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ASSET PURCHASE AGREEMENT
among
MEDE AMERICA CORPORATION
GENERAL COMPUTER CORPORATION
THE STOCKTON GROUP, INC.
and
JAMES S. SMITH
Dated as of October 20, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I. TRANSFERS ....................................................... 1
SECTION 1.01 Transfer of Assets....................................... 2
SECTION 1.02 Instruments of Conveyance and
Transfer............................................... 3
SECTION 1.03 Nonassignable Contracts.................................. 4
SECTION 1.04 Non-Assumption of Certain Liabilities.................... 4
ARTICLE II. CLOSING, PURCHASE PRICE, ETC..................................... 5
SECTION 2.01 Closing ................................................. 5
SECTION 2.02 Purchase Price........................................... 6
SECTION 2.03 Payment to Seller on Closing Date........................ 6
SECTION 2.04 Earn-Out ................................................ 6
SECTION 2.05 Dispute Resolution....................................... 8
ARTICLE III. REPRESENTATIONS AND WARRANTIES................................... 9
SECTION 3.01 Representations and Warranties of Seller
and the Stockholder.................................... 9
SECTION 3.02 Representations and Warranties of
Buyer and MedE......................................... 24
ARTICLE IV. COVENANTS 25
SECTION 4.01 Covenants of Seller and the Stockholder.................. 25
SECTION 4.02 Confidentiality.......................................... 27
SECTION 4.03 Allocation of Purchase Price............................. 27
SECTION 4.04 Preparation of Certain Financial
Statements............................................. 27
SECTION 4.05 Certain Tax Matters...................................... 28
SECTION 4.06 Insurance ............................................... 28
SECTION 4.07 Collection of Accounts Receivable........................ 28
SECTION 4.08 Retention of Employees................................... 29
SECTION 4.09 Payment of Certain Liabilities........................... 29
SECTION 4.10 Name Matters ............................................ 29
SECTION 4.11 Brookins and Lagnese..................................... 29
SECTION 4.12 Access to Records........................................ 30
ARTICLE V. CONDITIONS PRECEDENT............................................. 30
SECTION 5.01 Conditions Precedent to Obligations
of Buyer and MedE...................................... 30
SECTION 5.02 Conditions Precedent to Obligations
of Seller and the Stockholder.......................... 32
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ARTICLE VI. SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION.......................................... 34
SECTION 6.01 Survival of Representations.......................... 34
SECTION 6.02 Tax Indemnity........................................ 34
SECTION 6.03 General Indemnity.................................... 35
SECTION 6.04 Conditions of Indemnification........................ 36
ARTICLE VII. TERMINATION ................................................. 37
SECTION 7.01 Termination 37
SECTION 7.02 Effect of Termination................................ 37
ARTICLE VIII. MISCELLANEOUS................................................ 38
SECTION 8.01 Specific Performance................................. 38
SECTION 8.02 Bulk Transfer Laws................................... 38
SECTION 8.03 Expenses, Etc........................................ 38
SECTION 8.04 Execution in Counterparts............................ 38
SECTION 8.05 Notices ............................................. 39
SECTION 8.06 Waivers ............................................. 39
SECTION 8.07 Amendments, Supplements, Etc.......................... 40
SECTION 8.08 Entire Agreement...................................... 40
SECTION 8.09 Applicable Law........................................ 40
SECTION 8.10 Binding Effect; Benefits.............................. 40
SECTION 8.11 Assignability......................................... 41
TESTIMONIUM ................................................................. 42
(ii)
INDEX TO EXHIBITS AND ANNEXES
Exhibit Description
- ------- -----------
A Form of Bill of Sale, Assignment and
Assumption Agreement
B Form of Non-Compete Agreement
C Form of Consulting Agreement
D Form of Standard Service Agreement
E Form of Opinion of Parker, Poe, Adams &
Bernstein
F Form of Opinion of Reboul, MacMurray,
Hewitt, Maynard & Kristol
(iii)
INDEX TO SCHEDULES
Schedule Description
1.01(a)(i) Computer Equipment
1.01(a)(vi) Contracts to be Transferred
2.04 Customers of Seller
3.01(a) Jurisdictions
3.01(e) Effect of Agreements
3.01(f) Governmental Approvals
3.01(g) Financial Statements
3.01(h) Certain Changes or Events
3.01(i) Liens and Encumbrances
3.01(j) List of Properties, Contracts and
Other Data
3.01(k) Litigation
3.01(m) Employee Benefit Plans
3.01(n) Intellectual Property Rights
3.01(o) Software
3.01(s) Customers
3.01(t) Taxes
3.01(v) Transactions with Affiliates
3.01(w) Governmental Authorizations and
Regulations
3.01(x) Insurance
4.01(e) Written Service Agreements; Supplements
to Service Agreements
4.03 Allocation of Purchase Price
4.08 Retained Employees
(iv)
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 20, 1997, among
MEDE AMERICA CORPORATION, a Delaware corporation ("MedE"), GENERAL COMPUTER
CORPORATION, an Ohio corporation and a wholly-owned subsidiary of MedE
("Buyer"), THE STOCKTON GROUP, INC., a South Carolina corporation ("Seller"),
and James S. Smith (the "Stockholder").
WHEREAS, Seller is engaged in the business of providing
electronic data interchange and transaction processing services to the
healthcare industry (the "Business"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, all the assets and properties of Seller relating to the
Business (excluding certain specified assets), and to assume certain
liabilities, all on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
I. TRANSFERS
SECTION 1.001. Transfer of Assets. () On the terms and subject
to the conditions hereinafter set forth, on the Closing Date (as hereinafter
defined), Seller shall sell, convey, transfer, assign and deliver to Buyer, and
Buyer shall purchase from Seller, for the consideration set forth in Section
2.03 hereof, all the then existing assets and properties (of every kind, nature
and description, real, personal or mixed, tangible or intangible and wherever
situated, whether or not carried on the books of Seller) of Seller to the extent
that such assets are necessary to, or attributable to, the Business, or used by
Seller in connection with the Business, except those assets excluded pursuant to
paragraph (b) below (said assets and properties so to be sold, conveyed,
transferred, assigned and delivered being hereinafter collectively called the
"Assets"), including, without limitation:
(i) all tangible personal property, inventory, machinery,
equipment, supplies, tools, fixtures, leaseholds, computer equipment
(including without limitation the computer hardware described on
Schedule 1.01(a)(i) hereto), work in process, spare parts, vehicles,
furniture and office furnishings, wherever situated (it being the
intention hereby to assign and transfer all the tangible personal
property owned or claimed by Seller);
(ii) all intangible personal property of whatsoever kind or
character, whether evidenced in writing or not, including but not
limited to all customer lists, data bases, proprietary assays, deferred
charges and prepaid expenses, customer accounts, bonds, claims, and
causes of action (whether fixed or contingent);
(iii) the patents, trademarks and trade names (including
without limitation Seller's right, title and interest in and to the
"PreScrip" trade name as contemplated by Section 4.10 hereof),
trademark and trade name registrations, service marks and service mark
registrations, copyrights and copyright registrations, the applications
therefor and the licenses and franchises with respect thereto, in each
case listed in clause (iv) of Schedule 3.01(j) hereto, together with
all trade secrets, technology (including technology with respect to
which Seller is a licensee, in any such case only insofar as permitted
under the applicable license agreement), processes, inventions,
designs, drawings, blueprints, specifications, patterns, royalties,
privileges, permits and all other similar intangible personal property
(collectively, the "Intellectual Property Rights");
(iv) all technical materials and guidelines, brochures, sales
literature, promotional material and other selling material;
(v) all papers, documents, instruments, books and records,
files, agreements, books of account and other records by which the
Assets might be identified or enforced, or otherwise pertaining to the
Assets or the Business that are located at the offices or other
locations used in connection with the Assets or the Business
(including, without limitation, customer invoices, customer lists,
vendor and supplier lists, drafts and other documents and materials
relating to customer transactions);
(vi) the rights of Seller under (A) all contracts, agreements,
licenses, leases, sales orders, purchase orders and other commitments
relating to the Assets or the Business and listed on Schedule
1.01(a)(vi) hereto, and (B) the Key Customer Contracts (as defined
herein);
(vii) all computer software programs, the source and object
codes for such software programs and all documentation and training
manuals related thereto owned, held or licensed by Seller; and
(viii) all other assets and rights of every kind and nature,
real or personal, tangible or intangible, that are owned or claimed by
Seller and that are necessary to, or
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attributable to, the Business or used by Seller in connection with the
Business (including, without limitation, all goodwill), whether or not
such assets are reflected in the balance sheets and other financial
statements of Seller, together with the right to represent that Buyer
is the successor in interest to the Business.
Without limiting the generality of the foregoing, the Assets shall, except as
set forth in paragraph (b) below, include all assets set forth or reflected on
the audited balance sheet of Seller as of June 30, 1997 (the "June 30, 1997
Balance Sheet"), together with all such assets as may be acquired by Seller
after said date and that would be included on a balance sheet prepared in like
manner from such accounting records as of the Closing Date, except for any such
assets that may be or have been disposed of after said date in the ordinary
course of business on a basis consistent with past practice.
(b) Anything herein contained to the contrary notwithstanding,
the following assets and properties of Seller are specifically excluded from the
Assets and shall be retained by Seller:
(i) all cash and cash equivalents on hand, including
investment securities, bank accounts, temporary cash and petty cash
held by Seller as of the Closing Date;
(ii) all accounts receivable accrued on the books of Seller as
of the Closing Date and resulting from the delivery of goods and
services of the Business prior to the Closing Date;
(iii) all accrued but unbilled rebate commissions aris ing on
or prior to the Closing Date (in the event that such commissions are
paid to Buyer after the Closing Date, Buyer shall promptly remit the
same to Seller); and
(iv) any claims or rights against third parties relating to
liabilities or obligations that are not assumed by Buyer pursuant to
this Agreement.
SECTION 1.002. Instruments of Conveyance and Transfer. Subject
to Section 1.03 below, on the Closing Date, Seller shall execute and deliver to
Buyer (i) a bill of sale in the form included in the Form of Bill of Sale,
Assignment and Assumption Agreement annexed hereto as Exhibit A (the "Bill of
Sale, Assign ment and Assumption Agreement") and (ii) such other documents of
transfer that Buyer may reasonably request, transferring to Buyer the properties
and assets to be acquired by Buyer under the terms of this Agreement.
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SECTION 1.003. Nonassignable Contracts. Nothing in this
Agreement shall be construed as an attempt or agreement to assign (i) any
contract, agreement, license, lease, sales order, purchase order or other
commitment that is nonassignable without the consent of the other party or
parties thereto unless such consent shall have been given (subject, however, to
the covenant of Seller and the Stockholder in Section 4.01(d) hereof), or (ii)
any contract or claim as to which all the remedies for the enforcement thereof
enjoyed by Seller would not pass to Buyer as an incident of the assignments
provided for by this Agreement. In order, however, that the full value of every
contract and claim of the character described in clauses (i) and (ii) above and
all claims and demands on such contracts may be realized, Seller and the
Stockholder will use their best efforts to obtain approval for assignment and,
failing that, Seller shall, by itself or by its agents, at the request and
expense and under the direction of Buyer, in the name of Seller or otherwise as
Buyer shall specify and as shall be permitted by law, take all action and do or
cause to be done all things as shall in the opinion of Buyer be reasonably
necessary or proper (x) in order that the rights and obligations of Seller under
such contracts shall be preserved and (y) for, and to facilitate, the collection
of the moneys due and payable, and to become due and payable, to Seller in and
under every such contract and claim and in respect of every such claim and
demand, and Seller shall hold the same for the benefit of and shall pay the same
over promptly to Buyer.
SECTION 1.004. Non-Assumption of Certain Liabilities. Buyer is
not assuming, and shall not be deemed to have assumed, any liabilities or
obligations of Seller of any kind or nature whatsoever, except (x) executory
obligations under the operating contracts of Seller assigned to Buyer and listed
on Schedule 1.01(a)(vi) hereto, (y) executory obligations under the Key Customer
Contracts and (z) those employment obligations set forth in Section 4.08 hereof,
in each case only to the extent expressly provided in the Bill of Sale,
Assignment and Assumption Agreement (collectively, the "Assumed Liabilities").
Without limiting the generality of the foregoing, it is hereby agreed that Buyer
is not assuming any liability for and shall not have any obligation with respect
to:
(i) any and all (x) accrued but unpaid current liabilities and
(y) non-current liabilities of Seller, in each case as determined in
accordance with generally accepted accounting principles consistently
applied ("GAAP"), either set forth or reflected on the June 30, 1997
Balance Sheet or incurred by Seller after June 30, 1997;
(ii) any liabilities or obligations of Seller that arise under
the terms of a contract, agreement, license, lease, sales order,
purchase order, or other commitment
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which shall not be assigned to Buyer pursuant to this Agreement
(including, without limitation, any of the foregoing not listed on
Schedule 1.01(a)(vi) hereto);
(iii) any liabilities or obligations of Seller that arise
under the terms of a contract, agreement, license, lease, sales order,
purchase order, or other commitment which shall not be assigned to
Buyer pursuant to this Agreement;
(iv) any liabilities or obligations of Seller to the
Stockholder and his affiliates (including without limitation any notes
payable to the Stockholder), or to any other stockholder or purported
stockholder of Seller;
(v) any liabilities or obligations of Seller under any Plan
(as defined in Section 3.01(m) hereof, including any obligation to
adopt or to sponsor such Plan of Seller except as Buyer may, in its
sole discretion, elect to adopt or to sponsor);
(vi) any obligation of Seller arising out of any action, suit
or proceeding based upon an event occurring or a claim arising (A)
prior to or on the Closing Date or (B) after the Closing Date in the
case of claims in respect of products or services sold or provided by
Seller prior to the Closing Date or attributable to acts performed or
omitted by Seller prior to the Closing Date;
(vii) any and all Taxes (as hereinafter defined) incurred by
or imposed upon Seller, or any predecessor company thereof, for all
periods prior to (and up to and including) the close of business on the
Closing Date, including without limitation any Taxes incurred by or
imposed upon Seller and arising out of the consummation of the
transactions contemplated by this Agreement; and
(viii) any liability in respect of any failure of Seller to
conduct the Business in compliance with any Permit (as hereinafter
defined), law, regulation or order, including without limitation any
Environmental Law or Common Law Environmental Principle (each as
hereinafter defined), prior to the Closing Date.
II. CLOSING, PURCHASE PRICE, ETC.
SECTION 2.001. Closing. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York,
New York, 10111, on
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November 15, 1997, or on such other date as the parties may mutually agree (such
date and time of closing being herein called the "Closing Date"), and for tax
and accounting purposes shall be deemed effective as of the close of business on
such date.
SECTION 2.002. Purchase Price. The aggregate purchase price
for the Assets hereunder shall be () $10,400,000 in cash, payable on the Closing
Date, plus () an amount (the "Earn Out Amount") up to $2,600,000, together with
interest on such amount from the Closing Date to the Earn-Out Payment Date (as
hereinafter defined), such amount and the rate of interest thereon to be
determined in accordance with (and paid pursuant to) the provisions of Section
2.04 hereof (all such payments being collectively referred to herein as the
"Purchase Price").
SECTION 2.003. Payment to Seller on Closing Date. On the
Closing Date, Buyer shall pay to Seller $10,400,000 in cash by wire transfer of
immediately available funds to the account specified by Seller.
SECTION 2.004. Earn-Out. Subject to the terms of this
Agreement, Buyer may make an additional payment to Seller in respect of the
Earn-Out Period (as hereinafter defined), on the following terms:
(a) For the purposes of this Agreement, the terms set forth
herein have the following meanings:
(i) "Customers" means those customers of Seller listed on
Schedule 2.04 hereto.
(ii) "Earn-Out Period" means the twelve month period ended
September 30, 1998.
(iii) "Revenue" means the aggregate amount of all new and
recurring revenue booked by Seller during any applicable period.
Revenue shall include revenue derived from rebate transactions
(accounted for on an accrual basis); provided that only the portion of
such revenue actually retained by Seller (i.e., excluding any portion
remitted to the Customers) shall be included in Revenue. Revenue shall
be computed in accordance with generally accepted accounting principles
as historically applied by Buyer with regard to its business. Revenue
shall not include (i) any such revenue attributable to conversion of
customers of Buyer to Seller's transaction-processing system or (ii)
commission uplift revenue for current and future customers of Seller.
(b) The chief financial officer of Buyer shall in good faith
calculate Revenue for the Earn-Out Period on or before November 30, 1998. Such
computation shall be made in accordance
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with generally accepted accounting principles as historically applied by Buyer
with regard to its business. Promptly after such determination, Buyer shall
deliver to Seller a written calculation of Revenue for the Earn-Out Period. If
Seller objects in writing to such calculation within ten days after receipt
thereof, Buyer and Seller shall use reasonable efforts to resolve any such
objections. If no objection is so delivered within such ten day period, such
calculation shall be final and binding as to all parties. To the extent that
Buyer and Seller resolve any such objections and agree as to the calculation of
Revenue for the Earn-Out Period, Buyer and Seller shall sign a certificate to
that effect and such resolution shall be deemed final and binding as to all
parties for purposes of this Agreement. If Seller's objections cannot be so
resolved by the parties within 30 days of the date such written objection is
delivered to Buyer, any remaining disputes shall be resolved by a mutually
acceptable "big six" accounting firm in accordance with Section 2.05 hereof.
(c) The Earn-Out Amount shall be calculated as follows:
(i) in the event that Revenue for the Earn-Out Period is equal
to or greater than $5,000,000, then the Earn-Out Amount shall be equal
to $2,600,000, together with interest (computed on the basis of a
360-day year consisting of twelve 30-day months) on such amount at (i)
the annual rate of 7.25% from the Closing Date to the last day of the
month in which Revenue for the Earn-Out Period exceeds $5,000,000 (the
"Target Month") and (ii) at the prime rate offered by Citibank N.A.
from the first day of the month after the Target Month until the
Earn-Out Payment Date (as hereinafter defined); or
(ii) in the event that Revenue for the Earn-Out Period is less
than the $5,000,000, then the Earn-Out Amount (if any) shall be equal
to (A) $2,600,000 less (B) the difference between $5,000,000 and
Revenue for the Earn-Out Period, together with interest at the annual
rate of 7.25% on such amount from the Closing Date to the Earn-Out
Payment Date.
(d) Within five business days of the final determination of
Revenue for the Earn-Out Period pursuant to paragraph (b) above (or, if
applicable, pursuant to Section 2.05 hereof), Buyer shall pay the Earn-Out
Amount to Seller by wire transfer to the account specified by Seller (the date
of such payment being referred to herein as the "Earn-Out Payment Date"). In the
event Buyer fails to so pay the Earn-Out Amount on the Earn-Out Payment Date,
(i) the Earn-Out Amount shall accrue interest at the rate of 12% per annum until
paid and (ii) Buyer shall pay any reason-
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able collection fees and expenses (including attorneys' fees) actually incurred
by Seller in causing such payment to be made.
(e) During the Earn-Out Period, Buyer and MedE shall take
reasonable actions to devote substantially such personnel and resources to the
operation of the Business as is consistent with the past practice of Seller.
Notwithstanding the foregoing, Seller and the Stockholder acknowledge that
during the Earn-Out Period the Business will be integrated with the business of
MedE and Buyer, and that any incidental effects on customer service resulting
from such integration shall not constitute a breach of the obligations of MedE
and Buyer set forth in the preceding sentence. In the event that a Customer
ceases to do business with Buyer and MedE as a result of (i) a breach by Buyer
or MedE of its service contract with such Customer or (ii) a determination by
MedE to discontinue (or alter in a significant and adverse manner) services to
an individual Customer, a business segment or a group of Customers, then for
purposes of determining the Earn-Out Amount the Revenue for the Earn-Out Period
shall be increased by (x) the Revenue received from such Customer during the
last full processing month prior to such cessation multiplied by (y) the number
of months (and a pro rata fraction of any partial month) remaining in the
Earn-Out Period. In the event MedE and Buyer cease to provide services to a
Customer as a result of (i) a breach by such Customer of its service contract
with Buyer and/or MedE or (ii) the failure or refusal of such Customer to enter
into or renew (as applicable) its service contract on substantially those terms
set forth in the form of Standard Service Agreement (as defined herein), such
cessation shall not result in an increase in the Revenue for the Earn-Out Period
as provided in the preceding sentence. In the event a Customer ceases to do
business with MedE and/or Buyer for any other reason during the Earn-Out Period,
Buyer and Seller shall in good faith attempt to determine the degree (if any) to
which Revenue should be credited for purposes of determining the Earn-Out
Amount, taking into account the standards of conduct set forth in the first two
sentences of this paragraph (e). In the event that Buyer and Seller cannot make
a mutually agreeable determination within 20 days, they shall submit this issue
to a "big six" accounting firm for resolution pursuant to Section 2.05 hereof.
(f) During the Earn-Out Period, MedE will furnish to the
Stockholder such monthly financial reports for the Business as MedE shall
produce in the ordinary course of its business consistent with past practice.
The Stockholder hereby agrees to keep any such reports confidential.
SECTION 2.005. Dispute Resolution. () If and to the extent any
disputes concerning (i) calculation of Revenue for the Earn-Out Period or (ii)
adjustments to such Revenue as a result
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of the loss of any Customers have not been resolved by Buyer and Seller in
accordance with Section 2.04(b) or Section 2.04(e), as the case may be, Buyer
and Seller shall retain a mutually acceptable "big six" accounting firm, acting
through one or more audit partners (who shall be agreed to by Buyer and Seller)
knowledgeable in businesses comparable to that of Seller, to review and resolve
any remaining differences. The resolution of such differences by such accounting
firm shall be final and binding on all parties hereto. Such accounting firm
shall be directed to deliver its resolution of such differences not more than 30
days after being so retained.
(b) The parties shall make available to each other and their
respective accountants, and, if applicable, the "big six" accounting firm
contemplated by paragraph (a) above, such books, records and other information
as any of them may reasonably request in connection herewith. The fees and
expenses of such accounting firm (if any) shall be borne equally by Buyer and
Seller.
II. REPRESENTATIONS AND WARRANTIES
SECTION 3.001. Representations and Warranties of Seller and
the Stockholder. Seller and the Stockholder, jointly and severally, represent
and warrant to Buyer as follows:
(a) Organization, Power, etc. of Seller; Power of Stockholder.
Seller is a corporation duly formed, validly existing and in good standing under
the laws of the State of South Carolina. Seller is duly qualified or licensed to
do business in each jurisdiction in which it owns or leases any real property or
in which the nature of the business transacted by it makes such qualification
necessary, unless the failure to be so licensed or qualified would not have a
material adverse effect on the properties, assets, business, prospects,
operations, or condition (financial or otherwise) of Seller (a "Material Adverse
Effect"). Schedule 3.01(a) sets forth a complete list of the jurisdictions in
which Seller is qualified to do business. Seller has all requisite power and
authority to own, operate and lease the Assets, to carry on the Business as it
is now being conducted, to execute and deliver this Agreement together with the
Bill of Sale, Assignment and Assumption Agreement and a Confidentiality,
Non-Solicitation and Non-Compete Agreement in substantially the form attached
hereto as Exhibit B (the "Non-Compete Agreement"), and to perform its
obligations hereunder and thereunder. The Stockholder has the individual power
and authority, and the legal right, to execute and deliver this Agreement, the
Non-Compete Agreement and a consulting agreement substantially in the form
attached hereto as Exhibit C (the "Consulting Agreement," and collectively with
the Bill of Sale, Assignment and Assumption
9
Agreement and the Non-Compete Agreement, the "Ancillary Agreements"), and to
perform his obligations hereunder and thereunder.
(b) Subsidiaries. Seller has no direct or indirect
subsidiaries, or any participating equity interest in any partnership, joint
venture or other non-corporate business enterprise. As used herein, the term
"subsidiary" shall mean any corporation, partnership or other business entity, a
majority of whose voting capital stock (or other voting interests, as the case
may be) is at the time owned by Seller and/or any subsidiaries thereof.
(c) Capitalization. The authorized capital stock of Seller
consists of 100,000 shares of common stock, $1 par value, of which 65,000 shares
are issued and outstanding. All issued and outstanding shares of capital stock
of Seller are owned of record and beneficially by the Stockholder, free and
clear of any lien, charge, security interest or encumbrance of any nature
whatsoever. There are no outstanding options, warrants, calls or other rights to
subscribe for or purchase or acquire from Seller, or any plans, contracts or
commitments providing for the issuance of, or the granting of rights to acquire
(i) any capital stock or partnership interests, as the case may be, of Seller or
(ii) any securities convertible into or exchangeable for any capital stock of
Seller.
(d) Authorization of Agreements; Validity. The execution and
delivery by Seller of this Agreement and the Ancillary Agreements to which it is
a party, and the consummation by Seller of the transactions contemplated hereby
and thereby, have been duly authorized by all requisite corporate action. This
Agreement has been duly and validly executed by Seller and the Stockholder and
constitutes the legal, valid and binding obligation of Seller and the
Stockholder, enforceable against each of them in accordance with its terms. Each
of the Ancillary Agreements, when duly executed and delivered by Seller and/or
the Stockholder, as applicable, will constitute the legal, valid and binding
obligation of Seller and/or the Stockholder, as applicable, enforceable against
each of them in accordance with its terms.
(e) Effect of Agreements. Except as set forth on Schedule
3.01(e) hereto, the execution and delivery by Seller and the Stockholder of this
Agreement and the Ancillary Agreements to which each is a party and the
performance by Seller and the Stockholder of their respective obligations
hereunder and thereunder will not (x) violate any provision of law, any order of
any court or other agency of government, the Articles of Incorporation or
By-laws of Seller, or any judgment, award, decree, indenture, agreement, Permit
or other instrument to which Seller or the Stockholder is a party, or by which
Seller, the Stockholder,
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the Business or any of the Assets are bound or affected; (y) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement, Permit or other instrument; or (z)
result in the creation or imposition of any lien, charge, security interest or
encumbrance of any nature whatsoever upon any of the Assets.
(f) Governmental Approvals. Except as set forth on Schedule
3.01(f) hereto, no approval, authorization, consent, order or action of or
filing with any court, administrative agency or other governmental authority (i)
is required for the execution and delivery by Seller and the Stockholder of this
Agreement and the Ancillary Agreements to which they are party or the
consummation by Seller and the Stockholder of the transactions contemplated
hereby or thereby or (ii) is necessary in order that the Business may be
conducted immediately following the Closing Date substantially in the same
manner as theretofore conducted.
(g) Financial Statements.
(i) Prior to the Closing Date, Seller will furnish to Buyer
the June 30, 1997 Balance Sheet and the related audited statements of
operations, stockholders equity and cash flows for the year then ended,
(the "Financial Statements"), audited by Deloitte & Touche LLP, the
independent accountants retained by Seller. The Financial Statements
(including any related schedules and/or notes) are complete and correct
in all material respects and have been prepared in accordance with
GAAP. The June 30, 1997 Balance Sheet fairly presents the financial
condition of the Business as of such date, and such statements of
operations, stockholders equity and cash flows fairly present the
results of operations of the Business for the twelve months then ended.
(ii) Except (x) as expressly set forth in the Financial
Statements, (y) as set forth in Schedule 3.01(g) hereto or (z) as
incurred after June 30, 1997 in the ordinary course of business
consistent with past practice, Seller does not have any material
liabilities or obligations of any kind or nature, whether known or
unknown, secured or unsecured, absolute, accrued, contingent or
otherwise, and whether due or to become due.
(iii) The June 30, 1997 Balance Sheet correctly lists and/or
reflects, in accordance with GAAP, substantially all of the Assets to
be transferred to Buyer, other than goodwill and other intangible
assets resulting from the transactions contemplated hereby.
11
(h) Absence of Certain Changes or Events. Since June 30, 1997,
except as otherwise set forth on Schedule 3.01(h) hereto and except for the
transactions contemplated hereby, Seller has not:
(i) incurred any obligation or liability (whether fixed,
absolute, accrued, contingent, known or unknown, or otherwise, of any
kind or nature whatsoever), except normal trade or business obligations
incurred in the ordinary course of business and consistent with past
practice and except in connection with this Agreement and the
transactions contemplated hereby;
(ii) discharged or satisfied any material lien, security
interest or encumbrance or paid any obligation or liability (fixed or
contingent) of any kind or nature whatsoever, other than in the
ordinary course of business and consistent with past practice;
(iii) mortgaged, pledged or subjected to any lien, security
interest or other encumbrance any of the Assets (other than mechanic's,
materialman's and similar statutory liens arising as a matter of law
and purchase money security interests arising in the ordinary course of
business between the date of delivery and payment);
(iv) transferred, leased or otherwise disposed of any of the
Assets except for a fair consideration in the ordinary course of
business and consistent with past practice or, except in the ordinary
course of business and consistent with past practice, acquired any
assets or properties to be used by or in connection with the Business;
(v) declared, set aside or paid any distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or redeemed or otherwise acquired any of its capital
stock or split, combined or otherwise similarly changed its capital
stock or authorized the creation or issuance of or issued or sold any
capital stock or any securities or obligations convertible into or
exchangeable therefor, or given any person any right to acquire any of
its capital stock, or agreed to take any such action;
(vi) made any investment of a capital nature, whether by
purchase of stock or securities, contributions to capital, property
transfers or otherwise, in any partnership, corporation or other
entity;
12
(vii) canceled or compromised any debt or claim related to the
Business, except in the ordinary course of business and consistent with
past practice;
(viii) waived or released any rights of material value related
to the Business, except in any case for a fair consideration in the
ordinary course of business and consistent with past practice;
(ix) transferred or granted any rights under any concessions,
leases, licenses, sublicenses, agreements, patents, inventions,
trademarks, trade names, service marks or copyrights or with respect to
any know-how related to the Business, except in the ordinary course of
business and consistent with past practice;
(x) made or granted any wage, salary or benefit increase or
paid any bonus applicable to any group or classification of employees
generally, entered into or amended the terms of any employment contract
with, or made any loan to, or granted any severance benefits to or
entered into or amended the terms of any material transaction of any
other nature with, any officer or employee engaged in the operations of
the Business;
(xi) entered into any transaction, contract or commitment,
except (A) contracts listed on Schedule 3.01(j) here to, (B) this
Agreement and the transactions contemplated hereby and (C) as involve
payments of less than $25,000;
(xii) suffered any casualty loss or damage (whether or not
such loss or damage shall have been covered by insurance) or received
any claim or claims in respect of the Business in excess of insurable
limits, or canceled any insurance coverage, in whole or in part, under
any policy the coverage limits of which exceed $25,000;
(xiii) suffered any material adverse change in any of its
operations or in its financial condition or in its assets, properties,
business or prospects;
(xiv) surrendered, had revoked or otherwise terminated or had
terminated any material license, Permit or other approval,
authorization or consent from any court, administrative agency or other
governmental authority; or
(xv) entered into any agreement or commitment to take any
action described in this Section 3.01(h).
(i) Title to Properties, Absence of Liens and Encumbrances.
Except as set forth in Schedule 3.01(i) hereto, Seller
13
has good and marketable title to all the Assets, free and clear of all liens,
charges, pledges, security interests or other encumbrances of any nature
whatsoever. Except as set forth on Schedule 3.01(i) hereto, all leases of real
and personal property of Seller to be assigned to Buyer hereunder are valid and
binding in accordance with their respective terms, and there is not under any
such lease any existing default, or any condition, event or act which with
notice or lapse of time or both would constitute such a default, nor would
consummation of the transactions contemplated hereby result in a default or any
such condition, event or act.
(j) List of Properties, Contracts and Other Data. Annexed
hereto as Schedule 3.01(j) is a list setting forth with respect to the Business,
as of the dates specified on such Schedule, the following:
(i) all real properties owned in fee simple by Seller;
(ii) all tangible assets owned by Seller with original book
value in excess of $10,000;
(iii) all leases of real or personal property involving
payments in excess of $10,000 per annum to which Seller is a party,
either as lessee or lessor;
(iv) (A) all patents, trademarks and trade names, trademark
and trade name registrations, service marks and service mark
registrations, copyrights and copyright registrations which are
unexpired as of the date hereof, all applications pending on said date
for patents or for trademark, trade name, service mark or copyright
registrations, and all other proprietary rights, owned or held by
Seller, and (B) all licenses and sublicenses granted by or to Seller
and all other agreements to which Seller is a party which relate, in
whole or in part, to any items of the categories mentioned in (A) above
or to other Intellectual Property Rights used by Seller in connection
with the Business, whether owned by Seller or any affiliate thereof;
(v) all employment and consulting agreements, executive
compensation plans, collective bargaining agreements, bonus plans,
deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock
option plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of Seller
engaged in the Business, whether oral or written;
(vi) all contracts in respect of customer accounts that either
(A) generated in excess of $10,000 in Revenue during
14
the twelve months ended December 31, 1996 or (B) Seller reasonably
expects will generate in excess of $10,000 in Revenue during the twelve
months ended December 31, 1997 (collectively, the "Key Customer
Contracts");
(vii) all other contracts, understandings and commitments
(including, without limitation, powers of attorney, mortgages,
indentures and loan agreements or obligations for borrowed money
including, without limitation, guarantees), whether oral or written, to
which Seller is a party or to which Seller or any of the Assets are
subject and which are not specifically referred to above, and which (A)
is a contract or group of related contracts which involve payments
exceeding $25,000 per annum in amount, (B) is a sales contract of an
open-ended or blanket nature or provides for prepaid commissions or
rebates, (C) contains penalty provisions for late delivery or
completion, (E) cannot be performed in the normal course within 365
days after the Closing Date or canceled within such period by Seller or
its assignees without breach or penalty, or (F) contains a prohibition
on the assignment thereof or any limitation on the ability of Seller to
assign the same;
(viii) the names and current annual compensation rates of all
employees of Seller engaged in the Business earning in excess of
$30,000 per annum; and
(ix) all agreements with third party payors.
True and complete copies of all documents and complete descriptions of all oral
understandings (if any) referred to in Schedule 3.01(j) hereto have been
provided or made available to Buyer and its counsel. Except as disclosed in said
Schedule, there is no claim that any contract referred to in said Schedule is
not valid and enforceable in accordance with its terms for the periods stated
therein, and there does not exist under any such contract any existing default
or event of default or event which with notice or lapse of time or both would
constitute such a default.
(k) Litigation. Except as otherwise set forth on Schedule
3.01(k) hereto, there are no actions, suits or proceedings involving claims by
or against Seller pending or, to the best knowledge of Seller, threatened
against Seller or relating to any of the operations of the Business, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, nor, to the
best of Seller's knowledge, is there any basis for any such claim. Except as set
forth in Schedule 3.01(k) hereto, there are no orders, judgments or decrees of
any court or governmental agency with respect to which Seller has been named or
is a party.
15
(l) Collective Bargaining Agreements, Labor Controversies,
etc. Seller is not a party to any labor or collective bargaining agreement, and
there are no labor or collective bargaining agreements which pertain to any
employees engaged in the operations of the Business. No employees of Seller are
represented by any labor organization. No labor organization or group of
employees of Seller has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of Seller, threatened to be brought or
filed with the National Labor Relations Board or other labor relations tribunal.
There is no organizing activity involving Seller pending or, to the knowledge of
Seller, threatened by any labor organization or group of employees of Seller.
There are no (A) strikes, work stoppages, slowdowns, lockouts or arbitrations or
(B) material grievances or other material labor disputes pending or, to the
knowledge of Seller, threatened against or involving Seller. There are no unfair
labor practice charges, grievances or complaints pending or, to the knowledge of
Seller, threatened against or involving Seller or any group of employees of
Seller. Hours worked by and payments made to employees of Seller have not been
in violation of the federal Fair Labor Standards Act or any other law dealing
with such matters.
(m) Employee Benefit Plans.
(i) Schedule 3.01(m) hereto lists each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained by Seller or to
which Seller contributes or is required to contribute or in which any
employee of Seller participates (a "Plan"). No Plan is a defined
benefit plan as defined in Section 3(35) of ERISA. Seller has complied
and currently is in compliance, both as to form and operation, with the
applicable provisions of ERISA and the Internal Revenue Code of 1986,
as amended (the "Code"), respectively, with respect to each Plan.
(ii) Each of the Plans that is intended to qualify under
Section 401(a) of the Code does so qualify and is exempt from taxation
pursuant to Section 501(a) of the Code, and Seller has received
favorable and unrevoked determination letters from the Internal Revenue
Service to that effect.
(iii) Seller has not maintained, contributed to or been
required to contribute to, nor do any of its employees participate in,
a "multiemployer plan" (as defined in Section 3(37) of ERISA). No
amount is due or owing from Seller on account of a "multiemployer plan"
(as defined in Section 3(37) of ERISA) or on account of any withdrawal
therefrom.
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In addition, no withdrawal liability would result if there were a
partial or complete withdrawal from any multiemployer plan as of the
Closing Date.
(iv) Notwithstanding anything else set forth herein, Seller
has not incurred any liability with respect to any Plan under ERISA
(including, without limitation, Title I or Title IV of ERISA), the Code
or other applicable law, which has not been satisfied in full, and no
event has occurred, and there exists no condition or set of
circumstances which could result in the imposition of any liability
under ERISA (including, without limitation, Title I or Title IV of
ERISA), the Code or other applicable law with respect to any of the
Plans.
(v) No Plan, other than a Plan which is an employee pension
benefit plan (within the meaning of Section 3(2)(A) of ERISA), provides
benefits, including without limitation death, health or medical
benefits (whether or not insured), with respect to current or former
employees of Seller beyond their retirement or other termination of
service with Seller (other than (A) coverage mandated by applicable
law, (B) deferred compensation benefits accrued as liabilities on the
books of Seller, or (C) benefits the full cost of which is borne by the
current or former employee (or his beneficiary)).
(vi) The consummation of the transactions contemplated by this
Agreement will not (A) entitle any current or former employee or
officer of Seller to severance pay, unemployment compensation or any
other payment, or (B) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer.
(vii) Seller has provided to Buyer true and complete copies of
the following: (A) each of the Plans; (B) summary plan descriptions of
each of the Plans; (C) each trust agreement, insurance policy or other
instrument relating to the funding of each of the Plans; (D) the two
most recent Annual Reports (Form 5500 series) and accompanying
schedules filed with the Internal Revenue Service or United States
Department of Labor with respect to each of the Plans; (E) the most
recent audited financial statement for each of the Plans; (F) the most
recent actuarial report of each of the Plans; (G) each policy of
fiduciary liability insurance (and agreements related thereto)
maintained in connection with the Plans, and (H) the most recent
determination letter issued by the Internal Revenue Service with
respect to each of the Plans that is intended to qualify under Section
401(a) of the Code.
17
(n) Intellectual Property Rights. The Intellectual Property
Rights listed in clause (iv) of Schedule 3.01(j) hereto, constitute all such
proprietary rights that are necessary to the conduct of the Business as of the
date hereof. Seller owns or has valid rights to use all such Intellectual
Property Rights without conflict with the rights of others. Except as set forth
on Schedule 3.01(n) hereto, no person has made or, to the best knowledge of
Seller, threatened to make, any claims that the operations of the Business are
in violation of or infringe upon any intellectual property rights or any other
proprietary or trade rights of any third party, nor, to the best of Seller's
knowledge, is there any basis for any such claim. None of the Intellectual
Property Rights is the subject of any outstanding order, ruling, decree,
judgment or stipulation. Seller has taken and is taking reasonable precautions
to protect any material trade secrets and other confidential information
included in the Intellectual Property Rights.
(o) Software.
(i) The operating and applications computer software programs
and databases used by Seller in the conduct of the Business (other than
"off-the-shelf" programs and databases that are generally commercially
available at a per unit cost of less than $500) (collectively, the
"Software") are listed on Schedule 3.01(o) hereto. Except as set forth
on Schedule 3.01(o), Seller owns outright or holds valid licenses to
all copies of the Software used by it in the Business. None of the
Software used by Seller, and no use thereof, infringes upon or violates
any patent, copyright, trade secret or other proprietary right of any
other person and, to the best knowledge of Seller, no claim with
respect to any such infringement or violation is threatened, nor does
any person have any basis for such a claim. Seller has taken all steps
necessary to protect its right, title and interest in and to the
Software owned by Seller.
(ii) Seller possesses or has access to the original and all copies
of all Software (including, without limitation, all source code) and
all documentation relating thereto owned or used by Seller. Upon
consummation of the transactions contemplated by this Agreement, Buyer
will (A) own all the Software owned by Seller immediately prior to the
Closing, free and clear of all claims, liens, encumbrances, obligations
and liabilities and, (B) with respect to all Software licensed or
leased to Seller, have valid rights to use such Software on
substantially the same terms as presently apply to Seller.
(iii) Any programs, modifications, enhancements or other inventions,
improvements, discoveries, methods or works of
18
authorship included in the Software that were created by employees of
Seller were made in the regular course of such employees' employment
with Seller using Seller's facilities and resources, and as such
constitute "works made for hire".
(p) Use of Real Property. The owned and leased real property
listed on Schedule 3.01(h) hereto are used and operated in material compliance
and conformity with all applicable leases, contracts, commitments, licenses,
zoning ordinances, codes and Permits.
(q) Condition of Assets. As of the Closing Date, all tangible
personal property, fixtures, machinery and equipment comprising the Assets will
(i) be in a good state of repair (ordinary wear and tear excepted) and operating
condition and will be suitable for the purposes for which they are being used
and (ii) substantially conform with all ordinances, codes, regulations and
requirements applicable to them.
(r) Compliance With Law. The conduct of the Business by Seller
does not violate in any material respect any federal, state or local laws,
statutes, ordinances, regulations, decrees, orders, Permits or other similar
rules presently in force (including, without limitation, any of the foregoing
relating to the federal Medicare program, any federal and/or state Medicaid
programs or ERISA). Seller is not liable for any arrears of wages or any taxes
or penalties for failure to comply with any of the foregoing.
(s) Third-Party Payor and Customer Contracts. Except as
otherwise set forth on Schedule 3.01(s) hereto, since June 30, 1997, Seller has
not lost or been notified that (whether as a result of the consummation of the
transactions contemplated by this Agreement or otherwise) it will lose or suffer
diminution in its relationships with any third-party payor(s), formulary plans
or other customer(s), other than normal attrition at historically consistent
levels.
(t) Taxes.
(i) Except as set forth on Schedule 3.01(t) hereto, Seller has
duly and timely filed all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed by
it in respect of any Taxes (as hereinafter defined). All Returns
(including all informational Returns) were correct as filed and
correctly reflect the facts regarding the income, business, assets,
operations, activities and status of Seller as well as any Taxes
required to be paid or collected by Seller. Seller has timely paid or
withheld all Taxes that are due and payable with respect to the Returns
referred to above.
19
Seller has established, consistent with past practice, an adequate
reserve on the June 30, 1997 Balance Sheet for the payment of all Taxes
with respect to Seller not yet due for any taxable period or portion
thereof ending on or prior to the Closing Date (or otherwise relating
or attributable to the results of operations of Seller on or prior to
the Closing Date). Seller has complied with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes, and
has timely withheld from employee wages and paid over to the proper
governmental authorities when due all amounts required to be so
withheld and paid over (including, but not limited to, federal income
taxes, Federal Insurance Contribution Act taxes, state and local income
and wage taxes, payroll taxes, workers' compensation and unemployment
compensation taxes).
(ii) Except as set forth in Schedule 3.01(t) hereto, (A)
Seller is not delinquent in the payment of any Taxes and has not
requested any extension of time within which to file or send any
Return, which Return has not since been filed or sent; (B) there is no
deficiency, claim, audit, action, suit, proceeding or investigation now
pending or threatened against or with respect to Seller in respect of
any Taxes; and (C) there are no requests for rulings or determinations
in respect of any Taxes pending between Seller and any taxing
authority, and no such rulings or determinations have been received by
Seller.
(iii) Seller has not executed or entered into (and, prior to
the Closing, Seller will not execute or enter into) with the Internal
Revenue Service or any other taxing authority (A) any agreement or
other document extending or having the effect of extending the period
for assessments or collection of any Taxes for which Seller would be
liable or (B) a closing agreement pursuant to Section 7121 of the Code,
or any predecessor provision thereof or any similar provision of
foreign, state or local Tax law that relates to the assets or
operations of Seller.
(iv) Except as set forth on Schedule 3.01(t) hereto, Seller
has never (A) been a member of a consolidated, combined or unitary
group for federal, state, local or foreign Tax law purposes, (B) been a
party to any Tax-sharing or allocation agreement or (C) filed any
election or caused any deemed election under Section 338 of the Code.
(v) Seller is not a party to any agreement, contract or
arrangement that would result, by reason of the consummation of any of
the transactions contemplated herein, separately or in the aggregate,
in the payment of any "ex-
20
cess parachute payment" within the meaning of Section 280G of the
Code.
(vi) No agreement or consent pursuant to Section 341(f) of the
Code has ever been made with respect to Seller or any assets or
properties of Seller (or any predecessor corporation of Seller).
Further, Seller shall not make any agreement or consent pursuant to
said Section 341(f) in respect of the transactions contemplated by this
Agreement.
(vii) Seller has been, for all Tax periods beginning on or
after its inception, and ending on or before the Closing Date, a
validly electing subchapter S corporation within the meaning of Section
1361 of the Code and the corresponding provisions (if any) of state and
local income tax laws in all jurisdictions in which it is required to
report its business operations. Schedule 3.01(t) hereto lists all the
states and localities with respect to which Seller is or was required
to file any Returns and sets forth whether Seller is or was treated as
the equivalent of an S corporation by or with respect to each such
state and/or locality.
(viii) Except as set forth in Schedule 3.01(t), the
Stockholder has paid all Taxes relating to his ownership interest in
Seller and required to be paid by him on or prior to June 30, 1997.
(ix) For purposes of this Agreement, "Tax" (and with
correlative meaning, "Taxes") means (A) any net income, gross income,
gross receipts, franchise, profits, license, sales, use, ad valorem,
value added, property, payroll, withholding, excise, severance,
transfer, employment, alternative or add-on minimum, stamp, occupation,
premium, environmental or windfall profits taxes, customs duties or
other taxes, governmental fees or other like assessments or charges of
any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental
authority responsible for the imposition of any such Taxes (domestic or
foreign); (B) any liability of Seller for the payment of any amounts of
the type described in (A) as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party
to any agreement or arrangement whereby liability of Seller for
payments of such amounts was determined or taken into account with
reference to the liability of any other person for any period prior to
the Closing Date; and (C) any liability of Seller with respect to the
payment of any amounts described in (A) as a result of any express or
implied obligation to indemnify any other person.
21
(u) Environmental Matters.
(i) Neither the business or operations of Seller nor, to the
knowledge of Seller and the Stockholder, the real property used by
Seller in the Business (the "Real Property") violates any applicable
Environmental Law in any material respect.
(ii) Seller has not disposed of, stored or used any
pollutants, contaminants or hazardous or toxic wastes, substances or
materials in violation of any Environmental Law on or at the Real
Property.
(iii) Seller is not the subject of any government or private
litigation or proceedings involving a demand for damages or other
potential liability pursuant to any Environmental Laws or Common Law
Environmental Principles (as defined below).
(ii) For the purposes of this Agreement, the following terms
have the meanings set forth below:
"Common Law Environmental Principles" means any principles of
common law under which a person or entity may be held liable for the
release or discharge of any pollutants, contaminants or hazardous or
toxic wastes, substances or materials into the environment.
"Environmental Law" shall mean any law, statute, regulation,
rule, order, consent decree, settlement agreement or governmental
requirement of any governmental authority, as in effect on the date of
this Agreement, which relates to or otherwise imposes liability or
standards of conduct concerning discharges or releases of any
pollutants, contaminants or hazardous or toxic wastes, substances or
materials into ambient air, water or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment,
storage, disposal, cleanup, transport or handling of pollutants,
contaminants or hazardous or toxic wastes, substances or materials.
(v) Transactions with Affiliates. Except as set forth on
Schedule 3.01(v) hereto, no partner, director or officer of Seller or any member
of such individual's immediate family, owns, directly or indirectly, or has an
ownership interest in (i) any business, (corporate or otherwise) which is a
party to, or in any property which is the subject of, business arrangements or
relationships of any kind with Seller, or (ii) any business (corporate or other)
which conducts the same business, or a business similar to, that which is
conducted by Seller.
22
(w) Governmental Authorizations and Regulations.
(i) Seller has all governmental licenses, franchises, permits,
consents, certificates, approvals and all registrations and filings
with any governmental body with respect thereto (collectively,
"Permits"), required under applicable law for the conduct of the
Business as currently conducted, other than any of the foregoing the
failure of which to have would not have, in the aggregate, a Material
Adverse Effect. Seller has made all required registrations and filings
with all governmental bodies that are required to be obtained in
connection with the operations of the Business. All such Permits are
listed on Schedule 3.01(w) hereto. Such Permits have been validly
issued by the appropriate governmental bodies and are in full force and
effect. No material default or violation, or event that with the lapse
of time or the giving of notice or both would become a material default
or violation, has occurred in the due observance of such Permit.
(ii) The Business is being conducted in material compliance
with all applicable laws, ordinances, rules and regulations of all
governmental authorities relating to Seller's Assets or applicable to
the Business, including without limitation the terms of all Permits.
Seller has not received any notice of any alleged violation of any of
the foregoing.
(iii) Neither Seller nor any of its properties, operations or
businesses is subject to any court or administrative order, judgment,
injunction or decree. To the best knowledge of Seller, no action has
been taken or recommended by any governmental or regulatory official,
body or authority, either to revoke, withdraw or suspend any Permit.
(x) Insurance. All policies of fire, liability, workers'
compensation, and other forms of insurance providing insurance coverage to or
for Seller are listed in Schedule 3.01(x) hereto. All premiums with respect
thereto covering all periods up to and including the date as of which this
representation is being made have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. All such policies
are in full force and effect and provide insurance, including without limitation
liability insurance, in such amounts and against such risks as is customary for
companies engaged in similar businesses to Seller.
(y) Broker's or Finders' Fees. All negotiations relative to
this Agreement and the transactions contemplated hereby have been carried out by
Seller directly with Buyer, without the intervention of any persons on behalf of
Seller in
23
such a manner to give rise to any claim by any person against Buyer for a
finder's fee, brokerage commission or similar payment.
SECTION 3.002. Representations and Warranties of Buyer and
MedE. Buyer and MedE jointly and severally represent and warrant to Seller as
follows:
(a) Organization, Corporate Power, Etc. Each of Buyer and MedE
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio and the State of Delaware, respectively. Each of Buyer
and MedE has all requisite corporate power and authority to acquire, own, lease
and operate its properties and to execute and deliver this Agreement and the
Ancillary Agreements applicable to such party, and to perform its obligations
hereunder and thereunder.
(b) Authorization of Agreements; Validity. The execution and
delivery by Buyer and MedE of this Agreement and the Ancillary Agreements, and
the consummation by Buyer and MedE of the transactions contemplated hereby and
thereby, have been duly authorized by all requisite corporate action. This
Agreement has been duly and validly executed by Buyer and MedE and constitutes
the legal, valid and binding obligation of Buyer and MedE, enforceable in
accordance with its terms. Each Ancillary Agreement, when duly executed and
delivered by Buyer and MedE (if a party thereto), will constitute the legal,
valid and binding obligation of Buyer and MedE, enforceable in accordance with
its terms.
(c) Effect of Agreements. The execution and delivery by Buyer
and MedE of this Agreement and the Ancillary Agreements to which each is a party
and the performance by Buyer and MedE of their respective obligations hereunder
and thereunder will not (x) violate any provision of law, any order of any court
or other agency of government, the charter or By-laws of Buyer or MedE, or any
judgment, award, decree, indenture, agreement, Permit or other instrument to
which Buyer or MedE is a party, or by which Buyer or MedE is bound or affected
or (y) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under, any such indenture, agreement, Permit or
other instrument.
(d) Actions Pending. There is no action, suit, investigation
or proceeding pending or, to the knowledge of Buyer and MedE, as the case may
be, threatened against or affecting Buyer or MedE or any of their respective
properties or rights before any court or by or before any governmental body or
arbitration board or tribunal, the outcome of which, if adversely decided, would
prevent the consummation of the transactions contemplated hereby.
24
(e) Governmental Approvals. No approval, authorization,
consent or order or action of or filing with any court, administrative agency or
other governmental authority is required for the execution and delivery by Buyer
or MedE of this Agreement and the Ancillary Agreements to which each is a party
or the consummation by Buyer or MedE of the transactions contemplated hereby or
thereby.
(f) Broker's or Finders' Fees. All negotiations relative to
this Agreement and the transactions contemplated hereby have been carried out by
Buyer and MedE directly with Seller without the intervention of any persons on
behalf of Buyer or MedE in such a manner to give rise to any claim by any person
against Seller for a finder's fee, brokerage commission or similar payment.
IV. COVENANTS
SECTION 4.001. Covenants of Seller and the Stockholder.
(a) Seller and the Stockholder jointly and severally agree
that, at all times between the date hereof and the Closing Date, unless Buyer
and Seller shall otherwise agree in writing, Seller shall (and the Stockholder
shall cause Seller to):
(i) operate the Business only in the usual, regular and
ordinary manner and, to the extent consistent with such operations, (A)
use its best efforts to preserve the current business organization of
the Business and Seller's present relationships with customers of, and
all other persons having business dealings with, the Business, and (B)
use reasonable efforts to keep available the services of those officers
and employees currently engaged in the operations of the Business;
(ii) maintain all its Assets in good repair, order and
condition, reasonable wear and tear excepted;
(iii) maintain its books of account and records in the usual,
regular and ordinary manner, on a basis consistent with past practice,
and use its best efforts to comply with all laws applicable to it and
to the conduct of the Business and perform all its material obligations
without default;
(iv) not change the character of the Business in any material
manner;
(v) not, with respect to the Business take any action or
undertake any commitment or obligation of the types
25
described in clauses (i) through (xi) and (xiv) of Section 3.01(h)
hereof; and
(vi) not, except in the ordinary course and consistent with
past practice or as otherwise contemplated by this Section 4.01, amend
or modify in any way adverse to the interests of Seller any contract
listed on Schedule 1.01 hereto.
(b) Between the date of this Agreement and the Closing Date,
Seller will afford the representatives of Buyer reasonable access during normal
business hours to the offices, facilities, books and records of Seller and the
opportunity to discuss the affairs of Seller with officers and employees of
Seller familiar therewith.
(c) Between the date of this Agreement and the Closing Date,
Seller shall not, except as required by GAAP, (i) utilize accounting principles
different from those used in the preparation of the Financial Statements, (ii)
change in any manner its method of maintaining its books of account and records
from such methods as in effect on June 30, 1997, or (iii) accelerate booking of
revenues or the deferral of expenses, other than as shall be consistent with
past practice and in the ordinary course of business.
(d) Between the date hereof and the Closing Date, Seller
shall, with Buyer's assistance and cooperation but at the expense of Seller,
promptly apply for or otherwise seek and use reasonable efforts (it being
understood, for purposes of paragraphs (d) and (e) hereof, that "reasonable
efforts" shall not include either (i) incurring any material cash expenditures
or (ii) payment of any material sums) to obtain all authorizations, consents,
waivers and approvals as may be required in connection with the assignment of
the contracts, agreements, licenses, leases, sales orders, purchase orders and
other commitments and all Permits of which Seller is the beneficiary to be
assigned to Buyer pursuant to Section 1.01(a) hereto (including without
limitation (A) any Key Customer Contracts for which such consent is required and
(B) those contracts scheduled in response to Section 3.01(j)(vii)(F) hereof).
(e) Between the date hereof and the Closing Date, Seller
shall, with Buyer's assistance and cooperation but at the expense of Seller, use
reasonable efforts (i) to enter into written service agreements substantially in
the form attached as Exhibit D hereto ("Standard Service Agreements") with
respect to the Key Customer Contracts listed on Part I of Schedule 4.01(e)
hereto, and (ii) to enter into supplements to the Key Customer Contracts listed
on Part II of Schedule 4.01(e) hereto. The terms of such supplements shall be
satisfactory to Buyer.
26
(f) Between the date of this Agreement and the Closing Date,
Seller will not enter into any transaction or make any agreement or commitment,
or permit any event to occur, which would result in any of the representations,
warranties or covenants of Seller contained in this Agreement not being true and
correct at and as of the time immediately after the occurrence of such
transaction or event.
SECTION 4.002. Confidentiality. The contents of this Agreement
shall be kept confidential among the parties, except that each party may reveal
and discuss the contents with its respective professional advisors, including
attorneys and accountants. The parties may mutually agree in writing as to the
revealing of the subject transaction to current employees and to the public. In
so doing, the parties shall agree to the timing and content of the release of
such information.
SECTION 4.003. Allocation of Purchase Price. Each of the
parties hereto agrees to allocate the Purchase Price (and any liabilities
assumed by Buyer from Seller) among the Assets in the manner specified in
Schedule 4.03 hereto. Each of the parties hereto shall respect such allocation
for all financial accounting and Tax purposes and shall file all Returns and
other documents with all taxing authorities on a basis consistent therewith.
Buyer and Seller shall timely complete and file a Form 8594 Asset Acquisition
Statement of Allocation consistent with such allocation, and shall provide a
certified copy of such form to Buyer or Seller, as the case may be, and, if
applicable, shall file a certified copy of such form with its federal income Tax
Return for the period that includes the Closing Date.
SECTION 4.004. Preparation of Certain Financial Statements.
After the date hereof, Seller and the Stockholder shall provide MedE and Buyer
and their independent auditors with all reasonable assistance required to
prepare audited financial statements for the Business for and as of (x) the
period from July 1, 1997 through the Closing Date and (y) each of the
twelve-month periods ended December 31, 1996, December 31, 1995, and December
31, 1994. Seller and the Stockholder confirm and agree that such assistance
shall include, without limitation, (i) providing MedE, Buyer and their
representatives with all necessary financial information and data relating to
the Business for such periods, (ii) making available all employees of Seller or
any of its affiliates deemed necessary by MedE and Buyer to assist in the
preparation of such financial statements, and (iii) delivering to MedE's
independent auditors a management representation letter for such periods in a
form reasonably acceptable to such auditors.
27
Section 4.005. Certain Tax Matters. () All stamp, transfer,
sales or use Taxes imposed upon or incurred by any of the parties hereto in
connection with this Agreement and the transactions contemplated hereby shall be
borne by Buyer. Seller and Buyer shall jointly prepare and file all necessary
Returns and other documents with respect to all such stamp, transfer, sales or
use taxes and each party shall bear its own expenses in connection therewith. If
required by applicable law, any other party hereto shall join in the execution
and filing of any such Returns or other documents.
(b) For all federal, state, local and foreign income and
franchise Tax purposes, each of the parties hereto agrees to treat the
acquisition of the Assets by Buyer, pursuant to the terms and conditions of this
Agreement, as a fully taxable sale of the assets of Seller to Buyer solely in
exchange for cash (and the liabilities assumed by Buyer from Seller).
(c) Seller shall be responsible for and shall pay (i) any and
all Taxes with respect to Seller, the Business or the Assets relating to any Tax
period or portion thereof ending on or before the Closing Date and (ii) any and
all Taxes incurred by or imposed upon Seller (other than any Taxes described in
paragraph (a) above) as a result of the consummation of any of the transactions
contemplated by this Agreement. The Stockholder shall be responsible for and
shall pay all Taxes relating to his ownership interest in Seller and
attributable to any period (or portion thereof) ending on or prior to the
Closing Date.
SECTION 4.006. Insurance. Between the date of this Agreement
and the Closing Date, Seller shall maintain in full force and effect all
insurance policies listed on Schedule 3.01(x) hereto.
SECTION 4.007. Collection of Accounts Receivable. (a) For a
period of twelve months after the Closing Date, Buyer will use reasonable
efforts to collect for the benefit of Seller, and with the risk of
non-collection continuing to be the risk of Seller, the accounts receivable of
Seller as of the Closing Date (such receivables being hereinafter referred to as
the "Collection Receivables"). Buyer shall deposit in Seller's account, when and
as received (together with appropriate statements of collection), all monies,
drafts, checks and other instruments of payment received by it as payments on
the Collection Receivables, provided that payments applying to both Collection
Receivables and receivables of Buyer shall be deposited in Buyer's account and
funds in the amount attributable to the Collection Receivables shall be promptly
remitted to Seller. Buyer shall apply all collections from account debtors owing
Collection Receivables to the payment in full of undisputed and matured
Collection Receivables in priority to any accounts receivable from such
28
account debtors with respect to services rendered, goods sold or work done on or
after the Closing Date; provided, however, that in the event that any such
collection is received from such an account debtor as to whom transaction
processing services are discontinued, such collection shall be allocated between
Seller and Buyer pro rata on the basis of the ratio of (A) Collection
Receivables payable by such account debtor to (B) receivables payable by such
account debtor that accrue after the Closing Date.
SECTION 4.008. Retention of Employees. Effective as of the
Closing Date, except for the employees of the Business listed in Schedule 4.08
hereto, Buyer will offer to continue the employment of all employees of Seller
at salaries equal to those now paid by Seller, and on such other terms as MedE
and Buyer make available to their employees generally. It is understood and
agreed that nothing in this Agreement shall be deemed to create any employment
status other than employment at will or require Buyer to continue for the
benefit of any employee any Plan or other benefits program or arrangement
maintained by Seller prior to the Closing Date.
SECTION 4.009. Payment of Certain Liabilities. () Seller
shall, on a timely basis and in a manner consistent with past practice, pay all
liabilities of Seller not assumed by Buyer.
(b) Prior to the Closing Date, Buyer shall pay to Seller
$130,000, to be used to repay purchase money indebtedness on the computer
equipment described on Schedule 1.01(a)(i) hereto. Seller shall promptly use
such sum to repay such indebtedness, and shall at the Closing deliver such
computer equipment free and clear of any liens, charges, pledges, security
interests or other encumbrances of any nature whatsoever.
SECTION 4.10. Name Matters. (a) Prior to the Closing Date,
Seller shall procure from Dan Bowden and PreScrip Services, Inc., all of their
respective right, title and interest in and to the name "PreScrip" and the
service mark associated therewith, and the same shall be among the Assets
conveyed to Buyer pursuant to Section 1.01 hereof.
(b) Within 30 days of the Closing Date, Seller shall change
its name to a name that does not include the word "Stockton" or any variation
thereon.
SECTION 4.11. Brookins and Lagnese. (a) Seller shall pay to
Gerald Brookins ("Brookins") and to Christopher Lagnese ("Lagnese") amounts
equal to 25% and 10%, respectively, of the Purchase Price, when and as the
Purchase Price is received by Seller.
29
(b) Prior to the Closing Date, Seller and the Stockholder
shall use their reasonable efforts to procure from each of Brookins and Lagnese
a release whereby each waives any claim to any interest in the equity or the
assets of Seller (or any other ownership interest in or relating to Seller).
Such releases shall be reasonably satisfactory in form and substance to Buyer.
SECTION 4.12 Access to Records. Following the Closing Date,
Buyer and MedE shall grant the Stockholder, Brookins and Lagnese reasonable
access to the books and records of the Company and the Business for the purposes
of maintaining personal financial records and paying taxes, and for other
similar purposes; provided that any such person requesting access to such
information shall (i) provide reasonable notice of any such request, (ii)
conduct any investigation or review of such information so as to minimize any
disruption to the operations of MedE and Buyer and (iii) keep such information
confidential.
V. CONDITIONS PRECEDENT
SECTION 5.001. Conditions Precedent to Obligations of Buyer
and MedE. The obligations of Buyer and MedE under this Agreement are subject, at
the option of Buyer and MedE, to the satisfaction at or prior to the Closing
Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller and the Stockholder contained in this
Agreement or in any certificate or document delivered to Buyer pursuant hereto
shall be true and correct in all material respects on and as of the Closing Date
as though made at and as of that date, and Seller and the Stockholder shall have
delivered to Buyer a certificate to that effect.
(b) Compliance with Covenants. Seller and the Stockholder
shall have performed and complied in all material respects with all terms,
agreements, covenants and conditions of this Agreement to be performed or
complied with by it at or prior to the Closing Date, and Seller and the
Stockholder shall have delivered to Buyer a certificate to that effect.
(c) Opinion of Counsel to Seller. Buyer shall have received an
acceptable opinion of Parker, Poe, Adams & Bernstein L.L.P., counsel for Seller,
dated the Closing Date, providing for opinions substantially in the form
attached hereto as Exhibit E.
(d) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to restrain,
prohibit, invalidate or otherwise affect the consumma-
30
tion of the transactions contemplated hereby or which would, if adversely
decided, have a Material Adverse Effect.
(e) Consents; Assignment of Contracts. Seller shall have
obtained all the authorizations, consents, waivers and approvals required in
connection with the transfer or assignment of each of (i) the Key Customer
Contracts for which any such approval is required and (ii) those Permits,
contracts, agreements, licenses, leases, sales orders, purchase orders and other
commitments scheduled pursuant to Section 3.01(j)(vii)(F) hereof.
(f) Written Service Agreements; Supplements to Service
Agreements. Seller shall have entered into Standard Service Agreements in
respect of the Key Customer Contracts listed on Part I of Schedule 4.01(e)
hereto, and shall have entered into supplements to those Key Customer Contracts
listed on Part II of Schedule 4.01(e) hereto. The terms of such supplements
shall be reasonably satisfactory to Buyer and its counsel.
(g) Audited Financial Statements. Seller shall have delivered
to MedE and Buyer (x) audited financial statements for the Business for and as
of the twelve-month period ended June 30, 1997, and (y) financial statements for
the Business for and as of each of the twelve-month periods ended December 31,
1996, December 31, 1995, and December 31, 1994, unaudited but reviewed by the
independent accountants retained by Seller.
(h) Ancillary Agreements. The Ancillary Agreements shall have
been executed and delivered by each party thereto, and said Agreements shall be
in full force and effect as of the Closing Date.
(i) Employment Arrangements. Each of Brookins and Lagnese
shall have executed and delivered to MedE an Employment Agreement and a
Non-Compete Agreement. The terms of such agreements shall be satisfactory to
MedE and Brookins or Lagnese, as the case may be.
(j) Supporting Documents. Buyer and MedE shall have received
copies of the following supporting documents:
(i) (A) a copy of the charter of Seller as amended through the
date hereof, certified as of a recent date by the Secretary of State of
the state of South Carolina, and () a certificate of said Secretary of
State, dated as of a recent date, as to the due incorporation and good
standing of Seller and listing all documents of Seller on file with
said Secretary; and
(ii) a certificate of the Secretary or an Assistant Secretary of
Seller dated the Closing Date and certifying:
31
(1) that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors of Seller authorizing the execution,
delivery and performance of this Agreement and the Ancillary Agreements
and that all such resolutions are still in full force and effect and
are all the resolutions adopted in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements; and (2) as
to the incumbency and specimen signature of each officer of Seller
furnishing any certificate or instrument pursuant hereto, and a
certification by another officer of Seller as to the incumbency and
signature of the officer signing the certificate referred to herein.
(k) All Proceedings To Be Satisfactory. All corporate and
other proceedings to be taken by Seller in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Buyer and its counsel, and Buyer and said
counsel shall have received all such counterpart originals or certified or other
copies of such documents as it or they may reasonably request.
(l) Allocation of Purchase Price. Buyer and Seller shall have
agreed to an allocation of the Purchase Price among the Assets in accordance
with Section 4.03 hereof.
(m) Receipt of Releases. Buyer shall have received the
releases to be procured pursuant to Section 4.11 hereof.
SECTION 5.002. Conditions Precedent to Obligations of Seller
and the Stockholder. The obligations of Seller and the Stockholder under this
Agreement are subject, at the option of Seller and the Stockholder, to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer and MedE contained in this Agreement or
in any certificate or document delivered to Seller pursuant hereto shall be true
and correct in all material respects on and as of the Closing Date as though
made at and as of that date, and Buyer and MedE shall have delivered to Buyer a
certificate to that effect.
(b) Compliance with Covenants. Buyer and MedE shall have
performed and complied in all material respects with all terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at or prior to the Closing Date, and Buyer and MedE shall have delivered to
Seller a certificate to that effect.
(c) Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted or threatened seeking to
32
restrain, prohibit, invalidate or otherwise affect the consummation of the
transactions contemplated hereby or which would, if adversely decided, have a
Material Adverse Effect.
(d) Ancillary Agreements. The Ancillary Agreements shall have
been executed and delivered by each party thereto, and said Agreements shall be
in full force and effect as of the Closing Date.
(e) Supporting Documents. Seller shall have received copies of
the following supporting documents:
(i) (A) a copy of the charter of each of Buyer and MedE as
amended through the date hereof, certified as of a recent date by the
Secretary of State of the state in which Buyer or MedE (as applicable)
is incorporated, and () a certificate of said Secretary of State, dated
as of a recent date, as to the due incorporation and good standing of
Buyer or MedE (as applicable) and listing all documents of Buyer or
MedE on file with said Secretary; and
(ii) a certificate of the Secretary or an Assistant Secretary of
Buyer and MedE dated the Closing Date and certifying: (1) that attached
thereto is a true and complete copy of resolutions adopted by the Board
of Directors of Buyer and MedE authorizing the execution, delivery and
performance of this Agreement and the Ancillary Agreements and that all
such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by
this Agreement and the Ancillary Agreements; and (2) as to the
incumbency and specimen signature of each officer of Buyer and MedE
furnishing any certificate or instrument pursuant hereto, and a
certification by another officer of each of Buyer and MedE as to the
incumbency and signature of the officer signing the certificate
referred to herein.
(f) All Proceedings To Be Satisfactory. All corporate and
other proceedings to be taken by Buyer and MedE in connection with the
transactions contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to Seller and its counsel, and
Seller and said counsel shall have received all such counterpart originals or
certified or other copies of such documents as it or they may reasonably
request.
(g) Allocation of Purchase Price. Buyer and Seller shall have
agreed to an allocation of the Purchase Price among the Assets in accordance
with Section 4.03 hereof.
33
(h) Opinion of Buyer's Counsel. Seller shall have received the
favorable opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol, counsel for
Buyer and MedE, dated the Closing Date, substantially in such form attached
hereto as Exhibit F.
(i) Lease Agreement. Buyer shall have entered into a lease
agreement with Troon Properties, Inc. on terms satisfactory to Buyer.
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
SECTION 6.001. Survival of Representations. Except as
otherwise set forth below, all representations and warranties made by any party
hereto in this Agreement or pursuant hereto shall survive for a period of 24
months following the Closing Date, except for the representations and warranties
as to Tax and environmental matters made by any party hereto in this Agreement
or pursuant hereto (which representations and warranties shall survive for the
applicable statute of limitation period, including any extensions thereof).
SECTION 6.002. Tax Indemnity. () Seller and the Stockholder
hereby jointly and severally agree to indemnify, defend and hold Buyer and MedE
harmless from and against any and all Taxes incurred by, imposed upon or
attributable to Seller or any predecessor company thereof, including reasonable
legal fees and expenses incurred by any party hereto and relating thereto, for
any Tax period or portion thereof ending on or before the Closing Date.
(b) Buyer and MedE hereby jointly and severally agree to
indemnify, defend and hold Seller and the Stockholder harmless from and against
any and all Taxes incurred by, imposed upon or attributable to Buyer, MedE or
any predecessor company thereof, including reasonable legal fees and expenses
incurred by any party hereto and relating thereto, for any Tax period or portion
thereof ending after the Closing Date.
(c) For purposes of this Section 6.02, any interest, penalty
or additional charge included in Taxes shall be deemed to be a Tax for the
period to which the item or event giving rise to such interest, penalty or
additional charge is attributable, and not a Tax for the period during which
such interest, penalty or additional charge accrues.
(d) The indemnity provided for in this Section 6.02 shall be
independent of any other indemnity provision hereof and, anything in this
Agreement to the contrary notwithstanding shall survive until the expiration of
the applicable statutes of limitation, including any extensions thereof, for the
Taxes referred
34
to herein. Any Taxes, legal fees and expenses subject to indemnification under
this Section 6.02 shall not be subject to indemnification under Section 6.03.
SECTION 6.003. General Indemnity. (a) Subject to the terms and
conditions of this Article VI, Seller and the Stockholder hereby jointly and
severally agree to indemnify, defend and hold Buyer and MedE harmless from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively,
"Damages"), asserted against, imposed upon or incurred by Buyer or MedE by
reason of or resulting from:
(i) a breach of any representation, warranty or cove nant of
Seller or the Stockholder contained in or made pursuant to this
Agreement;
(ii) any liabilities or obligations of, or claims against or
imposed on Seller (whether absolute, accrued, contingent or otherwise
and whether a contractual, or any other type of liability, obligation
or claim) and not assumed by Buyer pursuant to this Agreement and the
Bill of Sale, Assignment and Assumption Agreement;
(iii) any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) in respect of any action, suit or
proceeding relating to the conduct of the Business by Seller and based
upon an event occurring or a claim arising on or prior to the Closing
Date (including without limitation those actions listed on Schedule
3.01(k) hereto); and
(iv) any liability in respect of any failure by Seller to
conduct the Business in compliance with any Permit, law, regulation or
order prior to the Closing Date.
(b) Subject to the terms and conditions of this Article VI,
Buyer and MedE hereby jointly and severally agree to indemnify, defend and hold
Seller and the Stockholder harmless from and against all Damages asserted
against, imposed upon or incurred by Seller or the Stockholder by reason of or
resulting from:
(i) a breach of any representation, warranty or covenant of
Buyer or MedE contained in or made pursuant to this Agreement;
(iii) the failure of Buyer to pay, perform and discharge when
due any Assumed Liabilities;
35
(iii) any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) in respect of any action, suit or
proceeding relating to the conduct of the Business by Buyer and based
upon an event occurring or a claim arising after the Closing Date; and
(iv) any liability in respect of any failure by Buyer to
conduct the Business in compliance with any Permit, law, regulation or
order after the Closing Date.
SECTION 6.004. Conditions of Indemnification. The respective
obligations and liabilities of Seller and the Stockholder, on the one hand, and
Buyer and MedE, on the other hand (the "indemnifying parties"), to the others
(the "parties to be indemnified") under Sections 6.02 and 6.03 hereof with
respect to claims resulting from the assertion of liability by third parties
shall be subject to the following terms and conditions:
(a) within 20 days after receipt of notice of commencement of
any action or the assertion in writing of any claim by a third party, the
parties to be indemnified shall give the indemnifying parties written notice
thereof together with a copy of such claim, process or other legal pleading, and
the indemnifying parties shall have the right to undertake the defense thereof
by representatives of its own choosing;
(b) in the event that the indemnifying parties, by the 30th
day after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the parties to be indemnified will
(upon further notice to the indemnifying parties) have the right to undertake
the defense, compromise or settlement of such claim on behalf of and for the
account and risk of the indemnifying parties, subject to the right of the
indemnifying parties to assume the defense of such claim at any time prior to
settlement, compromise or final determination thereof, provided that the
indemnifying parties shall be given at least 15 days prior written notice to the
effectiveness of any such proposed settlement or compromise;
(c) anything in this Section 6.04 to the contrary
notwithstanding (i) if there is a reasonable probability that a claim may
materially and adversely affect the indemnifying parties other than as a result
of money damages or other money payments, the indemnifying parties shall have
the right, at their own cost and expense, to compromise or settle such claim,
but (ii) the indemnifying parties shall not, without the prior written consent
of the party to be indemnified, settle or compromise any claim or consent to the
entry of any judgment which does
36
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the parties to be indemnified a release from all liability in
respect of such claim; and
(d) in connection with any such indemnification, the
indemnified parties will cooperate in all reasonable requests of the
indemnifying parties.
VII. TERMINATION
SECTION 7.001. Termination. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by Buyer, if the conditions set forth in Section 5.01
shall not have been complied with or performed in any material respect
and such noncompliance or nonperformance shall not have been waived,
cured or eliminated (or by its nature cannot be cured or eliminated) by
Seller or the Stockholder on or before November 30, 1997;
(b) by Seller, if the conditions set forth in Section 5.02
shall not have been complied with or performed in any material respect
and such noncompliance or nonperformance shall not have been waived,
cured or eliminated (or by its nature cannot be cured or eliminated) by
Buyer or MedE on or before November 30, 1997; or
(c) by Buyer or Seller, in the event the Closing Date has not
occurred on or prior to the close of business on November 30, 1997 or
such later date as the parties hereto may agree in writing (unless such
event has been caused by the breach of this Agreement by the party
seeking such termination). A failure to satisfy a condition hereunder
(including without limitation a condition set forth in Section 5.01(e)
or 5.01(f) hereof) shall not of itself constitute a breach of this
Agreement.
SECTION 7.002. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.01 hereof, this Agreement
shall thereafter become void and have no effect, and no party hereto shall have
any liability to any other party hereto or its partners or stockholders or
directors or officers in respect thereof, except that nothing herein shall
relieve any party from liability for any willful breach hereof. The terms of the
Non-Disclosure Agreement, dated as of February 24, 1997, between MedE and Seller
shall survive any termination of this Agreement. Without limiting the effect of
said Non-Disclosure Agreement, upon any termination of this Agreement, each of
Buyer and MedE, on the one hand, and Seller and the
37
Stockholder, on the other hand, (i) shall not use any confidential information
disclosed by the other for its own benefit and (ii) shall promptly return to the
other all documents, papers and other confidential information delivered to such
party by the other at any time prior to the date of such termination.
VIII. MISCELLANEOUS
SECTION 8.001. Specific Performance. Seller and the
Stockholder acknowledge that the acquisition of the Assets is a vital, necessary
and unique part of Buyer's strategic plan, which includes the acquisition and
consolidation of other related businesses, and that any breach of this Agreement
by Seller or the Stockholder could not be adequately compensated by damages.
Buyer and MedE acknowledge that any breach of this Agreement by Buyer or MedE
could not be adequately compensated by damages. Accordingly, each of Buyer and
MedE, on the one hand, and Seller and the Stockholder, on the other hand, shall
be entitled, in the event of a breach of this Agreement by the other, in
addition to any other remedies that it may have, to enforcement of this
Agreement by a decree of specific performance requiring that the other party or
parties fulfill their respective obligations under this Agreement.
SECTION 8.002. Bulk Transfer Laws. Subject to the provisions
of Section 6.03 hereof, Buyer hereby waives compliance by Seller with any
applicable bulk transfer laws, including, without limitation, the bulk transfer
provisions of the Uniform Commercial Code of any state, or any similar statute,
with respect to the transactions contemplated hereby.
SECTION 8.003. Expenses, Etc. Whether or not the transactions
contemplated by this Agreement are consummated, Seller and the Stockholder, on
the one hand, and Buyer and MedE, on the other hand, shall not have any
obligation to pay any of the fees and expenses of the other party incident to
the negotiation, preparation and execution of this Agreement, including the fees
and expenses of counsel, accountants, investment bankers and other experts.
Seller and the Stockholder, on the one hand, and Buyer and MedE, on the other
hand, will indemnify the other and hold the other harmless from and against any
claims for finders fees or brokerage commissions in relation to or in connection
with such transactions as a result of any agreement or understanding between
such indemnifying party and any third party.
SECTION 8.004. Execution in Counterparts. This Agreement may
be executed in one or more counterparts, or by the parties hereto on separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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SECTION 8.005. Notices. All notices which are required or may
be given pursuant to the terms of this Agreement shall be in writing and shall
be sufficient in all respects if given in writing and delivered personally,
transmitted by facsimile, sent by nationally recognized overnight courier or
mailed by registered or certified mail postage prepaid, as follows:
If to Seller or to the Stockholder, to:
The Stockton Group, Inc.
125 Venture Blvd.
Spartanburg, South Carolina 29306
Attention: President
Fax: (864) 574-0424
with a copy to:
Parker, Poe, Adams & Bernstein
101 West Saint John Street, Suite 203
Spartanburg, South Carolina 29306
Attention: T. Alexander Evins, Esq.
Fax: (864) 591-2050
If to Buyer or MedE, to:
MedE America Corporation
90 Merrick Avenue, Suite 501
East Meadow, New York 11554
Attention: David M. Goldwin, Esq.
Fax: (516) 542-4508
with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Mark J. Tannenbaum, Esq.
Fax: (212) 841-5725
or such other address or addresses as Seller and the Stockholder, on the one
hand, or Buyer and MedE, on the other hand, shall have designated by notice to
the other in writing.
SECTION 8.006. Waivers. Seller (acting on behalf of itself and
the Stockholder), on the one hand, and MedE (acting on behalf of itself and
Buyer), on the other hand, may, by written notice to the other, (i) extend the
time for the performance of any of the obligations or other actions of the other
under this Agreement; (ii) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement; (iii) waive
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compliance with any of the conditions or covenants of the other contained in
this Agreement; or (iv) waive performance of any of the obligations of the other
under this Agreement. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party shall be deemed to constitute a
waiver by such party of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
SECTION 8.007. Amendments, Supplements, Etc. At any time this
Agreement may be amended or supplemented by such additional agreements, articles
or certificates as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by all parties.
SECTION 8.008. Entire Agreement. This Agreement, its Exhibits
and Schedules, the Ancillary Agreements and the documents executed on the
Closing Date in connection herewith, constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party which is not
embodied in this Agreement or such other documents, and no party shall be bound
by, or be liable for, any alleged representation, warranty, promise, inducement
or statement of intention not embodied herein or therein.
SECTION 8.009. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.10. Binding Effect; Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
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SECTION 8.11. Assignability. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by any party hereto without
the prior written consent of the other parties hereto.
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IN WITNESS WHEREOF, this Asset Purchase Agreement has been
duly executed and delivered by the parties hereto as of the date first above
written.
GENERAL COMPUTER CORPORATION
By
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MEDE AMERICA CORPORATION
By
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THE STOCKTON GROUP, INC.
By
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James S. Smith
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