MERGER AGREEMENT
AGREEMENT dated as of October 1, 1996, by and among HEALTHCARE
CAPITAL CORP., a corporation organized under the laws of the Province of
Alberta, Canada ("HealthCare"), and HEARING CARE ASSOCIATES - GLENDALE, INC., a
California corporation ("Glendale"), HEARING CARE ASSOCIATES - GLENDORA, INC., a
California corporation ("Glendora"), and HEARING CARE ASSOCIATES - NORTHRIDGE,
INC., a California corporation ("Northridge"); Glendale, Glendora, and
Northridge are hereinafter referred to from time to time as the "HCA
Corporations" and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (the
"Shareholders").
RECITALS
A. The Shareholders own all the issued and outstanding capital
stock of the HCA Corporations.
B. The HCA Corporations operate audiology and hearing aid
clinics in the greater Los Angeles, California, metropolitan area which perform
testing and evaluation of patients' hearing, prescribe and fit hearing aids, and
provide related services and products.
C. HealthCare and the HCA Corporations and the Shareholders
desire that HealthCare acquire the HCA Corporations through a merger of the HCA
Corporations into HealthCare Hearing Clinics, Inc., a Washington corporation
("Newco"), which is a wholly owned subsidiary of HealthCare. The parties intend
such merger to qualify as a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
TERMS
In consideration of the premises and the covenants of the
parties set forth herein and subject to all the terms and conditions set forth
herein, the parties agree as follows:
1. MERGER
1.1 AGREEMENT AND PLAN OF MERGER. The parties agree that the HCA
Corporations shall be merged into Newco pursuant to an Agreement and Plan of
Merger prepared in accordance with Section 1101 of the California General
Corporation Law and Section 23B.11.010 of the Washington Business Corporation
Act which shall be in the form of SCHEDULE 1.1 attached hereto (the "Agreement
and Plan of Merger"). The merger of the HCA Corporations into Newco (the
"Merger") shall be on the terms set forth in the Agreement and Plan of Merger
and in this Agreement.
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1.2 MANNER OF MERGER. Upon the consummation of the Merger:
(a) Newco shall be the surviving corporation (the "Surviving
Corporation") and shall continue its existence as a Washington
corporation under the name "HealthCare Hearing Clinics, Inc.";
(b) The separate corporate existences of the HCA Corporations
shall terminate;
(c) The presently issued and outstanding shares of the stock
of the HCA Corporations shall be converted into shares of the common
stock of HealthCare as provided in Section 1.4(a),(b), and (c) hereof;
and
(d) The presently issued and outstanding stock of Newco shall
be converted into shares of the stock of Newco as provided in Section
1.4(d) hereof.
1.3 CONSUMMATION. The consummation of the Merger shall take place on
the Closing Date (as defined in Section 2.1 hereof). The Merger shall be
consummated by filing
(a) A copy of the California Merger Agreement accompanied by
an appropriate officer's certificate with the Secretary of State of the
state of California; and
(b) Articles of Merger with the Secretary of State of the
state of Washington.
The term "Effective Time" shall mean the time when the second of the two filings
is completed and the Merger becomes effective.
1.4 CONVERSION OF SHARES. The basis for converting and exchanging the
issued and outstanding shares of the HCA Corporations and Newco upon the
consummation of the Merger will be as follows:
(a) The 400 issued and outstanding shares of Glendale which
are owned as follows:
SHAREHOLDER NUMBER OF GLENDALE SHARES
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 200
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 200
Total 400
shall, as of the Effective Time by virtue of the Merger and without any
action on the part of the holders thereof, be converted into and
exchanged for 506,181 shares of the common stock of HealthCare and cash
in the total amount of $68,364 so that immediately
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following Effective Time the Shareholders named below shall become
holders of HealthCare common stock ("HealthCare Shares") and cash as
follows:
SHAREHOLDER HEALTHCARE SHARES CASH
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 253,091 $34,182
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 253,091 34,182
------- -------
Total 506,182 $68,364
(b) The 2,000 issued and outstanding shares of Glendora which
are owned as follows:
SHAREHOLDER NUMBER OF GLENDORA SHARES
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 2,000
shall, as of the Effective Time by virtue of the Merger and without any
action on the part of the holders thereof, be converted into and
exchanged for 45,000 shares of the common stock of HealthCare and cash
in the amount of $9,500 so that immediately following Effective Time
the Shareholders named below shall become holders of HealthCare Shares
and cash as follows:
SHAREHOLDER HEALTHCARE SHARES CASH
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 45,000 $9,500
(c) The 200 issued and outstanding shares of Northridge which are owned as
follows:
SHAREHOLDER NUMBER OF NORTHRIDGE SHARES
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 100
▇▇▇▇ ▇▇▇▇▇▇▇▇ 100
Total 200
shall, as of the Effective Time by virtue of the Merger and without any
action on the part of the holders thereof, be converted into and
exchanged for 1,838,354 shares of the common stock of HealthCare and
cash in the total amount of $236,859 so that
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immediately following Effective Time the Shareholders shall become
holders of HealthCare Shares and cash as follows:
SHAREHOLDER HEALTHCARE SHARES CASH
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 919,177 $118,430
▇▇▇▇ ▇▇▇▇▇▇▇▇ 919,177 118,430
------- --------
Total 1,838,354 $236,860
(d) Each share of Newco stock issued and outstanding at the
Effective Time shall, as of the Effective Time by virtue of the Merger
and without any action on the part of the holder thereof, be converted
into and exchanged for one share of the stock of the Surviving
Corporation.
1.5 ISSUANCE OF HEALTHCARE SHARE CERTIFICATES. At the Closing
each holder of a certificate or certificates representing shares of stock of the
HCA Corporations issued and outstanding at the Effective Time (other than
treasury shares) shall surrender such certificate or certificates duly endorsed
as HealthCare may require and shall receive in exchange therefore a certificate
or certificates representing 75 percent of the number of HealthCare Shares into
which the stock of the HCA Corporations theretofore represented by the
certificate or certificates so surrendered shall have been converted and
exchanged as provided in Section 1.4 hereof. Certificates for the remaining 25
percent balance of such HealthCare Shares (the "Retained Shares") shall be held
and canceled or delivered as set forth in subsections 1.6(c), (d) or (e) below.
1.6 CLOSING BALANCE SHEET ADJUSTMENTS.
(a) Promptly after the Closing Date, the HCA Corporations will
prepare balance sheets (the "Closing Balance Sheets") as of the close
of business on the Closing Date. The Closing Balance Sheets will be
prepared on an accrual basis in accordance with generally accepted
accounting principals except to the extent set forth in this Subsection
1.6(a) and shall be audited by a certified public accounting firm
approved by HealthCare. The Closing Balance Sheets shall include
accruals for liabilities as of the Closing Date, including but not
limited to, all applicable taxes (including income taxes for the
current period through Closing Date) and salaries, wages, and benefits
(including any outstanding bonuses but excluding sick and vacation pay
entitlements as set forth on SCHEDULE 3.13 of the Disclosure Schedule
as defined in Section 6.5 hereof). In preparing the Closing Balance
Sheets, (i) all hearing aids ordered but not fitted to the patient as
of the Closing Date will not be deemed sold and will not be included in
sales or Closing Balance Sheet accounts receivable, and (ii) all
payments made by the HCA Corporations with respect to such hearing aid
orders shall be treated as prepaid items. The Closing Balance Sheets
shall be subject to review and reasonable approval by HealthCare.
(b) When the Closing Balance Sheets have been prepared and
approved by HealthCare, the "Net Current Assets" of each HCA
Corporation shall be determined.
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"Net Current Assets" shall equal (i) cash, money market accounts,
accounts receivable (net of reasonable provisions for doubtful
accounts), and prepaid expenses less (ii) all current liabilities
(including but not limited to trade accounts payable, accrued expenses
and supplier loans).
(c) The HCA Corporations shall have "Target Net Current
Assets" as follows:
(i) Glendale - $95,000; (ii) Glendora -($11,000); and
(iii) Northridge - $417,200.
To the extent that the Net Current Assets of an HCA Corporation as
shown on its Closing Balance Sheet exceed such HCA Corporation's Target
Net Current Assets, HealthCare shall either (i) issue to the
Shareholders in the aggregate one HealthCare Share for each dollar (all
dollar references herein are to United States dollars) of such excess
or (ii) pay to the shareholders one dollar for each dollar of such
excess. Such HealthCare Shares or cash shall be apportioned among the
Shareholders pro rata based upon their holdings of the shares of the
applicable HCA Corporation. To the extent that an HCA Corporation's
Closing Balance Sheet Net Current Assets are less than such
corporation's Target Net Current Assets, the Shareholders shall elect
either (i) to cancel Retained Shares in an aggregate amount equal to
one share for each dollar of the shortfall or (ii) to pay to HealthCare
one dollar for each dollar of shortfall. The Retained Shares canceled
or the repayment shall be apportioned among the Shareholders pro rata
based upon each Shareholder's holdings of the shares of the HCA
Corporation with respect to which cancellation or repayment is
required. Fractional HealthCare Shares resulting from any of the
foregoing calculations shall be rounded up to the nearest whole share.
(d) At the Closing Date, the HCA Corporations shall have no
long term debt (with the exception of a promissory note of Northridge
in the aggregate principal amount of $56,898 payable to ▇▇▇▇▇▇▇ Labs)
or any other forms of noncurrent liabilities. To the extent that the
Closing Balance Sheets disclose any such long term debt or noncurrent
liability other than such promissory note, Retained Shares shall be
canceled in an aggregate amount equal to one share for each dollar of
long term debt or noncurrent liability or, alternatively, the
Shareholders shall pay HealthCare one dollar for each dollar of
long-term debt or noncurrent liability. The Retained Shares canceled or
amount repaid shall be proportioned among the Shareholders as set forth
in Section (c) above.
(e) When the requirements of Subsections 1.3(c) and (d) have
been implemented, an amount equal to 60 percent of the Retained Shares
less any shares canceled pursuant to Subsections 1.6(c) and (d) shall
be delivered to the Shareholders. On the 200th day following the
Closing Date (with the exception of those accounts receivable listed on
SCHEDULE 1.6(E) for which the applicable collection period shall be 365
days), one Retained Share shall be canceled for each dollar of the
accounts receivable shown on the Closing Balance Sheet which remains
uncollected in excess of the reserves for doubtful accounts set out on
the Closing Balance Sheet and any remaining balance of the Retained
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Shares shall be delivered pro rata to the Shareholders, provided,
however, that the Shareholders may elect to reimburse HealthCare one
dollar for each dollar of uncollected accounts receivable shown on the
Closing Balance Sheets in lieu of such cancellation. Shareholders shall
promptly reimburse Healthcare one dollar for each dollar of accounts
receivable listed on SCHEDULE 1.6(E) which remains uncollected in
excess of the reserve for doubtful accounts as of the 365th day
following the Closing Date.
2. CLOSING
2.1 CLOSING DATE. The closing of the transaction provided for herein
(the "Closing") shall occur on October 1, 1996, or on such other date as the
parties may mutually agree (the "Closing Date"). Notwithstanding the foregoing,
HealthCare shall have the right to extend the Closing Date for up to 90 days if,
in its judgment, it becomes necessary to do so as a result of requirements of
the Province of Alberta, the Alberta Stock Exchange, United States or California
securities laws, regulations or rules. The Closing shall take place at the
offices of HealthCare at ▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, at such time as the parties shall mutually agree.
2.2 CLOSING TRANSACTIONS. At the Closing:
(a) HealthCare will deliver to the Shareholders:
(i) Certificates for HealthCare Shares as specified
in Section 1.5 hereof; and
(ii) The opinion of counsel referred to in Section
8.4;
(b) The Shareholders will deliver to HealthCare:
(i) Certificates for the shares of the HCA
Corporations listed in Section 1.4 hereof; and
(ii) Counterparts of the Noncompetition and
Confidentiality Agreements provided for in Section 5.1 hereof
duly executed by the Shareholders; and
(c) The Shareholders and HealthCare will deliver to each other
duly executed counterparts of the Employment Agreements provided for in
Section 6.1 hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except to the extent otherwise expressly set forth in the Disclosure
Schedule (as defined in Section 6.5 hereof), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ jointly and severally represent and warrant to HealthCare with respect
to Glendale and Glendora and the Shareholders jointly and
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severally represent and warrant to HealthCare with respect to Northridge that as
of the date hereof:
3.1 CORPORATE.
3.1(a) ORGANIZATION. The HCA Corporations are corporations
duly organized and existing under the laws of the state of California.
3.1(b) CAPITALIZATION. The authorized capital stock of each of
the HCA Corporations consists of a single class of common stock. The
number of authorized, issued, and outstanding shares of the HCA
Corporations are as follows:
(i) Glendale
Authorized: 2,000 shares
Issued and outstanding: 400 shares
(ii) Glendora
Authorized capital: 2,000 shares
Issued and outstanding: 2,000 shares
(iii) Northridge
Authorized capital: 10,000 shares
Issued and outstanding: 200 shares
All issued and outstanding shares of the HCA Corporations have been
validly issued and are fully paid and nonassessable. Each Shareholder
is the owner (beneficially and of record) of the number of shares of
the common stock of the HCA Corporations as set forth in section 1.4
hereof free and clear of all liens, claims, and encumbrances whatsoever
and such shares constitute all the outstanding shares of capital stock
of the HCA Corporations. Except for Buy-Out Agreements to which the
Shareholders are parties, no person has any agreement, option or other
right, present or future, to purchase or otherwise acquire any of the
shares of the HCA Corporations. Such Buy-Out Agreements will be
terminated effective as of the Closing Date.
3.1(c) CORPORATE POWER. The HCA Corporations have all
requisite corporate power and authority to own, operate and lease their
properties and to carry on their business as and where such is now
being conducted.
3.1(d) NO SUBSIDIARIES. The HCA Corporations do not own an
interest in any corporation, partnership or other entity.
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3.1(e) ARTICLES OF INCORPORATION; BYLAWS. The copies of the
HCA Corporations' articles of incorporation (certified by the Secretary
of State of California) and bylaws (certified by the HCA Corporations'
secretaries) which have heretofore been delivered to HealthCare are
complete and correct as amended or restated to the date hereof.
3.2 NO VIOLATION. Neither the execution and delivery of this Agreement
or the other documents and instruments to be executed and delivered by the HCA
Corporations or the Shareholders pursuant hereto, nor the consummation by the
Shareholders of the transactions contemplated hereby and thereby (a) will
violate any statute or law or any rule, regulation, order, writ, injunction or
decree of any court or governmental authority, (b) will require any
authorization, consent, approval, exemption or other action by or notice to any
court, administrative or governmental agency, instrumentality, commission,
authority, board or body or (c) will violate or conflict with, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or accelerate
the performance required by, or result in the creation of any material Lien (as
defined in Section 3.9(b)) upon any of the assets of the HCA Corporations under,
any term or provision of the articles of incorporation or bylaws of the HCA
Corporations or of any material contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which any of
the HCA Corporations is a party or by which any of the HCA Corporations or any
of the HCA Corporations' assets or properties or the shares of the HCA
Corporations may be bound or affected.
3.3 FINANCIAL STATEMENTS. The Shareholders have heretofore delivered to
HealthCare the following financial statements of the HCA Corporations including
balance sheets and statements of income (the "Financial Statements"):
(a) Financial statements for the HCA Corporations' 1993, 1994,
and 1995 fiscal years and where applicable the 1996 fiscal year; and
(b) Financial statements for the interim period ended August
31, 1996.
The Financial Statements are correct and complete in all material respects and
fairly present the financial condition of the HCA Corporations at the dates
indicated and results of their operations and changes in their financial
position for the periods then ended.
3.4 INVENTORY. The inventories of the HCA Corporations are of a quality
and quantity usable and salable in the ordinary course of business, have a
commercial value at least equal to the value shown on the HCA Corporations'
books.
3.5 ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
balance sheet included in the Financial Statements, there has not been:
3.5(a) ADVERSE CHANGE. Any material adverse change in the
financial condition, assets, liabilities, business, prospects or
operations of the HCA Corporations;
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3.5(b) DAMAGE. Any material loss, damage or destruction,
whether covered by insurance or not, affecting the HCA Corporations'
businesses or assets;
3.5(c) INCREASE IN COMPENSATION. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of the HCA Corporations (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit sharing, retirement or other plan or commitment), or any bonus
or other employee benefit granted, made or accrued;
3.5(d) LABOR DISPUTES. Any labor dispute or disturbance, other
than routine individual grievances which are not material to the
business, financial condition or results of operations of the HCA
Corporations;
3.5(e) COMMITMENTS. Any commitment or transaction by the HCA
Corporations (including, without limitation, any capital expenditure)
other than in the ordinary course of business consistent with past
practice;
3.5(f) DIVIDENDS. Any declaration, setting aside, or payment
of any dividend or any other distribution in respect of the HCA
Corporations' capital stock; any redemption, purchase or other
acquisition by the HCA Corporations of any capital stock of the HCA
Corporations, or any security relating thereto; or any other payment to
any Shareholder as a shareholder;
3.5(g) DISPOSITION OF PROPERTY. Any sale, lease or other
transfer or disposition of any properties or assets of the HCA
Corporations except for sales of inventory, consumption of supplies,
and nonmaterial dispositions of worn or broken parts and equipment in
the ordinary course of business;
3.5(h) INDEBTEDNESS. Any indebtedness for borrowed money
incurred, assumed or guaranteed by the HCA Corporations other than
changes in the HCA Corporations' lines of credit in the ordinary course
of business, except for loans to the HCA Corporations by the
Shareholders which loans shall be treated as provided in Section 6.7
hereof;
3.5(i) AMENDMENT OF CONTRACTS. Any entering into, amendment or
termination by the HCA Corporations of any contract, or any waiver of
material rights thereunder, other than in the ordinary course of
business;
3.5(j) LOANS, ADVANCES, OR CREDIT. Any loan or advance or any
grant of credit by the HCA Corporations; or
3.5(k) UNUSUAL EVENTS. Any other event or condition
specifically related to the HCA Corporations not in the ordinary course
of business which would have a material adverse effect on the assets or
the business of the HCA Corporations.
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3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
specifically disclosed in the most recent balance sheets included in the
Financial Statements or this Agreement, the HCA Corporations do not have any
liabilities other than commercial liabilities and obligations incurred since the
date of such balance sheet in the ordinary course of business consistent with
past practices none of which has or will have a material adverse effect on the
business, financial condition or results of operations of the HCA Corporations.
3.7 NO LITIGATION. There is no action, suit, arbitration, proceeding,
investigation or inquiry pending or to the knowledge of the Shareholders
threatened against the HCA Corporations, their directors (in such capacity),
their businesses or any of their assets, nor do the Shareholders know of any
such proceeding, investigation or inquiry threatened against the HCA
Corporations. The Disclosure Schedule identifies all actions, suits,
proceedings, investigations and inquiries to which the HCA Corporations have
been a party since January 1, 1993. Neither the HCA Corporations nor their
businesses or assets are subject to any judgment, order, writ or injunction of
any court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
3.8 COMPLIANCE WITH LAWS.
3.8(a) COMPLIANCE. The HCA Corporations (including each and
all of their operations, practices, properties and assets) are in
material compliance with all applicable federal, state, local and
foreign laws, ordinances, orders, rules and regulations (collectively,
"Laws"), including, without limitation, those applicable to
discrimination in employment, occupational safety and health, trade
practices, environmental protection, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement and
labor relations, and product advertising except to the extent any
noncompliance would not have a material adverse effect upon the assets
or the businesses of the HCA Corporations taken as a whole. The HCA
Corporations have not received notice of any violation or alleged
violation of, and are not subject to liability for past or continuing
violation of, any Laws. All reports and returns required to be filed by
the HCA Corporations with any governmental authority have been filed,
and were accurate and complete when filed except to the extent any
deficiency would not have a material adverse effect upon the assets or
the business of the HCA Corporations taken as whole.
3.8(b) LICENSES AND PERMITS. The HCA Corporations have
obtained all licenses, permits, approvals, authorizations and consents
of all governmental and regulatory authorities and all certification
organizations required for the conduct of their businesses (as
presently conducted) except to the extent failure to do so would not
have a material adverse effect upon the assets or the businesses of the
HCA Corporations taken as a whole. All such licenses, permits,
approvals, authorizations and consents are described in the Disclosure
Schedule and are in full force and effect. The HCA Corporations
(including their operations, properties and assets) are and have been
in compliance with all such permits and licenses, approvals,
authorizations and consents, except to the extent
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any noncompliance would not have a material adverse effect upon the
assets or the businesses of the HCA Corporations taken as a whole.
3.9 TITLE TO AND CONDITION OF PROPERTIES.
3.9(a) REAL PROPERTY. Except as set forth on the Disclosure
Schedule, the HCA Corporations do not own any interest in any real
property other than the leases referred to in Section 3.11(a) hereof.
3.9(b) PERSONAL PROPERTY. The HCA Corporations have good and
marketable title to all their assets, free and clear of all mortgages,
liens (statutory or otherwise), security interests, claims, pledges,
equities, options, conditional sales contracts, assessments, levies,
easements, covenants, reservations, restrictions, exceptions,
limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens"). All the HCA Corporations' tangible assets are
located at the business premises leased by the HCA Corporations and all
tangible assets located at such premises are owned by the HCA
Corporations.
3.9(c) CONDITION. All the HCA Corporations' tangible assets
are, taken as a whole, in good operating condition and repair, normal
wear and tear excepted.
3.9(d) LAND USE REGULATIONS. There are no condemnation,
environmental, zoning, land use, or other regulatory proceedings,
pending or, to the knowledge of the Shareholders, planned to be
instituted, that could detrimentally affect the ownership, use, or
occupancy of the real property presently occupied by the HCA
Corporations or the continued operation of the HCA Corporations'
business as they are presently being conducted.
3.10 INSURANCE. The HCA Corporations maintain policies of fire,
liability, product liability, workers compensation, health and other forms of
insurance with such coverage limits and deductible amounts as are reasonable and
prudent in light of the nature of its assets and the risks of its business.
3.11 CONTRACTS AND COMMITMENTS.
3.11(a) LEASES. Set forth in SCHEDULE 3.11(A) of the
Disclosure Schedule is a list of all real and personal property leases
to which the HCA Corporations are parties. Complete and correct copies
of each lease listed on the schedule, and all amendments thereto, have
heretofore been made available to HealthCare.
3.11(b) PURCHASE COMMITMENTS. Set forth in SCHEDULE 3.11(B) of
the Disclosure Schedule is a list of all agreements (written or oral)
between the HCA Corporations and third parties for the purchase of
goods and supplies by the HCA Corporations which individually call for
the payment by the HCA Corporations after the date hereof of more than
$1,000 or which obligate the HCA Corporations for a period extending
beyond
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December 31, 1996. Complete and correct copies of all such written
agreements have heretofore been made available to HealthCare.
3.11(c) SALES COMMITMENTS. Set forth in SCHEDULE 3.11(C) of
the Disclosure Schedule is a list and description of all presently
effective agreements (written or oral) between the HCA Corporations and
third parties for the distribution and sale of their products. Complete
and correct copies of all such written contracts have heretofore been
made available to HealthCare.
3.11(d) CONTRACTS WITH SHAREHOLDERS AND CERTAIN OTHERS. Except
for the employment relationships which exist between the Shareholders
and the HCA Corporations, the HCA Corporations have no agreement,
understanding, contract or commitment (written or oral) with any
Shareholder, or any relative of a Shareholder.
3.11(e) COLLECTIVE BARGAINING AGREEMENTS. The HCA Corporations
are not parties to any collective bargaining agreements with any union.
3.11(f) LOAN AGREEMENTS. Except as set forth on the Disclosure
Schedule, the HCA Corporations are not obligated under any loan
agreement, promissory note, letter of credit, or other evidence of
indebtedness as signatories, guarantors or otherwise.
3.11(g) GUARANTEES. The HCA Corporations have not under any
instrument which is presently effective guaranteed the payment or
performance of any person, firm or corporation, agreed to indemnify any
person or act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person.
3.11(h) RESTRICTIVE AGREEMENTS. The HCA Corporations are not
parties to nor are they bound by any agreement requiring them to assign
any interest in any trade secret or proprietary information, or
prohibiting or restricting them from competing in any business or
geographical area or soliciting customers or otherwise restricting them
from carrying on its business anywhere in the world.
3.11(i) OTHER MATERIAL CONTRACTS. The HCA Corporations are not
parties to any lease, license, contract (including without limitation
contracts with health maintenance organizations) or commitment of any
nature involving consideration or other expenditure in excess of
$1,000, or involving performance over a period of more than 90 days, or
which is otherwise individually material to the operations of the HCA
Corporations, except as set forth in SCHEDULE 3.11(I) of the Disclosure
Schedule.
3.11(j) NO DEFAULT. The HCA Corporations are not in default
under any lease, agreement, contract or commitment, nor has any event
or omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the
acceleration of any of the HCA Corporations' obligations or result in
the creation of any Lien on any of the assets owned, used or occupied
by the HCA Corporations. To the knowledge of the Shareholders, no third
party is in default
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under any lease, agreement, contract or commitment to which any of the
HCA Corporations is a party, nor has any event or omission occurred
which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder or give rise to an automatic
termination, or the right of discretionary termination thereof.
3.12 EMPLOYEE BENEFIT PLANS. Set forth in SCHEDULE 3.12 of the
Disclosure Schedule, is a description of all pension, profit sharing,
retirement, bonus, executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," severance agreements or
plans, vacation and sick leave plans including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee manuals, and
all written or binding oral statements of policies, practices or understandings
relating to employment, which are provided to, for the benefit of, or relate to,
any persons employed by the HCA Corporations. The items described in the
foregoing sentence are hereinafter sometimes referred to collectively as
"Employee Plans/Agreements." True and correct copies of all written Employee
Plans/Agreements, including all amendments thereto, have heretofore been
provided to HealthCare. The HCA Corporations are in compliance with and have
made all payments due under all Employee Plans/Agreements and with respect
thereto the HCA Corporations are in compliance with all applicable federal and
state laws and regulations. The HCA Corporations are not contributors to any
multi-employer pension plan which has an unfunded liability with respect to
benefits due its participants.
3.13 EMPLOYMENT COMPENSATION. Set forth in SCHEDULE 3.13 of the
Disclosure Schedule is a true and correct list of:
(a) All employees to whom the HCA Corporations are paying
compensation; and in the case of salaried employees such list
identifies the current annual rate of compensation for each employee
and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within
each such range;
(b) All amounts owed to employees of the HCA Corporations
(including the Shareholders) for accrued sick pay, vacation pay, and
bonus pay.
3.14 PATENTS, TRADEMARKS, ETC. Set forth in SCHEDULE 3.14 of the
Disclosure Schedule attached hereto is a list of all United States and foreign
trademarks, service marks, trade names, brand names, copyrights, including
registrations and applications, patent and patent applications, and employee
covenants and agreements respecting intellectual property ("Trade Rights") in
which the HCA Corporations now have any interest, specifying the basis on which
such Trade Rights are owned, controlled, used or held (under license or
otherwise) by the HCA Corporations, and also indicating which of such Trade
Rights are registered. All Trade Rights shown as registered in SCHEDULE 3.14 of
the Disclosure Schedule have been properly registered, all pending registrations
and applications have been properly made and filed and all annuity, maintenance,
renewal and other fees relating to registrations or applications are current. In
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order to conduct the business of the HCA Corporations, as such is currently
being conducted, the HCA Corporations do not require any Trade Rights that they
do not already have. The HCA Corporations are not infringing and have not
infringed on any Trade Rights of another in the operation of the business of the
HCA Corporations, nor to the knowledge of the Shareholders is any other person
infringing on the Trade Rights of the HCA Corporations. The HCA Corporations
have not granted any license or made any assignment of any Trade Right and no
other person has any right to use any Trade Right owned or held by the HCA
Corporations. The HCA Corporations do not pay any royalties or other
consideration for the right to use any Trade Rights of others. Except as set
forth in SCHEDULE 3.14 of the Disclosure Schedule, to the knowledge of
Shareholders, there are no inquiries, investigations or claims or litigation
challenging or threatening to challenge the HCA Corporations' right, title and
interest with respect to their continued use and right to preclude others from
using any Trade Rights of the HCA Corporations. To the knowledge of
Shareholders, all Trade Rights of the HCA Corporations are valid, enforceable
and in good standing, and there are no equitable defenses to enforcement based
on any act or omission of the HCA Corporations.
3.15 PRODUCT WARRANTY AND PRODUCT LIABILITY. Set forth in SCHEDULE 3.15
of the Disclosure Schedule is a true, correct and complete copy of the HCA
Corporations' standard warranty or warranties for sales of its products.
3.16 TAX MATTERS. The HCA Corporations have properly completed and
filed in correct form all federal, state, and other tax returns (including Forms
1099 and other informational returns) of every nature required to be filed by
them and have paid all taxes (whether or not requiring the filing of returns)
including all deficiencies, assessments, additions to tax, penalties and
interest of which notice has been received to the extent such amounts have
become due. The HCA Corporations have obtained all required Forms W-9. Complete
and correct copies of the HCA Corporations' federal and California income tax
returns for 1993, 1994, and 1995 have been delivered by the Shareholders to
HealthCare. All tax liabilities have been fully and properly reflected in the
Financial Statements. The income tax returns of the HCA Corporations have not
been examined by the Internal Revenue Service. There are no outstanding
agreements or waivers extending the statutory period of limitation for any
federal or state tax return of the HCA Corporations for any period. The HCA
Corporations have made all required deductions and payments and has properly
prepared and delivered all required documents in connection with the withholding
of taxes from the wages and other compensation of its employees. The HCA
Corporations have filed all sales/use tax returns and have paid all such taxes
for all states in which they have responsibility to do so. The HCA Corporations
have obtained and maintain, to the extent required by law, a current sales and
use tax exemption certificate for each customer to which it makes tax-exempt
sales.
3.17 KEY EMPLOYEES; BANK; ETC. Set forth in SCHEDULE 3.17 of the
Disclosure Schedule is a list showing:
(a) The names of all the HCA Corporations' officers and
directors;
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(b) The name of each bank at which the HCA Corporations have
(i) an account and the numbers of all accounts, (ii) a line of credit,
or (iii) a safe deposit box and the name of each person authorized to
draw thereon or have access thereto; and
(c) The name of each person holding a power of attorney from
the HCA Corporations and a summary of the terms thereof.
3.18 RECORDS. The books of account of the HCA Corporations fairly
reflect the items of income and expense and the assets, liabilities, and
accruals of their businesses and operations. The minute books and stock transfer
records of the HCA Corporations contain records which are complete and accurate
in all material respects of all minutes, consents of shareholders and directors,
all corporate actions, and all stock transfers of the HCA Corporations.
3.19 ADVERSE CONDITIONS. There are no conditions known to any
Shareholder with respect to the markets, products, facilities, or personnel of
the HCA Corporations which might materially adversely affect its business or
prospects other than such conditions as may affect the industry in which the HCA
Corporations participates as a whole.
3.20 DISCLOSURE. No representation or warranty by the Shareholders in
this Agreement, nor any statement, certificate, schedule or exhibit hereto
furnished or to be furnished by or on behalf of the Shareholders pursuant to
this Agreement, nor any document or certificate delivered to HealthCare pursuant
to this Agreement or in connection with transactions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits or
shall omit a material fact necessary to make the statements contained therein
not misleading.
4. REPRESENTATIONS AND WARRANTIES OF HEALTHCARE
HealthCare represents and warrants to the Shareholders as follows:
4.1 CORPORATE.
4.1(a) ORGANIZATION. HealthCare is a corporation duly
organized and validly existing under the laws of the Province of
Alberta, Canada.
4.1(b) CORPORATE POWER. HealthCare has all requisite corporate
power and authority to own, operate and lease its properties, to carry
on its business as and where such is now being conducted, to enter into
this Agreement and the other documents and instruments to be executed
and delivered by HealthCare pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
4.1(c) QUALIFICATION. HealthCare is duly licensed or qualified
to do business as a foreign corporation, and is in good standing, in
each jurisdiction wherein the character
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of the properties owned or leased by it, or the nature of its business,
makes such licensing or qualification necessary.
4.2 CAPITALIZATION. The authorized and issued capital stock of
HealthCare is set forth in the Prospectus referred to in 6.2(a)(ii) as of the
date thereof. All of the issued and outstanding shares have been validly issued
and are fully paid and nonassessable. The HealthCare Shares to be issued to the
Shareholders pursuant to this Agreement will, upon issuance, be validly issued,
fully paid, and nonassessable and free and clear of any lien.
4.3 AUTHORITY. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by HealthCare
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the board of directors of HealthCare. This
Agreement constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by HealthCare pursuant hereto will
constitute, valid and binding agreements of HealthCare, enforceable in
accordance with their respective terms.
4.4 NO VIOLATION. Neither the execution and delivery of this Agreement
or the other documents and instruments to be executed and delivered by
HealthCare pursuant hereto, nor the consummation by HealthCare of the
transactions contemplated hereby and thereby (a) will violate any statute or law
or any rule, regulation, order, writ, injunction or decree of any court or
governmental authority, (b) will require any authorization, consent, approval,
exemption or other action by or notice to any court, administrative or
governmental agency, instrumentality, commission, authority, board or body
(except the Alberta Stock Exchange), or (c) will violate or conflict with, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any
material Lien upon any of the assets of HealthCare under, any term or provision
of the Articles of Incorporation or By-laws of HealthCare or of any material
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which HealthCare is a party or by which HealthCare or
any of its assets or properties may be bound or affected.
4.5 WARRANTIES RELATED TO TAX FREE REORGANIZATION.
(a) HealthCare controls Newco within the meaning of Section
368(c) of the Code;
(b) HealthCare has no plan or intention to reacquire any of
its stock issued in the transaction, except as provided in Sections 1.6
and 6.9 hereof;
(c) HealthCare has no plan or intention to liquidate Newco; to
merge Newco with and into another corporation; to sell or otherwise
dispose of the stock of Newco; or to cause Newco to sell or otherwise
dispose of any of the assets of the HCA Corporations acquired in the
transaction except for dispositions made
- 16 -
in the ordinary course of business or transfers described in
Section 368(a)(2)(C) of the Code;
(d) Neither HealthCare nor Newco is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code;
(e) The HealthCare Shares issued in exchange for the stock of
the HCA Corporations hereunder, including all Retained Shares,
constitutes less than 50 percent of both the voting power and the value
of all HealthCare stock that will be outstanding immediately following
the transaction; and
(f) HealthCare has been engaged in the active conduct of a
trade or business that is substantial in comparison to each of the
businesses of the HCA Corporations for the entire 36 month period
immediately preceding the Effective Time.
4.6 DISCLOSURE. To HealthCare's knowledge, no representation or
warranty by HealthCare in this Agreement nor any statement, certificate,
schedule or exhibit hereto furnished or to be furnished by or on behalf of
HealthCare pursuant to this Agreement, nor any document or certificate delivered
to HealthCare pursuant to this Agreement or in connection with transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact or omits or shall omit a material fact necessary to make the statements
contained therein not misleading.
5. COVENANTS OF SHAREHOLDERS
5.1 NONCOMPETITION; CONFIDENTIALITY. As an inducement to HealthCare to
execute this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the businesses of the HCA
Corporations being acquired pursuant to this Agreement, the Shareholders hereby
covenant and agree to deliver to HealthCare at the Closing Noncompetition and
Confidentiality Agreements in the form attached hereto as SCHEDULE 5.1.
5.2 ACCESS TO INFORMATION AND RECORDS. The Shareholders agree that
during the period prior to the Closing, HealthCare, its counsel, accountants and
other representatives shall be provided (i) reasonable access during normal
business hours to all of the properties, books, records, contracts and documents
of the HCA Corporations for the purpose of such inspection, investigation and
testing as HealthCare deems appropriate (and Shareholders shall furnish or cause
to be furnished to HealthCare and its representatives all information with
respect to the business and affairs of the HCA Corporations as HealthCare may
reasonably request); (ii) reasonable access to employees and agents of the HCA
Corporations for such meetings and communications as HealthCare reasonably
desires; and (iii) with the prior consent of the HCA Corporations in each
instance (which consent shall not be unreasonably withheld), access to vendors,
customers, and others having business dealings with the HCA Corporations.
- 17 -
5.3 CONDUCT OF BUSINESS PENDING THE CLOSING. The Shareholders agree
that from the date hereof until the Closing, except as provided in Section 6
hereof or otherwise approved in writing by HealthCare:
5.3(a) NO CHANGES. The HCA Corporations will carry on their
businesses diligently and in the same manner as heretofore and will not
make or institute any changes in their methods of purchase, sale,
management, accounting or operation.
5.3(b) MAINTAIN ORGANIZATION. The HCA Corporations will use
their best efforts to maintain, preserve, renew and keep in force and
effect the existence, rights and franchises of the HCA Corporations and
to preserve the business organization of the HCA Corporations intact,
to keep available to HealthCare the present officers and employees of
the HCA Corporations, and to preserve for HealthCare their present
relationships with suppliers and customers and others having business
relationships with the HCA Corporations.
5.3(c) NO BREACH. The HCA Corporations will use their best
efforts to avoid any act, or any omission to act, which may cause a
breach of any material contract, commitment or obligation, or any
breach of any representation, warranty, covenant or agreement made by
the Shareholders.
5.3(d) NO MATERIAL CONTRACTS. No contract or commitment will
be entered into, and no purchase of assets (tangible or intangible)
will be made, by or on behalf of the HCA Corporations, except
contracts, commitments, purchases or sales which are in the ordinary
course of business and consistent with past practice.
5.3(e) NO CORPORATE CHANGES. The HCA Corporations shall not
amend their Articles of Incorporation or Bylaws or make any changes in
their authorized or issued capital stock.
5.3(f) MAINTENANCE OF INSURANCE. The HCA Corporations shall
maintain all of their insurance in effect as of the date hereof or
replace such insurance with comparable coverage and shall procure such
additional insurance as shall be reasonably requested by HealthCare at
HealthCare's expense.
5.3(g) MAINTENANCE OF PROPERTY. The HCA Corporations shall
use, operate, maintain and repair all their assets and properties in a
normal business manner consistent with the HCA Corporations' past
practices.
5.3(h) INTERIM FINANCIALS. The HCA Corporations will provide
HealthCare with interim monthly financial statements and other
management reports as and when they are available.
5.3(i) NO DIVIDENDS. The HCA Corporations shall not declare or
pay any dividend (whether in cash, stock or property) or make any other
distribution to the
- 18 -
Shareholders, except for (i) the repayment of loans made by the
Shareholders to the HCA Corporations and (ii) the distribution of a
Dodge Caravan automobile to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
5.3(j) COMPENSATION. The HCA Corporations shall not increase
the compensation or benefits of any of their employees nor make any
other change in the terms of their employment.
5.4 REIMBURSEMENT OF SICK AND VACATION PAY. In preparing the Closing
Balance Sheets it has been agreed that no accrual shall be made for sick and
vacation pay entitlements for employees of the HCA Corporations. In
consideration of this exclusion, the Shareholders agree to reimburse Newco for
any sick or vacation pay payments Newco is required to make to former employees
of the HCA Corporations who become employees of Newco as of the Closing and
whose employment terminates for any reason within the first six months following
the Closing Date to the extent such payments relate to accruals of sick or
vacation pay prior to the Closing Date.
5.5 PRESERVATION OF TAX-FREE REORGANIZATION STATUS. The Shareholders
consent and agree as follows:
(a) There is no plan or intention by the Shareholders to sell,
exchange or otherwise dispose of a number of HealthCare Shares received
in the Merger that would reduce the Shareholders' ownership of
HealthCare Shares to a number of shares having a value, as of the date
of the Merger, of less than 50 percent of the value of all of the
formerly outstanding stock of the HCA Corporations as of the same date.
(b) Newco will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market
value of the gross assets held by each of the HCA Corporations
immediately prior to the Merger.
(c) The liabilities of the HCA Corporations assumed by Newco
and the liabilities to which the transferred assets of the HCA
Corporations are subject were incurred by the HCA Corporations in the
ordinary course of its business.
(d) The HCA Corporations, and the Shareholders will pay their
respective expenses, if any, incurred in connection with the
transaction.
(e) The HCA Corporations are not investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(f) The HCA Corporations are not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(g) The fair market value of the assets of the HCA
Corporations transferred to Newco will equal or exceed the sum of the
liabilities assumed by
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Newco, plus the amount of liabilities, if any, to which the transferred
assets are subject.
6. OTHER MATTERS
6.1 EMPLOYMENT AGREEMENT. At the Closing, Newco and each of the
Shareholders shall execute and deliver counterparts of Employment Agreements in
the form attached hereto as SCHEDULES 6.1-A (▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇); 6.1-B (▇▇▇▇▇▇▇
▇▇▇▇▇▇▇); AND 6.1-C (▇▇▇▇ ▇▇▇▇▇▇▇▇).
6.2 SECURITIES LAWS.
6.2(a) INVESTMENT REPRESENTATIONS. The Shareholders represent
to HealthCare as follows:
(i) The HealthCare Shares are being acquired for their own
accounts and for investment only, and not with a view to the
distribution of all or any part of the HealthCare Shares, and the
acquisition of the HealthCare Shares by the Shareholders and their
continued holding thereof as may be required by law and the terms
hereof are consistent with their respective financial positions.
(ii) The Shareholders have had access to complete information
regarding the business and finances of HealthCare, have met and
discussed the business and finances of HealthCare with its management
employees to the extent they deem necessary, and have received, read,
and understood the contents of the Healthcare Capital Corp. Preliminary
Prospectus dated July __, 1996; draft dated July 12, 1996 (the
"Prospectus").
6.2(b) LIMITATIONS ON TRANSFER. Except as expressly provided
in this Agreement, the Shareholders shall not, directly or indirectly,
offer or sell, pledge, transfer, or otherwise dispose of all or any
portion of the HealthCare Shares, or solicit any offer to buy,
purchase, or otherwise acquire or take a pledge of all or any portion
of the HealthCare Shares, except (A) in the manner and to the extent
described in (i) a registration statement in effect under the
Securities Act of 1933 (the "Act") covering the HealthCare Shares and
as to which a prospectus meeting the requirements of the Act is duly
delivered or (ii) an opinion of counsel for the Shareholders, which
opinion is in form and substance satisfactory to counsel for
HealthCare, to the effect that such proposed offer, sale, pledge,
transfer, or other disposition of HealthCare Shares may lawfully be
made without such registration and delivery or (B) pursuant to trades
made on the Alberta Stock Exchange ("ASE") after 90 days following the
Closing Date pursuant to Rule 904 of Regulation S under the Act. The
Shareholders acknowledge that they have consulted with counsel
concerning the limited availability of exemptions from registration
under the Act and they understand that they (i) may bear the economic
risk of investment in the HealthCare Shares for an indefinite period of
time because the HealthCare Shares have not been registered under the
Act and, therefore, cannot be sold unless they are subsequently
registered under the Act or an exemption from such
- 20 -
registration, such as that contained in Rule 904 is available, (ii)
HealthCare is not obligated to register the HealthCare Shares under the
Act, (iii) that absent registration, the HealthCare Shares ordinarily
may not be sold in the United States for at least two years after the
Closing Date and then only in accordance with Rule 144 under the Act,
and (iv) the HealthCare Shares may not be sold, transferred or
otherwise disposed of in the province of Alberta, Canada, or traded
through the facilities of the ASE for a period of 90 days following the
Closing Date.
6.2(c) LEGENDS ON CERTIFICATES. Certificates representing the
HealthCare Shares shall be endorsed with legends, (i) substantially in
the form set forth in SCHEDULE 6.2(D)(I) hereto, and (ii) to the effect
that the HealthCare Shares may not be traded in Canada for 90 days
following the Closing Date. HealthCare need not recognize any person
other than the Shareholders as having any interest in or to the
HealthCare Shares unless the acquisition thereof shall have been made
in compliance with Subsection 6.2(b) above. HealthCare may issue
appropriate stop transfer instructions to the transfer agent for the
HealthCare Shares to prevent transfers in violation of Subsection
6.2(b) hereof.
6.2(d) REMOVAL OF LEGENDS. (i) At any time while the
HealthCare Shares are registered under the Act, HealthCare shall, upon
written request, cause the certificates representing the HealthCare
Shares to be reissued free of all legends and withdraw all stop
transfer instructions. Upon the termination of any such registration, a
Shareholder who owns HealthCare Shares represented by a certificate
without such legends, shall, upon written request, promptly return such
certificate to HealthCare for reissue for a certificate endorsed with
the legends specified in, and otherwise subject to, the provisions of
Subsection 6.2(c). Three years after the Closing Date, HealthCare's
right to request the return of unlegended certificates for previously
registered HealthCare Shares shall terminate and HealthCare shall, upon
written request of the Shareholders, cause any certificates bearing one
or more legends to be reissued free of such legends and withdraw all
stop transfer instructions, provided that Rule 144(k) under the Act, or
a comparable rule, is in effect in substantially its present form and
the Shareholders furnish to HealthCare evidence satisfactory to
HealthCare and its counsel that they meet the requirements of such
rule.
(ii) HealthCare shall, upon written request, cause a
certificate representing all or a portion of the HealthCare Shares to
be reissued free of all legends and shall withdraw all stop transfer
instructions upon the provision by a Shareholder of a declaration to
The R-M Trust Company as transfer agent in substantially the form set
forth in EXHIBIT 6.2(D)(II) hereto.
6.3 REGISTRATION UNDERTAKING.
(a) HealthCare agrees that, if at any time from and after the
Closing Date and before the second anniversary of such date, the board
of directors of HealthCare shall authorize the filing of a registration
statement under the Act to permit the trading of HealthCare Shares in
the United States, HealthCare will (i) promptly notify the
- 21 -
Shareholders that such registration statement will be filed and that
the HealthCare Shares which are then held by the Shareholders will be
included in such registration statement at their request, (ii) subject
to the last sentence of this subsection (a), cause such registration
statement to cover all HealthCare Shares which it has been so requested
to include by the Shareholders, provided such request is delivered to
HealthCare not later than 20 days after such notice is given to the
Shareholders and specifies the number of HealthCare Shares to be
included in the proposed registration, (iii) use reasonable efforts
subject to market conditions to cause such registration statement to
become effective and remain effective and current for such period as
may be necessary to permit the underwriters to complete the
distribution of the securities covered by the registration statement,
if such offering is an underwritten offering, or, if not, for such
period, not in excess of 90 days, as may be necessary for the
Shareholders to effect a proposed sale or other distribution, and (iv)
take all other action necessary under any federal or state law or
regulation of any governmental authority (other than the state
securities or blue sky laws) to permit the shares included in such
registration statement to be sold or otherwise disposed of and will
maintain such compliance with each such federal and state law and
regulation of governmental authority for the period necessary for the
underwriters or the Shareholders, as the case may be, to effect the
proposed sale or other disposition. Notwithstanding the foregoing
provisions, if the registration statement relates to an underwritten
offering of HealthCare Shares and the managing underwriter shall inform
in writing HealthCare and the Shareholders and any other holders of
HealthCare Shares requesting such registration that the managing
underwriter believes that the number of shares requested to be included
in such registration would materially, adversely affect its ability to
effect such offering, then HealthCare will include in such registration
the number of HealthCare Shares which HealthCare is so advised can be
sold in (or during the time of) such offering as follows: first, all
shares proposed by HealthCare to be sold for its own account, and,
second, such HealthCare Shares requested to be included in such
registration, pro rata by the Shareholders and other holders of
HealthCare Shares on the basis of the number of HealthCare Shares so
proposed to be sold and so requested to be included; PROVIDED, HOWEVER,
that HealthCare shall be obligated to register any HealthCare Shares so
excluded from the registration statement pursuant to a registration
statement filed 90 days after the effectiveness of such initial
registration statement or such greater number of days as may be
specified in "lock-up" agreements entered into with the managing
underwriter.
(b) Whenever HealthCare is required pursuant to the provisions
of this Section 6.3 to include HealthCare Shares in a registration
statement, HealthCare shall (i) furnish each Shareholder and each
underwriter of such HealthCare Shares with such copies of a prospectus,
including the preliminary prospectus, conforming to the Act (and such
other documents as each Shareholder and each such underwriter may
reasonably request) in order to facilitate the sale or distribution of
HealthCare Shares, (ii) use its best efforts to register or qualify
such HealthCare Shares under the blue sky laws (to the extent
applicable) of such jurisdiction or jurisdictions as the Shareholders
and each underwriter of HealthCare Shares being sold shall reasonably
request and (iii) take such other
- 22 -
actions as may be reasonably necessary or advisable to enable the
Shareholders and such underwriters to consummate the sale or
distribution in such jurisdiction or jurisdictions in which such
holders shall have reasonably requested that the HealthCare Shares be
sold. Each Shareholder shall furnish to HealthCare in writing such
information relating to themselves as HealthCare may reasonably request
in connection with the preparation of such registration statement.
(c) HealthCare shall pay all expenses incurred in connection
with any registration or other action pursuant to the provisions of
this Section 6.3, other than underwriting discounts and applicable
transfer taxes relating to the HealthCare Shares sold by Shareholders
and attorney fees and expenses of the Shareholders.
(d) HealthCare agrees to indemnify and hold harmless the
Shareholders from and against any and all losses, claims, damages,
liabilities or actions, joint or several, to which the Shareholders may
become subject under the Act for any legal or other expenses (including
the cost of any investigation and preparation) incurred by them in
connection with any litigation or threatened litigation, whether or not
resulting in any liability, but only insofar as such losses, claims,
damages, liabilities or actions arise out of, or are based upon, (i)
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement pursuant to which HealthCare
Shares were registered under the Act (hereinafter called a
"Registration Statement"), any preliminary prospectus, the final
prospectus or any amendment or supplement thereto (or in any
application or document filed in connection therewith) or any document
filed by HealthCare in any jurisdiction in order to register or qualify
the HealthCare Shares under the securities laws thereof or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or (ii) the employment by HealthCare of any device, scheme or artifice
to defraud, or the engaging by HealthCare in any act, practice or
course of business which operates or would operate as a fraud or
deceit, or any conspiracy with respect thereto, in which HealthCare
shall participate, in connection with the issuance and sale of any of
the HealthCare Shares; PROVIDED, HOWEVER that (i) the indemnity
agreement contained in this Subsection (d) shall not extend to any
Shareholder in respect of any such losses, claims, damages, liabilities
or actions arising out of, or based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, if
such statement or omission was based upon and made in conformity with
information furnished in writing to HealthCare by a Shareholder
specifically for use in connection with the preparation of such
Registration Statement, any final prospectus, any preliminary
prospectus or any such amendment or supplement thereto (or in any
application or document filed in connection therewith) or document
filed in any jurisdiction in order to register or qualify the
HealthCare Shares under the securities laws thereof. HealthCare agrees
to pay any legal and
- 23 -
other expenses for which it is liable under this Subsection (d) from
time to time (but not more frequently than monthly) within 30 days
after its receipt of a ▇▇▇▇ therefor.
(e) Each Shareholder, severally and not jointly, will
indemnify and hold harmless HealthCare, its directors, its officers who
shall have signed the Registration Statement and each person, if any,
who controls HealthCare within the meaning of Section 15 of the Act to
the same extent as the foregoing indemnity from HealthCare, but in each
case to the extent, and only to the extent, that any statement in or
omission from or alleged omission from such Registration Statement, any
final prospectus, any preliminary prospectus or any amendment or
supplement thereto (or in any application or document filed in
connection therewith) or document filed in any jurisdiction in order to
register or qualify the HealthCare Shares under the securities laws
thereof was made in reliance upon information furnished in writing to
HealthCare by such Shareholder specifically for use in connection with
the preparation of the Registration Statement, any final prospectus or
the preliminary prospectus or any such amendment or supplement thereto
(or in any application or document filed in connection therewith) or
document filed in any jurisdiction in order to register or qualify the
HealthCare Shares under the securities laws thereof; PROVIDED, HOWEVER,
that the obligation of any Shareholder to indemnify HealthCare under
the provisions of this Subsection (e) shall be limited to the product
of the number of HealthCare Shares being sold by the Shareholder and
the market price of HealthCare Shares on the date of the sale to the
public of these HealthCare Shares. Each Shareholder agrees to pay any
legal and other expenses for which he or she is liable under this
Subsection (e) from time to time (but not more frequently than monthly)
within 30 days after receipt of a ▇▇▇▇ therefor.
(f) If any action is brought against a person entitled to
indemnification pursuant to the foregoing Subsections (d) and (e) (an
"indemnified party") in respect of which indemnity may be sought
against a person granting indemnification (an "indemnifying party")
pursuant to such Subsections (d) and (e), such indemnified party shall
promptly notify such indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party of any
such action shall not release the indemnifying party from any liability
it, he or she may have to such indemnified party otherwise than on
account of the indemnity agreement contained in Subsections (d) and (e)
of this Section 6.3. In case any such action is brought against an
indemnified party and it, he or she notifies an indemnifying party of
the commencement thereof, the indemnifying party against which a claim
is to be made will be entitled to participate therein at its, his or
her own expense and, to the extent that it, he or she may wish, to
assume at its, his or her own expense the defense thereof, with counsel
reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER,
that (i) if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnifying party
shall have reasonably concluded
- 24 -
based upon advice of counsel that there may be legal defenses available
to it, he or she and/or other indemnified parties which are different
from or additional to those available to the indemnified party, the
indemnified party shall have the right to select separate counsel to
assume such legal defenses and otherwise to participate in the defense
of such action on behalf of such indemnified party or parties and (ii)
in any event, the indemnified party shall be entitled to have counsel
chosen by such indemnified party participate in, but not conduct, the
defense at the expense of the indemnifying party. Upon receipt of
notice from the indemnifying party to such indemnified party of its,
his or her election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 6.3 for
any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof unless (i) the indemnified
party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with proviso (i) to the next
preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate
counsel), (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement
of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. An indemnifying party shall not be liable for any
settlement of any action or proceeding effected without its written
consent.
(g) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in
Subsections (d) and (e) of this Section 6.3 is unavailable to an
indemnified party in accordance with its terms, HealthCare and the
Shareholders shall contribute to the aggregate losses, claims, damages
and liabilities, of the nature contemplated by said indemnity
agreement, incurred by HealthCare and the Shareholders, in such
proportions as are appropriate to reflect the relative benefits
received by HealthCare and the Shareholders from any offering of the
HealthCare Shares; PROVIDED, HOWEVER, that if such allocation is not
permitted by applicable law or if the indemnified party failed to give
the notice required under Subsection (f) of this Section 6.3, then the
relative fault of HealthCare and the Shareholders in connection with
the statements or omissions which resulted in such losses, claims,
damages and liabilities and other relevant equitable considerations
will be considered together with such relative benefits.
(h) The respective indemnity and contribution agreements by
HealthCare and the Shareholders in Subsections (d), (e), (f) and (g) of
this Section 6.3 shall remain operative and in full force and effect
regardless of (i) any investigation made by any Shareholder or by
HealthCare or any controlling person of HealthCare or any director or
any officer of HealthCare, (ii) payment for any of the HealthCare
Shares or (iii) any termination of this
- 25 -
Agreement, and shall survive the delivery of the HealthCare Shares, and
any successor of HealthCare, or of any Shareholder, or of any person
who controls HealthCare, as the case may be, shall be entitled to the
benefit of such respective indemnity and contribution agreements. The
respective indemnity and contribution agreements by HealthCare and the
Shareholders contained in Subsections (d), (e), (f) and (g) of this
Section 6.3 shall be in addition to any liability which HealthCare and
the Shareholders may otherwise have.
(i) If, after the date hereof, HealthCare issues unregistered
HealthCare Shares and provides to the recipient registration rights
which are more favorable than those afforded to the Shareholders in
this Section 6.3, the Shareholders shall without further action be
entitled to the benefit of such more favorable registration provision.
6.4 NASDAQ LISTING. HealthCare intends to apply for and shall use its
best efforts to obtain not later than six months after the Closing Date
quotation of HealthCare Shares on the National Market System tier of The Nasdaq
Stock Market.
6.5 DISCLOSURE SCHEDULE. The "Disclosure Schedule" has been compiled in
a bound volume executed by the Shareholders and dated and delivered on the date
of this Agreement. The Disclosure Schedule includes a table of contents or index
of all the information and documents contained therein.
6.6 RELEASE OF SHAREHOLDERS. The Shareholders have provided personal
guarantees or have otherwise become individually liable with respect to certain
leases, line of credit agreements, purchase agreements with manufacturers, or
other agreements for the benefit for the HCA Corporations, including, without
limitation, those described on SCHEDULE 6.4 of the Disclosure Schedule. After
the Closing Date, HealthCare will use its best efforts to obtain the release of
the Shareholders from all such personal liabilities. To the extent that any such
release cannot be obtained, HealthCare will indemnify and hold the Shareholders
harmless with respect to any loss, cost, or expense Shareholders may incur as a
result of not being released.
6.7 SHAREHOLDER LOANS. As of the date hereof, the HCA Corporations are
indebted to the Shareholders as set forth on SCHEDULE 6.5 of the Disclosure
Schedule. Notwithstanding any other provision of this Agreement, the
Shareholders shall have the option to (i) contribute such indebtedness to the
capital of the HCA Corporations on or prior to the Closing Date, or (ii) cause
the HCA Corporations to repay such indebtedness to the extent the HCA
Corporations have funds available for such purpose. In the event any
indebtedness of the HCA Corporations to the Shareholders remains unpaid
following the Closing Date, HealthCare shall cause Newco to repay such
indebtedness in full within 45 days of the Closing Date.
- 26 -
6.8 COVENANTS OF HEALTHCARE.
(a) Following the Merger, Newco will not issue additional
shares of its stock that would result in HealthCare losing control of
Newco within the meaning of Section 368(c) of the Code.
(b) Following the Merger, Newco will continue the historic
business of each of the HCA Corporations or use a significant portion
of each of the HCA Corporations' business assets in a business.
(c) HealthCare will comply, and will cause Newco to comply,
with the reporting requirements set forth in ss. 1.367(a)-3T(c)(4) of
the U.S. Treasury Regulations following consummation of the Merger.
(d) HealthCare and Newco will treat the Merger as tax-free
reorganizations of the HCA Corporations for U.S. tax purposes on all
tax returns filed by them in the United States, and neither HealthCare
nor Newco will take any action inconsistent with such treatment of the
Merger, or which would cause the Merger to fail to qualify as tax-free
reorganizations.
6.9 REDEMPTION OF HEALTHCARE SHARES. As of the last business day of
each calendar quarter for the 20 calendar quarters immediately following the
Closing Date, the Shareholders shall have a right to tender to HealthCare, in
the numbers set forth below, HealthCare Shares they own, in which event
HealthCare shall redeem from the Shareholders and pay for within 20 business
days of the end of the applicable quarter the number of shares tendered at $1.67
(U. S.) per HealthCare Share. The number of HealthCare Shares which each
Shareholder shall be entitled to tender for redemption as of the end of each
calendar quarter is as follows:
SHAREHOLDER NUMBER OF SHARES
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,800
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 6,600
▇▇▇▇ ▇▇▇▇▇▇▇▇ 6,600
The Shareholders' rights to tender HealthCare Shares shall be noncumulative and
to the extent not exercised as of the end of any calendar quarter shall expire
and thereafter be of no further force and effect.
7. CONDITIONS PRECEDENT TO HEALTHCARE'S OBLIGATIONS
Each and every obligation of HealthCare to be performed at Closing
shall be subject to the satisfaction prior to or at the Closing (or the waiver
by HealthCare) of each of the following conditions:
- 27 -
7.1 REPRESENTATIONS AND WARRANTIES TRUE CLOSING. Each of the
representations and warranties made by the Shareholders in this Agreement, or in
any instrument, schedule, list, certificate or writing delivered by Shareholders
pursuant to this Agreement, shall be true and correct when made and shall be
true and correct in all material respects at and as of the Closing as though
such representations and warranties were made as of the Closing.
7.2 COMPLIANCE WITH AGREEMENT. The Shareholders shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing, including the delivery of the closing documents
specified in Section 2.2(b) hereof.
7.3 ABSENCE OF SUIT. No action, suit, investigation or proceeding
before any court or any governmental authority shall have been commenced or
threatened, against HealthCare, the HCA Corporations or any of the affiliates,
officers or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions; provided that the obligations of HealthCare
shall not be affected unless there is a reasonable likelihood that as a result
of such action, suit, investigation, or proceeding HealthCare will be unable to
retain substantially all the practical benefits of the transaction to which it
is entitled under this Agreement.
7.4 RELATED TRANSACTIONS. HealthCare shall have entered into
arrangements satisfactory to HealthCare in its sole discretion, pursuant to
which HealthCare will acquire part of or all the shares of the corporations
operating under the name "Hearing Care Associates" which are listed on SCHEDULE
7.4 of the Disclosure Schedule.
7.5 ALBERTA STOCK EXCHANGE. The issuance of the HealthCare Shares to
the Shareholders shall have been approved by the ASE.
7.6 SANTA CLARITA. Prior to Closing, Northridge shall have delivered to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ its note in the amount of $236,550 payable 30 days after the
Closing Date to satisfy her claim against the corporation with respect to the
Santa Clarita clinic, and Northridge shall have received a release of claims and
noncompetition agreement from ▇▇▇▇▇▇▇▇ in form reasonably satisfactory to
HealthCare and its counsel.
7.7 AGREEMENTS WITH SHAREHOLDERS. The Shareholders shall have executed
and delivered to HealthCare the noncompetition and confidentiality agreements
provided for in Section 5.1 hereof and the employment agreements provided for in
Section 6.1 hereof.
8. CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
Each and every obligation of the Shareholders to be performed at
Closing shall be subject to the satisfaction prior to or at the Closing (or the
waiver by the Shareholders) of the following conditions:
- 28 -
8.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties made by HealthCare in this Agreement, or in any
instrument, list, certificate or writing delivered by HealthCare pursuant to
this Agreement, shall be true and correct when made and shall be true and
correct at and as of the Closing Date as though such representations and
warranties were made as of the Closing.
8.2 COMPLIANCE WITH AGREEMENT. HealthCare shall have in all material
respects performed and complied with all of HealthCare's agreements and
obligations under this Agreement which are to be performed or complied with by
HealthCare prior to or on the Closing, including the delivery of the closing
documents specified in Section 2.2(a) hereof.
8.3 ABSENCE OF SUIT. No action, suit, investigation, or proceeding
before any court or any governmental authority shall have been commenced or
threatened against HealthCare, the HCA Corporations or any of the affiliates,
officers or directors of any of them, seeking to restrain, prevent or change the
transactions contemplated hereby, or questioning the validity or legality of any
such transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions; provided that the obligations of the
Shareholders shall not be affected unless there is a reasonable likelihood that
as a result of such action, suit, proceeding or investigation, the Shareholders
will be unable to retain substantially all the consideration to which they are
entitled under this Agreement.
8.4 OPINION OF COUNSEL. The Shareholders shall have received an opinion
of HealthCare's counsel, Ballem ▇▇▇▇▇▇▇▇, substantially in the form of SCHEDULE
8.4 attached hereto.
8.5 RELATED TRANSACTIONS. The Shareholders shall have entered into
arrangements satisfactory to the Shareholders in their sole discretion pursuant
to which HealthCare will acquire part of or all the shares of the corporations
operating under the name "Hearing Care Associates" which are listed on SCHEDULE
7.4 of the Disclosure Schedule.
8.6 SHARE PRICE. The Shares as traded on The Alberta Stock Exchange
shall not have traded for any three consecutive trading days between the date
hereof and the Closing Date at a price of less than $1.40 (Canadian) or less.
8.7 EMPLOYMENT AGREEMENTS. Newco shall have executed and
delivered the employment agreements with the Shareholders provided for
in Section 6.1 hereof.
8.8 ASE PERFORMANCE ESCROW. Terms of any performance escrow required by
the ASE with respect to HealthCare's shares issued to the Shareholders hereunder
shall be reasonably satisfactory to the Shareholders.
9. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
9.1 INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders hereby agree
to indemnify, defend, and hold HealthCare harmless from and against all Claims
(as defined below)
- 29 -
asserted against, resulting to, imposed upon, or incurred by HealthCare directly
or indirectly by reason of, arising out of, or resulting from (a) the inaccuracy
or breach of any representation or warranty of the Shareholders contained in or
made pursuant to this Agreement, or (b) the breach of any covenant of the
Shareholders contained in this Agreement. As used in this Section 9.1, the term
"Claim" shall include all losses, damages, judgments, awards, settlements,
costs, and expenses (including without limitation penalties, court costs, and
attorneys fees and expenses at trial and on appeal) awarded by the arbitrator or
arbitrators pursuant to Section 13.1 hereof.
9.2 INDEMNIFICATION BY HEALTHCARE. HealthCare hereby agrees to
indemnify, defend, and hold harmless the Shareholders from and against all
Claims (as defined in Section 10.1) asserted against, resulting to, imposed
upon, or incurred by the Shareholders directly or indirectly by reason of,
arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of HealthCare contained in or made pursuant to this
Agreement, or (b) the breach of any covenant of HealthCare contained in this
Agreement, including without limitation Section 6.6 hereof.
9.3 NOTICE; DEFENSE OF CLAIMS. If a claim is to be made by a party
entitled to indemnification hereunder, the party entitled to such
indemnification shall give written notice to the indemnifying party immediately
after the party entitled to indemnification becomes aware of any fact, condition
or event which may give rise to a matter for which indemnification may be
sought; provided that the failure of any indemnified party to give timely notice
shall not affect the rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
If any lawsuit or enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, and if the indemnifying party shall acknowledge
in writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit, action or claim, then the indemnifying party shall be entitled, if it
so elects, to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and defend
the same, at the indemnifying party's cost, risk and expense provided that the
indemnifying party and its counsel shall proceed with diligence and in good
faith with respect thereto. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom.
9.4 SURVIVAL OF REPRESENTATIONS. All representations and warranties
made by the parties in this Agreement are made only as of the date of this
Agreement but will survive the consummation of the transactions contemplated by
this Agreement for a period ending 90 days after the second fiscal year end
(July 31) of Newco which occurs after the Closing Date (except for the
representations and warranties of the Shareholders set forth in Section 3.16
hereof which shall expire 90 days after the applicable statutes of limitation
shall have run with respect to all tax returns filed by the HCA Corporations for
all periods ended on or before the Closing Date) after which all such
representations and warranties shall expire except with respect to claims
- 30 -
asserted in writing prior to such date. Notwithstanding the foregoing,
HealthCare's representations and warranties set forth in Section 4.2 hereof
shall survive indefinitely.
10. TERMINATION
10.1 RIGHT OF TERMINATION WITHOUT BREACH. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
(a) By mutual written agreement of the parties, or
(b) By either HealthCare or the Shareholders if the Closing
shall not have occurred on or before December 31, 1996, provided the
terminating party has not, through breach of a representation, warranty
or covenant, prevented the Closing from occurring on or before such
date.
10.2 TERMINATION FOR BREACH.
10.2(a) TERMINATION BY HEALTHCARE. If there has been a
material breach by the Shareholders of any of their agreements,
representations or warranties contained in this Agreement which has not
been waived in writing by HealthCare, then HealthCare may, by written
notice to Shareholders at any time prior to the Closing that such
breach is continuing, terminate this Agreement with the effect set
forth in Section 10.2(c) hereof.
10.2(b) TERMINATION BY SHAREHOLDERS. If there has been a
material breach by HealthCare of any of its agreements, representations
or warranties contained in this Agreement which has not been waived in
writing by the Shareholders, then the Shareholders may, by written
notice to HealthCare at any time prior to the Closing that such breach
is continuing, terminate this Agreement with the effect set forth in
Section 10.2(c).
10.2(c) EFFECT OF TERMINATION. Termination of this Agreement
pursuant to this Section 10.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has breached or failed to perform any of the
representations, warranties, covenants, or agreements of this Agreement
prior to termination hereof.
11. DISCLOSURES AND ANNOUNCEMENTS
Both the timing and the content of all disclosures to third parties and
public announcements concerning the transactions provided for in this Agreement
by either Shareholders or HealthCare shall be subject to the approval of the
other in all essential respects, except that the Shareholders' approval shall
not be required as to any announcements or filings HealthCare may be required to
make under applicable laws or regulations.
- 31 -
12. ASSIGNMENT; PARTIES IN INTEREST
12.1 ASSIGNMENT. Except as expressly provided herein, the rights and
obligations of a party hereunder may not be assigned, transferred or encumbered
without the prior written consent of the other parties.
12.2 PARTIES IN INTEREST. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the respective heirs, successors and
permitted assigns of the parties hereto. Nothing contained herein shall be
deemed to confer upon any other person any right or remedy under or by reason of
this Agreement.
13. RESOLUTION OF DISPUTES
13.1 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or the performance by the parties of its terms shall
be settled by binding arbitration held in Los Angeles, California, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then in effect, except as specifically otherwise provided in this Section 13.
Notwithstanding the foregoing, HealthCare, in its discretion, apply to a court
of competent jurisdiction for equitable relief from any violation or threatened
violation of the covenants of the Shareholders under Section 5.1 of this
Agreement.
13.2 ARBITRATORS. If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for arbitration,
to exceed $50,000, then the panel to be appointed shall consist of three neutral
arbitrators; otherwise, one neutral arbitrator.
13.3 PROCEDURES; NO APPEAL. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the circumstances and
shall resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within 120 days after the selection of the arbitrator(s). The
arbitrator(s) shall give the parties written notice of the decision, with the
reasons therefor set out, and shall have thirty (30) days thereafter to
reconsider and modify such decision if any party so requests within ten (10)
days after the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in the
arbitration process.
13.4 AUTHORITY. The arbitrator(s) shall have authority to award relief
under legal or equitable principles, including interim or preliminary relief,
and to allocate responsibility for the costs of the arbitration and to award
recovery of attorney fees and expenses in such manner as is determined to be
appropriate by the arbitrator(s).
13.5 ENTRY OF JUDGMENT. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. The Shareholders and HealthCare hereby submit to the in personam
jurisdiction of the federal and state courts in California for the purpose of
confirming any such award and entering judgment thereon.
- 32 -
13.6 CONFIDENTIALITY. All proceedings under this Section 13, and all
evidence given or discovered pursuant hereto, shall be maintained in confidence
by all parties.
13.7 CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this Section 13 shall have been or may be invoked shall
not excuse any party from performing its obligations under this Agreement, and
during the pendency of any such procedure all parties shall continue to perform
their respective obligations in good faith, subject to any rights to terminate
this Agreement that may be available to any party.
14. LAW GOVERNING AGREEMENT
This Agreement may not be modified or terminated orally, and shall be
construed and interpreted according to the internal law of the state of
California, excluding any choice of law rules that may direct the application of
the laws of another jurisdiction.
15. AMENDMENT AND MODIFICATION
HealthCare and the Shareholders may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
16. NOTICE
All notices, requests, demands and other communications hereunder shall
be given in writing and shall be: (a) personally delivered; (b) sent by
telecopier, facsimile transmission or other electronic means of transmitting
written documents; or (c) sent to the parties at their respective addresses
indicated herein by private overnight courier service. The respective addresses
and telephone numbers to be used for all such notices, demands or requests are
as follows:
If to HealthCare: HealthCare Capital Corp.
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President, Personal & Confidential
with a copy to: G. ▇▇▇▇ ▇▇▇▇▇▇▇
Miller, Nash, Wiener, Hager & ▇▇▇▇▇▇▇
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 33 -
If to the Shareholders:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Carton & ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted, such communication shall be
deemed delivered the next business day after transmission (and the sender shall
bear the burden of proof of delivery); if sent by overnight courier pursuant to
this paragraph, such communication shall be deemed delivered upon receipt. Any
party to this Agreement may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this section.
17. EXPENSES
Regardless of whether or not the transactions contemplated hereby are
consummated:
17.1 BROKERAGE. The Shareholders and HealthCare each represent and
warrant to the other that there is no broker involved or in any way connected
with the transaction provided for herein. HealthCare agrees to hold the
Shareholders harmless from and against all claims for brokerage commissions or
finder's fees incurred through any act of HealthCare in connection with the
execution of this Agreement or the transactions provided for herein. The
Shareholders agree to hold HealthCare harmless from and against all claims for
brokerage commissions or finder's fees incurred through any act of the
Shareholders in connection with the execution of this Agreement or the
transactions provided for herein.
17.2 EXPENSES TO BE PAID BY THE SHAREHOLDERS. The Shareholders shall
pay all their fees and expenses for legal, accounting, and other professional
services in connection with the transactions contemplated hereby.
- 34 -
18. ENTIRE AGREEMENT
This instrument embodies the entire agreement between the parties
hereto with respect to the transactions contemplated herein, and there have been
and are no agreements, representations or warranties between the parties other
than those set forth or provided for herein.
19. SHAREHOLDER ACTION
Whenever in this Agreement the Shareholders are given the discretion to
take or not to take any action, the decision of the Shareholders shall be made
pursuant to the per capita majority vote of the Shareholders.
20. 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.
21. HEADINGS
The headings in this Agreement are inserted for convenience only and
shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
SHAREHOLDERS: HEALTHCARE CAPITAL CORP.
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President
/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
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HCA CORPORATIONS:
HEARING CARE ASSOCIATES - GLENDALE, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
HEARING CARE ASSOCIATES - GLENDORA, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
HEARING CARE ASSOCIATES - NORTHRIDGE, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
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SCHEDULES TO MERGER AGREEMENT
Schedule 1.1 Agreement and Plan of Merger
Schedule 1.6(e) Accounts Receivable
Schedule 3.11(a) Real and Personal Property Leases
Schedule 3.11(b) Purchase Commitments
Schedule 3.11(c) Sales Commitments
Schedule 3.11(i) Other Material Contracts
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Employment Compensation
Schedule 3.14 Patents, Trademarks, etc.
Schedule 3.15 Product Warranty and Product Liability
Schedule 3.17 Key Employees; Bank; Etc.
Schedule 5.1 Noncompetition; Confidentiality
Schedule 6.1-A Employment Agreement-▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Schedule 6.1-B Employment Agreement-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Schedule 6.1-C Employment Agreement-▇▇▇▇ ▇▇▇▇▇▇▇▇
Schedule 6.4 Personal Liabilities
Schedule 7.6 Related Transactions
Schedule 8.4 Opinion of Counsel
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