AGREEMENT AND PLAN OF MERGER
by and among
ACCUHEALTH, INC.,
HHI ACQUIRING CORP.,
HEALIX HEALTHCARE, INC.,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇. O'▇▇▇▇▇ ▇▇▇▇▇▇▇▇, AND ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Dated as of December 1, 1997
TABLE OF CONTENTS
1. The Merger; The Surviving Corporation
1.1 The Merger...................................................1
1.2 Closing..................................................... 1
1.3 Effective Time of the Merger.................................2
1.4 Certificate of Incorporation and By-Laws.....................2
2. Conversion of Shares; Options
2.1 Treatment of Shares of the Company...........................2
2.2 Exchange of Company Stock....................................3
2.3 No Fractional Securities.....................................4
3. Representations and Warranties of the Stockholders and the Company
3.1 Organization................................................4
3.2 Capitalization...............................................5
3.3 Subsidiaries.................................................5
3.4 Authority....................................................6
3.5 Consents and Approvals: No Violations........................6
3.6. Financial Statements.........................................6
3.7 Absence of Undisclosed Liabilities...........................7
3.8 Absence of Certain Changes or Events.........................7
3.9 Material Contracts...........................................8
3.10 No Default...................................................9
3.11 Compliance with Law..........................................9
3.12 Health Care Matters..........................................9
3.13 Litigation..................................................10
3.14 Permits.....................................................10
3.15 Taxes.......................................................10
3.16 Title of Properties: Encumbrances...........................10
3.17 Proprietary Rights..........................................10
3.18 Employee Benefit Plans; ERISA; Labor Matters................11
3.19 Environmental Laws and Regulations..........................12
3.20 Brokers.....................................................14
3.21 Minute Books and Stock Transfer Books.......................14
3.22 Bank Accounts...............................................14
3.23 Insurance...................................................14
3.24 Accuracy of Information.....................................15
3.25 Investment Representations..................................15
4. Representations and Warranties of Parent
4.1 Organization...............................................16
4.2 Capitalization.............................................16
4.3 Authority..................................................16
4.4 Consents and Approvals: No Violations.......................17
4.5 Reports and Financial Statements............................17
4.6 Brokers.....................................................17
4.7 Depositions.................................................17
4.8 Compliance with Law.........................................17
4.9 Health Care Matters.........................................18
4.10 Litigation, etc.............................................18
4.11 Taxes.......................................................19
5. Covenants
5.1 Covenants of the Company and the Stockholders...............19
5.2 Covenants of Parent.........................................21
i
6. Additional Agreements
6.1 Reasonable Best Efforts.....................................22
6.2 Expenses....................................................22
6.3 Public Announcements........................................22
6.4 Supplemental Disclosure.....................................22
6.5 Board Representation........................................22
6.6 Parent Financing............................................23
6.7 Proxy.......................................................23
6.8 Board Meetings..............................................23
6.9 Company Financing...........................................23
7. Conditions to Consummation of the Closing
7.1 Conditions to Effect the Closing............................23
7.2 Conditions to Obligations of Parent and Sub to Effect the
Preliminary Closing time..................................23
7.3 Conditions to Obligation of the Stockholders and the
Company to Effect Preliminary Closing.....................29
8. Termination
8.1 Termination ................................................31
8.2 Effect of Termination ......................................31
8.3 Liability of Stockholders ..................................32
9. Survival ............................................................32
10. Miscellaneous
10.1 Amendment and Modification..................................32
10.2 Wavier. ....................................................32
10.3 Notices.....................................................32
10.4 Headings....................................................33
10.5 Entire Agreement; Assignment................................33
10.6 Governing Law...............................................33
10.7 Severability................................................34
10.8 Counterparts................................................35
ii
SCHEDULES OF COMPANY:
3.2 Capitalization of Company
3.3A Capitalization of Subsidiaries
3.3B PRN Acquisition Agreement
3.5 Consents: Noncontravention
3.6A Financial Statements
3.6B Deviations from GAAP
3.7 Undisclosed Liabilities
3.8 Subsequent Events
3.9 Material Contracts
3.10 Defaults
3.12(a) Healthcare Cost Reports
3.12(c) Business Generation
3.12(d) Health Care Professionals
3.13 Litigation
3.15 Taxes
3.16 Liens
3.16A Leases of Personal Property
3.16B Real Property
3.17 Proprietary Rights
3.18 Employee Benefit Plans
3.21 Officers and Directors
3.22 Bank Accounts
3.23 Insurance
SCHEDULES OF PARENT:
4.4 Consents; Noncontravention
4.9(a) Healthcare Cost Reports
4.9(b) Health Care Audit
4.9(c) Business Generation
4.9(d) Healthcare Professionals
4.10 Litigation
4.11 Taxes
EXHIBITS
Exhibit 1.5 (1.5) Escrow Agreement
Exhibit A (7.2(b)(ii)) Non-Competition Agreements
Exhibit B (7.2(b)(iv) Opinions
(7.3(b)(ii)
Exhibit C (7.2(b)(xv)) Stock Option Cancellations
Exhibit D (7.3(b)(i)) Registration Rights Agreements
iii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") dated as of
December 1, 1997 is among Accuhealth, Inc., a New York corporation ("PARENT"),
HHI Acquiring Corp., a Delaware corporation and wholly-owned subsidiary of
Parent ("SUB"), Healix HealthCare, Inc., a Delaware corporation (the "COMPANY"),
▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. ("Charylan"), ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇▇"), R.N., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D. ("Freed"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇.
▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"),
▇▇▇▇▇▇▇▇, P. O'▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
("▇▇▇▇▇▇▇▇") (Barkan, Charytan, Comerford, Freed, ▇. ▇▇▇▇▇▇▇▇▇, R. GiaQuinto,
Labra, McDonald and Shwacke are hereinafter individually and collectively
referred to as the "STOCKHOLDERS").
INTRODUCTION:
A. The Parent and the Company are engaged in the business of providing
home health care services.
B. Parent, Sub, the Company and the Stockholders desire that Sub merge
with and into the Company in accordance with the terms of this Agreement and the
Delaware General Corporation Law (the "DGCL").
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency thereof is hereby acknowledged, the parties agree as follows:
1. THE MERGER; THE SURVIVING CORPORATION.
1.1 THE MERGER. Subject to the terms and conditions contained herein,
at the Effective Time (as defined in section 1.3), Sub shall be merged with and
into the Company (the "MERGER") pursuant to the DGCL, and the separate existence
of Sub shall cease. The Company shall be the surviving corporation (the
"SURVIVING CORPORATION") and shall continue to be governed by the DGCL.
1.2 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
330 Madison Avenue, New York, New York (the "ESCROW AGENT") at 10:00 a.m., local
time, no later than two (2) business days after the conditions specified in
Section 7.1 have been satisfied or on such other date and at such other time and
place as Parent and the Company shall agree (the "CLOSING DATE").
1
1.3 EFFECTIVE TIME OF THE MERGER. Immediately after the Closing, a
properly executed certificate of merger ("MERGER CERTIFICATE") providing for the
Merger shall be filed with the Secretary of State of the State of Delaware. The
Merger shall become effective at the time of filing of the Merger Certificate or
at such later time specified in the Merger Certificate (the "EFFECTIVE TIME").
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The articles of
incorporation and by-laws of Sub in effect at the Effective Time shall be the
certificate of incorporation and by-laws of the Surviving Corporation until
amended, except that the name of the Surviving Corporation shall be "Healix
HealthCare, Inc."
1.5 PRELIMINARY CLOSING. In order to effectuate the transactions
contemplated herein, at the Preliminary Closing (as defined herein) the parties
hereto shall execute an escrow agreement (the "Escrow Agreement") in the form of
Exhibit 1.5 annexed hereto. Subject to the terms and conditions of Section 8.1
hereof, on the later of (i) December 31, 1997 and (ii) within three (3) business
days following the satisfaction of the conditions set forth in Sections 7.2(a)
and 7.3 (a) a preliminary closing shall occur (the "Preliminary Closing") at
which the following shall take place:
(a) the Company and the Stockholders shall deliver all Company Closing
Documents (as defined herein), duly executed (with the exception of the DOH
Consent if it has not been obtained), to the Escrow Agent; and
(b) the Parent and the Sub shall deliver all Parent Closing Documents
(as defined herein), duly executed (with the exception of the DOH Consent if it
has not been obtained), to the Escrow Agent.
The date on which the Preliminary Closing shall occur is the
"Preliminary Closing Date". All documents delivered to the Escrow Agent shall be
held pursuant to the terms and conditions of the Escrow Agreement. Subject to
the terms and conditions contained in the Escrow Agreement, at such time as the
DOH Consent has been delivered to the Escrow Agent and the other conditions
provided for in Section 7.1(a) are satisfied, the Escrow Agent shall effect the
Closing by filing the Merger Certificate and releasing the Documents held by it
from escrow.
2. CONVERSION OF SHARES.
2.1 TREATMENT OF SHARES OF THE COMPANY. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof:
(a) Subject to the provisions of Section 2.1(c) hereof, all the shares
2
of capital stock, par value $.0001 per share, of the Company ("COMPANY COMMON
STOCK") issued and outstanding immediately prior to the Effective Time (other
than shares to be cancelled in accordance with section 2.1(b)) shall
automatically be cancelled and each share of Company Common Stock shall be
converted into the right to receive .740721 shares of the common stock, par
value $.01 per share, of Parent ("PARENT COMMON STOCK"), which shall be
delivered to the existing stockholders of the Company (the "HEALIX
STOCKHOLDERS") within one business day after the surrender of the certificate or
certificates formerly representing such share of Company Common Stock in
accordance with Section 2.2 hereof.
(b) Any shares of Company Common Stock that are held by the Company as
treasury shares shall be cancelled and retired and cease to exist, and no
securities of Parent or other consideration shall be delivered in exchange
therefor.
(c) Notwithstanding anything contained herein to the contrary, in the
event any Healix Stockholder exercises any dissenters rights he may have under
applicable Delaware law, the shares of such stockholder shall be deemed
automatically cancelled and the surviving corporation of the Merger shall pay
such dissenting stockholder such amounts to such stockholder as is ultimately
determined to be owing to him in connection with such rights. Provided that the
Merger is effected, the Parent and the Sub shall indemnify and hold the
Stockholders harmless from any claims by any dissenting shareholder in
connection with the Merger to the fullest extent permitted by applicable law. If
a holder of shares of Company Common Stock who demands appraisal of those shares
under the DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal in accordance with the provisions of the DGCL,
then as of the Effective Time or the occurrence of such event, whichever occurs
later, each such share of Company Common Stock shall be converted into and
represent the right to receive the merger consideration as provided in Section
2.1(a) upon the surrender of the certificate or certificates representing those
shares.
(d) To the extent that indemnification of officers and directors is
permitted by the New York Business Corporation Law ("NYBCL"), from and after the
Effective Time, Parent and the Surviving Corporation shall jointly and severally
indemnify, defend, and hold harmless the past and present officers and directors
(the "Indemnified Parties") of the Company against all losses, claims, damages,
or liabilities ("Claims") arising out of actions or omissions occurring at or
prior to the Effective Time that are based on or arising out of the fact that
such person is or was a director or officer of the Company prior to the
Effective Time, including, without limitation, any Claim arising out of this
Agreement or the transactions contemplated hereby.
2.2 EXCHANGE OF COMPANY STOCK.
Subject to the provisions of Section 2.1(c) hereof, promptly after the
Effective Time, the Escrow Agent shall present to Parent for cancellation a
certificate or certificates, which immediately prior to the Effective Time
3
represented all of the issued and outstanding shares of Company Common Stock
(other than dissenting shares, if any) free and clear of all Liens (as defined
in Section 3.2), and Parent shall thereupon deliver to each of the Healix
Stockholders, pro rata, in proportion to their ownership of Company Common
Stock, in exchange therefor a certificate or certificates representing .740721
shares of Parent Common Stock for each share of Company Common Stock tendered.
2.3 NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of certificates of Company Common Stock or pursuant to Section 2.1(a)
or section 2.1(b), and such fractional interests shall not entitle the owner
thereof to vote or to any rights of a security holder. In lieu of any such
fractional securities the Healix Stockholders would otherwise have been entitled
to receive pursuant to Sections 2.1(a) or 2.1(b), (a) the Healix Stockholders
will be entitled to receive, and Parent will timely make, a cash payment
(without interest) determined by multiplying (i) the fractional interest to
which a Healix Stockholder would otherwise be entitled and (ii) the "market
value of Parent Common Stock" (as defined below), or (b) at the option of the
Healix Stockholders, any such stockholder may pay to the Parent an amount equal
to the difference between the market value of a share of the Parent Common Stock
less the value of such fractional interest as determined pursuant to clause (a),
above, and receive an additional share of Parent Common Stock. For purposes
hereof, the "market value of Parent Common Stock" shall be the average, for the
thirty day period immediately prior to the Preliminary Closing Date, of the per
share closing price for the Parent Common Stock on the NASDAQ or the average per
share closing bid and ask price of the Parent Common Stock on the
over-the-counter Bulletin Board (as reported by the NASDAQ Stock Market, Inc.),
as the case may be.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND THE COMPANY
The Company and the Stockholders jointly and severally represent and
warrant to Parent and Sub as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. The Company is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a Company Material Adverse Effect.
For purposes of this Agreement, "COMPANY MATERIAL ADVERSE EFFECT" means
a material adverse effect, individually or in the aggregate, on the financial
condition, results of operations, business, assets or prospects of the Company
and its Subsidiaries (as defined in Section 3.3(a) below) taken as a whole, or
the ability of the Company to consummate the Merger and the other transactions
contemplated by this Agreement.
4
3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
10,000,000 shares of Company Common Stock, of which 2,010,003 shares of Company
Common Stock are issued and outstanding and owned, beneficially and of record,
as set forth on Schedule 3.2, hereto, free and clear of liens, pledges, security
interests, claims, charges or other encumbrances or rights of third parties of
any kind whatsoever ("LIENS"). After giving effect to the acquisition of PRN
Home Care Agency, Inc., a Delaware corporation ("PRN Home Care") there shall be
2,010,003 shares of Company Common Stock issued and outstanding and owned,
beneficially and of record, as set forth on Schedule 3.2 hereto, free and clear
of Liens.
(b) Except as set forth in Schedule 3.2, there is not outstanding
any security, right, subscription, warrant, call, option or other agreement or
arrangement of any kind (collectively, "RIGHTS") entitling any person to acquire
any shares of the capital stock or any other security of the Company, and there
is no outstanding security of any kind convertible into or exchangeable for the
capital stock of the Company. There is no voting agreement, voting trust, proxy
or other agreement, instrument or understanding with respect to the voting of
the capital stock of the Company or any agreement with respect to the
transferability, purchase or redemption of the capital stock of the Company.
3.3 SUBSIDIARIES.
(a) Set forth on Schedule 3.3A hereto, is the name of each
corporation in which the Company owns, directly or indirectly, capital stock,
including without limitation, P.R.N. Home Care (individually and collectively
referred to as the "Subsidiaries"), the authorized, issued and outstanding
capital stock of each such corporation and the names of the record and/or
beneficial owners of the outstanding capital stock of such corporations. Except
for the Subsidiaries, the Company does not, directly or indirectly own, control,
or have any interest in any corporation, partnership, joint venture, association
or other business entity. The Company does not conduct any business other than
through the Company and the Subsidiaries. Annexed hereto as Schedule 3.3B is a
copy of the Stock Purchase and Exchange Agreement, dated May 6, 1996, among PRN
Home Care, Freed and Barkin, as amended (the "ACQUISITION AGREEMENT"). The
Company and the Stockholders covenant and agree that no material provision of
the Acquisition Agreement will be amended or waived by the Company without the
prior written consent of the Parent; PROVIDED, HOWEVER, that the Company shall
provide Parent with written notice of any amendment or waiver to the Acquisition
Agreement.
(b) RIGHTS. There is not outstanding any Right entitling any person
to acquire any shares of the capital stock or any other security of the
Subsidiaries, and there is no outstanding security of any kind convertible into
or exchangeable for the capital stock of the Subsidiaries. There is no voting
agreement, voting trust, proxy or other agreement, instrument or understanding
5
with respect to the voting of the capital stock of the Subsidiaries or any
agreement with respect to the transferability, purchase or redemption of the
capital stock of the Subsidiaries.
3.4 AUTHORITY. The Company, and each Stockholder (as to the Company,
and him or herself only), has the full legal corporate power or capacity, as the
case may be, to execute and deliver each Document (as defined below) to which
he, she or it is a party. The execution, delivery and performance of each
Document executed or to be executed by the Company has been duly authorized by
its board of directors and the Stockholders, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any
other Documents or for the Company to consummate the transactions contemplated
hereby or thereby. The Documents are, or when executed and delivered will be,
valid and binding obligations of the Company and/or each Stockholder that is a
party thereto (as to the Company, and him or herself only), enforceable against
the Company and each such Stockholder in accordance with their terms, except as
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
For purposes of this Agreement, "DOCUMENTS" means this Agreement, the
Employment Agreements (as hereafter defined), the Non-Competition Agreements (as
hereafter defined), the Registration Rights Agreements (as hereafter defined),
the Stock Option Agreements (as hereafter defined) and each other document or
agreement executed and delivered by the Company and/or any Stockholder pursuant
to this Agreement.
3.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the DOH Consent
and except as set forth on SCHEDULE 3.5, the execution, delivery and performance
of this Agreement will not: (i) conflict with or result in any breach of any
provisions of the certificate of incorporation, by laws or other organizational
documents of the Company or the Subsidiaries, (ii) require a filing with, or a
permit, authorization, consent or approval of, any federal, state, local or
foreign court, arbitration tribunal, administrative agency or commission or
other governmental or other regulatory authority or administrative agency or
commission (a "GOVERNMENTAL ENTITY"), except the filing of a Merger Certificate,
(iii) conflict with, or result in the breach, termination or acceleration of, or
constitute a default under, or result in the creation of a Lien on any property
or asset of the Company or the Subsidiaries pursuant to any written lease,
agreement, commitment or other instrument (each, a "CONTRACT") to which the
Company, the Subsidiaries or any Stockholder is a party or by which any of them
or any of their properties or assets is bound or (iv) violate any law, order,
writ, injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to the Company or any Stockholder or any of their respective
properties or assets.
3.6 FINANCIAL STATEMENTS. The consolidated balance sheet of the Company
and the Subsidiaries as of June 30, 1997, the statements of operations, changes
in stockholders' equity and cash flows of the Company and the Subsidiaries for
the one-year period ended June 30, 1997, and the consolidated balance sheet of
6
the Company and the Subsidiaries (the "INTERIM BALANCE SHEET") as of September
30, 1997 and the statement of operations of the Company (together with the
Interim Balance Sheet, the "INTERIM FINANCIAL STATEMENTS") for the period from
June 30, 1997 through September 30, 1997 (collectively, the "FINANCIAL
STATEMENTS") are attached to this Agreement as SCHEDULE 3.6A. Except as
described on SCHEDULE 3.6B, the Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, are true and correct in all material respects and fairly present in all
material respects the financial position and the results of operations of the
Company and the Subsidiaries, as the case may be, as of the dates and for the
periods indicated. Since June 30, 1997, there has been no change in any of the
significant accounting (including tax accounting) policies, practices or
procedures of the Company or the Subsidiaries.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected
or reserved for in the Financial Statements, neither the Company nor any of the
Subsidiaries has any liability, debt or obligation (nor is there any asserted
claim alleging a liability, debt or obligation) of any kind whatsoever, whether
accrued, absolute, contingent or otherwise, in any material amount (whether
individually or in the aggregate) due or to become due, other than (a) as set
forth on SCHEDULE 3.7, or (b) liabilities and obligations under agreements and
other commitments entered into in the ordinary course of business and in amounts
substantially consistent with past practices. Except as set forth on SCHEDULE
3.7, neither the Company nor the Subsidiaries has any indebtedness to any Healix
Stockholder or any affiliate of any Healix Stockholder.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.8, since June 30, 1997,
(a) The Company and the Subsidiaries have conducted their
businesses and operations in the ordinary course of business and consistent with
past practice, and there has not been any material change in the Company's or
the Subsidiaries' outstanding liabilities; have timely paid their respective
accounts payable; have not instituted any unusual or novel methods of purchase,
sale, lease, management, accounting or operation; and have not accelerated
collections of accounts receivable;
(b) neither the Company nor any of the Subsidiaries has (i)
increased or decreased the rates of pay, fixed compensation or benefits
(including under Company Plans, as defined in Section 3.18) of any of its
employees earning in excess of $15,000 per annum, or entered into any contract
or commitment to do the same, or (ii) paid any bonus or commission to any
employee or agent under any incentive or compensation plan or program to any
such person, or (iii) paid any dividends or made any distributions to the Healix
Stockholders;
(c) neither the Company nor any of the Subsidiaries has taken any
actions that, if it had been in effect, would have violated or been inconsistent
with the provisions of Section 5.1(a);
7
(d) there has been no material adverse change in the assets,
business, condition or prospects, financial or otherwise, of the Company or the
Subsidiaries.
(e) all tangible property of the Company and the Subsidiaries has
been used, maintained and repaired in the usual and ordinary course and the
Company and the Subsidiaries have maintained insurance upon all of their
respective assets and properties and with respect to the conduct of their
businesses in amounts and covering such risks substantially the same as that in
effect on the date hereof.
(f) the Company and the Subsidiaries have maintained their books,
accounts and records in the usual, regular and ordinary manner, on a basis
consistent with prior practices in all material respects.
3.9 MATERIAL CONTRACTS. SCHEDULE 3.9 lists each Contract to which the
Company or the Subsidiaries are a party or are bound or which is applicable to
the Company's or the Subsidiaries' businesses that is material in nature or
amount or that was entered into other than in the ordinary course of business
and consistent with past practice (a "MATERIAL CONTRACT"), including, without
limitation, the following:
(a) each contract for the purchase of products or services that
involves or will involve an expenditure or series of related expenditures of
more than $10,000, other than purchases of inventory in the ordinary course;
(b) each real or personal property lease that involves annual
payments or receipts of more than $10,000;
(c) each note or other contract relating to any indebtedness (other
than trade debt) or any guaranty of indebtedness;
(d) each employment or consulting agreement that provides for
compensation in excess of $10,000 per year and each contract that provides for
severance or similar benefits;
(e) each contract between the Company or the Subsidiaries, on the
one hand, and any of its affiliates, associates or the Healix Stockholders, on
the other hand;
(f) each contract to which the Company or the Subsidiaries is a
party containing any provisions relating to a change in its control;
(g) each contract under which the Company or the Subsidiaries is
restricted from engaging in any business or competing with any other person;
8
(h) any material contract for the sale, lease, license, rental or
disclosure of any lists or records, including customer lists, relating to the
business of the Company or the Subsidiaries; and
(i) any other contract (written or oral) that requires payment by
or to the Company or the Subsidiaries of more than $10,000 or cannot be
terminated by the Company or the Subsidiaries on less than 30 days notice
without liability.
True and complete copies of all the Material Contracts have been delivered to
Parent.
3.10 NO DEFAULT. Except as set forth on SCHEDULE 3.10, each Material
Contract is in full force and effect in accordance with its terms, and, neither
the Company nor any of the Subsidiaries is in default thereunder (and no event
has occurred, which, with notice or the lapse of time or both, would constitute
a default by the Company or the Subsidiaries thereunder) and, to the best
knowledge of the Company and each Stockholder, no other party to any such
Material Contract is in default (and no event has occurred, which, with notice
or the lapse of time or both, would constitute a default) of any term, condition
or provision of any Material Contract, except for any default that would not
have a Company Material Adverse Effect.
3.11 COMPLIANCE WITH LAW. Neither the Company nor any of the
Subsidiaries is in violation (and no event has occurred, which, with notice or
the lapse of time or both, would constitute a violation) of any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or the
Subsidiaries, except for a violation that would not have a Company Material
Adverse Effect.
3.12 HEALTH CARE MATTERS.
(a) SCHEDULE 3.12(A) lists the required cost reports and other
submissions and filings (other than claims for payments), with respect to
Medicaid and Medicare or other third party payments to the Company and indicates
each cost report or other submission or filing that has been audited by the
government or other third party payor (and all disallowances and retroactive
rate adjustments thereon settled, paid or otherwise recouped). All the cost
reports and other submissions and filings were complete and accurate in all
material respects, and were prepared in accordance with the requirements of the
Medicaid program, the Medicare program or the other third party payors, as
applicable.
(b) No third-party payor (including, without limitation, Medicare
or Medicaid) has asserted any liability against the Company in respect of any
period through the date of this Agreement, which has not been settled or paid.
There is no pending audit or any pending or, to the best knowledge of the
Company and each Stockholder, threatened audit assessment or retroactive rate
adjustment against the Company and no basis therefor.
9
(c) SCHEDULE 3.12(C) lists all agreements, arrangements and other
relationships of the Company or the Subsidiaries, which are in effect or were in
effect at any prior time, with individuals and entities who refer or have
referred to or otherwise generate or have generated business for the Company or
the Subsidiaries (including without limitation, sales representatives and
referring health care providers).
(d) Except as set forth on Schedule 3.12(d), no referring
physician, chiropractor, podiatrist, dentist, nurse or other licensed health
professional has, or has ever had, an ownership interest in or otherwise has or
had a financial relationship with the Company or the Subsidiaries.
3.13 LITIGATION, ETC. Except as set forth on SCHEDULE 3.13, there is no
suit, action, proceeding, investigation or review pending or, to the best
knowledge of the Company and each Stockholder, threatened against or affecting
the Company or the Subsidiaries or any suit, action or proceeding brought by or
on behalf of the Company or the Subsidiaries, and, to the best knowledge of the
Company and each Stockholder, there is no basis for any such suit, action,
proceeding, investigation or review. Except as set forth on SCHEDULE 3.13, There
is no judgment, decree, injunction, ruling or order of any third party or
Governmental Entity outstanding against the Company or the Subsidiaries.
3.14 PERMITS. Each of the Company and the Subsidiaries holds all
permits, licenses, exemptions, orders and approvals of all Governmental Entities
necessary for the conduct of its businesses (collectively, "PERMITS"). Each of
the Company and the Subsidiaries is in compliance in all material respects with
the terms of all Permits, and no fact exists or event has occurred, and no
action or proceeding is pending or, to the Company's and the Stockholders' best
knowledge, threatened, that is reasonably likely to result in a revocation,
nonrenewal, termination, suspension or other material impairment of any material
Permit.
3.15 TAXES. Except as set forth on SCHEDULE 3.15, the Company and the
Subsidiaries have (a) filed with the appropriate federal, state and local taxing
authorities all tax returns required to be filed by or with respect their
respective businesses or operations, and those tax returns are correct and
complete in all respects, and (b) paid in full or made adequate provision for
the payment of all taxes shown to be due on those tax returns. Except as set
forth on Schedule 3.15, neither the Company nor the Subsidiaries have received
any notice of deficiency or assessment from any federal, state or local taxing
authority with respect to liabilities for taxes that have not been fully paid or
finally settled.
3.16 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in Schedule
3.16, the Company and the Subsidiaries have good and marketable title to, or
valid leasehold interests or licenses in, all their respective properties and
assets of whatever kind (real or personal, tangible or intangible), including,
without limitation, all the properties and assets reflected in the Financial
Statements (except for properties and assets disposed of in the ordinary course
of business and consistent with past practices since June 30, 1997). None of
such properties or assets are subject to any Liens (whether absolute, accrued,
contingent or otherwise), except for liens for current taxes and assessments not
yet due and payable for which adequate provision has been made on the Financial
Statements. Except as set forth on SCHEDULE 3.16A, none of the properties or
assets, including, without limitation, contract rights, used by the Company or
the Subsidiaries in the conduct of their respective businesses as presently
conducted is owned or leased by a third party and licensed to either of them.
SCHEDULE 3.16B contains a complete list of all real property (including
buildings and structures) and all material equipment, computers, furniture,
leasehold improvements, vehicles and other personal property owned, leased or
used by the Company and the Subsidiaries.
3.17 PROPRIETARY RIGHTS. SCHEDULE 3.17 lists all patents and patent
applications, trademarks, trade names, registered copyrights, service marks, and
applications therefor owned, used or held for use in connection with the
businesses of the Company and the Subsidiaries (collectively, "PROPRIETARY
RIGHTS"), specifying as to each, as applicable: (i) the owner of the Proprietary
Right and (ii) all licenses, sublicenses and other agreements, including any
amendments or addenda thereto, to which the Company, the Subsidiaries or any
Stockholder is a party and pursuant to which any person is authorized to use the
10
Proprietary Right. Neither the Company nor the Subsidiaries has any notice of
any claim that the Proprietary Rights infringe any other party's rights and, to
the Company's and the Stockholders' best knowledge, the Company has used the
Proprietary Rights without infringing any other party's rights and without
infringement by others. None of the Company and the Stockholders is aware of any
assertion or any reasonable basis for asserting that any Proprietary Right is
invalid or unenforceable.
3.18 EMPLOYEE BENEFIT PLANS; ERISA; LABOR MATTERS.
(a) SCHEDULE 3.18 sets forth a true and complete list of all
Company Plans. For purposes of this Agreement, "COMPANY PLAN" shall mean any
employee benefit plan, arrangement or agreement that is maintained, or was
maintained or contributed to by the Company or the Subsidiaries or by any
Company ERISA Affiliate (as defined below) on behalf of employees or former
employees and with respect to which the Company currently has or, to the best
knowledge of the Company and the Stockholders, could incur liability, including,
without limitation, "employee welfare plan" as that term is defined in Section
3(1) of ERISA; "employee pension benefit plan" as that term is defined in
Section 3(2) of ERISA; multi-employer plan" as that term is defined in Section
4001(a)(3) of ERISA; or other "benefit arrangements," which term shall include
unfunded and unqualified executive compensation agreements, employment
agreements, contracts and benefits other than (i) any defined contribution plan
that is intended to be qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code") and is not subject to Section 412 of the
Code or (ii) any provision of any employment agreement that is Company Plan that
relates to the plan described in (i) herein.
For purposes of this Agreement, "ERISA" means the Employee,
Retirement Income Security Act of 1974, as amended, and Company ERISA Affiliate
means any trade or business, whether or not incorporated which together with the
Company would be deemed a "single employer" within the meaning of Section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
(b) Each Company Plan is and has been operated and administered in
all material respects in accordance with the terms of the Company Plan and in
accordance in all material respects with the requirements prescribed by all
applicable statutes, orders and governmental rules and regulations, including in
compliance in all material respects with the applicable provisions of ERISA and
the Code. There are no pending or, to the best knowledge of the Company and the
Stockholders, threatened claims by or on behalf of any Company Plan, by any
employee, former employee or beneficiary covered under any Company Plan, or
otherwise involving any Company Plan which allege a breach of fiduciary duties
or violations of other applicable state or Federal law which could result in
liability (other than routine claims for benefits) on the part of the Company or
the Subsidiaries or any of the Company Plans under ERISA or any other law nor,
to the best knowledge of the Company and the Stockholders, is there any basis
for such a claim. The transactions contemplated by this Agreement will not
result in liability for severance pay, accrued vacation pay or any similar
payments to employees of the Company or the Subsidiaries. Each Company Plan
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the IRS stating that such plan is
so qualified and, to the best knowledge of the Company and the Stockholders,
nothing has occurred that caused or reasonably could be expected to cause the
loss of such qualification or imposition of any penalty.
(c) Neither the Company nor any Company ERISA Affiliate nor any
predecessors of the Company or any Company ERISA Affiliate maintains, has ever
maintained, contributes to or has ever contributed to a plan which is subject to
Section 412 of the Code or Title IV of ERISA. No Company Plan is a multiemployer
plan (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA or Section
414(f) of the Code) ("MULTIEMPLOYER PLAN") and no Company Plan is a multiple
employer plan as defined in Section 413 of the Code ("MULTIPLE EMPLOYER PLAN").
All required contributions have been made for all employees and former employees
of the Company under or with respect to each Company Plan with respect to all
periods through the Effective Time except as fully accrued and reflected in the
Financial Statements. Neither the Company nor any Company ERISA Affiliate is or
was obligated to contribute to any Multiemployer Plan. There are no "accumulated
funding deficiencies" as that termed is defined in ERISA with respect to any
Company Plan.
(d) Except as set forth on SCHEDULE 3.18, neither the Company nor
the Subsidiaries provides medical, health or life benefits to any former
employees, other than as required pursuant to Section 4980Bof the Code.
11
(e) No liability has been, or is expected to be, incurred by the
Company or the Subsidiaries or by any "Company ERISA Affiliate" under Sections
4062, 4063 or 4064 of ERISA with respect to the Company Plans.
(f) Any group health plan (as defined in Section 5200 (b) (1) of
the Code) maintained by the Company or the Subsidiaries with respect to its
employees is in compliance in all material respects with the continuation
coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA.
(g) Neither the Company nor any of the Subsidiaries is a party to,
or bound by, any collective bargaining agreement, contract or other
understanding with a labor union or labor organization and, to the knowledge of
the Company and the Stockholders, there is no activity involving any employees
of the Company seeking to certify a collective bargaining unit or engaging in
any other organizational activity.
(h) The Company and the Subsidiaries are in compliance in all
material respects with all Federal, state and local laws (other than ERISA and
the Code) affecting employment and employment practices, including terms and
conditions of employment, wages and hours, and are not engaged in any unfair
labor practice. There are no complaints against either the Company or the
Subsidiaries pending or, to the best knowledge of the Stockholders and the
Company, threatened with respect to its employees before the National Labor
Relations Board, the Equal Employment Opportunity Commission or other
governmental entity regarding the terms and conditions of their employment.
There are no labor strikes, slowdowns or stoppages pending or, to the best
knowledge of the Company and the Stockholders, threatened with respect to the
employees of the Company or the Subsidiaries. SCHEDULE 3.18 hereto, to the best
knowledge of the Stockholders and the Company, lists all pending and threatened
worker's compensation claims against the Company and the Subsidiaries relating
to their respective employees, and, to the best knowledge of the Company and the
Stockholders, all of such claims are adequately covered by insurance. True and
complete policies of insurance owned by the Company and the Subsidiaries in
connection with the Company Plans have been made available to the Parent.
3.19 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) The Company and the Subsidiaries are and have been in
compliance in all material respects with, and neither the Company nor any of the
Stockholders is aware of any outstanding allegations by any person or entity
that either the Company or the Subsidiaries is not or has not been in compliance
with, all federal, state and local laws, rules, regulations, common law,
ordinances, administrative orders or other binding legal requirements relating
to employee health and safety, air, water or noise pollution or otherwise
relating to public health and safety or environmental protection (including the
protection of endangered species), or the use, generation, manufacture,
accumulation, storage, discharge, release, disposal or transportation of
12
Hazardous Substances ("ENVIRONMENTAL LAWS"). The Company and the Subsidiaries
currently hold all permits, licenses, registrations and other governmental
authorizations (including exemptions, waivers, and the like) and financial
assurance required under Environmental Laws to operate their respective
businesses. For purposes of this Agreement, the term "HAZARDOUS SUBSTANCE" shall
mean any substance, material, waste, gas or particulate matter which has been
determined to be a health danger, soil, water or air contaminant or which is
regulated by any state or local governmental authority or the United States
Government, including, but not limited to, any material or substance which is
(i) defined as a 'hazardous waste', 'hazardous material', 'hazardous substance',
'extremely hazardous waste', or 'restricted hazardous waste', under any
provision of Federal, state or local law or rule or regulation thereunder; (ii)
composed of petroleum or has a petroleum base (except where used or present in
strict compliance with the Environmental Laws and not released into the
environment); (iii) composed of friable asbestos or materials containing friable
asbestos; (iv) polychlorinated biphenyls; (v) radioactive material; (vi)
designated as a toxic pollutant pursuant to federal law including Section 311 of
the Clean Water Act, 33 U.S.C. ss.1251 ET SEQ. (33 U.S.C. ss.1317); (vii)
defined as a 'hazardous waste' pursuant to Section 1003 of the Resource
Conservation and Recovery Act, 42 U.S.C. ss.6901 ET SEQ. (42 U.S.C. ss.6903); or
(viii) defined as a 'hazardous substance' pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
ss.9601 ET SEQ. ("CERCLA").
(b) Without conducting any investigation, to the knowledge of the
Company and the Stockholders, there is no friable asbestos-containing material
in or on any real property currently owned, leased or operated by the Company or
the Subsidiaries, and there are and have been no underground storage tanks
(whether or not required to be registered under any applicable law), dumps,
landfills, lagoons, surface impoundments, injection ▇▇▇▇▇ or other land disposal
units in or on any property currently owned, leased or operated by the Company
or the Subsidiaries.
(c) Neither the Company nor the Subsidiaries have received (i) any
notice, citation, summons or order complaint, no penalty has been assessed and
no investigation or review is pending or to the best knowledge of the Company
and the Stockholders, threatened by any governmental authority with respect to,
stating or alleging that either of them may be a potentially responsible party
under any Environmental Law (including, without limitation, CERCLA) with respect
to any actual or alleged environmental contamination or (ii) any request for
information under any Environmental Law from any Governmental Entity with
respect to any actual or alleged material environmental contamination; and (iii)
none of the Company, the Subsidiaries or any Governmental Entity is conducting
or has conducted (or, to the knowledge of the Company and the Stockholders, is
threatening to conduct) any environmental remediation or investigation which
could result in a material liability of the Company or the Subsidiaries under
any Environmental Law.
(d) Neither the Company nor the Subsidiaries have transported any
13
Hazardous Substances or arranged for the transportation of such substances to
any location which is listed or proposed for listing under CERCLA, CERCLIS or on
any similar state list, or, which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against the
Company or the Subsidiaries for clean-up costs, remedial work, damage to natural
resources or for personal injury claims, including, but not limited to, claims
under CERCLA. For purposes hereof, the term "CERCLIS" shall mean the data base
maintained by the Environmental Protection Agency which supports and tracks the
Environmental Protection Agency's planning and tracking functions under CERCLA.
3.20 BROKERS. No broker, finder or financial advisor is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or the Subsidiaries.
3.21 MINUTE BOOKS AND STOCK TRANSFER BOOKS. The minute books of the
Company and the Subsidiaries are true, correct, complete and current and contain
records of all actions taken by its stockholders and Board of Directors, and all
signatures contained therein are the true signatures of the persons whose
signatures they purport to be. True and accurate copies of such minute books and
stock transfer ledgers have been provided to the Parent. The stock transfer
books of the Company and the Subsidiaries are true, correct, and complete.
SCHEDULE 3.21 sets forth a true, correct and complete list of the names and
titles of all officers and directors of the Company and the Subsidiaries.
3.22 BANK ACCOUNTS. SCHEDULE 3.22 annexed hereto sets forth a complete
list of the names and locations of all banks at which the Company or the
Subsidiaries have an account or safe deposit box, the names of all persons
authorized to draw on each such account and having access to each such box and
the contents of such boxes.
3.23 INSURANCE. SCHEDULE 3.23 contains a true, correct and complete
list of all policies of fire and casualty, property, product and other
liability, worker's compensation and other forms of insurance maintained by the
Company and the Subsidiaries, all of which policies are in effect and the
premiums due thereunder have been paid. Such policies are sufficient for
compliance with all requirements of law and agreements by which the Company and
the Subsidiaries are bound and to which their assets are subject, and provide
adequate insurance coverage for their respective properties and operations in
such amounts and against such risks and losses as are reasonable for their
respective business and properties. The Company has delivered to the Parent
copies of all such policies of insurance, including insurance providing benefits
for employees, in effect on the date hereof, certified by a duly authorized
officer of the Company to be true, correct and complete as of the date thereof.
Neither the Company nor any of the Subsidiaries is subject to liability as a
self-insurer. There are no claims pending or, to the best knowledge of the
Company and Stockholders, threatened under any of such policies, there are no
disputes between either the Company and the Subsidiaries and any of the
underwriters of said policies, all premiums due and payable under such policies
14
have been paid, subject to no readjustment of any nature whatsoever, and all
such policies are in full force and effect in accordance with their respective
terms.
3.24 ACCURACY OF INFORMATION. The representations, warranties and
certifications contained in this Agreement or in any of the Documents executed
by the Company or the Stockholders and all other information with respect to the
Company and the Subsidiaries, and their respective assets, liabilities,
operations or financial condition that has been supplied to the Parent by the
Company or the Stockholders or on their behalf, taken together in the context in
which they have been provided, are true, complete and correct in all material
respects as of the date hereof. Such information accurately presents the
material facts regarding the assets, liabilities, operations and financial
condition of the Company and the Subsidiaries and does not contain any untrue
statement of a material fact, or omit to state a material fact necessary in
order to make the statements herein and therein made, in the light of the
circumstances under which they were made, not misleading.
3.25 INVESTMENT REPRESENTATIONS. Each of the Stockholders, severally
and not jointly, represents and warrants to the Parent and Sub as follows:
(a) Such Stockholder is acquiring shares of Parent Common Stock for
his or her own account, as the case may be, for the purposes of investment only
and not with the view towards the distribution thereof;
(b) Such Stockholder, together with his or her advisors, is capable
of understanding the merits and risks of investing in the Parent;
(c) Such Stockholder is able to bear the risk of loss of his or her
entire investment in the Parent;
(d) Such Stockholder has access to all information concerning the
Parent that is material to an investor in determining whether to make an
investment in the Parent and has had the opportunity to ask questions concerning
the Parent and its condition, financial and otherwise; and
(e) Such Stockholder acknowledges and agrees that the shares of
Parent Common Stock to be acquired pursuant to this Agreement are not registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"); that such
shares may not be resold unless subsequently registered or unless an exemption
from registration under the Securities Act is available; and that the
certificates representing such shares shall bear a legend to such effect.
4. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and warrants to
the Company and Stockholders as follows:
15
4.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the state of New York and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified will not have a Parent Material Adverse Effect. For purposes of this
Agreement, "PARENT MATERIAL ADVERSE EFFECT" means a material adverse effect,
individually or in the aggregate, on the financial condition, results of
operations, business, assets or prospects of Parent and its subsidiaries taken
as a whole or the ability of Parent to consummate the Merger and the other
transactions contemplated by this Agreement. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub has not engaged in any business (other than in connection with
this Agreement and the transactions contemplated hereby) since the date of its
incorporation.
4.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 15,000,000
shares of Parent Common Stock, of which 1,825,150 are issued and outstanding,
and 5,000,000 shares of preferred stock, of which 1,350,000 shares of 6%
cumulative convertible preferred stock of Parent are issued and outstanding.
Options and warrants to acquire an aggregate of 812,500 shares of Parent Common
Stock (collectively, the "PARENT STOCK Options") are outstanding. All the
outstanding shares of capital stock of Parent are, and the shares of Parent
Common Stock issuable in exchange for shares of Company Common Stock at the
Effective Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable.
(b) The authorized capital stock of Sub consists of 3,000 shares of
Sub Common Stock, of which 100 shares are issued and outstanding. All the
outstanding shares of Sub Common Stock are owned by Parent and are validly
issued, fully paid and nonassessable.
4.3 AUTHORITY. Each of Parent and Sub has the full legal corporate
power to execute and deliver each Document to which it is a party. The
execution, delivery and performance of each Document executed or to be executed
by Parent or Sub have been duly authorized by its respective boards of
directors, and no other corporate proceedings on the part of Parent or Sub are
necessary to authorize this Agreement or any other Document or for Parent and
Sub to consummate the transactions contemplated hereby or thereby. The Documents
to which Parent or Sub are a party are, or when executed and delivered will be,
valid and binding obligations of Parent or Sub, enforceable against Parent or
Sub in accordance with their terms, except as may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
in general and subject to general principles of equity (regardless of whether
16
enforceability is considered in a proceeding in equity or at law).
4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the DOH Consent
and except as set forth in SCHEDULE 4.4, the execution, delivery and performance
of this Agreement by Parent and Sub will not: (i) conflict with or result in any
breach of any provisions of the certificate of incorporation or by-laws of
Parent or of Sub, (ii) require a filing with, or a permit, authorization,
consent or approval of, any Governmental Entity, except in connection with or in
order to comply with the applicable provisions of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") and the filing of the Merger Certificate,
(iii) conflict with, or result in the breach, termination or acceleration of, or
constitute a default under, or result in the creation of a Lien on any property
or asset of Parent or any of its subsidiaries pursuant to any term, condition or
provision of any material Contract to which Parent or Sub is a party or by which
either of them or any of their properties or assets are bound or (iv) violate
any law, order, writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to Parent, Sub or any of their properties or
assets.
4.5 REPORTS AND FINANCIAL STATEMENTS. Since March 31, 1995, Parent has
filed all reports (collectively, the "SEC REPORTS") required to be filed with
the Securities and Exchange Commission ("SEC") pursuant to the Securities Act
and the Exchange Act. The SEC Reports, as of their respective dates, complied in
all material respects with the applicable requirements of the Securities Act of
1933 and the Exchange Act of 1934, as the case may be, and none of such SEC
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the SEC Reports have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated (except as otherwise noted
therein or, in the case of unaudited statements, as permitted by applicable law)
and fairly present (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments and any other adjustments described therein) in
all material respects the consolidated financial position of Parent and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of operations and cash flows of Parent and its consolidated subsidiaries for the
periods then ended. Since the date of Parent's last report on Form 10-Q, there
has not been any fact, event, circumstance or change affecting or relating to
the Parent or any of its subsidiaries which has had or is reasonably likely to
have a Parent Material Adverse Effect.
4.6 BROKERS. No broker, finder or financial advisor is entitled to any
brokerage finder's or other fee or commission in connection with the Merger or
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Sub.
4.7 DISPOSITIONS. Parent has no present intention to dispose of a
significant amount of the stock or assets of the Company, other than disposals
in the ordinary course of business and to eliminate duplicate facilities or
17
excess capacity, if any.
4.8 COMPLIANCE WITH LAW. Neither the Parent nor the Sub is in violation
(and no event has occurred, which, with notice or the lapse of time or both,
would constitute a violation) of any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or Sub, except for a violation that
would not have a Parent Material Adverse Effect.
4.9 HEALTH CARE MATTERS.
(a) SCHEDULE 4.9(A) lists the required cost reports and other
submissions and filings (other than claims for payments), with respect to
Medicaid and Medicare or other third party payments to Parent and indicates each
cost report or other submission or filing that has been audited by the
government or other third party payor (and all disallowances and retroactive
rate adjustments thereon settled, paid or otherwise recouped). All the cost
reports and other submissions and filings were complete and accurate in all
material respects, and were prepared in accordance with the requirements of the
Medicaid program, the Medicare program or the other third party payors, as
applicable.
(b) Except as set forth in SCHEDULE 4.9(B), no third-party payor
(including, without limitation, Medicare or Medicaid) has asserted any liability
against Parent in respect of any period through the date of this Agreement,
which has not been settled or paid. Except as set forth in SCHEDULE 4.9(B),
There is no pending audit or any pending or, to the best knowledge of Parent,
threatened audit, assessment or retroactive rate adjustment against Parent and
no basis therefor.
(c) SCHEDULE 4.9(C) lists all agreements, arrangements and other
relationships of Parent, which are in effect or were in effect at any prior
time, with individuals and entities who refer or have referred to or otherwise
generate or have generated business for Parent (including without limitation,
sales representatives and referring health care providers).
(d) Except as set forth on SCHEDULE 4.9(D), no referring physician,
chiropractor, podiatrist, dentist, nurse or other licensed health professional
has, or has ever had, an ownership interest in or otherwise has or had a
financial relationship with Parent.
4.10 LITIGATION, ETC. Except as set forth on SCHEDULE 4.10, there is no
suit, action, proceeding, investigation or review pending or, to the best
knowledge of Parent, threatened against or affecting Parent, or any suit, action
or proceeding brought by or on behalf of Parent, and, to the best knowledge of
Parent, there is no basis for any such suit, action, proceeding, investigation
or review. Except as set forth on SCHEDULE 4.10, there is no judgment, decree,
injunction, ruling or order of any third party or Governmental Entity
outstanding against Parent.
18
4.11 TAXES. Except as set forth on SCHEDULE 4.11, Parent has (a) filed
with the appropriate federal, state and local taxing authorities all tax returns
required to be filed by or with respect to its businesses or operations, and
those tax returns are correct and complete in all respects, and (b) paid in full
or made adequate provision for the payment of all taxes shown to be due on those
tax returns. Except as set forth on SCHEDULE 4.11, Parent has not received any
notice of deficiency or assessment from any federal, state or local taxing
authority with respect to liabilities for taxes that have not been fully paid or
finally settled.
5. COVENANTS.
5.1 COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
(a) CONDUCT OF BUSINESS. Except for the acquisition of PRN Home
Care pursuant to the Acquisition Agreement, prior to the Effective Time, and
except as Parent shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement, the Company shall conduct, and the Stockholders
shall cause the Company to conduct, its business and the business of the
Subsidiaries only in the ordinary and usual course consistent with past
practice, and the Company shall use its reasonable efforts to preserve intact
the present business organization, keep available the services of its and its
Subsidiaries' present officers and key employees, and preserve the goodwill of
those having business relationships with it and the Subsidiaries. Without
limiting the generality of the foregoing and except as contemplated by this
Agreement, prior to the Effective Time, unless Parent shall otherwise agree in
writing:
(i) neither the Company nor any of the Subsidiaries shall (A)
amend its charter, by-laws or other organizational documents, (B) split, combine
or reclassify any shares of its outstanding capital stock, (C) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or (D) directly or indirectly redeem or otherwise acquire any shares
of its capital stock;
(ii) neither the Company nor any of the Subsidiaries shall (A)
authorize for issuance, issue or sell or agree to issue or sell any shares of,
or Rights to acquire any securities or convertible into any shares of, its
capital stock; (B) merge or consolidate with another entity; (C) acquire or
purchase an equity interest in or a substantial portion of the assets of another
corporation, partnership or other business organization or otherwise acquire any
assets outside the ordinary and usual course of business and consistent with
past practice; (D) enter into any material contract, commitment or transaction
outside the ordinary and usual course of business consistent with past practice;
(E) sell, lease, license, waive, release, transfer, encumber or otherwise
dispose of any of its assets outside the ordinary and usual course of business
and consistent with past practice; (F) incur, assume or prepay any material
indebtedness or any other material liabilities other than in the ordinary course
of business and consistent with past practice; (G) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; (H) make any loans, advances
19
or capital contributions to, or investments in, any other person, other than
extensions of credit to customers in the ordinary course of business consistent
with past practice; (I) authorize or make capital expenditures other than in the
ordinary course of business consistent with past practice; (J) change any
accounting principle or practice used by it, except as required by generally
accepted accounting principles; (K) permit any insurance policy naming the
Company or Subsidiaries as a beneficiary or a loss payee to be cancelled or
terminated other than in the ordinary course of business; or (L) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing; and
(iii) neither the Company nor any of the Subsidiaries shall (A)
adopt, enter into, terminate or amend (except as may be required by applicable
law) any Company Plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee, (B) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee of the Company or the Subsidiaries (except for
normal increases in salaried compensation in the ordinary course of business
consistent with past practice), or (C) take any action to fund or in any other
way secure, or to accelerate or otherwise remove restrictions with respect to,
the payment of compensation or benefits under any employee plan, agreement,
contract, arrangement or other Company Plan.
(b) NO SOLICITATION. Prior to the Effective Time, the Stockholders
and the Company agree that none of them nor the Subsidiaries nor any of any of
their affiliates, nor any of the respective directors, officers, employees,
agents or representatives of the foregoing will, directly or indirectly,
solicit, initiate, facilitate or knowingly encourage (including by way of
furnishing or disclosing non-public information) any inquiries or the making of
any proposal with respect to any merger, consolidation or other business
combination involving the Company or the Subsidiaries or the acquisition of any
securities of, or of all or any significant assets of, the Company or the
Subsidiaries taken as a whole, (an "ACQUISITION TRANSACTION") or enter into or
continue any discussions or negotiations with any person (other than Parent and
its representatives) with respect to any Acquisition Transaction or enter into
any agreement, arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement.
The Stockholders and the Company agree that as of the date of this Agreement,
they, and their affiliates, and the respective directors, officers, employees,
agents and representatives of the foregoing, shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
person (other than Parent and its representatives) conducted heretofore with
respect to any Acquisition Transaction. The Company and the Stockholders agree
to immediately advise Parent in writing of any inquiries or proposals received
by, any information requested from, or any negotiations or discussions sought to
be initiated or continued with, any of the Stockholders, the Company, the
Subsidiaries or their respective affiliates, or any of the respective directors,
officers, employees, agents or representatives of the foregoing, in each case
from a person (other than Parent and its representatives) with respect to an
Acquisition Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon Parent's request, the
status thereof.
20
(c) ACCESS AND INFORMATION.
(i) The Stockholders shall cause the Company and the Company
shall (and shall cause its and the Subsidiaries' respective officers, directors,
employees, auditors and agents to) afford to the Parent and to the Parent's
officers, employees, financial advisors, legal counsel, accountants, consultants
and other representatives reasonable access during normal business hours
throughout the period prior to the Effective Time to all books and records
(other than privileged documents) relating to the Company and the Subsidiaries,
properties and plants used in connection with the Company's and the
Subsidiaries' businesses and personnel who are familiar with their respective
businesses.
(ii) Unless otherwise required by law, Parent agrees that prior
to the Effective Time, it (and its representatives) shall hold in confidence all
non-public information acquired by it pursuant to this section 5.1(c).
5.2 COVENANTS OF PARENT
(a) CONDUCT OF BUSINESS. Prior to the Effective Time, except as
otherwise expressly contemplated by this Agreement or for the acquisition of a
durable medical equipment company or similar entity (with respect to which
Parent shall consult with the Company prior to the entering into of a formal
agreement), the Parent shall not conduct its business and the business of the
Sub other than in the ordinary and usual course consistent with past practice
(including not taking the actions described in Section 5.1(a)(i)(A),(B) and (D)
above), and the Parent shall use its reasonable efforts to preserve intact the
present business organization, keep available the services of its and Sub's
present officers and key employees, and preserve the goodwill of those having
business relationships with it and the Sub.
(b) ACCESS AND INFORMATION.
(i) The Parent shall (and shall cause its officers, directors,
employees, auditors and agents to) afford to the Company and to the Company's
officers, employees, financial advisors, legal counsel, accountants, consultants
and other representatives reasonable access during normal business hours
throughout the period prior to the Effective Time to all books and records
(other than privileged documents) relating to the Parent's properties and plants
used in connection with the Parent's business and personnel who are familiar
with its respective business.
(ii) Unless otherwise required by law, Company and the
Stockholders agree that prior to the Effective Time, they (and their
representatives) shall hold in confidence all non-public information acquired by
them pursuant to this Section 5.2(b).
21
6. ADDITIONAL AGREEMENTS.
6.1 REASONABLE BEST EFFORTS. Subject to the terms and conditions of
this Agreement, each party agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, the obtaining of all necessary waivers, consents
and approvals (including the DOH Consent) and the effecting of all necessary
registrations and filings.
6.2 EXPENSES. Except as otherwise provided herein, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
6.3 PUBLIC ANNOUNCEMENTS. None of Parent, the Stockholders, the
Subsidiaries or the Company shall issue any press release or otherwise make any
public statement with respect to this Agreement or the transactions contemplated
hereby without the prior consent of the others, which consent shall not be
unreasonably withheld or delayed; PROVIDED, HOWEVER, that such disclosure can be
made without obtaining such prior consent if (a) the disclosure is required by
law and (b) the party making such disclosure has first used all reasonable
efforts to consult with the other party about the form and substance of such
disclosure.
6.4 SUPPLEMENTAL DISCLOSURE. The Company shall give prompt notice to
Parent, and Parent shall give prompt notice to the Company of (a) the existence,
nonexistence, occurrence, or non-occurrence, of any fact, circumstance or event
the existence, nonexistence, occurrence, or non-occurrence of which would be
likely to cause (i) any representation or warranty by any party contained in
this Agreement to be untrue or inaccurate or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(b) any failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 6.4 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Section 7 of this Agreement or
otherwise limit or affect the remedies available hereunder to any party.
6.5 BOARD REPRESENTATION. Provided that the Merger is effected, the
Parent agrees that Freed's name, or the name of his designee that is acceptable
to Board of Directors of Parent (the "Board"), shall be submitted to the
nominating committee of the Board for nomination as a Board member, and the
nominating committee shall nominate Freed or such permitted designee, for two
consecutive three-year terms. Parent, ▇▇▇▇▇ ▇. ▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall, to the extent permitted by law, use their reasonable efforts to secure
the election of Freed or such permitted designee to the Board; such efforts to
22
include, but not be limited to, the voting of all shares held by them or shares
for which it and they hold proxies in accordance therewith.
6.6 PARENT FINANCING. The Parent shall use its best efforts to obtain a
commitment letter for long term financing from a third party lender on terms
approved by the Board of Directors after consultation with Freed and ▇▇▇▇
▇▇▇▇▇▇▇▇▇.
6.7 PROXY. Each of the Stockholders hereby grants to ▇▇▇▇▇ ▇. ▇▇▇▇▇ and
his nominees an irrevocable proxy (each a "Proxy") to vote all shares of Parent
Common Stock they may now or hereafter own for the two (2)-year period
commencing on the Effective Date or for two annual Shareholder meetings of the
Parent, whichever is greater, for the election of Directors nominated by the
Parent, including Freed or his designee as provided in Section 6.5 above. The
Stockholders acknowledge that this grant is coupled with an interest and may not
be terminated by them for any reason whatsoever; PROVIDED, HOWEVER, that the
proxy shall terminate with respect to shares of Parent Common Stock which are
sold on the open market in accordance with applicable law in a bona fide sale
that is permitted under the Registration Rights Agreement (as defined below) to
a third party who is not affiliated or related to the Stockholders. At the
Preliminary Closing, each Healix Stockholder that is not a Stockholder and that
is not exercising his dissenters rights shall execute and deliver to the Parent
a proxy in form and substance substantially similar to the Proxy.
6.8 BOARD MEETINGS. Prior to the Effective Time, ▇▇. ▇▇▇▇▇ shall be
given notice of and be invited to attend all meetings of the Board of Directors
of Parent, and ▇▇▇▇▇ ▇▇▇▇▇ shall be given notice of and be invited to attend all
meetings of the Board of Directors of the Company.
6.9 COMPANY FINANCING. The Parent shall use its reasonable best efforts
to obtain the release of personal guarantees granted by the Stockholders to
Copelco/American Healthfund, Inc. ("Copelco") in connection with a certain
Accounts Purchase and Servicing Agreement, dated September __ , 1996 among the
Company, the Subsidiaries and Copelco, and such other personal guarantees
granted by the Stockholders to unaffiliated third parties guaranteeing the
obligations of the Company, all of which personal guarantees are separately
identified and set forth on Schedule 3.9 hereto (collectively, the "Personal
Guarantees"). Provided that the Merger is effected, the Parent shall indemnify
and hold harmless such Stockholders from any loss or claim under the Personal
Guarantees.
7. CONDITIONS TO CONSUMMATION OF THE CLOSING.
7.1 CONDITIONS TO EFFECT THE CLOSING.
(a) CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING.
The respective obligations of each party to effect the Closing shall be subject
23
to the satisfaction at or prior to the Closing of the following conditions,
unless waived in writing by each party:
(i) The Preliminary Closing shall have been effected and the
parties shall have procured the DOH Consent without conditions or qualifications
materially adverse to any of Parent, Sub, or the Company;
(ii) There shall not have been a material breach of a material
covenant or agreement set forth in this Agreement (which breach is not waived by
the non-defaulting party or is not curable, or if curable, is not cured within
30 days after written notice of such breach is given by the non-defaulting
party), and/or no Governmental Entity (including a federal or state court) of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the Merger or
any transaction contemplated by this Agreement; PROVIDED, HOWEVER, that the
parties shall use all reasonable efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted; and
(iii) There is no material regulatory suit, action, proceeding,
investigation or review, not in the ordinary course of business, pending against
the Company or Parent that is not disclosed hereunder ("Regulatory Proceeding"),
which Regulatory Proceeding would have a Company Material Adverse Effect or
Parent Material Adverse Effect, as the case may be (unless waived by the party
not subject to the Regulatory Proceeding).
(b) CONDITION TO OBLIGATION OF PARENT AND SUB TO EFFECT THE
CLOSING. PRN Home Care shall have been acquired by the Company in accordance
with the terms of the Acquisition Agreement, without any material amendments
thereto unless consented to by the Parent in writing.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
PRELIMINARY CLOSING TIME.
(a) The obligations of Parent and Sub to effect the Preliminary
Closing shall be subject to the satisfaction at or prior to the Preliminary
Closing Date of the following additional conditions, unless waived in writing by
Parent:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and Stockholders set forth in this Agreement shall be
true and correct in all material respects, as of the date of this Agreement,
and, except to the extent such representations and warranties speak as of an
earlier date, as of the Preliminary Closing Date as though made at and as of
such date, and Escrow Agent shall have received a certificate signed on behalf
of the Company by the chief executive officer or the chief financial officer of
the Company to such effect;
24
(ii) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company and
each Stockholder shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Preliminary Closing Date;
(iii) CONSENT. All notices to, and consents, approvals and
waivers set forth on SCHEDULE 3.5, SCHEDULE 3.10, or SCHEDULE 4.4 or otherwise
required hereunder, shall have been obtained in each case without any condition
or qualification adverse to Parent or Sub; and
(iv) MATERIAL ADVERSE CHANGE. No material adverse change has
occurred to the assets, properties, business or prospects, financial or
otherwise, of the Company or its Subsidiaries, taken as a whole.
(b) The obligations of Parent and Sub to effect the Preliminary
Closing shall be subject to the delivery of the following documents to the
Escrow Agent on or prior to the Preliminary Closing Date, unless waived in
writing by Parent:
(i) EMPLOYMENT AGREEMENT. Each of Comerford, Freed, Barkan,
Labra, McDonald and ▇▇▇▇▇▇▇▇ shall have entered into an employment agreement
with the Parent (the "EMPLOYMENT Agreement") containing such terms and
conditions as shall be mutually acceptable to the Parent and each of such
persons;
(ii) NON-COMPETITION AGREEMENT. Each of Comerford, Freed,
Barkan, Labra, McDonald and ▇▇▇▇▇▇▇▇ shall have entered into a non-competition
agreement with Parent and the Company in substantially the form attached to this
Agreement as EXHIBIT A (the "NON-COMPETITION AGREEMENT");
(iii) MERGER CERTIFICATE. The Company shall have executed and
delivered the Merger Certificate;
(iv) OPINION OF COUNSEL. Escrow Agent shall have received an
opinion dated the Preliminary Closing Date of counsel to the Company and the
Stockholders in the form of Exhibit B attached hereto.
(v) CERTIFICATIONS. Each of ▇▇▇▇▇▇▇▇▇, Freed and ▇▇▇▇▇▇▇▇ shall
have delivered to the Escrow Agent a certificate to the effect that he or she,
as the case may be, has not:
(1) filed or had filed against him a petition under the
Federal bankruptcy laws or any state insolvency law;
(2) had a receiver, fiscal agent or similar officer
appointed by a court for his business or property or any partnership in which he
25
was a general partner at, or any time after, January 1, 1994 or any corporation
or business association of which he was an executive officer at, or any time
after, January 1, 1994;
(3) been convicted in a criminal proceeding or named
subject of a pending criminal proceeding;
(4) been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting the following activities:
(A) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool operator, floor
broker, leverage transaction merchant, any other person regulated by the
Commodities Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with such activity,
(B) engaging in any type of business or practice or
(C) engaging in any activity in connection with the
purchase or sale of any security or in connection with any violation of Federal
or state securities laws;
(5) been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or state authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described in paragraph (d) above, or to be
associated with persons engaged in any such activity;
(6) been found by a court of competent jurisdiction in a
civil action or by the Securities Exchange Commission to have violated any
Federal or state securities law, and the judgment in such civil action or
finding by the Securities Exchange Commission has not been subsequently
reversed, suspended or vacated;
(7) been found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have violated any
Federal commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated;
26
(8) except as set forth in SCHEDULE 3.13, performed
services for the Company or the Subsidiaries in violation of any contract or
other obligation by which he is or was bound, including, but not limited to, any
non-competition agreement;
(vi) SHARE CERTIFICATES OF SUBSIDIARIES. Share certificates
representing all of the outstanding shares of all of the Subsidiaries shall have
been delivered to the Escrow Agent;
(vii) MINUTE BOOKS. All corporate minute and stock transfer
books and all books and records of the Company and the Subsidiaries, certified
by the President of the Company and such Subsidiaries to be all of the corporate
minute and stock transfer books and other books and records of the Company and
the Subsidiaries as of the Preliminary Closing Date have been delivered to the
Escrow Agent;
(viii) CERTIFICATES OF INCORPORATION. A copy of the
Certificates of Incorporation of the Company and the Subsidiaries, certified by
the Secretary of State of the jurisdictions in which they were incorporated have
been delivered to the Escrow Agent;
(ix) BY-LAWS. A copy of the By-Laws of each of the Company and
the Subsidiaries, certified by an officer of the Company and the Subsidiaries,
respectively, to be true, correct and complete as of the Preliminary Closing
Date have been delivered to the Escrow Agent;
(x) GOOD STANDING. Certificates of good standing for the
Company and the Subsidiaries as of a date not more than ten (10) days prior to
the Preliminary Closing Date issued by the Secretary of State of their
respective states of incorporation and every state in which either of them is
authorized to do business have been delivered to the Escrow Agent;
(xi) RESOLUTIONS. Copies of resolutions, adopted by the
Stockholders and the Board of Directors of the Company, authorizing the
execution of this Agreement, the Merger and the transactions contemplated
herein, certified by an officer of the Company to be true correct and complete
as of the Preliminary Closing Date, and an incumbency certificate, certifying
the names and true signatures of the officers of the Company executing and
delivering this Agreement and the Documents have been delivered to the Escrow
Agent;
(xii) RESIGNATIONS. Resignations, duly executed by each
director and officer of the Company and the Subsidiaries, to be dated as of the
Effective Time, have been delivered to the Escrow Agent;
(xiii) OTHER DOCUMENTS. Such other documents as shall
reasonably be requested by the Parent in order effectively to carry out the
27
transactions contemplated by this Agreement, duly executed by the Company and/or
the Stockholders where appropriate have been delivered to the Escrow Agent.
(xiv) HEALIX STOCKHOLDERS AND SHARE CERTIFICATES. (i) Evidence
that the Healix Stockholders have approved the Merger in accordance with
applicable law, (ii) each non-dissenting Healix Stockholder shall have executed
and delivered to Escrow Agent a certificate containing the representations set
forth in Section 3.25 above, (iii) all stock certificates representing
outstanding Company Common Stock (other than the certificates of dissenting
Healix Stockholders) shall have been delivered to the Escrow Agent.
(xv) COMPANY OPTIONS. The Stockholders and all existing
employees of the Company that hold Rights to acquire Company Common Stock
(including Rights held by Freed and ▇▇▇▇▇▇ with respect to the acquisition of
PRN Health Care, if any) shall have executed and delivered to the Escrow Agent
an agreement, substantially in the form of Exhibit C attached hereto, for the
cancellation of such Rights.
(xvi) RELEASES. The Stockholders (in their capacity as
stockholders), the Company and the Subsidiaries shall have executed and
delivered to the Escrow Agent an agreement to release each other from and in
respect of any and all rights, options, restrictions, liabilities, obligations,
debts, causes of action, claims or the like, arising or accruing at any time
prior to the Effective Date, in respect of any matter whatsoever, except for the
obligations of the Company to the Stockholders separately identified and set
forth on Schedule 3.9 hereto and indemnification obligations that the Company
may owe the Stockholders with respect to matters occurring prior to the
Effective Date to the extent that indemnification of stockholders is permitted
by applicable law.
(xvii) REGISTRATION RIGHTS AGREEMENT. The Stockholders shall
have entered into a registration rights agreement with the Parent in the form
attached hereto as Exhibit D (the "Registration Rights Agreement").
(xviii) PROXY. Each Healix Stockholder that is not a
Stockholder and that is not exercising his dissenters rights shall execute and
deliver to the Parent a proxy in form and substance substantially similar to the
Proxy, in accordance with Section 6.7 above. (xix) RELEASE OF GUARANTEES. The
Company's and Subsidiaries' guarantees of the indebtedness and obligations of
Rye Beach Pharmacy, Inc. shall have been released in all respects.
(xx) INDEMNIFICATION AGREEMENT. The Company and the
Stockholders shall have executed and delivered to the Escrow Agent an agreement
indemnifying the Parent, Sub and Surviving Corporation with respect to certain
matters, in form and substance acceptable to the Parent and its counsel.
28
The documents, instruments and certificates required to be executed and/or
delivered by the Company and the Stockholders hereunder shall be referred to
collectively as the "Company Closing Documents".
7.3 CONDITIONS TO OBLIGATION OF THE STOCKHOLDERS AND THE COMPANY TO
EFFECT THE PRELIMINARY CLOSING.
(a) The obligation of the Company and the Stockholders to effect
the Preliminary Closing shall be subject to the satisfaction at or prior to the
Preliminary Closing Date of the following additional conditions, unless waived
in writing by the Company:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement, and, except to the
extent such representations and warranties speak as of an earlier date, as of
the Preliminary Closing Date as though made on and as of such date, and the
Escrow Agent shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such effect.
(ii) CONSENTS. The consents referenced in Sections 3.5, 3.10
and 4.4 shall have been obtained; without any condition or qualification
materially adverse to the Company;
(iii) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Each of
Parent and Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Preliminary Closing Date.
(iv) MATERIAL ADVERSE CHANGE. No material adverse change has
occurred to the assets, properties, business or prospects, financial or
otherwise, of the Parent and Sub, taken as a whole.
(b) The obligations of the Company and Stockholders to effect the
Preliminary Closing shall be subject to the delivery of the following documents
to the Escrow Agent on or before the Preliminary Closing Date, unless waived in
writing by the Company:
(i) REGISTRATION RIGHTS AGREEMENT. Parent shall have entered
into the Registration Rights Agreement.
(ii) OPINION OF COUNSEL. The Escrow Agent shall have received
the opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, dated the Preliminary Closing Date in
substantially the form attached to this Agreement as EXHIBIT B.
29
(iii) RESOLUTIONS. Copies of resolutions duly adopted by the
board of directors of the Parent and the Sub authorizing the execution, delivery
and performance by the Parent and the Sub of this Agreement, the Merger and the
other Documents, duly certified by an officer of the Parent and the Sub,
respectively, and an incumbency certificate, certifying the names and true
signatures of the officers of the Parent and the Sub executing and delivering
this Agreement and the Documents shall have been delivered to the Escrow Agent;
(iv) CERTIFICATES OF INCORPORATION. Copies of the Certificates
of Incorporation of the Parent and the Sub, certified by the Secretary of State
of the states in which they were incorporated, dated a date not more than thirty
(30) days prior to the Preliminary Closing Date shall have been delivered to the
Escrow Agent;
(v) GOOD STANDING. Certificates of good standing for the Parent
and the Sub issued as of a date not more than ten (10) days prior to the
Preliminary Closing Date by the Secretary of State of the states in which they
were incorporated and are authorized to conduct business shall have been
delivered to the Escrow Agent;
(vi) BY LAWS. A copy of the By-Laws of each of the Parent and
the Sub, certified by an officer of the Parent and the Sub, respectively, to be
true, correct and complete as of the Preliminary Closing Date shall have been
delivered to the Escrow Agent;
(vii) OTHER DOCUMENTS. Such other documents as shall reasonably
be requested by the Company in order effectively to carry out the transactions
contemplated by this Agreement, duly executed by the Parent or the Sub where
appropriate shall have been delivered to the Escrow Agent;
(viii) EMPLOYMENT AGREEMENTS. The Parent shall have executed
the Employment Agreements;
(ix) OTHER OPINIONS. The Company shall have obtained a
favorable opinion from its counsel or accountants, which opinion shall be
delivered to the Escrow Agent, that:
(A) the transaction contemplated hereunder will be
treated as a pooling of interests; and
(B) the transaction contemplated hereunder will
qualify as a tax free reorganization;
(x) MERGER CERTIFICATE. The Sub shall have executed and
delivered the Merger Certificate; and
30
(xi) OPTIONS TO PURCHASE PARENT COMMON STOCK. Parent shall have
executed and delivered to the Escrow Agent a Stock Option Agreement granting
options to purchase shares of Parent Common Stock as follows: ▇▇▇▇▇ ▇▇▇: 37,000;
and ▇▇▇▇▇▇▇ ▇▇▇▇: 2,963.
The documents, instruments and certificates required to be executed and/or
delivered by the Parent and the Sub hereunder shall be referred to collectively
as the "Parent Closing Documents".
8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if the Preliminary Closing
shall not have been consummated before April 15, 1998 or the Effective Time has
not occurred by September 30, 1998 (unless, in the case of any termination
pursuant to this section 8.1(b), the failure to so consummate the Merger by such
date shall have been caused by the action or failure to act of the party (or its
subsidiaries) seeking to terminate this Agreement, which action or failure to
act constitutes a breach of this Agreement and which breach is not curable or,
if curable, is not cured within 30 day after written notice of such breach is
given to the breaching party and the Escrow Agent);
(c) by Parent, if there has been a breach in any material respect
of any of the covenants or agreements set forth in this Agreement on the part of
the Company or any Stockholder, in either case, which breach is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by Parent to the Company and the Escrow Agent, or
(d) by the Company if there has been a breach in any material
respect of any of the covenants or agreements set forth in this Agreement on the
part of Parent, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by the Company to Parent
and the Escrow Agent.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to this Section 8, the Merger shall be deemed abandoned and
this Agreement shall forthwith become void, without liability on the part of any
party hereto, except as provided in Section 6.2; PROVIDED, HOWEVER, that in the
event this Agreement is terminated or the Merger is abandoned pursuant to
Sections 8.1(b), (c) or (d), the breaching party shall pay the non-breaching
party as liquidated damages for such breach a termination fee of five-hundred
thousand ($500,000) dollars. The parties agree that in the event of a breach the
damages incurred by the non-breaching party shall be incalculable and that the
foregoing sum shall be deemed to be a reasonable estimate of such damages.
31
8.3 LIABILITY OF STOCKHOLDERS. Notwithstanding anything to the contrary
contained herein, in the event of a breach by the Company or any Stockholder,
the Stockholders shall not have any personal liability hereunder, except in the
event of actual fraud by any Stockholder; provided, however, that the Parent
shall not be deemed to have waived or relinquished any of its rights or remedies
against the Company and the Subsidiaries in accordance with the terms of this
Agreement and applicable law.
9. SURVIVAL.
The representations and warranties contained in Sections 3 and 4 of
this Agreement shall not survive the Preliminary Closing.
10. MISCELLANEOUS
10.1 AMENDMENT AND MODIFICATION. Prior to the Effective Time, this
Agreement may be amended or modified only by written agreement of Parent, Sub,
the Company and the Stockholders.
10.2 WAIVER. Prior to the Effective Time, Parent and Sub, on the one
hand, and the Company and the Stockholders, on the other hand, may waive
compliance by the other with any provision of this Agreement. No waiver of any
provision shall be construed as a waiver of any other breach of that provision
or of any other provision of this Agreement. Any waiver must be in writing.
10.3 NOTICES. Any notice or other communication under this Agreement
shall be in writing and shall be considered given upon receipt, if personally
delivered or telecopied (and followed by regular mail within two days of such
telecopy), or one day after delivery to a courier for next-day delivery, to the
parties at the addresses set forth below (or at such other address as a party
may specify by notice to the others).
If to Parent or Sub, to it at:
Accuhealth, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Y. ▇▇▇▇▇ ▇▇▇▇▇, Esq.
32
and a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
if to the Company or any Stockholder, to it, him or her at:
Healix HealthCare, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇ Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
10.4 HEADINGS. The section headings of this Agreement are for reference
purposes only and shall not affect the construction or interpretation of this
Agreement.
10.5 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
schedules and exhibits) contains a complete statement of the understanding of
the parties with respect to its subject matter and supersedes and cancels any
prior communications, understandings and agreements among them relating to that
subject matter. This Agreement and any party's rights and obligations hereunder
may not be assigned without the prior written consent of the non-assigning
party. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
10.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the law of the state of New York with respect to contracts to
be wholly performed in such state.
33
10.7 SEVERABILITY. The parties agree that any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
34
10.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
ACCUHEALTH, INC.
By:
Name:
Title:
HHI ACQUIRING CORP.
By:
Name:
Title:
HEALIX HEALTHCARE, INC.
By:
Name:
Title:
AGREED SOLELY IN CONNECTION WITH AND AS TO SECTION 6.5 HEREOF:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
STOCKHOLDERS OF
HEALIX HEALTHCARE, INC:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. O'▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
35