1
EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made this 28th day
of August 1997, by and among MEDIRISK, INC., a Delaware corporation
("Purchaser"), ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, a resident of the State of New York
("▇▇▇▇▇▇▇▇▇"); ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, a resident of the State of New York ("▇.
▇▇▇▇▇▇▇▇▇▇"); ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, a resident of the State of New York ("▇.
▇▇▇▇▇▇▇▇▇▇"); ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, a resident of the State of Washington ("▇.
▇▇▇▇▇▇▇▇▇▇"); LONGBOW PARTNERS, a New York general partnership ("Longbow");
▇▇▇▇▇ ▇▇▇▇▇▇▇, as Trustee for Alec Power and ▇▇▇ ▇▇▇▇▇▇▇, each minors,
respectively (collectively, the "Parower Trusts"); ▇▇▇▇ ▇▇▇▇▇▇, as Trustee for
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, each minors, respectively (collectively, the
"▇▇▇▇▇▇ Trusts"); ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of the State of New York
("▇▇▇▇▇▇"); and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of the Commonwealth of Pennsylvania
("▇▇▇▇▇▇").
W I T N E S S E T H:
WHEREAS, the parties desire to enter into this Stock Purchase Agreement
pursuant to which Purchaser will purchase all of the outstanding capital stock
of CareData Reports, Inc. (the "Company") from ▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇▇▇, ▇.
▇▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇▇▇, Longbow, the Parower Trusts, the ▇▇▇▇▇▇ Trusts,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ (collectively, the "Shareholders;" all of the foregoing
individuals and said partnership, except for ▇▇▇▇▇▇ and ▇▇▇▇▇▇, comprising the
existing shareholders of the Company, with ▇▇▇▇▇▇ and ▇▇▇▇▇▇ holding options to
acquire an aggregate of two and one-half (2.5%) percent and four (4%) percent of
the Stock (as hereinafter defined) from such existing shareholders; ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ being collectively hereinafter referred to as the "Accountable
Shareholders") upon the terms and subject to the conditions set forth herein;
and
WHEREAS, ▇▇▇▇▇▇▇▇▇ is an employee, officer and director of the Company,
and will receive appreciable benefits from the purchase and sale of the stock of
the Company as contemplated hereby; and
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
hereinafter set forth, the Shareholders shall sell to Purchaser, and Purchaser
shall purchase from the Shareholders, free and clear of all liens, claims,
charges and encumbrances of any nature
2
whatsoever, an aggregate of 706,000 shares of issued and outstanding common
stock of the Company (the "Stock"), which shares represent all issued and
outstanding shares of capital stock of the Company. Each Shareholder shall sell
the number of shares of Stock set forth opposite his, her or its name on
SCHEDULE 1.1.
1.2 PURCHASE PRICE. In consideration of the sale and delivery of the
Stock, and in reliance on the representations and warranties set forth in
Article II below, Purchaser shall (i) pay to the Shareholders (and/or the
Shareholders' Representative on behalf of the Shareholders, as directed by the
Shareholders' Representative as evidenced by SCHEDULE 1.2 attached hereto) the
sum of Four Million One Hundred Sixteen Thousand Four Hundred Nine and 25/100
($4,116,409.25) Dollars in the aggregate in cash by wire transfer or check at
Closing, such amount to be allocated among the Shareholders as set forth on
SCHEDULE 1.2 under the heading of "Cash Payable at Closing;" (ii) deliver to the
Shareholders fourteen thousand five hundred sixteen (14,516) unregistered shares
of Common Stock of Purchaser (the "Medirisk Stock;" such number of shares being
equal to the quotient resulting from dividing the amount of One Hundred
Thirty-Three Thousand Five Hundred Ninety and 75/100 ($133,590.75) Dollars by
the average closing price of Medirisk Stock on the Nasdaq National Market over
the ten (10) trading days immediately preceding the Closing Date, with no
issuance of fractional shares) such Medirisk Stock to be allocated among and
issued to the respective Shareholders as set forth on SCHEDULE 1.2 under the
heading of "Medirisk Stock Deliverable Following Closing;" and (iii) make
payment of additional consideration (the "Additional Consideration") to the
Shareholders as defined and described and upon the terms set forth in SCHEDULE
1.2(iii). The consideration described in this Section 1.2 is in the aggregate
referred to as the "Purchase Price."
1.3 ELECTION UNDER SECTION 338(H)(10); TAX MATTERS.
(a) Purchaser and the Shareholders shall, at the written
request of Purchaser made within one hundred twenty (120) days after Closing, or
within the period described in subsection (d) of this Section 1.3 in the event
Purchaser makes a Determination Election, make a timely election (a "338
Election") under Section338(h)(10) of the Internal Revenue Code of 1986, as
amended (the "Code") and Section1.338(h)(10)-1 of the Treasury Regulations
promulgated pursuant to the Code, and any corresponding elections under state or
local tax law with respect to the purchase and sale of the Stock. Each
Shareholder shall take all actions reasonably requested by Purchaser (including,
without limitation, the preparation, completion and timely joint filing by
Purchaser and the Shareholders of Form 8023-A, and the preparation, completion
and timely filing of such other forms, returns, elections, schedules and other
documents and instruments reasonably requested by Purchaser) to effect a timely
Section338 Election with respect to the purchase and sale of the Stock. If
Purchaser makes a 338 Election, Purchaser and the Shareholders shall report the
purchase and sale of the Stock consistent with the 338 Election and shall take
no position contrary thereto or inconsistent therewith in any tax return, or in
any discussion with or any proceeding before any taxing authority or other
governmental body or otherwise.
(b) The purchase price specified in Section 1.2 and all other
items that comprise the "modified aggregate deemed sale price" (as defined in,
and required to be allocated pursuant to, Section 338(h)(10) of the Code) shall
be allocated in accordance with a schedule
-2-
3
prepared by Purchaser on a reasonable basis in accordance with the requirements
of the Code and the regulations thereunder and approved by the Shareholders,
which approval shall not be unreasonably withheld or delayed. Such allocation
and valuation shall, for tax purposes, be binding on the Company, the
Shareholders and Purchaser. If Purchaser makes a 338 Election, the Company, the
Shareholders and Purchaser shall file their respective tax returns in accordance
with such allocation and shall not take any position inconsistent with such
allocation. In the event that such allocation is disputed by any taxing
authority, the party receiving notice of such dispute shall promptly notify and
consult with the other parties hereto concerning resolution of such dispute and
no such dispute shall be finally settled or compromised without the mutual
consent of the parties, which consent will not be unreasonably withheld or
delayed.
(c) If Purchaser determines to make a 338 Election, Purchaser
shall, on a timely basis, prepare (in a manner consistent with prior practice),
execute and file on behalf of the Company (A) the federal income tax returns to
be filed on behalf of Company for the period ending as of the close of business
on the Closing Date that will include the gain or loss resulting from the
"deemed sale" and "deemed liquidation" that will occur (pursuant to Treasury
Regulation Section 1.338(h)(10)-1(e)(1) and (2) promulgated under the Code) by
reason of the 338 Election and (B) the corresponding state and local income tax
returns to be filed on behalf of Company for the period ending as of the close
of business on the Closing Date. The Shareholders shall cooperate with Purchaser
in connection with the preparation and filing of such returns by making the
books and records of the Company available to Purchaser and Purchaser's
independent accountant and taking such other actions as Purchaser may reasonably
request. The Shareholders, upon written notice to Purchaser, shall have the
right to review and comment upon such returns prior to filing; provided that
such review and comment must be completed at least fifteen (15) business days
prior to the date on which such returns are required to be filed. If Purchaser
does not make a 338 Election, the Shareholders shall, on a timely basis, prepare
(in a manner consistent with prior practice), execute and file on behalf of the
Company the federal, state and local income tax returns to be filed on behalf of
the Company for the period ending as of the close of business on the Closing
Date, and the Shareholders shall bear the costs and expenses of preparing and
filing such returns. Purchaser shall have the right to review and comment upon
such returns prior to filing; provided that such review and comment must be
completed at least fifteen (15) business days prior to the date on which such
returns are required to be filed.
(d) If (i) Purchaser determines to make a 338 Election
pursuant to subsection (a) above, Purchaser shall pay to the Shareholders, as
additional purchase price hereunder, an amount (the "338 Amount") equal to (A)
the difference between the net after tax proceeds of the sale of Stock that the
Shareholders would have received had no 338 Election been made and the net after
tax proceeds of such sale that the Shareholders will receive after applying such
338 Election plus (B) an amount such that the Shareholders, after receiving the
amount described in (A) and the amount described in this clause (B) and paying
applicable tax thereon, would receive the same net after tax proceeds as the
Shareholders would have received had no 338 Election been made. The
Shareholder's net after tax proceeds of the sale of Stock (both with and without
a 338 Election) and the tax effect of the payment described in (A) and (B) of
the immediately preceding sentence shall be determined by the Company's regular
independent accountant within
-3-
4
forty-five (45) days after Purchaser gives the Shareholders notice that it has
determined to make a 338 Election or that it is making a Determination Election,
if earlier. The Shareholders shall give Purchaser's independent accountant
fifteen (15) business days to review and comment upon such determination of the
Company's accountant (the "Review Period"). After the Review Period (and with
such adjustments as the Company's independent accountant may have made, in its
reasonable discretion, based upon the review and comment of Purchaser's
independent accountant), the determination of the net after tax proceeds and the
tax effect of such payment by the Company's independent accountant shall be
final and binding on the parties. Purchaser shall pay the fees and expenses of
the Company's independent accountant in connection with making such
determination and, if Purchaser makes a 338 Election, the preparation of the
returns under subsection (c) above (except the returns contemplated by the last
sentence of subsection (c) above). Purchaser will pay the amount due under this
Section 1.3(d) to the Shareholders' Representative within fifteen (15) business
days after the Review Period.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to
Purchaser as follows (the Accountable Shareholders being deemed to be the only
Shareholders making the representations and warranties set forth in Sections
2.1, 2.3(a), 2.4, 2.5, 2.6(a) and (e), and 2.7 through 2.24):
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York with the full power and authority to carry on its business in the
places and as it is now being conducted and to own and lease the properties and
assets it now owns or leases. The Company is duly qualified to transact business
and in good standing in the states listed on SCHEDULE 2.1, which are the only
jurisdictions in which operations of the Company's business or the assets of the
Company require such qualification
2.2 AUTHORITY AND STATUS. Each Shareholder has the capacity and
authority to execute and deliver this Agreement, to perform under it and to
consummate the transactions contemplated by this Agreement without the necessity
of any act or consent of any other person whomsoever. This Agreement and each
and every agreement, document and instrument to be executed, delivered and
performed in connection with this Agreement (the "Transaction Documents") by
each Shareholder constitute or will, when executed and delivered, constitute the
valid and legally binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles (whether
applied with action at law or in equity) or by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally.
-4-
5
2.3 CAPITALIZATION; OWNERSHIP OF STOCK.
(a) The authorized capital stock of the Company consists of
2,000,000 shares of Common Stock, $0.01 par value per share, 706,000 of which
are issued and outstanding. All of the issued and outstanding Shares are duly
and validly issued and outstanding, are fully paid and nonassessable, and were
issued pursuant to a valid exemption from registration under the Securities Act
of 1933, as amended, and all applicable state securities laws. Except as set
forth on SCHEDULE 2.3, there are no outstanding warrants, options, rights, calls
or other commitments of any nature relating to the Common Stock or any other
capital stock of the Company, and there are no outstanding securities of the
Company convertible into or exchangeable for shares of Common Stock or any other
capital stock of the Company.
(b) Each Shareholder is the legal and beneficial owner of the
number of shares of Stock reflected opposite his or her name on SCHEDULE 1.1,
free and clear of all liens, claims, charges, encumbrances, security interests,
pledges or other claims.
2.4 SUBSIDIARIES, INVESTMENTS AND PREDECESSORS. Except as set forth on
SCHEDULE 2.4, the Company has not owned and does not currently own, directly or
indirectly, of record, beneficially or equitably any capital stock or other
equity, ownership or proprietary interest in any corporation, partnership,
limited liability company, association, trust, joint venture or other entity.
Set forth on SCHEDULE 2.4 is a listing for the last five years of all
predecessor companies of the Company, including the names of any and all
entities from which the Company previously acquired material assets, and any
other entity of which the Company has been a subsidiary or division. Except as
listed on SCHEDULE 2.4, the Company has not sold or disposed of, by way of asset
sale, stock sale, spin-off, split-up or otherwise, any material assets or
business of the Company.
2.5 LIABILITIES AND OBLIGATIONS OF THE COMPANY.
(a) Attached as SCHEDULE 2.5 are true, correct and complete
copies of the Company's unaudited balance sheets as of 31 December 1994, 1995
and 1996 and the related statements of operations and cash flows for the fiscal
years ending on 31 December 1994, 1995 and 1996 (the "Financial Statements").
Also attached as SCHEDULE 2.5 are true, correct and complete copies of the
Company's unaudited balance sheet as of 31 July 1997 and the related unaudited
statement of operations and cash flows for the four-month period then ended (the
"Interim Financial Statements"). Except as specifically described in SCHEDULE
2.5, the Financial Statements and the Interim Financial Statements fairly
present the Company's current operations and financial condition as of the dates
thereof.
(b) Except as described in SCHEDULE 2.5, the Company has no
liability or obligation related to its assets or business (whether accrued,
absolute, contingent or otherwise), except for (i) the liabilities and
obligations of the Company that are disclosed or reserved against in the Interim
Financial Statements, to the extent and in the amounts so disclosed or reserved
against, (ii) liabilities that were incurred or accrued in the ordinary course
of the Company's business since the date of the Interim Financial Statements,
(iii) the liabilities and obligations of the Company under the Material
Agreements (as that term is defined in Section 2.11), and (iv)
-5-
6
those nonmaterial liabilities and obligations of the Company under all contracts
and agreements other than the Material Agreements.
2.6 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth
on SCHEDULE 2.6, the execution and delivery of the Transaction Documents by each
of Shareholders do not, and the consummation of the transactions contemplated
hereby will not, (a) violate or conflict with any provision of the Articles of
Incorporation, as amended, or Bylaws, as amended, of the Company; (b) require
any consent or approval under, conflict with, result in the breach, termination
or acceleration of, or violate or constitute an occurrence of default under any
provision of any mortgage, deed of trust, conveyance to secure debt, note, loan,
lien, lease, agreement or instrument to which the Company or any Shareholder is
a party or by which the Company, any Shareholder or any of their respective
properties are bound; (c) constitute a violation of any law, regulation, order,
writ, judgment, injunction, or decree applicable to the Company or any
Shareholder or any of the Company's properties; (d) result in the creation of
any lien upon any of the assets or business of the Company; or (e) have any
impact on Purchaser's right after the Closing to conduct the business of the
Company as being conducted by the Shareholders prior to the Closing.
2.7 LITIGATION Except as set forth on SCHEDULE 2.7, there is no suit,
action, proceeding, claim or investigation pending or, to the knowledge of each
of the Shareholders and the Company, threatened against, or affecting, the
Company; and to the knowledge of each of Shareholders and the Company, there
exists no basis or grounds for any such suit, action, proceedings, claim or
investigation. SCHEDULE 2.7 also contains a brief description of any suit,
action, proceeding, claim or investigation involving the Company settled or
otherwise concluded since 6 May 1994.
2.8 PERMITS. The Company holds, and SCHEDULE 2.8 lists, all
licenses, permits and other authorizations from all appropriate federal, state
or other public authorities necessary for the conduct of the Company's business
and the use of its assets. The Company is conducting and has conducted its
business so as to comply with all applicable statutes, rules, ordinances,
regulations, orders, injunctions, decrees or any other requirement of any
governmental body, agency or authority binding on it, or relating to its
property or business or its advertising, sales or pricing practices.
2.9 TITLE TO ASSETS. Attached as SCHEDULE 2.9 is a list and summary
description of all real property owned or leased by the Company and of all items
of personal property with a fair market value in excess of $500.00 owned or
leased by the Company (such list identifying the properties owned by the Company
and all of the leases or agreements under which the Company is lessee of or
holds or operates any property). Except as set forth on SCHEDULE 2.9, the
Company has good and valid title to all of its property and assets, other than
leased property, free and clear of any liens, claims, charges, options, rights
of tenants or other encumbrances, except as disclosed or reserved in the
Financial Statements or the Interim Financial Statements and except for liens
for current taxes not yet due and payable.
-6-
7
2.10 COMPUTER SOFTWARE, INTELLECTUAL PROPERTY.
(a) Attached SCHEDULE 2.10(a) sets forth a complete and correct list
and summary description of all trademarks, trade names, service marks, service
names, brand names, copyrights and patents, registrations thereof and
applications therefor, applicable to or used by the Company in the conduct of
its business, together with a complete list of all licenses granted by or to the
Company with respect to any of the above. All such trademarks, trade names,
service marks, service names, brand names, copyrights and patents reflected on
SCHEDULE 2.10(a) as owned by the Company are owned by the Company free and clear
of all liens, claims, security interests and encumbrances of any nature
whatsoever. All such trademarks, trade names, service marks, service names,
brand names, copyrights and patents reflected on SCHEDULE 2.10(a) as licensed,
leased or otherwise used (but not owned) by the Company are used by the Company
pursuant to terms of binding agreements under which the Company has the right to
use such trademarks, trade names, service marks, service names, brand names,
copyrights and patents as currently used in the Company's business without
payment of any royalty or other fee, except as set forth on SCHEDULE 2.10(a).
The Company is not currently in receipt of any notice of violation of, and the
Company is not violating the rights of others in any trademark, trade name,
service ▇▇▇▇, copyright, patent, trade secret, know-how or other intangible
asset.
(b) Attached SCHEDULE 2.10(b) contains a complete and accurate list
of the computer software, databases and other intellectual property that is
owned by the Company (the "Owned Software"). Except as set forth on SCHEDULE
2.10(b), the Company has exclusive rights and title to the Owned Software, free
and clear of all liens, claims, security interests and encumbrances of any
nature whatsoever, including claims or rights of employees, agents, consultants,
customers, licensees or other parties involved in the development, creation,
marketing, maintenance, enhancement or licensing of such Owned Software. Except
as set forth on SCHEDULE 2.10(b), the Owned Software is not dependent on any
Licensed Software (as defined below) in order to operate fully in the manner in
which it is intended, except for operating systems and third party applications
that are stated in the Owned Software documentation and are readily commercially
available. No Owned Software has been published or disclosed to any other
parties, except as set forth on SCHEDULE 2.10(b) and except pursuant to
contracts requiring such other parties to keep such Owned Software confidential.
To the knowledge of each of the Shareholders and the Company, no such other
party has breached any such obligation of confidentiality.
(c) Attached SCHEDULE 2.10(c) contains a complete and accurate list of
all computer software, databases and other intellectual property that is used
by the Company of which the Company is the licensee or lessee or the right
to use which the Company has otherwise obtained (other than commercially
available over-the-counter "shrinkwrap" software) (the "Licensed Software").
SCHEDULE 2.10(c) also sets forth a list of all license fees, rents, royalties or
other charges that the Company is required or obligated to pay with respect to
Licensed Software. Prior to the date of this Agreement, the Shareholders have
delivered to Purchaser true and complete copies of all agreements under which
the Company has the right to use Licensed Software. Except as described on
SCHEDULE 2.10(c), the Company has the right and license to use, sublicense,
modify and copy the Licensed Software, free and clear of any limitations or
encumbrances. The Company is in full compliance with all provisions of any
-7-
8
license, lease or other similar agreement pursuant to which the Company has
rights to use the Licensed Software. Except as disclosed on SCHEDULE 2.10(c),
none of the Licensed Software has been incorporated into or made a part of any
Owned Software or any other Licensed Software. The Company has not published or
disclosed any Licensed Software to any other party except, in the case of
Licensed Software that the Company leases or markets to others, in accordance
with and as permitted by any license, lease or similar agreement relating to the
Licensed Software and except pursuant to contracts requiring such other parties
to keep the Licensed Software confidential. To the knowledge of each of the
Shareholders and the Company, no party to whom the Company has disclosed
Licensed Software has breached such obligation of confidentiality.
(d) The Owned Software and the Licensed Software constitute
all software used in relation to the business of the Company (the "Company
Software"). Attached SCHEDULE 2.10(d) sets forth a list of all contract
programmers, independent contractors, nonemployee agents and persons or other
entities (other than employees) who have performed computer programming services
for the Company in connection with any of the Company Software and identifies
all contracts and agreements pursuant to which such services were performed. The
transactions contemplated by this Agreement will not cause a breach or default
under any license or similar agreement relating to the Company Software or
impair Purchaser's ability to use the Company Software in the same manner as
such Company Software is currently used by the Company. The Company is not
infringing any intellectual property rights of any other person or entity with
respect to the Company Software, and, to the knowledge of each of the
Shareholders and the Company, no other person or entity is infringing any
intellectual property rights of the Company with respect to the Company
Software.
(e) The Company and, to the knowledge of each of the
Shareholders and the Company, all other parties to any licensing or similar
arrangements under which the Company is the licensor or has otherwise granted
the right to use the Company Software are in full compliance with such licensing
or similar arrangements and are not in breach of their obligations with respect
thereto. The Company is not a party to any license, installation agreement,
maintenance agreement, data processing agreement, services agreement or other
agreement pursuant to which it is committed to perform software installation,
modifications, enhancements or services without payment or for payments which,
in the aggregate, are less than the reasonably anticipated cost to perform such
installation, modifications, enhancements or services. The Company has complied
in all material respects with its obligations to its customers and licensees in
respect of the Company Software.
(f) Except as set forth on SCHEDULE 2.10(f), the Company has
granted no marketing rights in the Company Software to any third party, and all
marketing rights granted by any third party to the Company have been granted
exclusively to the Company. SCHEDULE 2.10(f) lists and separately identifies all
agreements pursuant to which the Company has granted or been granted rights to
market software, databases and other intellectual property owned by third
parties.
-8-
9
2.11 CONTRACTS.
(a) Attached as SCHEDULE 2.11(a) is a true and correct list of
all contracts, agreements and other instruments to which the Company is a party
under which the aggregate liability of, or benefit to, the Company could
reasonably be expected to exceed $5,000.00, including without limitation
contracts, agreements and other instruments concerning the following matters
(collectively the "Material Agreements"):
(i) the lease (as lessee or lessor) or license
(as licensee or licensor) of any real or personal property (tangible or
intangible);
(ii) the employment, termination, severance or
engagement of or with respect to any officer, director, employee, consultant or
agent;
(iii) any arrangement between or among the
Company, its affiliates, the Shareholders, any director, officer or employee
thereof and/or related persons, including without limitation loans, guarantees
and credit arrangements;
(iv) any arrangement limiting the freedom of the
Company to compete in any manner in any line of business or requiring the
Company to share profits;
(v) any arrangement that could reasonably be
anticipated to have a material adverse effect on the Company, financial or
otherwise;
(vi) any arrangement not in the ordinary course
of business;
(vii) any power of attorney, whether limited or
general, granted by or to the Company;
(viii) any other arrangement that requires
performance for a period of more than thirty (30) days or that requires payments
in excess of $5,000.00;
(ix) any loan agreement, contract or other
arrangement relating to the borrowing of money by the Company and the amount
outstanding thereunder or the guarantee by the Company of any third party
obligation;
(x) any agreement or arrangement involving
intellectual property rights (other than contracts entered into in the ordinary
course of business with customers and "shrink-wrap" software licenses);
(xi) any contract or arrangement relating to the
provision of data processing, network communication or other technical services
to or by the Company or any affiliate thereof; and
(xii) any contract or arrangement relating to the
provision, purchase or sale of goods or services, other than contracts entered
into in the ordinary course of business and involving payments not in excess of
$5,000.00.
(b) Except as set forth on SCHEDULE 2.11(b), (a) the Material
Agreements are valid and effective in accordance with their terms, and (b) there
is not under any Material Agreement (i) any existing or claimed default by the
Company or (ii) to the knowledge of the Company and the Shareholders, any
existing or claimed default by any other party. There is no actual or, to the
knowledge of each of the Company and the Shareholders, threatened
-9-
10
termination, cancellation or limitation of any Material Agreements. To the
knowledge of each of the Company and the Shareholders, there is no pending or
threatened bankruptcy, insolvency or similar proceeding with respect to any
other party to any of the Material Agreements.
2.12 TAXES.
(a) The Company has timely and accurately filed all federal, state,
foreign and local tax and information returns and reports required to be filed
by it prior to such date and has timely paid, or will prior to Closing timely
pay, all taxes, including, without limitation, any and all income, sales, use,
withholding and excise taxes (collectively "Taxes") owed for all periods ending
prior to Closing. No liens have been filed and no claims are being asserted or,
to the knowledge of each of the Shareholders and the Company, might be asserted
with respect to any Taxes. No restrictions on assessment or collection of Taxes
have been waived with respect to the Company, and the Company has not consented
to the extension of any statute of limitations with respect to the Company
relating to Taxes, except for waivers or consents that are no longer in effect.
The Company has received no notice of assessment or proposed assessment of any
Taxes claimed to be owed by it or any other person or entity on its behalf. No
returns, reports or forms filed by or on behalf of the Company with respect to
Taxes are currently being audited or examined, and the Company has not received
any notice of any such audit or examination.
(b) The Company has withheld or collected from each payment made to
each of its employees the amount of all Taxes required to be withheld or
collected therefrom and the Company has paid the same to the proper tax
depositories or collecting authorities.
(c) Any ad valorem property taxes for years prior to 1997 imposed on
the Company with respect to, or which may become a lien on, its assets have been
paid in full.
2.13 EMPLOYEE BENEFIT PLANS. Attached as SCHEDULE 2.13 is a list of
every pension, retirement, profit-sharing, deferred compensation, severance pay,
vacation, bonus or other incentive plan, any other written or unwritten employee
program, arrangement that involves the expenditure of more than $500.00 per
year, agreement or understanding that involves the expenditure of more than
$500.00 per year, any medical, vision, dental or other health plan, any life
insurance plan or any other employee benefit plan or fringe benefit plan,
including without limitation any "employee benefit plan," as that term is
defined in Section 3(3) of the Employee Retirement Security Act of 1974, as
amended ("ERISA"), currently or previously adopted, maintained, sponsored or
contributed to by the Company for the benefit of employees, retirees,
dependents, spouses, directors or other beneficiaries and under which employees,
retirees, dependents, spouses, directors or other beneficiaries are eligible to
participate (collectively, the "Benefit Plans"). All of the Benefit Plans (and
any related trusts subject to ERISA) comply with and have been administered in
compliance with the provisions of ERISA, all provisions of the Code, all
applicable state or federal securities laws and all other applicable laws, rules
and regulations. No event has occurred that will or could reasonably be expected
to give rise to a disqualification of any such plan under Sections 401(a) or
501(a) of the Code or to a tax under Section 511 of the Code. Neither the
Company nor any administrator or fiduciary of any such Benefit Plan (or agent or
delegate of any of the foregoing) has engaged in
-10-
11
any transaction or acted or failed to act in any manner that could reasonably be
expected to subject the Company to any direct or indirect liability for a breach
of any fiduciary or co-fiduciary duty under ERISA. No "party in interest" (as
defined in Section 3(14) of ERISA) or "disqualified person" (as defined in
Section 4975(e)(2) of the Code) of any Benefit Plan has engaged in any
"prohibited transaction" (within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA and not exempt under Section 408 of ERISA).
2.14 CUSTOMERS. Attached as SCHEDULE 2.14 is a true and correct list of
all of the customers doing in excess of $2,500.00 of business with the Company
during 1995 and 1996 and to date in 1997 setting forth as to each such customer
its name, address, telephone number and principal person of contact. Neither the
Company nor any Shareholder has received any notice, or has any reason to
believe, that any such customer has taken or contemplates taking steps that
could disrupt the business relationship of the Company with such customer.
2.15 OFFICERS, DIRECTORS AND BANK ACCOUNTS. SCHEDULE 2.15(a) lists the
names of all directors and officers of the Company. SCHEDULE 2.15(b) lists the
name and location of each bank or other institution in which the Company has any
deposit account or safe deposit box, all account numbers and names of all
persons authorized to draw thereon or to have access thereto.
2.16 INTERESTED TRANSACTIONS.
(a) Except as set forth on SCHEDULE 2.16, the Company is not a
party to any contract, agreement or other instrument or transaction with any of
the following persons, or in which any of the following persons have any direct
or indirect interest (other than as a shareholder or employee of the Company);
(i) Any director or officer of the Company or
any of the Shareholders;
(ii) Any of the spouses, parents, siblings,
children, aunts, uncles, nieces, nephews, in-laws or grandparents of any of the
persons described in clause (i); or
(iii) Any corporation, trust, partnership or other
entity in which any of the persons described in clauses (i) or (ii) has a
beneficial interest (other than in a corporation whose shares are publicly
traded and in which such persons own beneficially in the aggregate no more than
two percent of the equity interest).
(b) None of the Shareholders is an employee, consultant,
partner, principal, director or shareholder of any business or entity (other
than the Company or a corporation whose shares are publicly traded and in which
such Shareholder beneficially owns in the aggregate no more than a two percent
equity interest) which is engaged in a business similar to the business of the
Company.
2.17 ABSENCE OF CERTAIN CHANGES. Since 31 December 1996: (a) the
Company has operated its business in the ordinary course; (b) there has not been
any change in the
-11-
12
business, financial condition or results of operations of the Company that has
had or is reasonably likely to have a material adverse effect on the Company or
its assets or business; (c) there has not been any damage, destruction or loss
(whether or not covered by insurance) to the Company's assets that has had or is
reasonably likely to have a material adverse effect on the Company or its assets
or business; (d) except as disclosed in SCHEDULE 2.17(a), no customer has
canceled, discontinued or given written or oral notice of its intention to
cancel, discontinue or substantially reduce its business with the Company; and
(e) except as disclosed in SCHEDULE 2.17(b), the Company is not in default and,
to the knowledge of each of the Company and the Shareholders, no customer is in
default, under the Company's contracts with any customer, and each such contract
is in full force and effect on the date of this Agreement, and such customer
contracts contain no material changes from the standard form of agreement used
by the Company (including, without limitation, any deviation from the standard
warranties or limitation of the Company's liability).
2.18 BOOKS AND RECORDS. All books, records and other information
(financial and otherwise), if any, provided by the Company or any Shareholder to
Purchaser are true and correct and accurately reflect the existence of the
Company's assets and the results of operations of the Company's business for the
periods of time stated therein, and such books, records and financial
information reflect revenues and income from the Company's business and not from
other sources, except as expressly disclosed to Purchaser.
2.19 ACCOUNTS RECEIVABLE AND PAYABLE. The accounts receivable
outstanding as of the date of the Interim Financial Statements are, and the
accounts receivable of the Company outstanding as of the Closing Date will be,
(i) valid and genuine accounts receivable arising only out of bona fide sales
and delivery of goods, performance of services and other business transactions
in the ordinary course of the Company's business consistent with past practice;
(ii) subject to no asserted defenses, counterclaims or rights of setoff, and
(iii) collectible within ninety (90) days after the due date shown on any
▇▇▇▇▇▇▇▇ therefor at the full recorded amount thereof less the recorded
allowance for doubtful accounts reflected on the Interim Financial Statements.
Except as set forth on SCHEDULE 2.19, no accounts payable of the Company are, as
of the date of this Agreement, over thirty (30) days old.
2.20 EMPLOYMENT AND LABOR MATTERS.
(b) SCHEDULE 2.20(a) sets forth (i) the number of all
full-time and part-time employees of the Company; (ii) the number of independent
contractors utilized by the Company and (iii) the name and compensation paid to
each independent contractor, employee of or consultant to the Company who
received salary and bonuses or other compensation for either of the Company's
two most recently ended fiscal years in excess of $500.00.
(b) To the knowledge of each of the Company and the
Shareholders, the Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health,
including laws concerning unfair labor practices within the meaning of Section 8
of the National Labor Relations Act, and the employment of non-residents
-12-
13
under the Immigration Reform and Control Act of 1986.
(c) Except as disclosed on SCHEDULE 2.20(c):
(i) There are no charges, governmental audits,
investigations, administrative proceedings or complaints concerning the
Company's employment practices pending or, to the knowledge of each of the
Company and the Shareholders, threatened before any federal, state or local
agency or court, and, to the knowledge of each of the Company and the
Shareholders, no basis for any such matter exists;
(ii) The Company is not a party to any union or
collective bargaining agreement, and, to the knowledge of each of the Company
and the Shareholders, no union attempts to organize the employees of the Company
have been made, and no such attempts now threatened; and
(iii) the Company has not experienced any
organized slowdown, work interruption, strike, or work stoppage by its
employees.
2.21 INSURANCE. Except as described on SCHEDULE 2.21, all of the assets
and business of the Company are insured in such amounts and against such losses,
casualties or risks as are customary for similar properties and businesses, and
SCHEDULE 2.21 contains a list of all policies of insurance currently in force
with respect to the Company and its assets and business.
2.22 ENVIRONMENTAL MATTERS. To the knowledge of each of the Company and
the Shareholders and except as set forth in SCHEDULE 2.22, there is no present
or past Environmental Condition in any way relating to the business, properties
or assets of the Company. "Environmental Condition" means (a) the introduction
into the environment of any pollution, including without limitation any
contaminant, irritant or pollutant or other toxic or hazardous substance, in
violation of any federal, state or local law, ordinance or governmental rule or
regulations, as a result of any spill, discharge, leak, emission, escape,
injection, dumping or release of any kind whatsoever of any substance or
exposure of any type in any work places or to any medium, including without
limitation air, land, surface waters or ground waters, or from any generation,
transportation, treatment, discharge, storage or disposal of waste materials,
raw materials, hazardous materials, biomedical waste including blood, toxic
materials or products of any kind or from the storage, use or handling of any
hazardous or toxic materials or other substances, as a result of which the
Company has or may become liable to any person or by any reason of which any of
the Assets of the Company may suffer or be subjected to any lien, encumbrance or
restriction of any nature, or (b) any noncompliance with any federal, state or
local environmental law, rule, regulation or order as a result of or in
connection with any of the foregoing.
2.23 COMPANY PRODUCTS AND SERVICES. The Company's products and services
conform in all material respects with any specification, documentation,
performance standard, representation or statement made or provided with respect
thereto by or on behalf of the Company, and there has not been during the last
three (3) years any claim made against the Company by any customer of the
Company or by any other person alleging that any product or
-13-
14
service of the Company (including each version thereof that has been licensed or
otherwise made available by the Company to any person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of the Company,
and, to the knowledge of each of the Company and the Shareholders, there is not
a reasonable basis for any such claim. No material product liability or warranty
claims have been communicated in writing to or threatened in writing against the
Company. To the knowledge of each of the Company and the Shareholders, the
Company's products and services, as of the date hereof, during and after the
calendar year 2000 A.D., include design, function and performance capabilities
such that the Company's products and services shall not abnormally end and/or
have invalid and/or incorrect results from and/or performance or functional
degradation because of the then-current date. To the knowledge of each of the
Company and the Shareholders, the design and function of the Company's products
and services ensure year 2000 A.D. functionality and include, but are not
limited to, date data century recognition, calculations that accommodate same
century and multi-century formulas and date values, and date data interface
values that reflect the century. Notwithstanding anything in the foregoing to
the contrary, the foregoing representation (dealing with Year-2000 issues) shall
not be deemed applicable to any reports or surveys prepared by the Company and
pertaining to years prior to the year 2000.
2.24 SCHEDULES. All Schedules attached hereto are true, correct and
complete as of the date of this Agreement. Matters disclosed on each Schedule
shall be deemed disclosed only for purposes of the matters to be disclosed in
such Schedule and shall not be deemed to be disclosed for any other purpose
unless specifically provided therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders as follows:
3.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with the full power and authority to carry on its business in the
places and as it is now being conducted.
3.2 AUTHORITY AND STATUS. Purchaser has the capacity and authority to
execute and deliver this Agreement, to perform under it and to consummate the
transactions contemplated by this Agreement without the necessity of any act or
consent of any other person whomsoever. This Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
Purchaser in connection with this Agreement constitute or will, when executed
and delivered, constitute the valid and legally binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms, except as enforceability may be limited by applicable equitable
principles (whether applied with action at law or in equity) or by bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect affecting the enforcement of creditors' rights generally.
-14-
15
3.3 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth
on SCHEDULE 3.3, the execution and delivery of the Transaction Documents by
Purchaser do not, and the consummation of the transactions contemplated hereby
will not, (a) violate or conflict with any provision of the Articles of
Incorporation, as amended, or Bylaws, as amended, of Purchaser; (b) require any
consent or approval under, conflict with, result in the breach, termination or
acceleration of, or violate or constitute an occurrence of default under any
provision of any mortgage, deed of trust, conveyance to secure debt, note, loan,
lien, lease, agreement or instrument to which Purchaser is a party or by which
the Company, any Shareholder or any of their respective properties are bound; or
(c) constitute a violation of any law, regulation, order, writ, judgment,
injunction, or decree applicable to Purchaser or any of Purchaser's properties.
3.4 SEC FILINGS. True, correct and complete copies of the following
documents have been made available to the Shareholders: (i) Purchaser's Annual
Report on Form 10-K for the fiscal year ended 31 December 1996, as filed with
the Securities and Exchange Commission (the "SEC"); and (ii) Purchaser's
Quarterly Reports on Form 10-Q for the three-month periods ended 31 March 1997
and 30 June 1997, as filed with the SEC (collectively the "SEC Reports"). Since
30 June 1997, there has been no material adverse change in the condition
(financial or otherwise), assets, liabilities, business or operations of
Purchaser that is unique to the business of Purchaser and its consolidated
subsidiaries and that is required to be disclosed by applicable law or by the
rules of the Nasdaq National Market.
3.5 LITIGATION. There is no litigation, proceeding or governmental
investigation pending (which pending investigation Purchaser has received notice
of), or any judgment, order, injunction or decree outstanding, against Purchaser
or any officer, director or employee in his or her capacity as such of
Purchaser, and to Purchaser's knowledge, there is no such litigation, proceeding
or investigation threatened against Purchaser or any officer, director or
employee in his or her capacity as such of Purchaser that might adversely affect
the ability of Purchaser to purchase the Shares hereunder or to obtain financing
for such purchase of the Shares.
ARTICLE IV
COVENANTS AND UNDERTAKINGS
4.1 COVENANT NOT TO COMPETE. At Closing, each Accountable Shareholder
will enter into a Covenant Not to Compete with Purchaser and the Company
substantially in the form of attached EXHIBIT 4.1 (the "Covenants Not to
Compete").
4.2 EMPLOYMENT AGREEMENT. At Closing, ▇▇▇▇▇▇▇▇▇, the Company and
Purchaser shall enter into an Employment Agreement in substantially the form
attached hereto as EXHIBIT 4.2 (the "Employment Agreement").
4.3 INVESTMENT LETTER. At Closing, each Shareholder receiving Medirisk
Stock under Section 1.2 will execute and deliver to Purchaser an investment
letter with respect to the
-15-
16
Medirisk Stock to be delivered to such Shareholder at Closing in substantially
the form attached hereto as EXHIBIT 4.3 (the "Investment Letter").
4.4 SHAREHOLDER CONSENT. Each Shareholder shall execute and deliver a
Shareholder Consent and Power of Attorney substantially in the form of attached
EXHIBIT 4.4 (the "Shareholder Consent") appointing ▇▇▇▇▇▇▇▇▇ to act as his, her
or its attorney-in-fact for purposes of this Agreement and the obligations and
covenants of such Shareholder hereunder. In such capacity ▇▇▇▇▇▇▇▇▇ (and any
successor of ▇▇▇▇▇▇▇▇▇ in such capacity as provided in the Shareholder Consent)
is referred to in this Agreement as the "Shareholders' Representative."
4.5 CONSENTS AND APPROVALS. Each Shareholder agrees to use his, her or
its best efforts to obtain the waiver, consent and approval of all persons whose
waiver, consent or approval is required in order to consummate the transactions
contemplated by this Agreement, or is required by any agreement, lease,
instrument, arrangement, judgment, decree, order or license to which the Company
or any Shareholder is a party or subject that would prohibit, or require the
waiver, consent or approval of any person to such transactions, or under which
the consummation of such transactions would constitute (or with notice or lapse
of time would constitute) an event of default.
4.6 CONDUCT OF THE BUSINESS PRIOR TO CLOSING. Except with the written
consent of Purchaser and except as may be required to effect the transactions
contemplated by this Agreement, between 1 August 1997 and the earlier of (i)
Closing and (ii) the termination of this Agreement, the Shareholder will cause
the Company to (a) make no distributions of its assets; (b) conduct the
operations of the Company in the ordinary course of business; (c) keep and
maintain the properties and facilities of the business of the Company in good
condition, repair and working order, reasonable wear and tear excepted, and
fully insured for liability and property damages; (d) use its reasonable best
efforts to preserve intact the business of the Company; (e) use its reasonable
best efforts to retain the service of its employees, agents and consultants
involved with or employed by the Company on terms and conditions not less
favorable than those existing prior to the execution of this Agreement; (f)
cooperate with Purchaser's representatives (without disclosure of this Agreement
or the contemplated sale to the Company's employees, customers or suppliers
without the consent of Purchaser) in reviewing facts and establishing and
implementing procedures necessary to effect the sale of the Stock as
contemplated by this Agreement; (g) conduct its activities in a manner
consistent with this Agreement; (h) not enter into, assume or make any contract,
loan, license, designation, loan commitment, purchase, sale or disposition of
assets of the Company outside the ordinary course of business; (i) except for
mailing invoices in the ordinary course of business, not contact any customer
regarding collection of any account receivable and not discount any account
receivable; (j) not declare any dividend or distribution; and (k) promptly
advise Purchaser in writing of any material adverse change in the Company's
financial condition or business affairs.
4.7 TERMINATION OF EMPLOYMENT AGREEMENTS. Each Shareholder agrees that
any employment or management agreement to which he, she or it is a party with
the Company is hereby terminated effective at the Closing, and the Company will
have no liability or obligation thereunder of any nature or kind from and after
the Closing Date.
-16-
17
4.8 RESIGNATIONS. As of the Closing Date, each Shareholder hereby
resigns as a director of the Company and hereby resigns from any officer
positions held by such Shareholder with the Company.
4.9 REGISTRATION RIGHTS AGREEMENT. At the Closing, each Shareholder who
is to receive Medirisk Stock at Closing and Purchaser will enter into a
Registration Rights Agreement substantially in the form of attached EXHIBIT 4.9
(the "Registration Rights Agreement").
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions:
5.1 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by the Shareholders in this Agreement or any
document or instrument delivered to Purchaser or its representatives hereunder
shall be true and correct on the Closing Date with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date. Each Shareholder shall have duly performed all of the agreements,
covenants, acts and undertakings to be performed by such Shareholder on or prior
to the Closing Date. Each Shareholder shall deliver to Purchaser a certificate,
dated the Closing Date, as to the satisfaction of the conditions set forth in
this Section 5.1.
5.2 NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement or the consummation of the transactions
contemplated hereby, or which is related to or arises out of the business of the
Company, if such action, proceeding, investigation, regulation or legislation,
in the judgment of Purchaser, would make it inadvisable to consummate such
transactions or would have a material adverse effect on the Company or its
assets or business.
5.3 NO MATERIAL ADVERSE CHANGE. There shall not have been any material
adverse change in the business, assets, liabilities or condition, financial or
otherwise, of the Company between the date of the Interim Financial Statements
and the Closing Date. In addition, the cash and accounts receivable of the
Company as of the Closing shall be not less than Seven Hundred Thousand and
No/100 ($700,000.00) in the aggregate.
5.4 CONSENTS. The Shareholders shall have delivered to Purchaser the
written consents of third parties and all governmental consents and approvals,
if any, referred to in
-17-
18
Section 4.5 hereof, which consents shall be in form, scope and substance
reasonably satisfactory to Purchaser and its counsel.
5.5 GOOD STANDING CERTIFICATE. Purchaser shall have received a
Certificate of Existence or Good Standing from the State of New York, and from
each other state in which the Company is qualified to transact business as a
foreign corporation, with respect to the Company as of the most recent practical
date prior to the Closing Date.
5.6 DUE DILIGENCE. Purchaser shall in all respects be satisfied in its
discretion with the results of its due diligence investigation of the Company
and its assets and business.
5.7 OPINION OF COUNSEL. Purchaser shall have received an opinion of
counsel to the Shareholders substantially in the form of attached EXHIBIT 5.7.
ARTICLE VI
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE SHAREHOLDERS TO CLOSE
The obligations of the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions:
6.1 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by Purchaser in this Agreement or any
document or instrument delivered to the Shareholders or their representatives
hereunder shall be true and correct on the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
such date. Purchaser shall have duly performed all of the agreements, covenants,
acts and undertakings to be performed by it on or prior to the Closing Date.
Purchaser shall deliver to the Shareholders a certificate, dated the Closing
Date, as to the satisfaction of the conditions set forth in this Section 6.1.
6.2 NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain,
prohibit, or obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement or the consummation of the transactions
contemplated hereby.
-18-
19
ARTICLE VII
CLOSING
7.1 TIME AND PLACE OF CLOSING.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement will be held on 28 August 1997 or such other date
as the parties may agree. The Closing shall commence at 10:00 a.m. at the
offices of Medirisk, Inc., Two Piedmont Center, Suite 400, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or at such other time or place upon which the
parties agree. The date on which Closing occurs shall be referred to as the
"Closing Date". Unless the parties otherwise agree in writing, the transactions
contemplated by this Agreement will be deemed closed as of 12:01 a.m. on the day
after the Closing Date.
(b) The parties hereto agree that should the Closing occur,
the effective time and date of the transactions solely for accounting purposes
shall be 11:59 p.m., Eastern Time on 1 August 1997. By way of explanation, the
parties intend, in light of the control of the business of the Company exerted
by Purchaser from and after 1 August 1997, that all revenue generated after 31
July 1997 shall be for the benefit of Purchaser. The parties acknowledge that
while for accounting purposes the effective date of the transaction shall be 1
August 1997, no obligations that accrue under contracts or agreements prior to
the Closing Date and no accrued liabilities of the Company shall be assumed,
directly or indirectly, by Purchaser except as and when the Stock is purchased
hereunder, that no employees or other agents of the Company shall directly or
indirectly become employees or other agents of Purchaser for any period prior to
the Closing Date, and that all covenants, representations and warranties in the
certificates to be provided by the Shareholders pursuant to Section 5.1 shall be
made and dated as of the Closing Date.
7.2 TRANSACTIONS AT CLOSING. At the Closing:
(a) Each of the Shareholders shall deliver to Purchaser
certificates for the Stock sold by such Shareholder to Purchaser, duly endorsed
for transfer or accompanied by blank stock powers;
(b) The Shareholders shall deliver or cause to be delivered to
Purchaser Certificates of Good Standing of the Company, as of the most recent
practicable date, as contemplated by Section 5.5;
(c) As contemplated by Section 4.1, Purchaser and each of the
Applicable Shareholders shall respectively execute and deliver to the other
their respective Covenants Not to Compete;
(d) As contemplated by Section 4.2, Purchaser and ▇▇▇▇▇▇▇▇▇
shall mutually execute and deliver to each other the Employment Agreement;
(e) As contemplated by Section 4.3, each of the Shareholders
shall execute and deliver to Purchaser an Investment Letter;
(f) As contemplated by Section 4.4, each of the Shareholders
shall execute and deliver to Purchaser a Shareholder Consent;
(h) The Shareholders shall execute and deliver the
certificates contemplated
-19-
20
by Section 5.1;
(i) Purchaser shall pay $4,116,409.25 by wire transfer to the
Shareholders and/or Shareholders' Representative for his or her distribution to
the Shareholders, as provided in Section 1.2 and as allocated among the
Shareholders as provided in SCHEDULE 1.2;
(j) Purchaser shall (as soon as practicable after the Closing)
deliver share certificates for the Medirisk Stock to the Shareholders'
Representative for his or her distribution to the Shareholders, as provided in
Section 1.2 and as allocated among the Shareholders as provided in SCHEDULE 1.2;
and
(k) Purchaser shall execute and deliver the Registration
Rights Agreement as specified in Section 4.9.
7.3 TRANSACTIONS FOLLOWING CLOSING. Within sixty (60) days after
Closing Purchaser and the Shareholders shall, and shall use commercially
reasonable efforts to cause the Indemnity Escrow Agent (as defined in Section
8.4 below) to, execute and deliver the Indemnity Escrow Agreement (as defined
and specified in Section 8.4 below).
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND
PURCHASER AND INDEMNITY.
(a) All representations, warranties, agreements, covenants and
obligations made or undertaken by the Purchaser and Shareholders in this
Agreement or in any document or instrument executed and delivered pursuant
hereto shall survive the Closing hereunder and shall not merge in the
performance of any obligation by any party hereto.
(b) Subject to the provisions of this Article VIII, each
Shareholder, jointly and severally, agrees to indemnify and hold Purchaser
harmless from and against all liability, loss, damages or injury and all
reasonable costs and expenses (including reasonable counsel fees and costs of
any suit related thereto) suffered or incurred by Purchaser arising from any
misrepresentation by, or breach of any covenant or warranty of, any Shareholder
contained in this Agreement, or any misrepresentation in any certificate or
other instrument furnished or to be furnished by any Shareholder hereunder.
(c) Subject to the provisions of this Article VIII, Purchaser
agrees to indemnify and hold each Shareholder harmless from and against all
liability, loss, damage or injury and all reasonable costs and expenses
(including reasonable counsel fees and costs of any suit related thereto)
suffered or incurred by such Shareholder arising from any misrepresentation by,
or breach of any covenant or warranty of, Purchaser contained in this Agreement
or any
-20-
21
misrepresentation in or omission from any certificate or instrument furnished or
to be furnished by Purchaser hereunder.
8.2 NOTICE OF ASSERTED LIABILITY. Promptly after receipt by an
indemnified party hereunder of notice of any demand, claim or circumstances
which, with or without the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a loss subject to
indemnification under this Agreement, such indemnified party shall give notice
thereof (the "Claims Notice") to the indemnifying party. The Claims Notice shall
describe the Asserted Liability in reasonable detail and shall indicate the
amount (estimated, if necessary) of the loss that has been or may be suffered by
such indemnified party.
8.3 OPPORTUNITY TO DEFEND. The indemnifying party may elect (with the
Shareholders being deemed one indemnifying party that acts through the
Shareholders' Representative in making such election and taking all other
actions specified in this Article VIII) to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability; provided, however, that
the indemnifying party may not compromise or settle any Asserted Liability
without the consent of the indemnified party unless such compromise or
settlement requires no more than a monetary payment for which the indemnified
party hereunder is fully indemnified or involves other matters not binding upon
the indemnified party and such compromise or settlement includes an
unconditional release of the indemnified party. If the indemnifying party elects
to compromise or defend such Asserted Liability, the Shareholders'
Representative or Purchaser shall within ten (10) ten business days after
receipt of notice thereof (or sooner, if the nature of the Asserted Liability so
requires) notify the indemnified party of his or its intent to do so, and the
indemnified party shall cooperate, at the expense of the indemnifying party with
respect to out-of-pocket expenses of the indemnified party, in the compromise of
or defense against such Asserted Liability. The assumption of the defense of a
matter by an indemnifying party shall be deemed an admission by such
indemnifying party of its obligation to indemnify the indemnified party
hereunder with respect to such claim. If the indemnifying party elects not to
compromise or defend the Asserted Liability, fails to notify the indemnified
party of its election as herein provided or contests its obligation to
indemnify, the indemnified party or parties may pay, compromise or defend such
Asserted Liability in respect of any Asserted Liability for which the
indemnifying party may have an indemnification obligation. In any event, the
indemnified party and the indemnifying party may participate in the defense of
such Asserted Liability in respect of any Asserted Liability for which the
indemnifying party may have an indemnification obligation; provided that if the
indemnifying party assumes the defense and compromise of such Asserted Liability
as provided above, then the indemnified party shall bear any expenses incurred
in participating in such defense from and after the assumption of the defense
thereof by the indemnifying party.
8.4 WITHHOLDING AND OFFSET. In addition to any other rights or remedies
Purchaser may have, it shall, subject to compliance with Sections 8.2 and 8.3
hereof, be entitled to (i) withhold from the payments due under clause (iii) of
Section 1.2 the amount of any and all liabilities, losses, damages, injuries,
costs, expenses and counsel fees that it has sustained or that it reasonably
believes may be sustained on account of an indemnified loss that Purchaser
believes
-21-
22
may be sustained on account of a specific allegation made by or against the
Company or Purchaser and (ii) to offset from such withheld amount any amount
ultimately determined to be due and owing to Purchaser by way of indemnification
pursuant to this Article VIII. Purchaser shall not be liable for breach of this
Agreement on any amounts so withheld and set off. Purchaser shall withhold and
set off against all payments due under clause (iii) of Section 1.2 in the
proportion that the original amount due under such clause (iii) to each
Shareholder bears to the aggregate original amount due under such clause (iii).
If the withholding of payments under this Section 8.4 has been based on a
reasonable belief of a future claim due to a specific allegation, Purchaser
shall pay said amount withheld which has not been offset pursuant to the
preceding sentence within one year of giving the written notification of such
claim to the Shareholders' Representative, unless a lawsuit, arbitration or
administrative proceeding based on such claim shall have been commenced within
said one-year period. If such a lawsuit, arbitration or administrative
proceeding has commenced within said one-year period, then Purchaser shall pay
within ninety (90) days after a final determination under such lawsuit,
arbitration or administrative proceeding, the difference if any, between said
withheld amount and the amount of any liability, loss, damage or injury actually
sustained, if the withheld amount is larger plus interest on the amount
overwithheld at the prime rate of NationsBank, N.A., Atlanta, Georgia, then in
effect. Notwithstanding the foregoing, if Purchaser withholds payments due under
Section 1.2(iii), Purchaser shall pay to the Indemnity Escrow Agent (as
hereinafter defined) all said amounts withheld on the date on which such payment
is due under Section 1.2(iii), said amount to be held and disbursed in
accordance with the terms of the Indemnity Escrow Agreement (as hereinafter
defined). Within sixty (60) days after Closing, Purchaser, the Shareholders and
The Bank of New York, N.A. (the "Indemnity Escrow Agent") shall enter into an
Indemnity Escrow Agreement (the "Indemnity Escrow Agreement") substantially in
the form of EXHIBIT 8.4 attached hereto.
8.5 NO CLAIM AGAINST COMPANY. Since following the Closing the Company
will be owned by Purchaser, the parties agree that the Shareholders will have no
right of reimbursement or contribution against the Company on account of any
indemnified loss hereunder, and any liability, loss, damage or injury suffered
or incurred by the Company against which Purchaser is indemnified and held
harmless as provided in Section 8.1 of this Agreement shall be deemed suffered
by Purchaser, which shall, either independently or jointly with the Company, be
entitled to enforce such indemnity.
8.6 LIMITATIONS.
(a) Notwithstanding the provisions of Section 8.1(b) above,
the Shareholders shall not be required to make any indemnification payments
under Section 8.1(b) until the aggregate amount of losses suffered by Purchaser
that are subject to indemnification under such Section exceed $50,000.00 (the
"Minimum Indemnity Amount"), at which time claims may be asserted for all
amounts up to and in excess of the Minimum Indemnity Amount.
(b) Notwithstanding the provisions of Section 8.1(b) above,
and except for any liability, loss, damage, injury or claim resulting from a
breach of the covenants, representations and warranties set forth in Article I
or Sections 2.1, 2.2, 2.3, 2.9. 2.12 and 2.13,
-22-
23
the maximum aggregate liability of Shareholders for indemnification under this
Agreement shall be equal to the Purchase Price.
(c) Notwithstanding the provisions of Section 8.1(c) above,
and except for any liability, loss, damage, injury or claim resulting from a
breach of the covenants, representations and warranties set forth in SCHEDULE
1.2(iii) or Sections 3.1 and 3.2, the maximum aggregate liability of Purchaser
for indemnification under this Agreement shall be equal to the Purchase Price.
(d) Notwithstanding the provisions of Section 8.1 above, no
claim for indemnification under this Agreement may be made after 31 August 1999,
unless notice of such claim or the facts underlying it is given to the
indemnifying party prior to 31 August 1999; provided, however, that the
foregoing restriction shall not apply with respect to (i) any liability, loss,
damage, injury or claim by Purchaser resulting from a breach of the covenants,
representations and warranties set forth in Sections 2.1, 2.2, 2.3, 2.9, 2.12 or
2.13, and (ii) any liability, loss, damage, injury or claim by the Shareholders
resulting from a breach of the covenants, representations and warranties set
forth in SCHEDULE 1.2(iii) and Sections 3.1 and 3.2; provided further that any
claim based upon any of the matters described in subsection (i) or (ii) may be
brought at any time, subject to any applicable statutes of limitation.
(e) Notwithstanding any provision of this Article VIII to the
contrary, each of the Shareholders' respective obligations hereunder to
indemnify Purchaser shall be limited to the portion of the Purchase Price
actually received by them.
ARTICLE IX
TERMINATION
9.1 METHOD OF TERMINATION. This Agreement and the transactions
contemplated by it may be terminated at any time prior to the Closing Date:
(a) By the mutual consent of the Shareholders' Representative
and Purchaser;
(b) By the Shareholders' Representative after 31 August 1997
if Purchaser shall (i) fail to perform in any material respect its agreements
contained herein required to be performed by it on or prior to the Closing Date,
or (ii) materially breach any of its representations, warranties or covenants
contained herein;
(c) By Purchaser after 31 August 1997, if any Shareholder
shall (i) fail to perform in any material respect his, her or its agreements
contained herein required to be performed by him, her or it on or prior to the
Closing Date, or (ii) materially breach any of his, her or its representations,
warranties or covenants contained herein;
(d) By the Shareholders' Representative or Purchaser at any
time after 31
-23-
24
August 1997 if the Closing shall not have occurred for any reason on or prior to
31 August 1997.
(e) By either Purchaser or the Shareholders' Representative if
there shall be any order, writ, injunction or decree of any court or
governmental or regulatory agency binding on Purchaser, the Company or any
Shareholder, which prohibits or restrains Purchaser and/or any Shareholder from
consummating the purchase and sale of the Stock hereunder from the Shareholders,
provided that Purchaser and the Shareholders shall have used their reasonable
best efforts to have any such order, writ, injunction or decree lifted and the
same shall not have been lifted within ten (10) business days after entry, by
any such court or governmental or regulatory agency.
9.2 NOTICE OF TERMINATION. Notice of termination of this Agreement, as
provided for in this Article IX, shall be given by the parties so terminating to
the other parties hereto in accordance with Section 10.1 of this Agreement.
9.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 9.1 hereof, this Agreement shall become void and of no further force and
effect, and each party shall pay the costs and expenses incurred by it in
connection with this Agreement; and, provided the Agreement was not terminated
pursuant to subparagraph (b) or (c) of Section 9.1, no party (or any of its
officers, directors, employees, agents, representatives or shareholders) shall
be liable to any other party for any costs, expenses, damages (direct or
indirect) or loss of anticipated profits. If, however, this Agreement is
terminated pursuant to subparagraphs (b) or (c) of Section 9.1, this Section 9.3
shall not relieve a breaching or defaulting party from any liability to the
other party.
9.4 RISK OF LOSS. The Company and the Shareholders shall bear all risk
of condemnation, destruction, loss or damage due to fire or other casualty from
the date of this Agreement through the Closing. If the condemnation,
destruction, loss or damage is such that the business of the Company is
interrupted or curtailed or the assets of the Company are materially affected,
then Purchaser shall have the right to terminate this Agreement. If the
condemnation, destruction, loss or damage is such that the business is neither
interrupted nor curtailed or the assets are not materially affected, or if the
business of the Company is curtailed or interrupted or the assets are materially
affected and Purchaser nevertheless forgoes the right to terminate this
Agreement, then the purchase price shall be adjusted at Closing to reflect such
condemnation, destruction, loss or damage to the extent that insurance proceeds
are not sufficient to cover such destruction, loss or damage. If Purchaser, on
the one hand, and the Shareholders, on the other, are unable to agree upon the
amount of such adjustment, then the dispute shall be resolved jointly by the
independent accounting firms then employed by the Company and Purchaser, and if
said accounting firms do not agree, they shall appoint a nationally recognized
accounting firm to make such determination, whose determination of the dispute
shall be final and binding. The fees and expenses of such nationally recognized
accounting firm shall be borne one-half by Purchaser and one-half by
Shareholders.
-24-
25
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. (a) All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
facsimile or mailed by nationally recognized overnight delivery service or by
registered or certified mail, return receipt requested, first class postage
prepaid, addressed as follows:
If to any Shareholder:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq., Shareholders' Representative
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-25-
26
With a copy (which shall not constitute notice) to:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser:
Medirisk, Inc.
Two Piedmont Center, Suite 400
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Legal Department
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If delivered personally or by facsimile, the date on which
a notice, request, instruction or document is delivered shall be the date on
which such delivery is made and, if delivered by mail, the date on which such
notice, request, instruction or document is received shall be the date of
delivery.
(c) Any party hereto may change its address specified for
notices herein by designating a new address by notice in accordance with this
Section 10.1.
10.2 BROKERS. Purchaser represents and warrants to Shareholders, and
Shareholders jointly and severally represent and warrant to Purchaser, that,
except as disclosed in SCHEDULE 10.2, no broker or finder has acted for it or
them or any entity controlling, controlled by or under common control with it or
them in connection with this Agreement.
10.3 FURTHER ASSURANCES. Each party covenants that at any time, and
from time to time, after the Closing, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
10.4 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
10.5 EXPENSES. All expenses incurred by the parties hereto in
connection with or related to the authorization, preparation and execution of
this Agreement and the Closing of the
-26-
27
transactions contemplated hereby, including, without limitation of the
generality of the foregoing, all fees and expenses of agents, representatives,
counsel and accountants employed by any such party, shall be borne solely and
entirely by the party which has incurred the same. The Shareholders agree that,
except for an amount not to exceed Fifteen Thousand and No/100 ($15,000.00)
Dollars to be paid to the Company's independent accountants, ▇▇▇▇▇▇▇ & Sage,
Certified Public Accountants, P.C., Great Neck, New York, the Company shall not
pay any expenses in connection with or related to the authorization, preparation
and execution of this Agreement or the Closing of the transactions contemplated
hereby and that, if the Company pays any such expenses, Shareholders shall
promptly reimburse the Company for any amount so paid.
10.6 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns.
10.7 HEADINGS. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
10.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes and cancels any prior agreements,
representations, warranties, or communications, whether oral or written, among
the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
10.10 ATTORNEYS' FEES. If any sums due and owing under this Agreement
are collected by or with the assistance of legal counsel, or if any party brings
suit of any type against another arising from this Agreement and prevails in
such action, then the losing party shall be liable to the prevailing party, and
shall promptly remit to the prevailing party upon demand, all of the prevailing
party's reasonable costs and expenses incurred with respect thereto, including
without limitation court costs and reasonable attorneys' fees.
10.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Document Continued On Next Page]
-27-
28
10.12 PRONOUNS. All pronouns used herein shall be deemed to refer to
the masculine, feminine or neuter gender as the context requires.
IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
PURCHASER:
MEDIRISK, INC.
By: /s/
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Executive Vice President &
Chief Financial Officer
SHAREHOLDERS:
/s/
-----------------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
LONGBOW PARTNERS
By: /s/
--------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
General Partner
/s/
-----------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/
-----------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Signatures Continued On Next Page]
-28-
29
/s/
-----------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/
-----------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
As Trustee for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, a Minor
/s/
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
As Trustee for ▇▇▇▇▇▇ ▇▇▇▇▇▇, a Minor
/s/
-----------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
As Trustee for ▇▇▇▇ ▇▇▇▇▇▇▇, a Minor
/s/
-----------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
As Trustee for ▇▇▇ ▇▇▇▇▇▇▇, a Minor
-29-