledges that HFC will
use such information to solicit such persons for employment by HFC.
(f) Access to Employees. Promptly upon the execution and delivery of this
Agreement, HCS shall provide access to HFC to all of the Business'
regional managers and other corporate level employees listed on
Schedule 10(f) for purposes of soliciting such employees to join HFC
and determining whether such employees will do so if offered terms of
employment at substantially the same base salary, with benefits
commensurate with benefits provided to similarly situated HFC
employees. Notwithstanding anything herein to the contrary, HFC shall
have the right to terminate this Agreement at any time before the
earlier of five business days after the date hereof and HFC's issuance
of the 8-K Compliant Press Release or other public announcement of the
transactions contemplated hereby if HFC determines that at least half
of such employees listed on Schedule 10(f) do not intend to join HFC.
- 20 -
(g) Transfer of Information to Summex. The parties acknowledge that certain
Customer Materials related to health risk assessment data of HCS's
affiliated customers that will be transferred to HFC hereunder will,
prior to the Closing, be transferred by HCS to Summex Corporation
("Summex") to be held for and on behalf of HFC, and that Summex will
charge a fee (the "Summex Fee") in connection with such transfer. The
parties agree to cooperate in effecting such transfer to Summex in a
timely manner. The parties agree that HCS will pay in full to Summex
the Summex Fee but that HFC will, as reflected in the Purchase Price
pursuant to Section 7(a), reimburse HCS at the Closing for one half of
the Summex Fee, provided such reimbursement does exceed $75,000.
11. Closing.
(a) Time and Place of Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place via facsimile at the
offices of Xxxxxxxxxx & Xxxxx, P.A. at 10:00 A.M. local time on the
third business day after all conditions to closing contained herein
have been satisfied or waived, or at such other place or at such other
time as HCS and HFC may mutually agree in writing. The date on which
and the time at which the Closing occurs is the "Closing Date." Time is
of the essence because HCS's intention to exit the Business is or will
become known to its employees, customers, suppliers and others having
dealings with HCS.
(b) Documents Delivered by HCS. At or before the Closing, HCS shall deliver
to HFC the following documents, duly executed as appropriate:
(i) Certified copies of corporate resolutions of HCS
authorizing and approving the execution, delivery and
performance by HCS of this Agreement and the
consummation of the transactions contemplated hereby.
(ii) A Xxxx of Sale for the sale of the Acquired Assets,
duly executed by an authorized officer of HCS.
(iii) Assignment and assumption agreement relating to the
Contracts being assigned to HFC as of the Closing
Date, other than real property leases, in the form
attached hereto as Exhibit 11(b)(iii) (the
"Assignment and Assumption Agreement"), executed by a
duly authorized officer of HCS.
(iv) Trademark and copyright assignments relating to the
transfer of the Trademarks and Copyrights to be
transferred under this Agreement, executed by a duly
authorized officer of HCS or, in the case of
Trademarks, the Affiliate(s) of HCS that own the
Trademark registrations in question.
(v) The Behavioral Solutions License Agreement.
- 21 -
(vi) A Master Services Agreement between HFC and Xxxxxxx &
Xxxxxxx Services, Inc., substantially in the form
attached hereto as Exhibit 11(b)(vi), providing for
HFC's management through the end of calendar year
2006 of all fitness sites of Xxxxxxx & Xxxxxxx and
its Affiliates currently being managed by the
Business.
(vii) Such other instruments of assignment as HFC may
reasonably request for the purpose of assigning the
Acquired Assets.
(c) Documents Delivered by HFC. At or before the Closing, HFC shall deliver
to HCS the following documents and other items, duly executed as
appropriate:
(i) Certified copies of corporate resolutions of HFC
authorizing and approving the execution, delivery and
performance by HFC of this Agreement and the
consummation of the transactions contemplated hereby.
(ii) The Purchase Price in accordance with Section 7(a).
(iii) The Assignment and Assumption Agreement, executed by
a duly authorized officer of HFC.
(iv) Such other agreements to assume as HCS may reasonably
request for the purpose of HFC's assumption of the
Assumed Liabilities.
(d) Conditions to Closing.
(i) Conditions Precedent to HFC's Obligations. All of the
obligations of HFC hereunder to consummate the
Closing are subject to fulfillment, prior to or at
the Closing, of the following conditions (compliance
with which or the occurrence of which may be waived
in whole or in part by HFC):
(A) The representations and warranties of HCS
contained herein (disregarding, for the
purpose of this subparagraph only, any
reference to materiality contained therein),
taken together, shall be accurate, true and
correct in all material respects on and as
of the Closing Date or, in the case of
representations and warranties made as of a
specified date, at the Closing with respect
to such specified date, in each case with
the exception of any inaccuracies to the
extent resulting from the loss of customers
or employees following the disclosure, in
accordance with this Agreement, of the
transactions contemplated hereby. HCS shall
have performed and complied in all material
respects with all the terms, provisions and
conditions of this Agreement to be complied
with and performed by HCS at or before the
Closing (disregarding, for the purpose of
this
- 22 -
subparagraph only, any reference to
materiality contained in such terms,
provisions and conditions). HFC shall have
received a certificate of an officer of HCS
dated the Closing Date certifying as to the
satisfaction of the conditions set forth in
this Section 11(d)(i)(A).
(B) No law or governmental regulation, rule or
directive shall have been enacted, issued or
promulgated, and no proceeding shall be
pending, which would prevent or restrain
completion of the transactions contemplated
hereunder.
(C) Since the date hereof, there shall not have
occurred any event, condition or change that
has a Material Adverse Effect.
(D) HFC shall have received acceptances of its
offers of employment from persons
constituting a majority of the Business'
current on-site account managers who are
offered employment by HFC on terms
consistent with Section 13(h)(iii).
(E) HCS shall have received all consents and
approvals that are required to be obtained
by HCS to assign or transfer to HFC the
Acquired Assets listed on Schedule
11(d)(i)(E) as contemplated by this
Agreement.
(F) HCS shall have received from the customers
party to the Non-affiliated Customer
Contracts all consents and approvals that
are required to be obtained by HCS under
Non-affiliated Customer Contracts in order
to assign to HFC Non-affiliated Customer
Contracts (each on terms that are no less
favorable to the Business than the current
terms of such Non-affiliated Customer
Contract) such that the Assigned Nominal
Revenue is at least $12,000,000.
(G) HCS shall have duly executed and delivered
to HFC each of the documents and agreements
provided for in Section 11(b).
(ii) Conditions Precedent to HCS's Obligations. All of the
obligations of HCS hereunder to consummate the
Closing are subject to fulfillment, prior to or at
the Closing, of the following conditions (compliance
with which or the occurrence of which may be waived
in whole or in part by HCS):
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(A) The representations and warranties of HFC
contained herein (disregarding, for the
purpose of this subparagraph only, any
reference to materiality contained therein),
taken together, shall be accurate, true and
correct in all material respects on and as
of the Closing Date or, in the case of
representations and warranties made as of a
specified date, at the Closing with respect
to such specified date. HFC shall have
performed and complied in all material
respects with all the terms, provisions and
conditions of this Agreement to be complied
with and performed by HFC at or before the
Closing (disregarding, for the purpose of
this subparagraph only, any reference to
materiality contained in such terms,
provisions and conditions). HCS shall have
received a certificate of an officer of HFC
dated the Closing Date certifying as to the
satisfaction of the conditions set forth in
this Section 11(d)(ii)(A).
(B) No law or governmental regulation, rule or
directive shall have been enacted, issued or
promulgated, and no proceeding shall be
pending, proposed or threatened which would
prevent or restrain completion of the
transactions contemplated hereunder.
(C) HCS shall have received the Purchase Price
in accordance with Section 7(a).
(D) HCS shall have received from the customers
party to the Non-affiliated Customer
Contracts all consents and approvals that
are required to be obtained by HCS under
Non-affiliated Customer Contracts in order
to assign to HFC Non-affiliated Customer
Contracts such that the Assigned Nominal
Revenue is at least $9,600,000.
(E) HFC shall have duly executed and delivered
to HCS each of the documents and agreements
provided for in Section 11(c).
12. Indemnification.
(a) Indemnification by HCS. HCS agrees to indemnify and hold harmless HFC
and HFC's officers, directors, shareholders, Affiliates, employees and
agents and its and their respective heirs, successors and assigns
(collectively, the "HFC Indemnified Parties," each of which shall be a
third party beneficiary under this Section 12) from and against:
(i) any and all claims, demands, actions, damages,
losses, costs and expenses (including reasonable
attorneys' fees actually incurred)
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(collectively, "Damages") sustained or incurred by
such HFC Indemnified Party, to the extent resulting
from: (A) any inaccuracy or misrepresentation in, or
any breach of, any representation or warranty made by
HCS to HFC in this Agreement, in the Behavioral
Solutions License Agreement or in any certificate or
instrument delivered pursuant to Section 11(b) or
11(d)(i)(A) hereof; (B) any breach of any covenant or
agreement to be performed by HCS under this Agreement
or under any certificate or instrument delivered
pursuant to Section 11(b) hereof; or (C) the failure
of HCS to comply with any bulk transfer laws or bulk
sales laws that may be applicable in connection with
the transactions contemplated by this Agreement; or
(ii) to the extent not indemnified pursuant to clause (i)
above, any claim, action, suit, proceeding, demand,
debt, liability, obligation, fine or penalty, and,
subject to Section 12(e) below, the costs and
expenses (including reasonable attorneys' fees
actually incurred) associated with the defense
thereof (each, a "Claim") asserted against such HFC
Indemnified Party by a third party to the extent
arising out of or resulting from (A) HCS's possession
or use of the Acquired Assets or HCS's conduct of the
Business prior to the Closing, or (B) any Excluded
Liability.
(b) Indemnification by HFC. HFC agrees to indemnify and hold harmless HCS
and HCS's officers, directors, shareholders, Affiliates, employees and
agents and its and their respective heirs, successors and assigns
(collectively, the "HCS Indemnified Parties," each of which shall be a
third party beneficiary under this Section 12) from and against:
(i) any and all Damages sustained or incurred by such HCS
Indemnified Party, to the extent resulting from: (A)
any inaccuracy or misrepresentation in, or any breach
of, any representation or warranty made by HFC to HCS
in this Agreement or in any certificate or instrument
delivered pursuant to Section 11(c) or 11(d)(ii)(A)
hereof; (B) any breach of any covenant or agreement
to be performed by HFC under this Agreement or under
any certificate or instrument delivered pursuant to
Section 11(c) hereof; or
(ii) to the extent not indemnified pursuant to clause (i)
above, any Claim asserted against such HCS
Indemnified Party by a third party to the extent
arising out of or resulting from (A) HFC's possession
or use of the Acquired Assets or HFC's conduct of the
Business after the Closing, or (B) any Assumed
Liability.
(c) Limits. Notwithstanding anything to the contrary in this Section 12,
HCS shall have no liability for indemnification pursuant to
- 25 -
Section 12(a)(i)(A) unless and until the aggregate amount of all
indemnifiable Damages sustained or incurred by all HFC Indemnified
Parties, taken together, cumulatively exceeds $50,000, and then only to
the extent of such excess, and in no event will HCS's aggregate
indemnification obligation under Section 12(a)(i) exceed the Purchase
Price. Notwithstanding anything to the contrary in this Section 12, HFC
shall have no liability for indemnification pursuant to Section
12(b)(i)(A) unless and until the aggregate amount of all indemnifiable
Damages sustained or incurred by all HCS Indemnified Parties, taken
together, cumulatively exceeds $50,000, and then only to the extent of
such excess, and in no event will HFC's aggregate indemnification
obligation under Section 12(b)(i) exceed the Purchase Price.
Notwithstanding the foregoing, this Section 12(c) shall not apply to
Damages resulting from or in connection with any fraudulent
misrepresentation.
(d) Survival of Claims. All representations and warranties made in this
Agreement, in the Behavioral Solutions License Agreement or in any
certificate or other document delivered pursuant hereto, and all
indemnification obligations with respect to any such representation or
warranty, shall terminate and expire on the second anniversary hereof.
No action or proceeding seeking indemnification, damages or other
relief for breach of any such representation or warranty or for any
misrepresentation or inaccuracy with respect thereto shall be commenced
after such date with respect to all claims of any indemnified person
under this Section 12, which shall not have been previously asserted,
with reasonable specificity, by written notice to the other party.
Notwithstanding the foregoing, the representations and warranties
(together with the related indemnification obligations) contained in
Sections 8(a)(i), 8(d) (solely insofar as it relates to title to the
Acquired Assets), 8(h), 8(m), 9(a) and 9(b) of this Agreement and
clauses (i) through (iv) of Section 11 of the Behavioral Solutions
License Agreement shall survive until 60 days following the expiration
of the statute of limitations applicable to the matters covered
thereby. If a claim with respect to any representation or warranty is
asserted in writing, with reasonable specificity, under this Section 12
prior to the otherwise applicable expiration date, such claim shall
survive until it is finally resolved.
(e) Indemnification Procedures with Respect to Third Party Claims. In the
event that any Claim shall be asserted in writing against an HFC
Indemnified Party or an HCS Indemnified Party (each, an "Indemnitee")
that, if sustained, would result in indemnifiable loss hereunder, the
Indemnitee, as soon as reasonably practicable and within a reasonable
time after learning of such Claim (which shall not be in excess of
fifteen (15) days), shall notify in writing the indemnifying party
hereunder (the "Indemnitor") of such Claim, and shall permit the
Indemnitor, at
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its option and expense, to assume complete control of the defense
against such Claim through legal counsel selected by it and reasonably
satisfactory to the Indemnitee, provided that the Indemnitor proceed in
good faith and with reasonable diligence. The failure to give notice as
required by this Section 12(e) shall not result in a waiver of any
right to indemnification hereunder except to the extent that the
Indemnitor is prejudiced thereby. The Indemnitee shall cooperate with
the Indemnitor in connection with any defense assumed by the Indemnitor
hereunder, and no effort to recover the amount of the loss related to
such Claim shall be made by the Indemnitee while such defense is still
being made until the earlier of (a) the resolution of said Claim by the
Indemnitor with the claimant, or (b) the termination of the defense by
the Indemnitor against such Claim or the failure of the Indemnitor to
prosecute such defense in good faith and with reasonable diligence. The
Indemnitee shall, at its option and expense, have the right to
participate, with legal counsel of its own selection (and at its own
expense), in any defense of a Claim undertaken by the Indemnitor;
provided, however, that if joint representation would give rise to a
conflict of interest for legal counsel, then the Indemnitee shall be
entitled to engage separate legal counsel to defend the Indemnitee
against such Claim at the sole expense of the Indemnitor. No settlement
or compromise of any Claim which may result in a loss to Indemnitee may
be made by the Indemnitor without the prior written consent of the
Indemnitee (which shall not be unreasonably withheld) unless (x) prior
to such settlement or compromise the Indemnitor acknowledges in writing
its obligation to pay in full the amount of the settlement or
compromise and the Indemnitee is furnished with (i) security reasonably
satisfactory to it that the Indemnitor will in fact pay such amount and
(ii) a full release of such Claim against the Indemnitee and (y) such
settlement or compromise provides for no relief or remedy other than
money damages. Notwithstanding anything to the contrary herein, with
respect to any Claim asserted by a governmental authority relating to
taxes (a "Tax Claim"), the Indemnitor shall be entitled to participate
in the defense of such Tax Claim, but the Indemnitee shall control such
defense. The Indemnitee will not settle any such Tax Claim without the
prior consent of the Indemnitor, such consent not to be unreasonably
withheld. As to any Claims (including Tax Claims) with respect to which
the Indemnitor does not assume control of the defense, all costs of
such defense by the Indemnitee shall be borne by the Indemnitor.
(f) Exclusive Remedy. From and after the Closing the sole and exclusive
remedies of the parties with respect to any and all claims relating to
the subject matter of this Agreement or the Behavioral Solutions
License Agreement (other than equitable remedies and remedies to
enforce any arbitration decision rendered pursuant to Section 16(j))
shall be pursuant to the indemnification provisions set forth in this
Section 12. In furtherance of the foregoing, each of HFC and HCS
hereby, on their own behalf and on behalf of the HFC Indemnified
Parties and HCS Indemnified Parties (as the case may be), waives, to
the fullest extent permitted under applicable laws, any other rights
and claims it may have against the other party relating to the Acquired
Assets, the Business or the transactions contemplated hereby.
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(g) Other Indemnity Matters. Upon making any payment to an indemnified
party for any indemnification claim pursuant to this Section 12, the
indemnifying party shall be subrogated, to the extent of such payment,
to any rights which the indemnified party may have against other
persons with respect to the subject matter underlying such
indemnification claim. If, after an indemnification payment is made
hereunder, the party to which such payment is made receives insurance
proceeds in respect of the loss, such amount shall promptly be remitted
to the indemnifying party. Notwithstanding anything to the contrary
contained herein, no party may make a claim for indemnification
hereunder with respect to a matter actually known by such party prior
to the Closing to conflict with the accuracy of any representation or
warranty hereunder.
13. Other Covenants.
(a) Access to and Preservation of Records. After the Closing Date, HFC
shall allow HCS to examine (and at HCS's own expense, copy) files,
books of account, correspondence and other records as reasonably
necessary: (i) to respond to any government investigation of HCS, (ii)
to resolve tax issues with respect to any period prior to the Closing,
or (iii) in connection with any litigation, administrative proceeding
or other dispute involving HCS. If such examination unreasonably
interferes with HFC's business, HCS shall reimburse HFC for any lost
profits and for time expended by its employees resulting from such
unreasonable interference. HFC shall not dispose of any of its records
relating to the Business or the Acquired Assets until the fifth
anniversary of the Closing Date.
(b) Noncompetition. After the Closing Date and for a period of three years
thereafter, HCS agrees (i) that it will not compete with HFC by
participating in the management of any fitness center facility in the
United States that is devoted to physical exercise (other than physical
rehabilitative therapy) and is owned by any person or entity that is
not an Affiliate of HCS, or (ii) not to market through any such fitness
center facility in the United States owned by any person or entity that
is not an Affiliate of HCS any health risk assessment (except as it may
relate to pharmacological studies), smoking cessation, weight loss or
physical exercise programs or services (provided that the
subcontracting and other arrangements pertaining to HFC Managed
Customer Sites contemplated by Section 3(d) or Section 3(g) of this
Agreement shall not be deemed to conflict with this provision). HCS
agrees that the covenant in this Section 13(b) applies to any act taken
by HCS directly, or indirectly through any of its Affiliates, whether
as agent, consultant or otherwise. Nothing in this Section 13(b) shall
(i) restrict any such Affiliate from engaging in any activity if done
independently of HCS, or (ii) apply to the sale of any products of HCS
or its Affiliates, or to the sale to health maintenance, managed care
and similar healthcare organizations of any Behavioral Solutions
programs to the extent they are sold in connection with related
products.
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(c) Use of Office Space. For a term of one year following the Closing Date,
HCS shall grant HFC a license, substantially in the form of Exhibit
13(c) attached hereto (the "Office Space License"), to use at least
1,500 square feet of contiguous office space at 000 Xxxx Xxxx,
Xxxxxxxxxx, Xxx Xxxxxx where the Business is currently located, or in
any other comparable building owned or leased by HCS that is within ten
miles of 000 Xxxx Xxxx (the "Licensed Space"). The Licensed Space shall
include furniture reasonably requested by HFC and of a type and
quantity customarily used in the Business prior to Closing in similar
office spaces of the Business. The monthly license fee for the Licensed
Space shall be no higher than HCS's cost of providing such Licensed
Space to HFC. HFC shall have access to the Licensed Space consistent
with all normal security policies applicable to the Licensed Space. HFC
may make minor, reasonable modifications and repairs to the Licensed
Space with the prior written consent of HCS which will not be
unreasonably withheld. HCS shall make available to HFC, at cost, the
following utilities for the Licensed Space: ambient heat, ventilation
and air conditioning, and water, electricity and telephone; provided
that HFC shall pay for its own telephone expenses.
(d) Covenant not to Hire or Solicit. Until the second anniversary of the
Closing Date, neither HFC nor any of its Affiliates will, directly or
indirectly, solicit (other than indirectly by means of general
advertising) for employment or hire any person now or hereafter
employed or retained by HCS in connection with the Behavioral Solutions
Business. Until the first anniversary of the Closing Date, HCS will
not, directly or indirectly, solicit (other than indirectly by means of
general advertising) for employment or hire any Hired Employee who is,
at the time of such solicitation or hiring, an employee of HFC.
(e) Further Assurances; Cooperation. The parties hereto agree that they
will, at any time and from time to time after the Closing Date, upon
request of the other, take or cause to be taken such further action and
execute and deliver or cause to be executed and delivered all such
further documents as such other party may reasonably require for the
assigning, transferring and delivering of the Acquired Assets and
assuming the Assumed Liabilities and documenting the transactions
contemplated hereby. HCS will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Business from
maintaining substantially the same business relationships with HFC
after the Closing Date as it maintained with HCS prior to the Closing
Date, and HCS will assist HFC in effecting an orderly and effective
transition of the Business from HCS to HFC. Without limiting the
generality of the foregoing, during the six (6) months immediately
following the Closing, Xxxxxxxx Xxxxx, on behalf of HCS, shall, to the
extent she remains employed by HCS or any Affiliate of HCS, (i) be
reasonably available to assist HFC, and shall provide HFC with such
assistance as it may reasonably request, in connection with such
orderly and effective transition, including by answering questions
regarding the history of the Business' relationships with its customers
(provided that such assistance shall not, in any material respect,
interfere with her performance of her full-time duties to HCS), and
(ii) have primary responsibility
- 29 -
for overseeing the management by HCS of any Terminated Contracts,
communicating with HFC regarding the status of such Terminated
Contracts and coordinating with HFC in the transitioning of any such
Terminated Contracts, including the employees and contractors of HCS
who service such Terminated Contracts, to HFC; provided, however, that
no such Terminated Contract shall be transitioned to HFC unless and
until the customer party thereto has consented in writing to such
transition.
(f) Use of the Names and Trademarks of HCS, Xxxxxxx & Xxxxxxx and their
Affiliates. HFC covenants that neither it nor any of its Affiliates
shall use in any manner any trademark, service xxxx, domain name or
trade name of HCS, Xxxxxxx & Xxxxxxx or any of their respective
Affiliates (other than the trademarks, domain names and service marks
transferred to HFC pursuant to this Agreement), including, without
limitation, "Pathways to Change", "Xxxxxxx & Xxxxxxx" or "J&J" or any
derivative or similar name or xxxx. This provision shall not prohibit
HFC from quoting publications by HCS, its Affiliates or any other
person or entity that are publicly available; provided that, in the
case of publications by HCS or its Affiliates, they are properly
attributed to HCS or its Affiliate, as the case may be.
(g) Bulk Sales. Subject to Section 12, HFC hereby waives compliance by HCS
with the provisions of the bulk transfer and bulk sales laws of any
applicable jurisdictions; provided that nothing in this Agreement will
estop or prevent either party from asserting as a bar or defense in any
action or proceeding brought under any bulk sales or bulk transfer law
that such law does not apply to the transactions contemplated by this
Agreement.
(h) Hired Employees.
(i) If, at any time during the period beginning on the
Closing Date and ending on the six month anniversary
thereof, HFC terminates for any reason other than
Cause any former employee of HCS hired by HFC in
connection with the transactions contemplated by this
Agreement (a "Hired Employee"), HFC shall pay such
employee the severance amount set forth opposite such
employee's name on Schedule 13(h) (including the
amount set forth in Schedule 13(h) if such employee
has signed a release that releases all claims that
such employee may then have against HFC); provided,
however, that HCS agrees to reimburse HFC for
one-half of any such severance payment that is
payable on account of the termination, during the
first three months following the Closing, of a Hired
Employee for a Customer-Related Reason; and provided,
further, that HCS agrees to reimburse HFC for any
such severance payment that is payable on account of
the termination of a Hired Employee for any reason
between three months and six months following the
Closing. For purposes of this Section 13(h), an
employee will be deemed to be terminated for "Cause"
by HFC if
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such termination arises from or is in any way related
to any of the following with respect to such
employee: (a) such employee's material or repeated
neglect of, or other failure to perform in all
material respects, any of his or her duties, or such
employee's failure to carry out reasonable directives
from HFC; (b) such employee's material or repeated
violation of HFC company policy; (c) such employee's
willful or repeated misconduct; (d) any statement,
representation or warranty made to HFC by such
employee that he or she knows to be false or
misleading; (e) such employee's commission of a
felony, whether or not against HFC and whether or not
committed during such employee's employment with HFC;
or (f) such employee's acting in a manner materially
adverse to the best interests of HFC. For purposes of
this Section 13(h), an employee will be deemed to be
terminated for a "Customer-Related Reason" if such
employee's employment with HFC is related primarily
to a specific customer, and such employee is
terminated in connection with the termination of
HFC's relationship with such customer or a reduction
in the services provided by HFC to such customer, or
such customer's dissatisfaction for any reason with
such employee.
(ii) The severance obligations of HFC set forth in clause
(i) above shall not apply to any employees whose
employment with HFC is related primarily to an HFC
Managed Customer Site and who are terminated in
connection with the termination of the arrangements
by which HFC manages such site due to the fact that
the customer does not consent to assignment of the
applicable Customer Contract or enter into a new
contract with HFC on terms no less favorable to HFC.
(iii) For a period of eighteen months after the Closing
Date, HFC shall provide to each Hired Employee, while
such Hired Employee remains employed by HFC, a base
salary substantially comparable to that which was
provided to such employee by HCS. For purposes of
this Section 13(h)(iii), HCS represents that it has
provided to HFC complete and accurate information
regarding the base salaries provided by HCS to the
Hired Employees. Subject to the immediately following
sentence, HFC also agrees to provide benefits to each
Hired Employee comparable to those that it offers to
similarly situated employees currently employed by
HFC, and to use commercially reasonable efforts to
make medical and dental insurance available to Hired
Employees without waiting periods. HFC agrees that,
with respect to all Employee Benefit Plans covering
any of the Hired Employees, service with HCS or any
of its Affiliates shall be counted as service with
HFC for purposes of determining any period of
eligibility to participate or to vest in benefits.
- 31 -
(i) Insurance. Except as provided in Section 4(d), the coverage under all
insurance policies related to the Business shall continue in force, if
at all, only for the benefit of HCS and its Affiliates, and not for the
benefit of HFC. As of the Closing Date HFC agrees to arrange for its
own insurance policies with respect to the Acquired Assets and the
Business covering all periods and agrees not to seek, through any
means, to benefit from any of HCS's, Xxxxxxx & Johnson's or its
Affiliates' insurance policies which may provide coverage for claims
relating in any way to the Acquired Assets or the Business on or prior
to the Closing Date, except as provided in Section 4(d).
(j) Client and Participant Information. HFC agrees to treat all client and
participant data transferred hereunder in accordance with each client's
respective Customer Contract. In addition, HFC agrees to treat all such
client and participant data that was collected through the Business's
online health risk assessments or other online applications in
accordance with the Business's online privacy policy as set forth in
Exhibit 13(j). HFC agrees to maintain all other personally identifiable
participant data transferred hereunder in strict confidence.
(k) Shared Assets. Based on its due diligence, HFC in good faith believes
that there are no Technology assets used in the Business that are
material to operation of the Business that are not included in the
Acquired Assets. However, if any such material Technology assets are
identified following Closing, HCS will, to the extent it has the right
to do so, permit HFC such limited use thereof as may be reasonably
necessary to enable HFC to provide customers with management services
substantially equivalent to those provided to such customers by the
Business prior to the Closing; provided that (i) such use shall not
interfere with HCS' own use of such assets; (ii) such use shall not
continue for a period of more than 90 days following the Closing; (iii)
HFC shall diligently undertake to obtain alternative assets as soon as
possible in an effort to minimize the extent to which HFC must take
advantage of the rights set forth in this paragraph; and (iv) in no
event shall HCS be required to permit HFC to have access to any
computer network of HCS or its Affiliates.
14. Termination. This Agreement may be terminated prior to the Closing as
follows:
(a) At the written election of HFC, without liability to HFC on account of
such termination, if (i) any representation or warranty of HCS made
herein is untrue in any respect and such breach is not cured within ten
(10) business days of HCS's receipt of written notice from HFC that
such breach exists or occurred and such breach has a Material Adverse
Effect, or (ii) HCS has defaulted in any respect in the performance of
any obligation under this Agreement and such default is not cured
within ten (10) business days of HCS's receipt of a written notice from
HFC that such default exists or has occurred and such default has a
Material Adverse Effect;
(b) At the written election of HCS, without liability to HCS on account of
such termination, if (i) any representation or warranty of HFC made
herein is untrue in
- 32 -
any material respect and such breach is not cured within ten (10)
business days of HFC's receipt of written notice from HCS that such
breach exists or occurred, or (ii) HFC has defaulted in any material
respect in the performance of any material obligation under this
Agreement and such default is not cured within ten (10) business days
of HFC's receipt of a written notice from HCS that such default exists
or has occurred; or
(c) At the written election of either HFC or HCS after 90 days following
the date hereof (but only if the Closing has not occurred other than
through the failure of any party seeking to terminate this Agreement to
comply with its obligations under this Agreement in all material
respects).
15. Certain Definitions.
(a) "Affiliate" means, with respect to any person or entity, any other
person or entity that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with such person or entity.
(b) "Assigned Nominal Revenue" shall mean the fixed amounts payable by
customers during the twelve months following the Closing Date under all
Non-affiliated Customer Contracts and Non-Contracted Accounts assigned
to HFC, assuming that such customers' contracts (or, in the case of
Non-Contracted Accounts, the customer's current level of business with
the Business) will remain in effect during such entire 12-month period,
such customers will not exercise any termination rights that they may
have under such contracts, and taking into consideration any reduction
in such fees or payments that were conceded by HCS in order to obtain
any Required Customer Consent for any such contract; provided, however,
that if a customer has informed HCS or HFC that such customer intends
to terminate, or not renew, its contract or relationship with the
Business, or intends to materially reduce or is considering a material
reduction of services from the Business, in each case during such
12-month period, then the information provided by such customer will be
taken into account in calculating the Assigned Nominal Revenue.
(c) "Control" of a person or entity means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
person or entity, whether by contract, ownership of voting securities
or otherwise.
(d) "Employee Benefit Plan" shall mean (i) any "employee benefit plan" (as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended), whether a single employer, a multiple employer or
a multiemployer plan, including each related trust, custodial account
or insurance contract, or (ii) any other plan, policy, program,
practice or arrangement providing compensation or benefits, including,
without limitation, retirement, pension, profit sharing, vacation,
holiday, medical, severance, disability, death, incentive compensation,
stock option or stock purchase or other similar benefits, whether
written or unwritten.
- 33 -
(e) "Material Adverse Effect" means a material adverse effect on the
Acquired Assets, taken as a whole, or on the financial condition or
operating results of the Business, or on the ability of the Business to
consummate the transactions contemplated by this Agreement, but shall
not mean any such effect resulting from or arising in connection with
(i) changes in economic, regulatory or political conditions generally
and changes or conditions affecting the industry that the Business is
in (including, without limitation, changes due to seasonality or war or
terrorism) and not specifically relating to the Business, (ii)
fluctuations in currency exchange rates, (iii) the transactions
contemplated by this Agreement, or any announcement thereof, (iv)
resignations or departures of employees or consultants of HCS, or (v)
changes resulting from any action taken by HFC prior to the Closing.
(f) "Non-affiliated Customer Contracts" means Customer Contracts between
HCS and a person or entity other than Xxxxxxx & Xxxxxxx or any
Affiliate of Xxxxxxx & Xxxxxxx.
(g) "Non-Contracted Account" shall mean any customer of the Business that
is currently purchasing goods or services from the Business without any
written contract, either because its contract with HCS has expired and
not been renewed (other than on a month-to-month or other informal
basis) or because no contract has yet been executed with such customer.
16. General Terms.
(a) Schedules and Exhibits. Each Schedule and Exhibit delivered pursuant to
the terms of this Agreement shall be in writing, and shall constitute a
part of the Agreement.
(b) Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given,
when received, if personally delivered, and, when deposited, if placed
in the U.S. mails for delivery by registered or certified mail, return
receipt requested, postage prepaid, addressed at the addresses set
forth above. Addresses may be changed by written notice given pursuant
to this Section, however any such notice shall not be effective, if
mailed, until three (3) working days after depositing in the U.S. mails
or when actually received, whichever occurs first.
(c) Severability. If any term of this Agreement is deemed unenforceable,
void or illegal, such term shall be deemed severable from all other
terms of this Agreement which shall otherwise continue in full force
and effect. Further, in the event that any provision is found by such a
court to be overbroad as written, such provision shall be deemed to be
amended to narrow its application to the extent necessary to make the
provision enforceable to the fullest extent permitted by law or equity.
- 34 -
(d) Counterparts. This Agreement may be executed in counterparts and by
different parties on different counterparts with the same effect as if
the signatures thereto were on the same instrument.
(e) Expenses. Except as otherwise provided herein, each party hereto shall
bear and pay for its own costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereby,
including, without limitation, all fees and disbursements of lawyers,
accountants and financial advisors incurred through the Closing Date.
(f) Entire Agreement; Modification and Waiver. This Agreement, together
with the Schedules, Exhibits and the related written agreements
specifically referred to herein, represents the only agreement among
the parties concerning the subject matter hereof and supersedes all
prior agreements whether written or oral, relating thereto, including
without limitation the letter agreement between HCS and HFC dated
January 9, 2003. No purported amendment, modification or waiver of any
provision hereof shall be binding unless set forth in a written
document signed by all parties (in the case of amendments or
modifications) or by the party to be charged thereby (in the case of
waivers). Any waiver shall be limited to the provision hereof and the
circumstance or event specifically made subject thereto and shall not
be deemed a waiver of any other term hereof or of the same circumstance
or event upon any recurrence thereof.
(g) Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs and
successors in interest.
(h) No Third Party Beneficiaries. Except as expressly set forth in Section
12, this Agreement shall not create any rights in or be enforceable in
any part by persons other than the parties hereto.
(i) Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts executed and performed
wholly within that State.
(j) Dispute Resolution.
(i) Any controversy or claim arising out of or relating
to this Agreement shall be resolved by arbitration
before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association ("AAA") then pertaining
(available at xxx.xxx.xxx), except where those rules
conflict with this provision, in which case this
provision controls. Any court with jurisdiction shall
enforce this clause and enter judgment on any award.
The arbitrator shall be selected within twenty
business days from commencement of the arbitration
from the AAA's National Roster of Arbitrators
pursuant to agreement or through selection procedures
administered by the AAA. Within 45 days of
- 35 -
initiation of arbitration, the parties shall reach
agreement upon and thereafter follow procedures,
including limits on discovery, assuring that the
arbitration will be concluded and the award rendered
within no more than eight months from selection of
the arbitrator or, failing agreement, procedures
meeting such time limits will be designed by the AAA
and adhered to by the parties. The arbitration shall
be held in New York, New York and the arbitrator
shall apply the substantive law of New York, except
that the interpretation and enforcement of this
arbitration provision shall be governed by the
Federal Arbitration Act. Prior to commencement of
arbitration, emergency relief is available from any
court to avoid irreparable harm. THE ARBITRATOR SHALL
NOT AWARD EITHER PARTY PUNITIVE, EXEMPLARY,
MULTIPLIED OR CONSEQUENTIAL DAMAGES, OR ATTORNEYS
FEES OR COSTS.
(ii) Prior to commencement of arbitration, the parties
must attempt to mediate their dispute using a
professional mediator from AAA, the CPR Institute for
Dispute Resolution, or like organization selected by
agreement or, absent agreement, through selection
procedures administered by the AAA. Within a period
of 45 days after the request for mediation, the
parties agree to convene with the mediator, with
business representatives present, for at least one
session to attempt to resolve the matter. In no event
will mediation delay commencement of the arbitration
for more than 45 days absent agreement of the parties
or interfere with the availability of emergency
relief.
- 36 -
[Signature page to Asset Purchase Agreement between Health Fitness Corporation
and Xxxxxxx & Xxxxxxx Health Care Systems Inc.]
Each of the parties hereto has caused this Purchase Agreement to be
executed by its duly authorized representative and in the manner appropriate to
each, all as of the day and year first above written.
HFC:
HEALTH FITNESS CORPORATION
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Name: Xxxxx X. Xxxxx
Title: President and CEO
HCS:
XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC.
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President, Finance
- 37 -
EXHIBIT 2
FORM OF
LICENSE AGREEMENT
This License Agreement ("Agreement") is effective as of [_________],
2003 (the "Effective Date"), by and between Xxxxxxx & Xxxxxxx Health Care
Systems Inc., a New Jersey corporation with an office at 000 Xxxx Xxxx,
Xxxxxxxxxx, XX 00000 ("Licensor"), and Health Fitness Corporation, a Minnesota
corporation with an office at 0000 Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, XX
00000 ("Licensee").
RECITALS
A. Licensor and Licensee are parties to an Asset Purchase
Agreement (the "Purchase Agreement") dated as of August [_______], 2003 pursuant
to which Licensor has, on the date hereof, sold to Licensee assets used in
Licensor's business of providing corporate fitness and wellness services and
products to Xxxxxxx & Xxxxxxx affiliated entities and to other companies and
entities, including assessment programs, consulting, operations management,
wellness programs and data analysis services (the "Business"). Capitalized terms
used but not defined herein shall have the respective meanings ascribed to them
in the Purchase Agreement.
B. The Purchase Agreement contemplates that Licensor and Licensee
will enter into a license agreement pursuant to which Licensor will grant to
Licensee a worldwide, irrevocable, paid-up, royalty-free, non-exclusive license
to use the materials (whether in written, electronic or other form) listed on
Schedule A attached hereto, in the form in which they exist on the date hereof,
together with the know-how and methodologies embodied therein (collectively, the
"Materials and Methodology").
AGREEMENT
In consideration of the mutual covenants contained in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto each agree to the terms and
conditions in this Agreement intending to be legally bound by them.
1. License Grant. Licensor hereby grants Licensee and its
Affiliates a worldwide, irrevocable, paid-up, royalty-free, non-exclusive
license to use, disclose and otherwise exploit the Materials and Methodology for
any purpose in connection with the Business and Licensee's business of managing
corporate and retail fitness and wellness facilities, and in connection with the
development, manufacture and marketing of any product or service incorporating
or utilizing any of the Materials and Methodology (the "Licensed Products and
Services"), subject to the other terms and conditions set forth herein.
Notwithstanding anything herein to the contrary, Licensed Products and Services
shall not include any pharmaceutical or surgical products, and the license
granted hereunder
- 38 -
shall not include any right to use any of the Materials and Methodology in
connection with any clinical trials or marketing of any pharmaceutical or
surgical products.
2. Disclosure of Materials and Methodology to Licensee. In
connection with the execution of this Agreement, Licensor is providing Licensee
with copies of all the materials described on Schedule A.
3. No License of Xxxx. The license grant set forth in Section 1
is a license of the Materials and Methodology only, and nothing in Section 1 or
in any other part of this Agreement shall be deemed to be a license of (a) the
name "Pathways to Change", including without limitation U.S. trademark nos.
1,884,929 and 2,023,025 for such name (collectively, the "Xxxx"), or any
derivative or similar name or xxxx, or (b) any other trade name, trademark,
service xxxx, logo or domain name of Licensor or its Affiliates or any
derivative or similar name or trademark, or to otherwise convey any rights or
interest in or to any of the items described in clause (a) or (b) above.
4. Use of Materials and Methodology. Licensee agrees that its and
its Affiliates' use of the Materials and Methodology, including the nature and
quality of the Licensed Products and Services provided by Licensee and its
Affiliates, shall conform to the standards set by Licensor. Licensee and its
Affiliates shall be in compliance with Licensor's quality standards so long as
Licensee and its Affiliates maintain the level of quality characterized by the
products and services currently offered by Licensee. Licensee agrees to provide
Licensor with specimens showing use of the Materials and Methodology in
connection with the Licensed Products and Services upon Licensor's request.
5. Goodwill. Licensee recognizes that the goodwill associated
with the Materials and Methodology has great value and acknowledges that, as
between Licensee and Licensor, the Materials and Methodology and all rights
therein and goodwill pertaining thereto belong exclusively to Licensor, and that
Licensee's use of the Materials and Methodology inures solely to the benefit of
Licensor. Licensee agrees that it will not attack the title or any rights of
Licensor in and to the Materials and Methodology or attack the validity of this
Agreement.
6. Notice of Infringement. Licensee agrees to notify Licensor of
any infringement by others of the Materials and Methodology or the Xxxx that may
come to Licensee's attention. Licensor shall have the sole right to determine
whether or not to take any action or enforcement on account of any infringement
of the Materials and Methodology or the Xxxx. Licensee shall not institute any
suit or take any action on account of any such infringement without first
obtaining the written consent of Licensor to do so.
7. Term. Subject to the termination provisions below, this
Agreement shall continue in force and effect perpetually.
8. Termination by Licensor. Licensor shall have the right to
terminate the license granted in this Agreement immediately upon the appointment
of any receiver or
- 39 -
trustee to take possession of the properties of Licensee or any sequestration by
governmental authority of Licensee or its assets. Licensor shall also have the
right terminate the license granted in this Agreement if (a) Licensee has
materially breached this Agreement, (b) Licensor has provided Licensee written
notice of such breach, and (c) Licensee has failed to cure such breach within
sixty (60) days after Licensee's receipt of such written notice and continues to
be in such breach upon the effectiveness of such termination.
9. Termination by Licensee. Licensee shall have the right to
terminate the license granted in this Agreement immediately upon written notice
to Licensor.
10. Post-Termination. Upon termination of this Agreement, Licensee
agrees to discontinue immediately all use of the Materials and Methodology.
Licensee acknowledges that all rights in the Materials and Methodology and the
goodwill connected therewith shall remain the property of Licensor.
11. Representations of Licensor; Indemnification.
Licensor represents and warrants that: (i) Licensor exclusively owns,
or has valid and subsisting license rights (with the right to sublicense) to,
the Materials and Methodology, subject to no lien or encumbrance whatsoever;
(ii) to the knowledge of Licensor, the Materials and Methodology has not been
challenged in any judicial or administrative proceeding and Licensor has not
received and is not aware of any claim or notice of any person that such person
is contemplating such action; (iii) to the knowledge of Licensor, Licensor's
execution and performance of this Agreement, the transactions contemplated
herein and Licensee's use of the Materials and Methodology will not infringe,
misappropriate, misuse or conflict with the rights, including patent and other
intellectual property or contractual rights, of third parties; (iv) Licensor has
the right and authority to enter into this Agreement and to grant the license
granted herein; and (v) the materials listed on Schedule A constitute all of
Licensor's existing methodologies and materials (including all software relating
thereto) for worksite versions of weight management programs that Licensor
markets under the Xxxx.
12. Miscellaneous.
(a) Relationship. Nothing in this Agreement shall be construed to
place the parties in the relationship of principal and agent, partners or joint
venturers for any purpose whatsoever. Neither party is granted any right or
authority to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of the other party. In fulfilling its
obligations pursuant to this Agreement, each party shall be acting as an
independent party.
(b) Entire Agreement. This Agreement, together with the Purchase
Agreement, constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements whether
written or oral relating hereto.
- 40 -
(c) Waiver, Discharge, Amendment, Etc. The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part thereof or the right of the
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach. Any amendment to this Agreement shall be in writing and signed by the
parties hereto.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. Copies of this Agreement with signatures
transmitted by facsimile shall be deemed to be original signed versions of this
Agreement.
(e) Assignment. This Agreement shall be binding upon and inure to
the benefit of the successors and permitted assigns of the respective parties,
provided, however, that Licensee may not assign this Agreement without the
written consent of Licensor except to an Affiliate of Licensee or in connection
with a sale of all or substantially all of Licensee's business, whether by
merger, sale or license of assets or otherwise.
(f) Severability. In the event any part of this Agreement is found
to be unenforceable, the parties agree that part shall be modified by the court
to make it enforceable to the maximum extent possible. If the part cannot be
modified, that part may be severed and the other parts of the Agreement shall
remain enforceable.
(g) Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement shall be resolved pursuant to Section 16(j) of the
Purchase Agreement.
XXXXXXX & XXXXXXX HEALTH CARE HEALTH FITNESS CORPORATION
SYSTEMS INC.
By: __________________________________ By: ________________________________
Name:_________________________________ Name: ______________________________
Its: _________________________________ Its: _______________________________
- 41 -
SCHEDULE A TO LICENSE AGREEMENT
List of Materials and Methodology
The Materials and Methodology consist of the following components of Licensor's
Worksite Weight Management Tool Kit:
1. Worksite Weight Management Program Protocol
2. Health Action Guide Titles
3. Templates for Weight Management Tools, i.e., Food & Activity
Tracker, Your Formula for Burning Calories, BMI Calculator,
Calorie Calculator & Grocery Shopping List
4. Cookbook recommendations
5. Counselor Resource Manual
6. Counselor Qualification Checklist
7. Counselor Training Workshop (1) Materials
8. Program Training Workshop (1) Materials
- 42 -
EXHIBIT 3(b)(ii)
COMMUNICATION PLAN
The Communication Plan consists of three documents. The first is the script and
general guidance document to be used by HCS in telephone calls to customers,
which calls may be made after HFC has publicly announced this Agreement
(pursuant to its press release (Exhibit 10(b)) or otherwise). HFC will notify
HCS promptly upon the release of such press release (or upon such other public
announcement). This script and general guidance document may also be used by the
parties' respective Assignment Representatives (or their designees) during their
joint meetings or telephone calls to customers of the Business as contemplated
by Section 3(b)(iii) of the Asset Purchase Agreement.
The second document is a letter that HCS may distribute to customers of the
Business as soon as HFC has publicly announced this Agreement.
The third document is a letter that HFC may distribute to customers of the
Business, provided that it shall not be delivered until the second business day
following the public announcement of this Agreement.
- 43 -
DOCUMENT ONE
BACKGROUND INFORMATION: XXXXXXX & JOHNSON'S EMPLOYEE WORKSITE ENVIRONMENT
INCLUDES A STRONG COMMITMENT TO HEALTH EDUCATION, PREVENTION, AND WELLNESS. A
MAJOR COMPONENT OF THIS CULTURE IS AN EXTENSIVE HEALTH & WELLNESS PROGRAM,
OFFERED AS AN ELEMENT OF THE COMPANY'S HEALTH CARE BENEFITS AT MOST MAJOR
XXXXXXX & XXXXXXX SITES ACROSS THE COUNTRY.
ESTABLISHED IN 1983 AND BRANDED AS LIVE FOR LIFE(R), THESE PROGRAMS FOR
EMPLOYEES ARE NOW IDENTIFIED AS HEALTH & WELLNESS(R) AND ARE DESIGNED TO PROVIDE
EMPLOYEES, THROUGH THEIR PARTICIPATION, WITH AN OPPORTUNITY TO POTENTIALLY
IMPROVE THEIR HEALTH AND WELL-BEING. IN 1986, THESE PROGRAMS WERE INTRODUCED
OUTSIDE OF THE CORPORATION TO EXTERNAL CUSTOMERS THROUGH A XXXXXXX & XXXXXXX
AFFILIATE COMPANY. THESE POSITIVE LIFESTYLE PROGRAMS CONTINUE TO BE WIDELY USED
BY EMPLOYEES OF XXXXXXX & XXXXXXX AND ITS OPERATING COMPANIES, AS WELL AS BY
EMPLOYEES OF OUTSIDE CLIENT COMPANIES.
Talking Points
- The health, fitness and well-being of our employees is a key component
of our corporate environment. It helps define us as a company and
reinforces our responsibilities to our customers, employees and the
communities in which we live and work.
- Our internal Health and Wellness program has been well received, with
high employee participation. In 1986, these services were offered to
external customers through a Xxxxxxx & Xxxxxxx affiliate company.
- Creation of the Health and Fitness Division within Xxxxxxx & Xxxxxxx
Health Care Systems allowed us to share our commitment and our skills
with other companies and we are proud of the value we have provided as
a result of this venture.
- We want this business to continue to grow and prosper.
- It is our belief that a better way for this business to grow and
prosper is to pass it on to a company that is focused on health and
fitness services as its core business. As a result, Health Fitness
Corporation (HFC) is acquiring the Health & Fitness Division and its
key program components.
- The Xxxxxxx & Xxxxxxx Family of Companies will be HFC's largest client
after the transaction.
- In transitioning the Health & Fitness business, we are working closely
with the acquiring company to identify employment opportunities for our
H&F employees.
- Our commitment to the health, fitness and well-being of employees will
continue to be important to our overall success.
- 44 -
DOCUMENT TWO
EXTERNAL CUSTOMERS LETTER
Dear client name (from merge):
This is to let you know about some planned changes related to the Health &
Fitness Division of Xxxxxxx & Xxxxxxx Health Care Systems Inc. Health Fitness
Corporation (HFC) has signed an agreement with us to acquire most of the
programs and accounts of our Health & Fitness Division. This transaction is
subject to certain conditions, but we expect these to be met within the near
future.
We have given a great deal of thought and consideration to reach this decision.
Our Health & Fitness organization has enabled us to successfully share our
people, our scientifically based programs, and skills with you and our other
customers for more than two decades and we are proud of the value it has
provided.
We also believe that providing an opportunity for this business to be integrated
into a company focused on health and fitness services as its core business
provides a greater opportunity for the business and for you as customers. The
Xxxxxxx & Xxxxxxx Family of Companies will become HFC's largest single client
after completion of the transaction.
In addition, we will work closely with HFC with the aim of ensuring that the
transition from our ownership is a smooth one.
We will continue to keep you updated as the transaction progresses. In the
meantime contact me at 732/000-0000 or xxxxxx@xxxxx.xxx.xxx for more
information.
Please let me know a good time to meet via phone and face-to-face to discuss
transition issues.
Sincerely,
Xxxxxxxx Xxxxx
- 45 -
DOCUMENT THREE
[Letterhead of HFC]
Date
Name
Title
Company
Address
City State ZIP
Dear Name,
I am pleased to announce that Health Fitness Corporation, a leader in corporate
health and fitness, has agreed to acquire the Health & Fitness Services Division
of Xxxxxxx & Xxxxxxx Health Care Systems Inc. (the "Health & Fitness
Division")This expanded, "new HFC" will be able to serve your company and its
employees' health, wellness, and fitness needs with even more resources.
The "new HFC" will be focused on providing the best of class in management,
consulting, and programs services to our clients across the United States and
Canada. This transaction will bring together the most formidable team of talent
in the industry -- more than 3,000 health and fitness professionals -- totally
focused on serving corporate America with the latest in programs and services to
achieve our clients' goals.
I wanted to get this announcement and accompanying material to you immediately.
I have been working with Xxx Xxxxx, Vice President of the Health & Fitness
Division, and we are in the process of making calls to all clients (we may or
may not have been able to reach you already) and ideally we would like to
arrange a time to meet with you. For your review, I have enclosed a brief write
up about the new expanded HFC.
We eagerly look forward to the opportunity to meet with you personally to
discuss this transition and to request the continuation of your business through
the assignment of your contract to HFC. You are very important to us. We at HFC
are excited about the opportunity to continue to serve your health and fitness
needs.
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
President and CEO
Health Fitness Corporation
Attachment:
- 46 -
EXHIBIT 3(b)(i)(D)
[LETTERHEAD OF XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC.]
[___________], 2003
[CUSTOMER NAME]
[CUSTOMER ADDRESS]
[CUSTOMER ADDRESS]
Attention: [CUSTOMER CONTACT PERSON]
Dear [CUSTOMER CONTACT PERSON]:
This letter confirms our conversation regarding the proposed sale of
our Health & Fitness Services business to Health Fitness Corporation ("HFC"),
which we expect to occur within the next [90] days. As part of this sale, we
would like to assign to HFC your Management Services Agreement with us dated
[_______________] (the "Agreement"). We are confident that HFC, as successor to
our Health & Fitness services business, will want to continue to serve your
fitness and wellness needs as set forth in that Agreement, and we hope you will
give them that opportunity.
As evidenced by the signature of its authorized representative below,
HFC agrees that, on and after the effective date of the proposed sale, it will
assume all obligations to you under the Agreement, and will accept and be bound
by all of the terms and conditions of the Agreement.
By countersigning this letter, you consent to our assignment of the
Agreement to HFC (and to the transfer of all related participant and other data
to HFC, which it will treat in accordance with the Agreement), and you confirm
your understanding that HFC will, once the proposed sale is complete, continue
to serve your fitness and other wellness needs as set forth in the Agreement,
which will continue in full force and effect in accordance with its terms.
If you have any questions regarding the above, please do not hesitate
to call me at (000) 000-0000.
Sincerely,
XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC.,
by its Health & Fitness Services Division
By:________________________________
Xxxxxxxx Xxxxx, Vice President
- 47 -
Accepted and agreed as of the
_____ day of ______________, 2003:
HEALTH FITNESS CORPORATION
By:_____________________________
Xxxxx X. Xxxxx, President and CEO
Accepted and agreed as of the
_____ day of ______________, 2003:
[CUSTOMER NAME]
By:_____________________________
Name:
Title:
- 48 -
EXHIBIT 3(d)(ii)
[LETTERHEAD OF XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC.]
[___________], 2003
[CUSTOMER NAME]
[CUSTOMER ADDRESS]
[CUSTOMER ADDRESS]
Attention: [CUSTOMER CONTACT PERSON]
Dear [CUSTOMER CONTACT PERSON]:
As you know, we are selling our Health & Fitness Services business to
Health Fitness Corporation ("HFC"). To date, we have not yet received your
consent to our proposed assignment to HFC of your Management Services Agreement
with us dated [_________________]. Therefore, we are terminating that Agreement
effective [___] days after the date of this letter, in accordance with the
termination clause of the Agreement. This letter constitutes the notice required
by that clause.
We are confident, however, that HFC, as successor to our Health &
Fitness Services business, will want to continue meeting your fitness and other
wellness needs, and we hope you will give them that opportunity. Therefore, if
instead of allowing the Agreement to terminate, you prefer to have HFC take over
the services as set forth in the Agreement, please sign and return to me the
attached consent form. If you do so, this termination notice will be deemed to
be rescinded (provided we receive your signed consent form prior to the
effective date of the termination) and the Agreement will be assigned to HFC as
of the date our Health & Fitness Services business is sold to HFC or, if later,
the date we receive your signed consent form. Following assignment to HFC, the
Agreement will continue in full force and effect in accordance with its terms.
If you have any questions regarding the above, please do not hesitate
to call me at (000) 000-0000.
Sincerely,
XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC., by its
Health & Fitness Services Division
By:__________________________________
Xxxxxxxx Xxxxx, Vice President
- 49 -
CONSENT
The undersigned customer ("Customer") hereby consents to the assignment
by Xxxxxxx & Xxxxxxx Health Care Systems Inc. ("JJHCS") to Health Fitness
Corporation ("HFC") of the Management Services Agreement dated
[__________________] between JJHCS and Customer, and to the transfer of all
related participant and other data to HFC, which it agrees to treat in
accordance with the Agreement. The assignment will be effective as of the date
JJHCS's Health & Fitness Services business is sold to HFC or, if later, the date
JJHCS receives this signed consent form from Customer (the "Assignment Date").
The foregoing consent is given with the understanding that HFC will, on and
after the Assignment Date, assume all obligations to Customer under the
Agreement and accept and be bound by all of the terms and conditions of the
Agreement. Customer agrees that the notice of termination set forth in the
accompanying letter from JJHCS will be rescinded effective as of JJHCS's receipt
of this signed consent form from Customer (provided that such receipt occurs
before the effective date of the termination), and that the Agreement, as
assigned to HFC, will continue in full force and effect in accordance with its
terms.
Date: ___________________ [CUSTOMER NAME]
____________________________________
Name:
Title:
Accepted and agreed as of the
_____ day of _____________, 2003:
HEALTH FITNESS CORPORATION
By:___________________________
Xxxxx X. Xxxxx, President and CEO
Acknowledged as of the ____ day of
_________________, 2003:
XXXXXXX & XXXXXXX HEALTH CARE
SYSTEMS INC., by its Health & Fitness
Services Division
By:___________________________
Xxxxxxxx Xxxxx, Vice President
- 50 -
EXHIBIT 7
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement"), is dated as of August
___, 2003 by and among Xxxxxxx & Xxxxxxx Health Care Systems Inc., a New Jersey
corporation ("J&J Health"), Bayview Capital Partners LP, a Delaware limited
partnership ("Bayview"), Xxxxx Fargo Bank, National Association, as lender
("Lender"), and Xxxxx Fargo Bank Minnesota, National Association, as escrow
agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Health Fitness Corporation, a Minnesota corporation ("HFC"),
and J&J Health are parties to that certain Asset Purchase Agreement, dated as of
the date hereof (the "Asset Purchase Agreement"), pursuant to which HFC will
acquire certain assets (the "Acquired Assets") of the Health & Fitness Services
division of J&J Health;
WHEREAS, to induce J&J Health to enter into the Asset Purchase
Agreement, Section 7(a) of the Asset Purchase Agreement provides that, in
connection with the purchase of the Acquired Assets, the sum of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000.00) (the "Escrow Contribution") shall
be deposited with the Escrow Agent and held by the Escrow Agent in an escrow
account established pursuant to this Escrow Agreement, and subsequently
disbursed in accordance with the terms of this Escrow Agreement;
WHEREAS, the Lender will deposit Two Million Two Hundred and Fifty
Thousand Dollars ($2,250,000) of the Escrow Contribution with the Escrow Agent
and Bayview will deposit Three Million Dollars ($3,000,000) of the Escrow
Contribution with the Escrow Agent; and
WHEREAS, the Escrow Agent has agreed to hold the Escrow Fund (as
defined herein) pursuant to the terms of this Escrow Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1) Defined Terms. Capitalized terms used and not otherwise
defined in this Agreement shall have the meanings assigned to them in the Asset
Purchase Agreement.
1.2) Additional Definitions. The following terms shall have the
following meanings:
"Closing Distribution Notice" means as defined in Section 4.1.
- 51 -
"Escrow Fund" means the Escrow Contribution deposited with the Escrow
Agent pursuant to Section 7(a) of the Asset Purchase Agreement, together with
interest and other earnings and profits upon or in respect of such amount, minus
amounts paid or distributed pursuant to this Agreement.
"Permitted Investments" means as defined in Section 3.1.
"Post-Closing Distribution Notice" means as defined in Section 4.1.
ARTICLE II
ESCROW
2.1) Funds Placed in Escrow. On the date hereof, Lender and Bayview
have deposited the Escrow Contribution with the Escrow Agent. The Escrow Agent
hereby acknowledges receipt of such deposits and accepts delivery of the Escrow
Contribution. The Escrow Agent agrees to hold the Escrow Fund in an escrow
account, subject to the terms and conditions of this Agreement. The escrow
account shall be a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party to
this Agreement.
2.2) Repayment; Reimbursement. The Escrow Fund shall be utilized to
pay to J&J Health the Purchase Price at the Closing for the Acquired Assets and
to pay J&J Health any adjusted Purchase Price after the Closing, all as provided
in Section 7(a) of the Asset Purchase Agreement.
2.3) Escrow Taxes. Unless otherwise required by law, J&J Health
will include in its income, for federal, state, local and foreign tax purposes,
that portion of income and gains realized by the Escrow Fund that is disbursed
to J&J Health, and shall pay all income taxes due with respect thereto. HFC will
include in its income, for federal, state, local and foreign tax purposes, that
portion of income and gains realized by the Escrow Fund that is disbursed other
than to J&J Health. As soon as practicable after December 31 of each calendar
year (but in no event later than required by applicable law), the Escrow Agent
shall report, as required by applicable law, income and gains realized by the
Escrow Fund in a manner consistent with this section.
ARTICLE III
INVESTMENT OF FUND
3.1) Permitted Investments; Interest. From the date hereof until
the final disbursement from the Escrow Fund pursuant to Article 4 of this Escrow
Agreement, the Escrow Agent is authorized and directed to invest and reinvest
the Escrow Fund in the Xxxxx Fargo Treasury Plus Money Market Fund (the
"Permitted Investments"). The Escrow Agent hereby represents that the Xxxxx
Fargo Treasury Plus Money Market Fund is a money market fund that is rated AAA
or Aaa by Standard & Poor's or Moody's, respectively, and that provides daily
liquidity without penalty. The Permitted Investments and interest accruing on,
and any profit resulting from, such investments
- 52 -
shall be added to, and become a part of, the Escrow Fund pursuant to this Escrow
Agreement. For purposes of this Escrow Agreement, "interest" on the Escrow Fund
shall include all proceeds thereof and investment earnings with respect thereto.
The Permitted Investments shall be registered in the name of the Escrow Agent.
The Escrow Agent shall have full power and authority to sell any and all of the
Permitted Investments held by it under this Escrow Agreement as necessary to
make disbursements under this Escrow Agreement, and may use its bond department
to effect such sales. The Escrow Agent shall not be responsible for any
unrealized profit or realized loss realized on such investments.
ARTICLE IV
RELEASE OF ESCROW ACCOUNT
4.1) Closing of the Asset Purchase Agreement. In connection with
the consummation of the Closing under the Asset Purchase Agreement, J&J Health
and HFC shall deliver to the Escrow Agent, with a copy to Bayview and the
Lender, a notice jointly executed by J&J Health and HFC stating that all
conditions precedent to the Closing of the Asset Purchase Agreement, with the
exception of delivery of the Purchase Price, have been satisfied and not waived
(provided that J&J Health may, in its sole and absolute discretion, waive any
one or more conditions precedent to J&J Health's obligation to consummate the
Closing set forth in Section 11(d)(ii) of the Asset Purchase Agreement), and
setting forth the amount of the Purchase Price to be distributed to J&J Health
in accordance with Section 7(a) of the Asset Purchase Agreement (the "Closing
Distribution Notice"), and the Escrow Agent thereupon shall promptly make a
disbursement to J&J Health from the Escrow Fund in the amount set forth in the
Closing Distribution Notice. Thereafter, at the end of each of the six calendar
months following the month in which the Closing occurs, the Escrow Agent shall
disburse to J&J Health an amount equal to the amount, if any, by which the
Purchase Price as recalculated in accordance with Section 7(a) of the Asset
Purchase Agreement at such month-end exceeds the total Purchase Price
theretofore paid to J&J Health upon the receipt of a notice, with a copy to
Bayview and the Lender, jointly executed by J&J Health and HFC setting forth and
directing the disbursement of any such amount (each a "Post-Closing Distribution
Notice"). Promptly following full payment of all amounts set forth in the
Closing Distribution Notice and all amounts set forth in the Post-Closing
Distribution Notices, any amounts remaining in the Escrow Fund shall be
disbursed to Lender.
4.2) Termination of the Asset Purchase Agreement. On receipt of a
notice jointly executed by J&J Health and HFC stating that the Asset Purchase
Agreement has been terminated (the "Termination Distribution Notice"), the
Escrow Agent shall promptly disburse all amounts in the Escrow Fund to Lender
and to Bayview pro rata based on the percentage of the Escrow Contribution
contributed by each.
4.3) No Closing or Termination. If the Escrow Agent has not
received the Closing Distribution Notice or Termination Distribution Notice on
or before November 30, 2003, the Escrow Agent shall promptly disburse all
amounts in the Escrow Fund to
- 53 -
Lender and to Bayview pro rata based on the percentage of the Escrow
Contribution contributed by each.
ARTICLE V
LIABILITY AND COMPENSATION OF ESCROW AGENT
5.1) No Implied Duties. The duties and obligations of the Escrow
Agent hereunder shall be determined solely by the express provisions of this
Escrow Agreement, and no implied duties or obligations shall be read into this
Escrow Agreement against the Escrow Agent. The Escrow Agent shall, in
determining its duties hereunder, be under no obligation to refer to any other
documents between or among the parties related in any way to this Escrow
Agreement (except to the extent that this Escrow Agreement specifically refers
to or incorporates by reference provisions of any other document).
5.2) Indemnification of Escrow Agent. HFC and the Escrow Agent have
entered into a separate letter agreement dated the date hereof relating to
indemnification of the Escrow Agent for certain liability and expense which may
arise out of actions taken or omitted by the Escrow Agent in accordance with
this Escrow Agreement (except such liability and expense as may result from the
gross negligence or willful misconduct of the Escrow Agent).
5.3) Standard of Care; Reliance. The Escrow Agent shall not be
liable to any person by reason of any error of judgment or for any act done or
step taken or omitted by it, or for any mistake of fact or law or anything which
it may do or refrain from doing in connection herewith unless caused by or
arising out of its own gross negligence or willful misconduct. The Escrow Agent
shall be entitled to rely in good faith on, and shall be protected in acting in
reliance in good faith upon, any instructions or directions furnished to it in
writing jointly executed by J&J Health and HFC or by Lender and Bayview, as
applicable, pursuant to any provision of this Escrow Agreement and shall be
entitled to treat as genuine, and as the document it purports to be, any letter,
paper or other document furnished to it by J&J Health and HFC or by Lender and
Bayview, and reasonably believed by the Escrow Agent to be genuine and to have
been signed and presented by the proper party or parties. In performing its
obligations hereunder, the Escrow Agent may consult with counsel to the Escrow
Agent and shall be entitled to rely in good faith on, and shall be protected in
acting in reliance in good faith upon, the advice or opinion of such counsel.
5.4) Compensation of Escrow Agent. The Escrow Agent shall be
entitled to its customary fee for the performance of services by the Escrow
Agent hereunder for each year or portion thereof that any portion of the Escrow
Fund remains in escrow and shall be reimbursed for reasonable costs and expenses
incurred by it in connection with the performance of such services (such fees,
costs and expenses are hereinafter referred to as the "Escrow Agent's
Compensation"). The Escrow Agent's Compensation shall be paid by HFC pursuant to
the terms of a separate letter agreement between the Escrow Agent and HFC dated
the date hereof.
- 54 -
5.5) Resignation and Successor. The Escrow Agent may resign at any
time by giving sixty (60) days written notice to Lender, Bayview and J&J Health;
provided, that such resignation shall not be effective unless and until a
successor Escrow Agent has been appointed and accepts such position pursuant to
the terms of this Section 5.5. In such event, Lender, Bayview and J&J Health
shall jointly appoint a successor Escrow Agent. If a successor Escrow Agent is
not appointed within the 30-day period following such notice, the Escrow Agent
may petition any court of competent jurisdiction to name a successor Escrow
Agent. Such appointment shall be effective on the effective date of the
aforesaid resignation (the "Escrow Transfer Date"). On the Escrow Transfer Date,
all right title and interest to the Escrow Fund, including interest thereon,
shall be transferred to the successor Escrow Agent and this Escrow Agreement
shall be assigned by the Escrow Agent to such successor Escrow Agent, and
thereafter, the resigning Escrow Agent shall be released from any further
obligations hereunder. The Escrow Agent shall continue to serve until its
successor is appointed, assumes this Escrow Agreement and receives the
transferred Escrow Fund.
5.6) Disputes. It is understood and agreed that in the event any
adverse claims or demands are made in connection with the Escrow Fund, or in the
event the Escrow Agent in good faith is in doubt as to what action it should
take hereunder, the Escrow Agent shall retain the Escrow Fund until the Escrow
Agent shall have received (i) an enforceable final order of a court or
arbitrator of competent jurisdiction which is not subject to further appeal
directing delivery of the Escrow Fund or (ii) a written statement jointly
executed by J&J Health and HFC, on the one hand, and Lender and Bayview, on the
other hand, directing delivery of the Escrow Fund, in which event Escrow Agent
shall disburse the Escrow Fund in accordance with such order or agreement. Any
court or arbitrator order referred to in clause (i) immediately above shall be
accompanied by a legal opinion of counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said court or arbitrator order or
judgment is final and enforceable and is not subject to further appeal. The
Escrow Agent shall act on such court or arbitrator order and legal opinion
without further question.
5.7) Limitation on Damages. In no event shall the Escrow Agent be
liable in connection with this Escrow Agreement for any special, indirect or
consequential loss or damage of any kind whatsoever, even if the Escrow Agent
has been previously advised of such loss or damage.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1) Representations by Escrow Agent. The Escrow Agent represents
and warrants to each of the other parties hereto that it is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
formation; that it has the power and authority to execute and deliver this
Escrow Agreement and to perform its obligations hereunder; that the execution,
delivery and performance of this Escrow Agreement by it has been duly authorized
and approved by all necessary action; that this Escrow Agreement constitutes its
legal, valid and binding obligation, enforceable against it in
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accordance with its terms; and that the execution, delivery and performance of
this Escrow Agreement by it will not result in a breach of or loss of rights
under or constitute a default under or a violation of any trust (constructive or
other), agreement, judgment, decree, order or other instrument to which it is a
party or by which it or its properties or assets may be bound.
6.2) Representations by J&J Health, Bayview and Lender. J&J Health,
Bayview and Lender each represents to each of the other parties hereto that it
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation; that it has the power and authority to execute and
deliver this Escrow Agreement and to perform its obligations hereunder; that the
execution, delivery and performance of this Escrow Agreement by it has been duly
authorized and approved by all necessary action; that this Escrow Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms; and that the execution, delivery and performance of
this Escrow Agreement by it will not result in a breach of or loss of rights
under or constitute a default under or a violation of any trust (constructive or
other), agreement, judgment, decree, order or other instrument to which it is a
party or by which it or its properties or assets may be bound.
ARTICLE VII
TERMINATION
7.1) Termination. This Agreement shall terminate on the date all
amounts in the Escrow Fund have been disbursed as provided herein.
ARTICLE VIII
GENERAL
8.1) Other Agreements. Nothing in this Agreement is intended to
limit any of the rights of HFC or J&J Health, or any obligation of HFC or J&J
Health, under the Asset Purchase Agreement (or any agreement entered into in
connection with the transactions contemplated by the Asset Purchase Agreement).
8.2) Governing Law. This Agreement shall be governed by the laws of
the State of Minnesota (regardless of the laws that might otherwise govern under
applicable Minnesota principles of conflicts of law).
8.3) Arbitration.
(i) The parties hereby agree that any dispute shall be
resolved by arbitration before a single arbitrator in
accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA") then
pertaining (available by xxx.xxx.xxx), except where
those rules conflict with this provision, in which
case this provision controls. Any court with
jurisdiction shall enforce this clause and enter
judgment on any award. The arbitrator shall be
selected within twenty business days from
commencement of
- 56 -
the arbitration from the AAA's National Roster of
Arbitrators pursuant to agreement or through
selection procedures administered by the AAA. Within
45 days of initiation of arbitration, the parties
shall reach agreement upon and thereafter follow
procedures, including limits on discovery, assuring
that the arbitration will be concluded and the award
rendered within no more than eight months from the
selection of the arbitrator, or, failing agreement,
procedures meeting such time limits will be designed
by the AAA and adhered to by the parties. The
arbitration shall be held in Minneapolis, Minnesota
and the arbitrator shall apply the substantive law of
Minnesota, except that the interpretation and
enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. Prior to
commencement of arbitration, emergency relief is
available from any court to avoid irreparable harm.
THE ARBITRATOR SHALL NOT AWARD EITHER PARTY PUNITIVE,
EXEMPLARY, MULTIPLIED OR CONSEQUENTIAL DAMAGES, OR
ATTORNEYS' FEES OR COSTS.
(ii) Prior to the commencement of arbitration, the parties
must attempt to mediate their dispute using a
professional mediator from AAA, the CPR Institute for
Dispute Resolution, or like organization selected by
agreement or, absent agreement, through selection
procedures administered by the AAA. Within a period
of 45 days after the request for mediation, the
parties agree to convene with the mediator, with
business representatives present, for at least one
session to attempt to resolve the matter. In no event
will mediation delay commencement of the arbitration
for more than 45 days absent agreement of the parties
or interfere with the availability of emergency
relief.
8.4) Benefit; Successor and Assigns. This Escrow Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns but shall not be assignable by any party hereto
without the written consent of all of the other parties hereto. The parties
acknowledge that HFC is an intended third-party beneficiary of this Escrow
Agreement and that this Escrow Agreement will not be amended without the consent
of HFC. This Escrow Agreement is not intended to confer on any person not a
party hereto, other than HFC pursuant to the immediately preceding sentence, any
rights or remedies hereunder.
8.5) Severability. If any provision of this Agreement, or the
application of such a provision, is for any reason and to any extent invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other circumstances shall be interpreted so as reasonably to effect the
intent of the parties to this Agreement. The parties shall replace such void or
unenforceable provision of this Agreement with a
- 57 -
valid and enforceable provision that shall achieve, to the greatest extent
possible, the economic, business and other purposes of the void or unenforceable
provision.
8.6) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts of it, individually or taken together,
whether delivered via facsimile or otherwise, bear the signatures of all the
parties reflected hereon as signatories.
8.7) Amendment and Waivers. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. Except
with respect to HFC pursuant to Section 8.4, notwithstanding any rights that may
be created in any third party under the terms of this Agreement, no such
amendment or waiver shall require the consent of such third party to be
effective. The waiver by a party of any breach of this Agreement or default in
the performance of any obligations under this Agreement shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
8.8) Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally by commercial courier service or
otherwise, or by telecopier, or by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to J&J Health:
Xxxxxxx & Xxxxxxx Health Care Systems Inc.
000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to Escrow Agent:
Xxxxx Fargo Bank Minnesota, N.A.
Corporate Trust Services
MAC N9303-110
Sixth and Marquette
Xxxxxxxxxxx, XX 00000
FAX: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
If to Lender:
Xxxxx Fargo Bank, N.A.
0000 Xxxxxx Xxxxxx Xxxxx
XXX X0000-000
Xxxxxxxxxxx, XX 00000
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FAX: (000) 000-0000
Attention: Xxxx X. Xxxxxxx
If to Bayview:
Bayview Capital Partners LP
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
FAX: (000) 000-0000
Attention: Xxxx Xxxxxx and Xxxx X. Xxx
Any party may change the above-specified recipient and/or mailing address by
notice to all other parties given in the manner herein prescribed. All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by telecopy) or on the day shown on the return receipt
(if delivered by mail).
8.9) Construction of Agreement. This Escrow Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
of this Agreement shall not be construed for or against any party. A reference
to a Section shall mean a Section in this Agreement unless otherwise explicitly
set forth. The titles and headings in this Agreement are for reference purposes
only and shall not in any manner limit the construction of this Agreement, which
shall be considered as a whole.
8.10) Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
in this Escrow Agreement and contemplated by it and to carry into effect the
intents and purposes of this Escrow Agreement.
8.11) Absence of Third Party Beneficiary Rights. No provisions of
this Escrow Agreement are intended, nor shall be interpreted, to provide or
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder or partner of any party to this Escrow
Agreement or any other person or entity unless specifically provided otherwise
in it, and, except as so provided, all provisions of this Escrow Agreement shall
be personal solely among the parties to this Escrow Agreement.
8.12) Entire Agreement. This Escrow Agreement and the Asset Purchase
Agreement and the exhibits and schedules to this Escrow Agreement and to the
Asset Purchase Agreement constitute the entire understanding and agreement of
the parties to this Escrow Agreement with respect to the subject matter of this
Agreement and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto. The express terms of this Escrow
Agreement control and supersede any course of performance or usage of trade
inconsistent with any of the terms of this Escrow Agreement.
- 59 -
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first above written.
XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC. Xxxxx Fargo Bank Minnesota, National
Association, as Escrow Agent
By: _________________________________ By: ________________________________
Name: ________________________________ Name:_______________________________
Title: _______________________________ Title:______________________________
XXXXX FARGO BANK, NATIONAL ASSOCIATION, BAYVIEW CAPITAL PARTNERS LP
AS LENDER
BY: BAYVIEW CAPITAL MANAGEMENT LLC
ITS: GENERAL PARTNER
By: _________________________________ By: _______________________________
Name: ________________________________ Name: ______________________________
Title: _______________________________ Title: _____________________________
- 60 -
EXHIBIT 10(b)
FORM IMMEDIATE RELEASE
FROM: Health Fitness Corporation
0000 Xxxx 00xx Xxxxxx Xxxxxxxxxxx, Xxxxxxxxx 00000
CONTACT: Xxxx Xxxxxx
Vice President of Marketing
952.897.5245 or xxxxxxx@xxxx.xxx
HEALTH FITNESS CORPORATION TO PURCHASE HEALTH & FITNESS SERVICES
DIVISION OF XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC.
(a) Creating America's Largest
Worksite Health, Wellness And
Fitness Company
MINNEAPOLIS, MINNESOTA, _________________, 2003 - Health Fitness Corporation
(OTC BB: HFIT), today announced it has signed an agreement to acquire the
business assets of the Health & Fitness Services Division (HFS Division) of
Xxxxxxx & Xxxxxxx Health Care Systems Inc. (JJHCS) for an undisclosed purchase
price.
Assets to be acquired by Health Fitness Corporation consist primarily of client
contracts, proprietary wellness, lifestyle and health promotion programs and
other health and wellness services of the HFS Division. Xxxxxxx & Xxxxxxx Health
Care Systems will retain its Integrated Behavioral Solutions business unit, and
will license certain Behavioral Solutions methodologies to Health Fitness
Corporation for use in its business. As part of the transaction, HFC will enter
into a multi-year management contract with another subsidiary of Xxxxxxx &
Xxxxxxx under which HFC will manage 30 Xxxxxxx & Xxxxxxx affiliate sites, making
J&J and its affiliates HFC's largest client.
As a result of this acquisition, Health Fitness Corporation will have the
largest market share and geographical presence in the industry, and will be
well-positioned to continue serving all of its existing clients together with
those of the HFS Division, and to build new business. The closing is subject to
certain conditions that the parties are endeavoring to satisfy within the next
45 to 60 days.
The HFS Division of Xxxxxxx & Xxxxxxx Health Care Systems has been serving
clients since 1986, providing corporate fitness and wellness services and
programs to companies across the United States and Canada and in Latin America.
Services include: health and fitness center management, consulting, occupational
health services, health risk assessment programs, wellness, fitness, injury
prevention and treatment programs and data analysis services. Currently, the HFS
Division manages approximately 190 health fitness centers throughout the U.S.
Health Fitness Corporation plans to finance its acquisition of the HFS Division
primarily with a bank term loan; supplemented with venture financing.
"This transaction will make Health Fitness Corporation the leader in the
worksite wellness and corporate fitness industry," said Xxxxx Xxxxx, Health
Fitness Corporation CEO and president. "Driving corporate health and wellness
needs are a number of widely publicized health concerns
- 61 -
in the U.S. related to unhealthy lifestyles, including tobacco use, poor diet,
and sedentary habits which lead to overweight, obesity, heart disease and
diabetes. As companies seek relief from their rising health care premiums and
medical costs, they increasingly look to their health and wellness program
providers to deliver a more complete range of health enhancement offerings. We
are tremendously excited about the opportunity to broaden our program offerings
by integrating the Health & Fitness Services division of Xxxxxxx & Xxxxxxx
Health Care Services into Health Fitness Corporation. Employers want programs
that produce quantifiable results. We have a greater opportunity to impact those
trends by combining our existing program offerings with those we are acquiring,
and delivering superior services to the worksite."
(i) ABOUT HEALTH FITNESS
CORPORATION
Health Fitness Corporation is the leading provider of results-oriented fitness,
assessment, wellness, and occupational health services to corporations,
hospitals, universities and communities. HFC has been serving clients since 1975
and manages 200 sites across the U.S. and Canada. For more information about
Health Fitness Corporation, go to xxx.xxxx.xxx.
This press release contains forward-looking statements within the meaning of
federal securities laws. These statements include statements regarding intent,
belief or current expectations of Health Fitness Corporation and its management.
These forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties that may cause Health Fitness'
actual results to differ materially from the results discussed in these
statements. Please refer to Management's Discussion and Analysis contained
within the Company's Annual Report on Form 10-K for the year ended December 31,
2002 and the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2003.
- 62 -
EXHIBIT 11(b)(iii)
FORM OF
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
THIS ASSIGNMENT AND ASSUMPTION (this "Assignment and Assumption") is
made this ____ day of ________________, 2003 by and between Xxxxxxx & Xxxxxxx
Health Care Systems Inc., a New Jersey corporation with an office at 000 Xxxx
Xxxx, Xxxxxxxxxx, XX 00000 ("Assignor"), and Health Fitness Corporation, a
Minnesota corporation with an office at 0000 Xxxx 00xx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxx, XX 00000 ("Assignee").
WHEREAS, pursuant to that certain Asset Purchase Agreement, dated as of
July ____, 2003, by and between Assignor and Assignee (the "Purchase
Agreement"), Assignor has, on the date hereof, sold to Assignee assets used in
the Company's Health & Fitness Services business (the "Business"); and
WHEREAS, Purchase Agreement provides that, at the Closing (as defined
in the Purchase Agreement), Assignor will assign to Assignee certain contracts
relating to the Business, and Assignee will assume such contracts from Assignor;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. All capitalized terms used but not defined herein shall have
the respective meanings ascribed to them in the Purchase
Agreement.
2. Assignor hereby assigns, sets over and transfers to Assignee
all of Assignor's right, title and interest in, to and under
the Contracts that are listed on Schedule A attached hereto,
and Assignee hereby accepts such assignment and assumes and
agrees to pay, perform and discharge when due all of the
liabilities and obligations of Assignor arising on or after
the Closing Date under such Contracts.
3. This Assignment and Assumption and the obligations of the
parties hereunder shall survive the Closing, shall be binding
upon and inure to the benefit of the parties hereto, their
respective legal representatives, successors and assigns,
shall be governed by and construed in accordance with the laws
of the State of New York (without regard to conflicts of laws
principles), and may not be modified or amended in any manner
other than by a written agreement signed by both parties.
- 63 -
4. This Assignment and Assumption may be executed in
counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
Copies of this Assignment and Assumption with signatures
transmitted by facsimile shall be deemed to be original signed
versions of this Assignment and Assumption.
5. Assignor and Assignee each hereby covenants and agrees that it
will, at any time and from time to time if requested by the
other party, or its successors or assigns, do, execute,
deliver and acknowledge, or will cause to be done, executed,
delivered and acknowledged, to such other party, or its
successors or assigns, as the case may be, such and all
further acts, assignments, assumptions and additional papers
and instruments as such other party may reasonably request,
and do or cause to be done all acts or things as often as such
other party may reasonably request and which may be proper or
necessary or advisable for better evidencing or effecting the
agreements made hereby, and effectively to carry out the
intent hereof.
6. This Assignment and Assumption is delivered pursuant to and is
subject to the terms and provisions of the Purchase Agreement.
If any provision hereof is construed to conflict with any
provision of the Purchase Agreement, the provisions of the
Purchase Agreement shall be deemed controlling.
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption with the intent and agreement that the same shall be effective as of
the day and year first above written.
XXXXXXX & XXXXXXX HEALTH CARE SYSTEMS INC.
By:_______________________________
Name:
Title:
HEALTH FITNESS CORPORATION
By:_______________________________
Name:
Title:
- 64 -
EXHIBIT 11(b)(vi)
MASTER SERVICES AGREEMENT BETWEEN
XXXXXXX & XXXXXXX SERVICES, INC.,
AND
HEALTH FITNESS CORPORATION
__________________, 2003
- 65 -
This Agreement, dated as of ______________, 2003 ("Effective Date")
between Health Fitness Corporation, a Minnesota corporation (hereinafter "HFC"),
and Xxxxxxx & Xxxxxxx Services, Inc., a ____________ corporation (hereinafter
"J&J Services"), sets forth the terms and conditions upon which the parties
agree to implement and manage the system of corporate health fitness centers of,
and provide other health, wellness and fitness services to J&J Services and its
affiliates.
1. Service Level Agreements; Exclusive Field
1.1 The parties contemplate that HFC and J&J Services will, during the term
of this Agreement, enter into service level agreements on an annual basis (each
"Service Level Agreement") relating to the implementation and/or management of
all of the corporate health fitness centers of, and/or the provision of all
other health, wellness and fitness programs, products and services ("Wellness
and Fitness Core") to, J&J Services and its affiliates in the United States (the
"Field"). Each Service Level Agreement will contemplate that HFC will perform
services (the "Services") to J&J Services and/or its affiliates (each entity to
which such Services are provided, a "Service Recipient"). The Services will
include, without limitation, services necessary to implement and manage all of
the health fitness centers of J&J Services and its affiliates (the "Centers")
and will provide to each Service Recipient at least those services provided for
in the service agreement which each Service Recipient currently has in place
with Xxxxxxx & Xxxxxxx Health Care Systems Inc, which services are described on
the attached Exhibits "I-A" (Wellness and Fitness Core Services - All
Locations), I-B (Wellness and Fitness Core and Additional Services - By Site)
and "I-C" (J&J Site Locations and Services Summary). The terms and conditions
relating to HFC's provision of the Services shall be as set forth in the
applicable Service Level Agreement and in this Agreement, with such Service
Level Agreement controlling to the extent of any conflict between such Service
Level Agreement and this Agreement. In addition, notwithstanding anything to the
contrary in this Agreement or in any Service Level Agreement, HFC shall have the
right, upon the specific written approval of the Service Recipient, to offer
additional programming, products and services in the Field to the employees,
contractors and other agents of the Service Recipients, where the fees for such
programming, products or services are paid directly to HFC by such employees,
contractors or other agents.
1.2 In order to facilitate the provision by HFC of the Services, each
Service Recipient will agree to provide various support services described in
the applicable Service Level Agreements (the "J&J Support"). J&J Services
guaranties that each Service Recipient will perform the J&J Support in a
professionally competent manner, using the standard of care a reasonable person
would use in the provision of the applicable J&J Support service being
performed. In addition, with respect to Services related to Centers, J&J
Services or the applicable Service Recipient shall be responsible for furnishing
to the Center electricity, gas, water, steam, telephone, cleaning services,
extermination services, elevator and boiler maintenance, air conditioning
maintenance, master television antennas, and other necessary utilities or
services. J&J Services or the applicable Service Recipient shall also be
responsible for making or installing such alterations, repairs or
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decorations of the facilities at which the Centers are located as J&J Services
or the applicable Service Recipient deems reasonable or necessary. Each Service
Recipient will provide physical exercise equipment, which HFC will service and
maintain in accordance with the accompanying equipment manuals and instructions.
In addition, each Service Recipient will provide HFC with at least one computer
terminal at each fitness site with access to the Xxxxxxx & Xxxxxxx computer
network for Fitness Center Tracking.
1.3 J&J Services agrees that, during the term of this Agreement, HFC shall
be the exclusive provider of services in the Field to the extent that those
services are currently being provided by Xxxxxxx & Xxxxxxx Health Care Systems
Inc. ("Exclusive Services"), and J&J Services shall not, and shall cause its
affiliates not to, do, perform or conduct any Exclusive Services or contract
with any third party other than HFC for the provision of any Exclusive Services.
Notwithstanding the foregoing, but subject to any Service Level Agreement,
neither J&J Services nor any of its affiliates shall be under any obligation to
develop or maintain any Center or contract with HFC for any services to be
performed in the Field.
2. Fees
2.1 The fees payable to HFC for its provision of Services under a Service
Level Agreement will be set forth in such Service Level Agreement (the "Service
Level Fees"). With respect to Services related to the management of Centers, the
Service Level Fees shall be no less than (i) HFC's "Entire Costs" for providing
such Services, including, but not limited to(A) wages of HFC employees, and
insurance costs (including the insurance noted in Section 7.2) (collectively
referred to as "fixed costs"), and (B) costs for administrative and operating
supplies, telephone calls and facsimile, office and other equipment, maintenance
of office and other equipment, any publications, travel expenses, any applicable
sales tax fees, and any charges for shipping and handling (collectively referred
to as "variable costs"), plus (ii) the percentage of the Entire Costs set forth
opposite the applicable year in which such Entire Cost becomes payable:
Year Percentage of Entire Costs
2003 15%
2004 15%
2005 16%
2006 16%
Notwithstanding the foregoing, HFC's Service Level Fees during the remainder of
calendar year 2003 shall not exceed the total costs currently incurred by J&J
Services for the same services. J&J Services' total projected costs for calendar
year 2003 are $4,923,035. Subsequent increases in Service Level Fees for the
same services shall not
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exceed the increase in the cost of living as reflected in the Consumer Price
Index published by the Bureau of Labor Statistics of the United States
Department of Labor unless they have been first discussed with the Service
Recipient and agreed to in writing.
In addition, HFC and J&J Services agree to develop a performance based
"Risk/Reward" Incentive Plan for HFC to attain on an annual basis. The
parameters for, and the monetary value of, the plan will be jointly developed
and agreed to during the first six months of the contract. Annual review of the
specific parameters for each contract year will be mutually agreed upon during
the fourth quarter of the preceding year.
2.2 From time to time, as agreed to by the parties, HFC shall provide
additional services ("Additional Services") to J&J Services other than the
Wellness and Fitness Core. Services Fees for the Additional Services shall be as
agreed to annually by the parties; provided, however, that no fee for any
Additional Services shall be higher than the lowest fee offered for the same
service to any other customer of HFC ("Additional Fees"). In addition, Service
Level Fees are subject to renegotiation up or down from time to time as
warranted by major increases or decreases in the personnel census and/or level
of services at various Field locations as per Exhibit I-C.
2.3 HFC shall invoice J&J Services monthly for the Service Level Fees and
any Additional Fees (collectively, the "Fees") incurred by J&J Services in the
month prior to such invoice. Fixed fees and variable fees shall be separately
itemized on such invoices. The invoices shall set forth the basis for such Fees
in reasonable detail. All Fees shall be paid by J&J Services to HFC within
forty- five (45) days after the date of the HFC invoice. Amounts invoiced and
not paid within 45 days of receipt shall be subject to monthly interest of
one-half percent (.5%), which shall be added to the Fees due.
3. Term & Termination
3.1 This Agreement shall remain in effect from the Effective Date and until
December 31, 2006 (the "Termination Date"), unless terminated earlier as
provided in Section 3.2. Following the Termination Date, this Agreement shall
automatically be renewed for successive one year periods unless either party
delivers written notice to the other party at least 90 days prior to the
Termination Date.
3.2 If at any time during the term of this Agreement HFC, on the one hand,
or J&J Services, on the other hand, commits a material breach of this Agreement
and such breach is not cured within sixty (60) days following receipt of written
notice of the breach by the non-breaching party, the non-breaching party shall
have the right (but not the obligation) to terminate this Agreement. The parties
acknowledge that the breach of a Service Level Agreement that is material with
respect to the Services under such Service Level Agreement will not be deemed a
material breach of this Agreement for purposes of this Section 3.2 unless such
breach, together with other then uncured breaches of Service Level Agreements,
in the aggregate are material.
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3.3 It is recognized that HFC has responsibility for the hosting of the
Health Profile program during the entire term of this Agreement. However, if,
after the second anniversary of the date hereof, J&J Services decides that
because of cost or service J&J Services wants to explore other options with
respect to the hosting location of the Health Profile program, HFC and J&J
Services shall negotiate in good faith regarding the transfer of such hosting
location so as to minimize costs and maximize service with respect to the Health
Profile program. Upon the termination of this Agreement, HFC shall, to the
extent not prohibited from doing so, grant J&J Services a non-transferable,
non-exclusive license to use, and shall promptly transfer to J&J Services, all
Health Profile program written materials, employee data and software (including
a license to use the Health Profile portion of Insight +). The scope of such
license shall be solely for the purpose of conducting the Health Profile program
with the employees of Xxxxxxx & Xxxxxxx and its affiliates.
3.4 Termination of this Agreement shall not affect the rights and
obligations of the parties that have accrued prior to the date of termination.
3.5 J&J Services will not, and will cause its affiliates not to, during the
term of this Agreement and for a period of one (1) year following its
termination, without the prior written consent of HFC, hire any employee or
retain any consultant who was, at any time during the term of this Agreement,
employed or retained by HFC to provide services related in any material respect
to the Services. Notwithstanding the foregoing, either J&J Services or its
affiliates may at any time rehire any of those persons who were employees of
Xxxxxxx & Xxxxxxx or its affiliates on the date of this Agreement and who are
named on the attached Exhibit "II".
3.6 A waiver of a breach of any provision of this Agreement shall not
constitute a waiver of any subsequent breach of that provision or a breach of
any other provision hereof. Failure of either party to enforce at any time or
from time to time any provision of this Agreement shall not be construed as a
waiver thereof.
4. Third Party Information
4.1 In order for HFC to render services hereunder it may be necessary for
J&J Services and/or a Service Recipient to disclose to HFC information
concerning or obtained from employees, patients, vendors and other third
parties. J&J Services represents and warrants to HFC that all such information
heretofore and in the future disclosed to HFC in pursuance hereof has been and
will be disclosed in a manner which does not violate the rights of third
parties. With respect to any such information provided to HFC and/or a Service
Recipient, and not improperly disclosed by HFC, J&J Services agrees to indemnify
HFC with respect to a third party's claim that such information was improperly
obtained from such third party or improperly disclosed to HFC.
4.2 HFC shall disclose and use such information in a manner that does not
violate the rights of third parties. HFC agrees on behalf of itself, its
employees, agents and subcontractors to indemnify J&J Services with respect to a
third party's claim that
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such information was improperly disclosed by HFC, or any employee, agent or
subcontractor of HFC, but only to the extent improperly disclosed by HFC.
4.3 HFC shall, if and to the extent required by HIPAA or any other
applicable law, execute and deliver to J&J Services a "business associate" or
other similar agreement in a form so required, and HFC shall thereafter be
subject to the provisions thereof. If HFC and J&J Services disagree about
whether or the extent to which HFC is required by HIPAA or other applicable law
to execute and deliver to J&J Services such a "business associate" or other
similar agreement, HFC and J&J Services shall submit such issue to a
third-party, disinterested expert on HIPAA, whose determination with respect to
such issue shall be final and binding on both HFC and J&J Services. HFC and J&J
Services shall each pay one-half of the costs associated with retaining such
expert.
5. Intellectual Property and Confidential Information
5.1 All intellectual property used or generated by HFC in the
implementation of this Agreement shall remain the sole property of HFC. During
the term of this Agreement, HFC hereby grants to J&J Services and the applicable
Service Recipient a worldwide, royalty-free (except for the payments described
elsewhere herein), non-exclusive license to use, but not to sell, transfer or
sublicense, such intellectual property insofar as necessary to enable J&J
Services to realize intended benefits of the Services, provided that, this
license does not apply to any trademark, service xxxx, trade name or corporate
name owned or used by HFC or any of its affiliates.
5.2 J&J Services acknowledges that the programming and operational manuals
prepared by HFC for operation and management of the Centers are copyrighted and
owned by HFC and that HFC's systems and methods of operations for the Centers
are proprietary to HFC (such copyrighted and proprietary information is
hereafter referred to as "HFC Intellectual Property"). J&J Services acknowledges
that HFC is in the business of managing similar centers for third parties and
that HFC utilizes HFC Intellectual Property at such other centers. Upon
termination of this Agreement for any reason, HFC shall retain all rights to and
copies of any materials, documents and media (including computer software)
containing HFC Intellectual Property, and J&J Services agrees that it will not,
and it will cause its affiliates not to, use any of the HFC Intellectual
Property after termination.
5.3 HFC and J&J Services agree to hold in confidence each other's
confidential information in the same manner (but not less than a reasonable
standard of care) that they employ to protect their own confidential information
of like importance. "Confidential Information" includes, but is not limited to,
any and all of either party's product information relating to design,
functionality, pricing, manufacturing, or marketing; the terms and conditions of
any proposed or actual agreement between the parties; either party's business
policies, practices or trade secrets; and the information of others that is
received by either party under an obligation of confidentiality.
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5.4 Notwithstanding the foregoing or anything else herein to the contrary,
HFC shall have the right to disclose to current and potential customers and
other third parties information about HFC's provision of the Services, and the
success thereof, but only to the extent that such information is in the public
domain. HFC may not otherwise use the names, trademarks, or logos of Xxxxxxx &
Xxxxxxx or any of its affiliates in any public utterance or publication without
the express written permission of J&J Services.
6. Relationship of Parties
6.1 HFC shall perform the Services in a professionally competent manner,
using the standard of care customary among the providers of health care
management and consulting services in the United States similar to the
applicable Service being performed.
6.2 Neither this Agreement nor the services to be rendered hereunder are
intended for the benefit of third parties, including without limitation any
Service Recipient.
6.3 All services rendered by HFC hereunder are rendered only to J&J
Services (and not to any Service Recipient), and J&J Services is solely
responsible for whether and how such services (and the advice embodied therein)
are used with respect to the Service Recipients and the employees, patients and
other third parties thereof.
6.4 HFC is an independent contractor of J&J Services and not a partner,
agent or joint venturer of J&J Services; and neither party shall hold itself out
contrary to these terms by advertising or otherwise, nor shall either party be
bound by any representation, act or omission whatsoever of the other. J&J
Services and HFC acknowledge that each is solely responsible for all activities
conducted by its respective employees or agents during the term of this
Agreement.
7. Indemnity; Insurance
7.1 HFC shall indemnify, defend and hold harmless J&J Services and its
affiliates and their directors, officers, and employees("Indemnified Parties") ,
from and against claims by third parties arising out of or based upon the
performance of the Services, except insofar as any such claim arises out of or
is based upon the negligent or willful misconduct of any Indemnified Party. J&J
Services shall indemnify, defend and hold harmless HFC and its affiliates and
their directors, officers, and employees, from and against claims by third
parties arising out of or based upon any action to be taken by J&J Services
hereunder, except insofar as any such claim arises out of or is based upon HFC's
negligent or willful misconduct. The "Indemnified Party" shall give the party
from which indemnification is sought (the "Indemnifying Party") prompt notice of
any claim with respect to which such Indemnified Party seeks indemnification.
The Indemnified Party allow the Indemnifying Party to control the defense and/or
settlement of such claim (except to the extent that such settlement shall
materially adversely affect the Indemnified Party's interest, in which case the
Indemnifying Party shall obtain the Indemnified Party's consent to such
settlement) and shall cooperate to the extent
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reasonable with the Indemnifying Party in all matters related thereto. The
indemnity obligations set forth herein shall survive the termination of this
Agreement.
7.2 At all times during the term of this Agreement, HFC shall maintain,
with financially responsible carriers, the following insurance, which shall not
be cancelable on less than 30 days notice to J&J Services, and under all of
which such insurance except for workers compensation and employers liability
coverage subrogation shall be waived by all applicable carriers, and under all
of which such insurance except workers compensation and employers liability
coverage J&J Services shall be named an additional insured:
i. Commercial General Liability, including contractual liability coverage,
with a per occurrence limit of not less than $1,000,000, provided that this
requirement may be made either through insurance or self-insurance;
ii. Worker's Compensation and Occupational Disease coverage as statutorily
required, and Employers Liability coverage with a per occurrence limit of not
less than $500,000;
iii. Incidental Professional coverage with a per occurrence limit of not
less than $1,000,000.00;
iv. Automobile Liability coverage, covering all motor vehicles owned,
hired, or used in the performance of this Agreement with a per occurrence limit
of not less than $1,000,000.
8. Work Environment Policy
It is the policy of HFC and J&J Services to provide a work environment free of
harassment, either physical or verbal, including, but not limited to, sexual,
racial, ethnic, age-related, and other areas prohibited by law. The parties
shall communicate this policy to their respective employees, agents and
representatives.
9. Notices
Any notice, demand, waiver, consent, approval or other communication given in
connection with this Agreement shall be in writing and shall be deemed given
only if delivered personally or sent by postage prepaid registered or certified
mail (return receipt requested), by recognized overnight courier or by confirmed
facsimile to the address or facsimile number of the recipient as set forth below
or as changed by notice given hereunder. Notices or communications shall be
effective when properly delivered:
if to HFC: Health Fitness Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, XX 00000
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Attention: ________________________
Facsimile No: _____________________
if to J&J Services: ________________
___________________
_____________
__________, _____________ _______
Attention: ________________________
Facsimile No.: _____________________
10. Dispute Resolution
Any controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitration shall be held in New York and the
arbitrator shall apply the substantive law of the State of New York, except that
the interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. The arbitrator shall not award any
party punitive or consequential damages, and each party hereby irrevocably
waives any right to seek such damages in arbitration or in judicial proceedings.
The parties agree to complete all arbitration proceedings within six (6) months
of the initiation of the arbitration.
11. Change of Law
If any governmental entity shall enact or amend a law or adopt or amend a
regulation, or if any governmental entity or court of competent jurisdiction
shall adopt or amend an interpretation of a law or regulation that has the
effect of (a) prohibiting any right or obligation of a party under this
Agreement, or (b) making any such right materially less valuable or any such
obligation materially more burdensome to a party, then such party may upon
notice to the other party terminate immediately such right or obligation in the
geographical area to which such law, regulation or interpretation applies.
12. Assignment
This Agreement and the rights and obligations hereunder shall be binding upon
and inure to the benefit of the parties hereto, their respective successors and
assigns, but except as provided below, this Agreement shall not be assignable by
either party without the prior written consent of the other party. Upon written
notice, either party may assign this Agreement to any majority-owned subsidiary
of the party or to any entity that acquires all or substantially all of the
stock or assets of the party.
13. Force Majeure
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Noncompliance with any obligation under this Agreement for reasons of force
majeure (such as acts, regulations or laws of any government; war or civil
commotion or destruction of production facilities or materials; fire, earthquake
or storm; labor disturbances; failure of public utilities or common carriers;
and any other causes beyond the reasonable control of the party affected) shall
not constitute a breach of this Agreement.
14. Agreement
14.1 The Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14.2 This Agreement may be executed in two counterparts, each of which shall
be deemed to be an original, but all of which shall be deemed to constitute only
one agreement.
14.3 To the extent either of the parties utilizes purchase order and/or
shipping documents in connection with this Agreement which contain any terms
inconsistent with the terms of this Agreement, such inconsistent terms in the
purchase order and/or shipping documents shall not be applicable and the terms
of this Agreement shall govern.
14.4 This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement may not
otherwise be amended or modified except by written instrument duly executed by
each party. Any and all previous agreements and understandings, whether written
or oral, between the parties regarding the subject matter of this Agreement are
superseded by this Agreement.
In Witness Whereof, the parties have caused this Agreement to be
executed by their duly authorized officers as of the Effective Date written
above.
HEALTH FITNESS CORPORATION
By _________________________________
Printed Name & Title
XXXXXXX & XXXXXXX SERVICES, INC.
By _________________________________
Printed Name & Title
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EXHIBIT 13(c)
FORM OF
LICENSE AGREEMENT FOR OFFICE SPACE
This Agreement is made as of the day of , 2003, by and between
Xxxxxxx & Xxxxxxx Health Care Systems Inc., a New Jersey corporation
having principal offices at 000 Xxxx Xxxx, Xxxxxxxxxx, XX 00000 (the
"Company"), and Health Fitness Corporation, a Minnesota corporation
having principal offices at 0000 Xxxx 00xx Xxxxxx, Xxxxx 000,
Xxxxxxxxxxx, XX 00000 (the "Licensee").
WHEREAS, the Company and the Licensee are parties to an Asset
Purchase Agreement (the "Purchase Agreement") dated as of August
[_______], 2003 pursuant to which the Company has, on the date hereof,
sold to the Licensee assets used in the Company's Health & Fitness
Services business (the "Business"); and
WHEREAS, The Purchase Agreement contemplates that the Company
and the Licensee will enter into a license agreement pursuant to which
the Licensee will have the right to use certain office space subleased
by the Company pursuant to that certain Sublease Agreement dated as of
November 11, 2002 (the "Sublease") by and between the Company and
Opencom Systems, Inc. ("Sublessor");
NOW, THEREFORE, in consideration of the mutual agreements
expressed herein, and other consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
1. LICENSE.
(a) The Company does hereby grant to the Licensee a
license to use approximately 1,500 square feet of contiguous
office space at 000 Xxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxx, where
the Business is currently located ("the Premises"), which
space is more specifically described on Exhibit A attached
hereto. Such license shall be irrevocable until the expiration
or termination of this Agreement. The Licensee acknowledges
and agrees that the Premises are being provided to it "AS IS",
and the Company makes no representation or warranty, express
or implied, including without limitation, any warranty of
habitability, to the Licensee, its customers or any other
party, regarding the Premises. The Company also agrees to
provide to the Licensee, within the Premises, (a) the office
furniture listed on Exhibit B attached hereto (the
"Furniture"), (b) the following utilities: ambient heat,
ventilation and air conditioning; water; electricity; and
telephone (collectively, the "Utilities"), and (c) cleaning
services substantially similar to the cleaning services
received by the Company with respect to other parts of the
building of which the Premises are a part (the "Building").
The Licensee's access to the Premises shall be
subject to the Licensee's compliance with the security rules
of the Company, Sublessor and Piscataway Centre Associates,
L.P., as owner of the Building ("Owner").
Licensee and its employees, agents and guests shall
be entitled to use the Common Areas in common with the Company
and any other tenants in the Building, subject to compliance
with the rules of Owner, Sublessor and the Company pertaining
to such Common Areas. "Common Areas" means all automobile
parking areas, pedestrian
sidewalks, entrances and exits to the Building, interior
stairways and elevators, hallways, bathrooms, kitchen
facilities and other areas and improvements provided by Owner
for general use, in common, by the Company and any other
tenants of the Building.
(b) In exchange for the use of the Premises and the
Utilities, the Licensee shall pay to the Company a fee of
$3,000 per month (the "License Fee"), which License Fee shall
be payable in advance on or before the first business day of
each month. In addition to the License Fee, the Licensee shall
pay for its own telephone usage charges.
2. USE OF THE PREMISES.
The Licensee agrees to use the Premises solely for
the purpose of conducting the Business in accordance with all
applicable laws.
The Licensee recognizes that the Building is a modern
first class office building and, as a further inducement to
the Company to enter into this Agreement, covenants and agrees
that the Licensee business to be conducted at, through and
from the Premises and the maintenance thereof by the Licensee
staff will be in conformity, in all material respects, with
the standards of a modern first class office building. The
operating and advertising employed in furtherance of the
Licensee business will be dignified and in conformity, in all
material respects, with the standards of a modern first class
office building. The Company acknowledges that Licensee's use
of the Premises in a manner substantially similar, in all
material respects, to the manner in which the Company used the
Premises in its operation of the Business will be deemed to be
in conformity with Licensee's obligations under this
paragraph.
The Licensee specifically represents and covenants
that it shall not store any hazardous material, or allow any
contamination of the Premises as a result of the Licensee's
operation and in the event of any such contamination will be
responsible for all costs of remediation or cleanup associated
with any contamination caused as a result of the Licensee's
use of the Premises.
The Licensee shall not make any changes to the
Premises, whether they be structural, electrical, or affecting
any of the mechanical systems applicable thereto without it
first obtaining the prior written consent of the Company.
Notwithstanding the foregoing, the Licensee may make minor,
reasonable modifications and repairs to the Premises with the
prior written consent of the Company, which will not be
unreasonably withheld.
The Company's employees and agents, and those of
Owner and Sublessor, will have access to the Premises as
necessary or convenient for purposes of maintaining the
security of the Company's facilities, and for purposes of
cleaning or maintaining the Premises if the Company has
requested or agreed to provide such services. Notwithstanding
the foregoing, the Company acknowledges that the Premises may
contain cash and/or other financial instruments as well as
important and/or sensitive records and other documents, all of
which may be secured in safes, strongboxes, cabinets,
drawers or similar containers having their own security
systems, locks, codes, etc. The Company acknowledges that the
Licensee need not provide the Company with the security codes,
lock combinations, keys, etc. to such containers.
Licensee agrees that its rights and obligations
hereunder shall be subject to the provisions of the Sublease
and the Lease dated as of December 29, 1995 between Sublessor
and Owner, as amended by a Lease Modification and Extension
Agreement dated June 15, 1998 (as so amended, the "Lease") and
Owner's written consent, dated October 31, 2002, to the
Sublease. Licensee further agrees not to do anything that
would constitute a default under the Lease or the Sublease.
3. RELATIONSHIP.
The relationship between the parties shall be that of
licensor and licensee with the Company as the licensor and the
Licensee as the licensee.
The Company shall exercise no supervision over the
Licensee's mode and manner of operation. The Licensee and its
employees shall not be deemed to be employees or agents of the
Company. It is understood that the Licensee is an independent
contractor for all purposes and at all times. It is agreed
that nothing contained in this Agreement shall be deemed or
construed as creating a partnership, joint venture, or the
relationship of landlord and tenant between Xxxxxxx & Xxxxxxx
or the Company and the Licensee.
4. TERM AND TERMINATION.
This Agreement shall have a term of one year from the
date hereof unless earlier terminated as provided below.
Notwithstanding the foregoing, this Agreement may be
terminated prior to the end of its term (or any renewal or
extension thereof) upon the following terms and conditions:
a. With Cause. Either party shall have the right to
immediately terminate this Agreement if the other party
fails to cure any material defect in the performance of
its obligations as set forth in this Agreement within
thirty (30) days of written notice thereof.
b. Destruction of Premises. Either the Company or Licensee
may terminate this Agreement immediately upon written
notice to the other if the Premises are either completely
or substantially destroyed and such destruction is not
caused by the party seeking to terminate this Agreement.
The termination of this Agreement shall not affect the responsibility
of the parties for transactions or obligations incurred prior to the termination
of this Agreement.
5. INSURANCE.
The Licensee will, at its own cost and expense, obtain and
maintain in full force and effect during the term of this Agreement:
a. Fidelity bond coverage reasonably acceptable to the
Company in an amount of not less than $5 million;
b. Worker's compensation insurance in accordance with the
statutory requirements of the state of New Jersey;
c. Employer's liability insurance with a minimum limit of
$500,000.00;
d. Comprehensive general liability insurance for bodily
injury and property damage, including contractual
liability and broad form property damage, with limits of
at least $5 million combined single limit for personal
injury and property damage for each occurrence.
The Licensee shall provide insurance certificates to confirm
the foregoing to the Company and shall designate the Company as an additional
insured. All such insurance must be primary and required to respond and pay
prior to any other available coverage. Each insurance policy obtained by the
Licensee pursuant to this section will provide that thirty (30) days prior
written notice of cancellation of, or material change to, the insurance will be
given to the Company.
The Licensee and the Licensee's subcontractors shall furnish,
prior to the start of work, certification or adequate proof of the foregoing
insurance, including copies of the endorsements and insurance policies.
The Licensee acknowledges that it is familiar with the manner
in which the Company, Sublessor and Owner maintain and secure the Premises and
the facilities within which the Premises are located, and the Licensee hereby
assumes all risks in connection with its use of the Premises, including without
limitation all risk of loss (whether by fire, theft, casualty or otherwise) with
respect to the Licensee's property located therein and within such facilities.
The Licensee further agrees that the Company shall have no liability to the
Licensee for any loss of or damage to such property, and the Licensee shall look
only to its insurer and not to the Company for payment in respect of any such
loss or damage. Notwithstanding the foregoing, this paragraph shall not apply to
the extent that any loss or damage results from the Company's negligence or
willful misconduct; provided that the Company's liability with respect to its
negligence shall be limited to the amount of the License Fee.
6. INDEMNIFICATION.
The Licensee agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, employees and
agents from and against any and all claims, losses, liability or expenses
(including reasonable attorneys' fees and expenses) (collectively, "Losses") to
the extent arising out of, or to the extent resulting from, the Licensee's (a)
breach of any of its obligations under this Agreement, (b) negligence and/or
willful misconduct with respect to its
performance under this Agreement or (c) occupation of, or acts or omissions on
or about, the Building, including without limitation (i) the conduct or
management of any business, and any work done or condition created, by the
Licensee, its employees, agents or contractors and (ii) all acts and omissions
of the Licensee's employees, agents, contractors or invitees. This paragraph
shall not apply to any Losses to the extent they resulted from the Company's
negligence or willful misconduct.
The Company agrees to indemnify and hold harmless the
Licensee, its Affiliates and their respective officers, directors, employees and
agents from and against any and all Losses to the extent arising out of, or to
the extent resulting from, the Company's (a) breach of any of its obligations
under this Agreement, or (b) negligence and/or willful misconduct with respect
to its performance under this Agreement; provided that the Company's indemnity
obligations hereunder shall be limited to the amount of the License Fee, except
to the extent such Losses resulted from the Company's willful misconduct. This
paragraph shall not apply to any Losses to the extent they resulted from the
Licensee's negligence or willful misconduct.
7. CONFIDENTIALITY.
Any confidential information including specifications,
drawings, sketches, product information, samples, data, computer programs,
reports, work, work product, documentation or other technical or business
information ("Confidential Information") furnished or disclosed by either party
(the "Disclosing Party") to the other party (the "Recipient") or to which the
Recipient may have access as a result of the transactions contemplated by this
Agreement is the property of and shall be deemed confidential to the Disclosing
Party, and shall not be copied or distributed by the Recipient and shall be
returned to the Disclosing Party at the expiration or earlier termination of
this Agreement, or shall be destroyed if the Disclosing Party shall so direct in
writing. Unless such Confidential Information was previously known to the
Recipient free of any obligation to keep it confidential, or is subsequently
made public by the Disclosing Party or by a third party having a legal right to
make such disclosure, it shall be held in confidence by the Recipient, shall be
used only for the purposes hereunder, and may be used for other purposes only
upon such terms and conditions as may be mutually agreed upon in writing by the
parties.
8. ASSIGNMENT.
This Agreement may not be assigned by the Licensee, nor may
the Licensee's obligations hereunder be subcontracted or delegated without the
Company's prior written consent, which the Company may withhold in its sole
discretion. Any purported assignment hereof or delegation of services or
assignment of rights by the Licensee under this Agreement without such written
consent shall be void.
No legal representative, successor, receiver or trustee of the
Licensee, and no other person, firm or corporation shall acquire or succeed to
the rights of the Licensee in this Agreement or to any rights under this
Agreement, either by purported assignment, operation of law, devolution or
otherwise, except with the prior written consent of the Company, which consent
the Company may withhold in its sole discretion.
9. SUBSTITUTE PREMISES.
The Company may, at its option and expense, but only once
during the term of this Agreement, elect by sixty (60) days written notice to
the Licensee to substitute for all of the Premises, other office space in a
building owned or leased by the Company within five miles of the Building (the
"Substitute Premises"). The Substitute Premises shall be located in a modern
first class office building and shall be substantially similar to the Premises.
The Licensee shall vacate and surrender the Premises and shall occupy the
Substitute Premises promptly after the Substitute Premises are ready for
occupancy.
10. MISCELLANEOUS PROVISIONS.
a. Notice. All notifications, letters, and other
correspondence issued by a party to the other party
hereunder shall be addressed as follows:
IF TO THE COMPANY: Xxxxxxx & Xxxxxxx Health Care Systems Inc.
000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
WITH A COPY TO: Xxxxxxx & Xxxxxxx
Office of General Counsel
Xxx Xxxxxxx & Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
IF TO THE LICENSEE: Health Fitness Corporation
0000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
b. Amendments. This Agreement cannot be amended except in a
writing executed by both parties.
c. Severability. If any term or provision of this Agreement
shall be held invalid or unenforceable, the remaining
terms hereof shall not be affected, but shall be valid
and enforceable. If any of the terms and provisions of
this Agreement are in conflict with any applicable
statute or rule of law, then such terms or provisions
shall be deemed inoperative to the extent that they
conflict therewith and shall be deemed to be modified to
conform with such statute or rule of law.
d. Force Majeure. Neither party to this Agreement shall be
liable for delays or failure of performance caused by
events unforeseeable and beyond its reasonable control.
When one party claims excuse under this section, it must
give written notice to the other party.
e. Non-Waiver. The failure of either party at any time to
enforce any rights or remedies available to it under this
Agreement with respect to any breach or failure by the
other party shall not be construed to be a waiver of such
right or remedy with respect to any other breach or
failure by the other party.
f. Survival of Obligations. The obligations of the parties
under this Agreement that by their nature continue beyond
the expiration or termination of this Agreement shall
survive the expiration or termination of this Agreement.
g. Captions. The captions in this Agreement are included for
convenience only and shall not be construed to define or
limit any of the provisions contained herein.
h. Interpretation of this Agreement. In the event of any
dispute concerning the interpretation of any of the terms
and provisions of this Agreement, the fact that this
Agreement was drafted by one of the parties shall not be
considered.
i. Definitions. All capitalized terms used by not defined
herein shall have the respective meanings ascribed to
them in the Purchase Agreement.
j. Integration. This Agreement constitutes the entire
agreement and understanding between the parties with
respect to the subject matter hereof and there are no
promises, representations, conditions, provisions or
terms related thereto other than those set forth in this
Agreement. Accordingly, this Agreement supersedes all
previous undertakings, agreements and representations
between the parties, written or oral, with respect to the
subject matter hereof.
k. Choice of Law/Dispute Resolution. The construction,
interpretation and performance of this Agreement shall be
governed by the laws of the State of New Jersey
applicable to contracts executed and to be performed in
that State. All disputes between the parties arising out
of or relating to this Agreement or the validity,
inducement, or breach thereof shall be resolved pursuant
to Section 16(j) of the Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be fully executed as of the date first written above:
XXXXXXX & XXXXXXX HEALTH CARE
SYSTEMS INC.
By:______________________________
Xxxxx X. Xxxxxxxx
Vice President, Finance
HEALTH FITNESS CORPORATION
By:______________________________
Xxxxx X. Xxxxx
President and CEO
