Execution Copy
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of this
3rd day of May, 2004, by and among REHABCARE GROUP, INC., a Delaware corporation
("Parent"), PHASE 2 CONSULTING, INC., a Delaware corporation and wholly-owned
subsidiary of Parent ("Buyer"), PHASE 2 CONSULTING, INC., a Utah corporation
("Seller") and each of JOHN H. SHORT, PETER F. SINGER and HOWARD W. SALMON
("Shareholders").
RECITALS
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WHEREAS, Shareholders own 100% of the issued and outstanding capital stock
of Seller; and
WHEREAS, Seller is in the business of providing healthcare management and
economic consulting to healthcare organizations, physician practices and long
term care and behavioral health providers and specializes in strategic planning,
clinical operations and productivity improvement, business planning, market and
financial feasibility studies and market research and analysis (the "Business");
and
WHEREAS, Seller and Shareholders desire to sell, assign, convey and
transfer to Buyer, and Buyer desires to acquire from Seller and Shareholders,
certain of Seller's assets associated with the Business pursuant to the terms
and conditions of this Agreement; and
WHEREAS, each of the parties hereto desires to set forth certain
representations, warranties, covenants and indemnity obligations, and to
establish certain closing conditions, made to induce the other to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
ARTICLE 1
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SALE AND PURCHASE OF ASSETS
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1.1 Description of Purchased Assets; Closing.
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(a) At the Closing on the Closing Date (each term as defined in Section 3.1
hereof), subject to the terms and conditions set forth in this Agreement,
Seller shall sell to Buyer, and Buyer shall purchase from Seller, only
those assets of Seller, tangible or intangible, wherever located, used in
the conduct of the Business, which are set forth in this Section 1.1(a),
free and clear of all liens, mortgages, security interests and encumbrances
(collectively, the "Purchased Assets"):
(i) All right, title and interest of Seller in and to all client accounts
and client contracts existing in connection with the Business which
are set forth on Schedule 1.1(a)(i), including, but not limited to,
all claims and rights under such client contracts, written and oral,
all claims and rights relating to such clients served by Seller in the
Business but not under written contracts, all client lists, records,
computer records and other similar data relating to such client
accounts (collectively the "Client Contracts" and the Business clients
the "Client Accounts");
(ii) Subject to any required consents, all right, title and interest in and
to all Leases (as defined in Section 4.4(b)) of real and personal
property set forth on Schedule 1.1(a)(ii) attached hereto, together
with all deposits relating thereto;
(iii)All property and equipment and other tangible personal property used
or usable by Seller in the Business which are set forth on Schedule
1.1(a)(iii), including, without limitation, leasehold improvements,
furniture, furnishings, machinery, equipment, vehicles, office
supplies, together with all manuals, records, written warranties,
licenses and similar documents and rights relating thereto;
(iv) All right, title and interest in and to all written bids, sales
orders, purchase orders, sales contracts, supply contracts and other
contract rights, oral or written, of Seller related to the Business
which are set forth on Schedule 1.1(a)(iv) attached hereto
(collectively, the "Assumed Contracts");
(v) All accounts receivable, net of reserves for bad debt, with current
active clients arising from transactions of Seller in the Business
outstanding as of the Closing Date and those billed after the Closing
Date for services rendered by Seller prior to the Closing Date whether
such accounts receivable have been fully reserved for as uncollected
accounts receivable or written off as uncollectible accounts (the
"Accounts Receivable");
(vi) All right, title and interest of Seller in and to the following
intellectual property used in the Business: (i) all patents,
trademarks, service marks, artwork designs, trade dress, logos, trade
names, including the trade name "Phase 2 Consulting," and corporate
names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith
and all applications, registrations and renewals in connection
therewith, (ii) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, and
(iii) all trade secrets and confidential business information
(including technical data, know-how, mailing lists, customer files and
account histories, customer and supply lists, pricing and cost
information and business and marketing plans and proposals) which are
set forth on Schedule 1.1(a)(vi) attached hereto (collectively, the
"Intellectual Property");
(vii)All files, books and records (including computer records) of Seller
relating to the foregoing items; and
(viii) The Business as a going concern, including all goodwill thereof.
(b) Excluded Assets. Notwithstanding the provisions of Section 1.1(a), Buyer
shall not be entitled to purchase, nor shall Seller be required to sell,
whether or not relating to the Business, any other asset of Seller,
including without limitation, the following assets (collectively, the
"Excluded Assets"):
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(i) Income and franchise tax returns, information returns, reports,
elections and work papers of Seller (it being understood that upon
request, Buyer shall have reasonable access to copies of any such
documents relating to the Business subject to any applicable
confidentiality obligations of Seller with respect to such documents
imposed by applicable law), and any rights to income tax refunds and
prepaid income taxes;
(ii) Any right and interest of Seller in this Agreement and any other
agreements and instruments to be executed by Seller in connection with
the sale of the Purchased Assets and other transactions contemplated
by this Agreement;
(iii)Except as otherwise provided herein, any and all of Seller's
insurance policies, including all rights to coverage, all proceeds and
all prepaid insurance under such policies;
(iv) The cash, cash equivalents, investments and securities of Seller and
accounts receivables of Seller not related to the Business (it being
understood that Buyer is purchasing the Accounts Receivable as set
forth in Section 1.1(a)(v));
(v) All real property owned or leased by Seller and whether or not
relating to the Business, except as specifically set forth in Section
1.1(a);
(vi) All of Seller's rights and liabilities under the Verus stock purchase
agreement, which shall include any subsequent investment in Verus by
Seller;
(vii)All contracts and agreements of Seller, whether or not relating to
the Business, other than the Client Contracts and the Assumed
Contracts set forth in Section 1.1(a);
(viii) Seller's corporate seal, charter and minutes and stock record books;
(ix) All motor vehicles owned or leased by Seller whether or not relating
to the Business; and
(x) All assets and rights of Seller, whether used in the Business or not,
not set forth in Section 1.1(a).
1.2 Purchase Price.
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The aggregate consideration to be paid by Buyer to Seller for the Purchased
Assets shall be cash in the aggregate amount of Five Million and 00/100 Dollars
($5,000,000.00) (the "Purchase Price"), subject to adjustment as set forth in
Section 1.3, payable as follows:
(a) by delivery to Seller on the Closing Date the amount of $4,709,277.33 by
wire transfer of immediately available funds pursuant to written wire
transfer instructions provided to Buyer by Seller at least two (2) business
days prior to the Closing Date; and
(b) by delivery to U.S Bank on the Closing Date the amount of $290,722.67 by
wire transfer of immediately available funds pursuant to written wire
transfer instructions provided to Buyer by U.S. Bank.
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1.3 Purchase Price Adjustment for Closing Working Capital.
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(a) Subject to the adjustments set forth below in this Section 1.3(a), Seller
shall use its reasonable best efforts to have on the Closing Date, Working
Capital (as defined in this Section 1.3(a)) in an amount equal to Eight
Hundred Seventy-Four Thousand Dollars ($874,000.00) (the "Agreed Working
Capital"). For purposes of this Section 1.3(a), the term Working Capital
shall mean the amount by which the aggregate book value of Seller's current
assets exceeds the aggregate book value of Seller's current liabilities,
all as determined in accordance with United States generally accepted
accounting principles as in effect on the date of this Agreement ("GAAP")
applied on a consistent basis throughout the periods covered by such
statements, except for the exclusion of deferred bonus and deferred
partnership distribution liabilities, and consistent with the presentation
in the balance sheet as of March 31, 2004 as attached hereto on Schedule
1.3(a) (the "Reference Balance Sheet"), but notwithstanding any provision
of GAAP to the contrary, specifically including in Seller's current assets
all work-in-process as of the Closing Date and specifically including in
Seller's current liabilities the aggregate amount of all obligations of
Seller under any long-term capital leases and specifically including in
Seller's current assets any deposits associated with the management
retreat. For purposes of determining Seller's current liabilities, in the
event that the Closing shall occur on a date not the end of the month the
amount of each expense historically accrued by Seller on a monthly or other
non-daily basis, including any expense for Taxes, shall, notwithstanding
any provision of GAAP to the contrary, be calculated by (i) dividing the
aggregate amount of such historical monthly accrual by 30, and (ii)
multiplying such per diem amount by the number of days expired in the month
up to and including the Closing Date. To the extent, if any, that the
Actual Working Capital (as defined in Section 1.3(b) below) is less than
the Agreed Working Capital, Seller and/or Shareholders shall, within the
earlier to occur of ninety (90) calendar days after the Closing or the
final determination (as set forth in Section 1.3(c) below) of the Actual
Working Capital, deliver to Buyer a check in the amount required to bring
the Actual Working Capital up to the Agreed Working Capital level. In the
event the Actual Working Capital exceeds the Agreed Working Capital, Buyer
shall deliver a check to Seller in an amount equal to the Actual Working
Capital in excess of the Agreed Working Capital within the same timeframe.
(b) Not more than 60 days after the Closing Date, Buyer shall prepare and
deliver to Shareholders a balance sheet of Seller as of the Closing Date
(the "Closing Balance Sheet") indicating, among other things, the Working
Capital of Seller as of the Closing Date (the "Actual Working Capital").
Such Closing Balance Sheet shall be prepared consistent with the
presentation in the Reference Balance Sheet and in accordance with GAAP,
applied on a consistent basis throughout the periods covered by such
statement, subject to the exceptions specifically set forth in Section
1.3(a). Seller and/or Shareholders shall have thirty (30) days after
receipt of the Closing Balance Sheet to independently verify that the
information contained thereon is both accurate and complete and to give
written notice to Buyer of any discrepancies. Buyer shall cooperate with
Seller and Shareholders during the verification period by providing
documentation and other information which Seller or Shareholders may
reasonably request to assist in verifying the information contained on the
Closing Balance Sheet. The costs and expenses related to the preparation
and verification of the Closing Balance Sheet as contemplated in this
Section 1.3(b) shall be borne by the party incurring such costs or
expenses.
(c) The parties shall in good faith attempt to resolve the discrepancies, if
any, in the Closing Balance Sheet. Should the parties be unable to agree
within five (5) days after the end of the verification period, then such
dispute shall be submitted for resolution to the St. Louis office of a
nationally recognized public accounting firm acceptable to the parties and
the determination of such firm shall be binding upon the parties. Buyer and
Shareholders shall direct such firm to render a determination on any
submitted dispute within thirty (30) days after its retention. Buyer, on
the one hand, and Shareholders, on the other, shall each pay one-half of
such firm's fees and expenses in connection with such services.
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1.4 Purchase Price Allocation.
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Following the Closing, Buyer and Seller agree to use their best efforts to
allocate the Purchase Price between and among the Purchased Assets. Neither
Buyer nor Seller shall take a position in any Return (as defined in Section
4.3), examination or other administrative or judicial proceeding relating to any
Return, that is inconsistent with such allocation.
1.5 Further Assurances.
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At any time and from time to time before and after the Closing, at the request
of any party and without further consideration, each party promptly shall
execute and deliver such instruments of sale, transfer, conveyance, assignment
assumption and confirmation, and take such other action, as may be reasonably
requested to more effectively carry out the intent of this Agreement.
ARTICLE 2
ASSUMPTION OF CERTAIN LIABILITIES
2.1 Assumed Liabilities.
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At the Closing, Seller shall assign, and Buyer shall assume and agree to pay,
discharge or perform, as applicable, pre-closing liabilities to the extent that
such liabilities are included in the Closing Balance Sheet as current
liabilities, and those obligations and liabilities accruing after the Closing
Date under the Client Contracts and Assumed Contracts transferred and validly
assigned to Buyer in accordance with Section 1.1(a) hereof (collectively, the
"Assumed Liabilities").
2.2 Excluded Liabilities.
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Notwithstanding the provisions of Section 2.1, Buyer shall not assume, and
Seller shall remain liable for, any and all liabilities, obligations, claims and
commitments of or against Seller which are not specifically set forth herein as
being expressly assumed by Buyer (and regardless of whether set forth on any
Schedule hereto), whether the same are known or unknown, existing, contingent
upon future events or circumstances, accrued, funded, unfunded or otherwise (the
"Excluded Liabilities"), including, without limitation:
(a) any Taxes (as defined in Section 4.3) imposed on Seller (including with
respect to the Excluded Assets at any time) or relating to the Business
(including the Purchased Assets) for any period (or portion thereof) ending
on or prior to the Closing Date;
(b) any liability or obligation resulting from any formal or informal, written
or unwritten, agreement with respect to employee compensation, severance
pay, bonus, partner distributions, pension, retirement, profit sharing,
health or medical benefit, welfare plan, or any other employee benefit or
fringe benefit plan and any stock option arrangements, warrants or
employment agreements for services for periods on or prior to the Closing
Date;
(c) any liability or obligation relating to the Business or Purchased Assets
arising out of any event or occurrence or a claim arising prior to the
Closing Date;
(d) any liabilities or obligations of Seller relating to the Excluded Assets;
(e) any liability or obligation of Seller arising or incurred in connection
with the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated hereby, including without
limitation, fees and expenses of its counsel, accountants and other
advisors;
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(f) any liabilities of Seller for commissions or fees owed to any finder or
broker retained by Seller or Shareholders in connection with the
transactions contemplated hereby;
(g) any obligation, liability, injury or damage arising, accruing or existing
prior to the Closing Date with respect to Seller's employees, including
without limitation any matters arising under laws governing wages and
hours, employment discrimination, sexual harassment, occupational safety
and health, workers' compensation, the payment and withholding of
employment taxes and any alleged violations of law;
(h) any liability of Seller or with respect to the Business for any violations
of any law, regulation or rule to the extent arising from acts or omissions
prior to the Closing Date, including, without limitation, applicable health
care laws, rules and regulations, including those relating to the payment
or receipt of illegal remuneration, including 42 U.S.C. ss.1395nn (the
Stark Statute), 42 U.S.C. ss.1320a-7a, 42 U.S.C. ss.1320a-7b(a), 42 U.S.C.
ss.1320a-7b(c) and any applicable state laws governing kickbacks and
matters similar to such federal statutes (collectively, the "Fraud and
Abuse Laws"); and
(i) any liability that represents amounts owed by Seller that are past due or
contractually due on or prior to the Closing Date, including any amounts
owing by Seller under any of the Client Contracts on or prior to Closing.
ARTICLE 3
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CLOSING AND CLOSING DATE
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3.1 Closing.
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The closing ("Closing") of the sale of the Purchased Assets and other
transactions contemplated by this Agreement shall take place at the offices of
Thompson Coburn LLP, One US Bank Plaza, St. Louis, Missouri 63101 commencing at
9:00 a.m., local time, on May 3, 2004 or on such other date ("Closing Date"),
not later than June 30, 2004, or at such other place as Buyer and Seller
mutually shall agree.
3.2 Simultaneous Closing.
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All actions taken at the Closing shall be deemed to be performed simultaneously
and the Closing shall not be deemed to have occurred until all required actions
of the parties pursuant to this Agreement have been performed. The parties shall
deliver such additional documents and take such additional actions as may
reasonably be deemed necessary to complete the transactions contemplated by this
Agreement.
ARTICLE 4
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REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
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Seller and Shareholders hereby jointly and severally represent and warrant
to Buyer on the date of this Agreement, and again on and as of the Closing Date,
as follows:
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4.1 Status of Seller.
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(a) Existence and Status. Seller is a corporation duly organized, entitled to
conduct business and validly existing in good standing under the laws of
the State of Utah.
(b) Articles of Incorporation and Bylaws of Seller. Attached to this Agreement
as Exhibit A and Exhibit B, respectively, are copies of: (i) the original
Articles of Incorporation of Seller and all amendments, restatements,
articles of merger, or other filings with respect thereto, and (ii) the
currently effective Bylaws of Seller. All amendments to, and articles of
merger and other filings with respect to, the Articles of Incorporation of
Seller were made in accordance with the Articles of Incorporation (as in
effect before the amendment of the articles or filings with respect
thereto), and the Bylaws and applicable law of Seller without violation of
any preemptive rights, and Seller has otherwise complied with its Articles
of Incorporation and Bylaws as in effect at the applicable time.
(c) Corporate Power of Seller. Seller has the power to own and lease the
Purchased Assets and otherwise to conduct the Business as currently
conducted.
(d) Ownership Interests. Seller has no subsidiaries or any equity securities
of, investment in or loans or advances to any business enterprise or person
or any agreements or commitments for such (other than trade terms extended
to customers in the ordinary course of business), or is subject to any
arrangement that could be treated as a partnership for federal income tax
purposes.
(e) Foreign Qualification. Schedule 4.1(e) lists the jurisdictions in which
Seller is qualified to do business as a foreign corporation, and nothing
(including the nature of or the manner in which Seller conducts its
business, the character or location of the properties which Seller owns,
leases or uses or the actions or location of employees or agents) either
requires Seller to be qualified in any other jurisdiction or subjects
Seller to any cost, restriction or penalty for failing to qualify.
(f) Authorization.
(i) Seller and each Shareholder has the right, power and authority to
enter into this Agreement and each other agreement, instrument or
other document contemplated hereunder (collectively, the "Other
Agreements") to which they are a party, and to consummate the
transactions contemplated by, and otherwise to comply with and perform
their respective obligations under, this Agreement and each of the
Other Agreements referred to herein;
(ii) The execution and delivery by Seller of this Agreement and the Other
Agreements to which it is a party, and the consummation by Seller of
the transactions contemplated by, and other compliance with and
performance of its obligations under, this Agreement and each of the
Other Agreements, have been duly authorized by all necessary corporate
action on the part of Seller in compliance with the Articles of
Incorporation and Bylaws (each as amended) of Seller and applicable
law; and
(iii)This Agreement and each of the Other Agreements to which Seller and
each Shareholder are parties, constitute the valid and binding
agreement of Seller and each Shareholder, as the case may be, that are
enforceable against Seller and each Shareholder, as the case may be,
in accordance with its terms.
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(g) Absence of Violations or Conflicts. Except as disclosed in Schedule 4.1(g),
the execution and delivery of this Agreement and the Other Agreements by
Seller and Shareholders and the consummation of the transactions
contemplated by, or other compliance with or performance under, this
Agreement and the Other Agreements do not and will not with the passage of
time or giving of notice or both:
(i) constitute a violation of, be in conflict with, constitute a default
or require any payment under, permit a termination of, require any
consent or approval under, or result in the creation or imposition of
any lien, encumbrance or other adverse claim or interest upon any of
the Purchased Assets under (A) any contract, agreement, commitment,
undertaking or understanding to which any of the Purchased Assets are
subject or bound, (B) any judgment, decree or order of any
governmental authority to which Seller, any of Shareholders or any of
the Purchased Assets are subject or bound, (C) any applicable law, or
(D) any governing or applicable agreements, instruments or other
documents to which Seller (including its Articles of Incorporation and
Bylaws (each as amended)) is a party; or
(ii) create, result in a Material Adverse Change (as defined in Section
4.2(c)(i)) to or cause the acceleration of the maturity of, any
Assumed Liabilities.
(h) No Governmental Consents Required. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental authority on the part of Seller is required in connection with
the execution or delivery of this Agreement, the Other Agreements or the
consummation of the transactions contemplated by, or other compliance with
or performance under, this Agreement or the Other Agreements.
4.2 Financial Matters.
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(a) Seller Financial Statements. Copies of the unaudited financial statements
of Seller as of and for the fiscal years ended December 31, 2003 and 2002
and the three months ended March 31, 2004 (all of which, including the
notes thereto, are collectively referred to in this Agreement as the
"Seller Financial Statements," with the balance sheet of Seller as of March
31, 2004 referred to separately as the "Seller Balance Sheet") are attached
hereto as Schedule 4.2. Seller Financial Statements were prepared in
accordance with the books and records of Seller and are complete and
accurate in all material respects, fairly present the financial condition
of Seller as of their respective dates and the results of operations of
Seller for the respective periods then ended and have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered by such statements, except for the exclusion of deferred bonus and
deferred partnership distribution liabilities.
(b) Absence of Undisclosed Liabilities. Except as and to the extent expressly
reflected in Seller Financial Statements or reserved against in Seller
Balance Sheet, there are no other liabilities of any nature relating to the
Purchased Assets, whether accrued, direct, indirect, absolute, contingent,
changing, known, unknown, determinable, indeterminable, liquidated,
unliquidated or otherwise and whether due or to become due, relating to any
existing or prior act, omission, condition or state of facts.
(c) Absence of Certain Changes. Since March 31, 2004, there has not been any
activity with respect to Seller other than in the ordinary course of
business and, without limiting the foregoing, there has not been:
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(i) any material adverse change in or loss to the Purchased Assets or the
operations, liabilities, earnings, relationships with existing
clients, business or condition (financial or otherwise) of the
Business which have been or could reasonably be expected to be,
individually or in the aggregate with other changes, materially
adverse to the Business or the Purchased Assets (a "Material Adverse
Change");
(ii) any increase in the compensation payable by Seller to any officer of
Seller or Retained Employee (as defined herein) other than routine
increases made in the ordinary course of business consistent with past
practice and not in excess of five percent (5%) of such Retained
Employee's annual salary, or any bonus, incentive compensation,
service award or other like benefit, granted, made or accrued,
contingently or otherwise, to or for the credit of any of such officer
or Retained Employee, or any employee welfare, pension, retirement or
similar payment or arrangement made or agreed to by Seller in which
any such officer or Retained Employee participates;
(iii)any capital expenditure or commitment to make a capital expenditure
with respect to the Purchased Assets (exclusive of expenditures for
repair or maintenance in the ordinary course of business);
(iv) any incurrence of any extraordinary loss or knowing waiver of any
rights of value by Seller in connection with any aspect of the
Business, whether or not in the ordinary course of business;
(v) any cancellation, termination or amendment by Seller of any contract
or agreement included in the Purchased Assets and to which Seller is a
party or by which Seller is bound;
(vi) any failure on the part of Seller to operate the Business in the
ordinary course so as to preserve its business organization intact,
including the services of Seller's present officers, professional
staff and employees and the goodwill of Seller's suppliers, customers
and others having business relations with Seller;
(vii)any sale, assignment or transfer (including, without limitation, any
collateral assignment or the granting or permitting of any lien,
encumbrance or other claim) of any of the Purchased Assets other than
in the ordinary course of business and consistent with past practices;
(viii) any amendment, modification, waiver or cancellation of any debt owed
to, or claim of, Seller, or settlement by Seller of any dispute
involving any payment or other obligation due to or owed by Seller to
be made or performed after the Closing Date which constitutes an Asset
or an Assumed Liability; or
(ix) any agreement by or commitment of Seller to do or permit any of the
foregoing.
4.3 Taxes.
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Notwithstanding anything in this Agreement to the contrary, this Section 4.3
shall not apply with respect to any Tax or Taxes (as such terms are defined in
this Section 4.3) to the extent that from and after Closing, the Purchased
Assets are not subject to a lien for such Tax or Taxes, and Buyer or its
affiliates are not liable for such Tax or Taxes.
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(a) Definitions. For purposes of this Agreement:
(i) the term "Code" shall mean the Internal Revenue Code of 1986, as
amended. All citations to the Code or to the regulations promulgated
thereunder shall include any amendments or any substitute or successor
provisions thereto;
(ii) the term "Returns" shall mean, collectively, all reports,
declarations, estimates, returns, information statements, and similar
documents relating to, or required to be filed in respect of, any
Taxes; and
(iii)the term "Taxes" shall mean (A) all income, net income, gross income,
gross receipts, sales, use, ad valorem, franchise, profits, license,
lease, service, service use, withholding, employment, payroll, excise,
severance, transfer, documentary, mortgage, registration, stamp,
occupation, environmental, premium, property, windfall, profits,
customs, duties, and other taxes, fees, assessments or charges of any
kind whatever, together with any interest, penalties and other
additions with respect thereto, imposed by any federal, territorial,
state, local or foreign government; and (B) any penalties, interest,
or other additions to tax for the failure to collect, withhold, or pay
over any of the foregoing, or to accurately file any Return; and the
term "Tax" shall mean any one of the foregoing Taxes. When used with
reference to specified persons (for example and without limitation,
"Taxes of Seller"), the terms "Taxes" and "Tax" shall include only
amounts of, or in respect of, Taxes for which such person is, or could
become, liable in whole or part (including, without limitation, any
obligation in connection with a duty to collect, withhold, or pay over
any Taxes, any obligation to contribute to the payment of any Taxes
determined on a consolidated, combined, or unitary basis, any
liability as a transferee, or any liability as a result of any express
or implied obligation to indemnify or pay the Tax obligations of
another person).
(b) Returns Filed and Taxes Paid. Except as set forth on Schedule 4.3(b),
Seller duly filed or caused to be filed, on or before the due date thereof
(as appropriately extended) with the appropriate taxing authorities, all
Returns that it is required to file, and each such Return (including any
amendment thereto) is true, correct, and complete in all material respects.
All Taxes of Seller due with respect to, or shown to be due on, each such
Return (or amendment) or subsequent assessment with regard thereto, have
been timely paid. There is no valid basis for the assessment of any
deficiency with regard to any such Return and except as set forth on
Schedule 4.3(b), there are no extensions of time to file which are pending.
No other Taxes of Seller are due with respect to any taxable periods or
portions of periods ending on or before the Closing Date. There are no
liens, attachments, or similar encumbrances on any of the Purchased Assets
of Seller with respect to any Taxes, other than liens for Taxes that are
not yet due and payable. Seller has collected or withheld all Taxes that it
is required to collect or withhold.
(c) Audit History and Other Proceedings. There are no pending or, to the
Knowledge (as defined in Section 4.15(b)) of Seller and Shareholders,
threatened (either in writing or verbally, formally or informally) audits,
investigations, claims, suits or other proceedings for or relating to any
material liability in respect of Taxes of Seller. No material deficiencies
for Taxes of Seller have been claimed, proposed or assessed by any taxing
or other governmental authority and there are no matters under discussion
with any governmental authorities with respect to Taxes, that could result
in any additional amount of Taxes of Seller and that could reasonably be
expected to affect the Business or the Purchased Assets. No extension of a
statute of limitations (whether arising by reason of a waiver, claim for
refund, or otherwise) in respect of such Taxes is in effect and there are
no requests for rulings or determinations in respect of Taxes of Seller
pending with any governmental authority.
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4.4 Title to and Condition of Purchased Assets.
------------------------------------------
(a) Title to Purchased Assets. Except as set forth on Schedule 4.4(a): (i)
Seller has good and marketable title to all of the Purchased Assets; and
(ii) none of the Purchased Assets is subject to any lien, claim or other
encumbrance whatsoever, except (A) liens for taxes not yet due and payable,
(B) liens shown and described in Seller Balance Sheet, (C) liens imposed by
law and incurred in the ordinary course of business for obligations not yet
due and payable to landlords, carriers, warehousemen, laborers, materialmen
and the like, and (D) liens to secure repayment of the indebtedness of
Seller under any of the Debt Instruments (as defined in Section 4.6(a) and
more fully described on Schedule 4.6(a) hereto) (collectively, the
"Permitted Liens").
(b) Leases; Subleases. For purposes of this Agreement, "Lease" means any
written or oral lease, sublease or rental agreement (and any related
contract and agreement) included as part of the Purchased Assets, and all
amendments, modifications and supplements thereof and waivers and consents
thereunder pursuant to which Seller leases, subleases or rents any real or
personal property included in the Purchased Assets, either as lessor,
lessee, landlord or tenant. Schedule 1.1(a)(ii) lists all Leases included
in the Purchased Assets, except those which (i) can be canceled by Seller
upon 30 or fewer days' notice without penalty or the acceleration of
rentals, (ii) do not grant an option to purchase the leased property, and
(iii) involve an annual rental of $15,000 or less. Schedule 1.1(a)(ii)
describes all oral Leases required to be disclosed in Schedule 1.1(a)(ii),
and true and complete copies of all written Leases required to be disclosed
have been heretofore delivered to Buyer. With respect to each of the
Leases: (A) neither Seller nor, to the best of Seller's and Shareholders'
Knowledge, any other party is in default in connection with such Lease; (B)
no act or event has occurred which, with notice or lapse of time or both,
would constitute a default under such Lease with respect to Seller or, to
the best of Seller's and Shareholders' Knowledge, any other party; (C)
there is no basis for any claim of default under such Lease with respect to
Seller or, to the best of Seller's and Shareholders' Knowledge, any other
party; (D) Seller has not given or received any notice of cancellation or
termination in connection with such Lease; (E) such Lease is the valid and
binding agreement of Seller, and, to the best of Seller's and Shareholders'
Knowledge, the other party thereto which is in full force and effect and is
enforceable in accordance with its terms, except, with respect to such
other party, to the extent that such enforceability may be limited by, or
subject to: (i) the effect of any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors' rights generally; (ii) the
availability of the remedies of specific performance or injunctive relief,
which may be subject to the discretion of the court before which any
proceeding for such remedies may be brought; and (iii) the exercise by any
court of equitable judicial discretion before which any proceeding may be
brought; (F) except as disclosed on Schedule 4.4(b), such Lease will not be
affected by, or require the consent of or payment to any other party to
avoid an event of default, an event of termination or other adverse effect
with respect to such by reason of the transactions contemplated by this
Agreement; and (G) such Lease is a "true" lease for federal income tax
purposes.
(c) Adequacy; Condition. Except as set forth in Schedule 4.4(c): (i) the
Purchased Assets are fit for use in the business of Seller as presently
conducted; (ii) the Purchased Assets are in good repair and operating
condition, normal wear and tear excepted, and structurally and mechanically
sound, as applicable; (iii) Seller is in material compliance with all
applicable building, zoning, land use or other similar statutes, laws,
ordinances, regulations, permits, health and safety codes or other
requirements in respect of any of the Purchased Assets subject to a Lease
(and Seller's current use of such properties does not constitute a
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nonconforming use) and Seller has not received any notice alleging such a
violation; (iv) to the Knowledge of Seller and Shareholders, none of the
Purchased Assets subject to a Lease has ever been used as a landfill or
otherwise been used for the disposal, storage or treatment of any waste,
trash, garbage, industrial by-product, chemical or hazardous substance of
any nature; (v) Seller has not caused the installation of any of such
property with asbestos insulation or any electrical equipment containing
polychlorinated biphenyls and, to Seller's and Shareholders' Knowledge,
none of the Purchased Assets subject to a Lease contains asbestos
insulation or electrical equipment containing polychlorinated biphenyls;
and (vi) to Seller's and Shareholders' Knowledge, there are no outstanding
requirements or recommendations by fire underwriters or rating boards, any
insurance companies or holders of mortgages or other security interests
requiring or recommending any repairs or work to be done with reference to
any of the Purchased Assets subject to a Lease.
(d) All Necessary Properties. The Purchased Assets (together with the
intangible properties disclosed, or not required to be disclosed, pursuant
to Sections 4.5 and 4.6 of this Agreement) constitute all of the properties
which Seller uses in connection with the operation of the Business as
presently conducted and the consummation of the transactions contemplated
by this Agreement (provided that all consents relating to the Purchased
Assets have been obtained) will not alter the rights or impair the ability
of Seller to use such Purchased Assets in the conduct of the Business as it
is now being conducted. 4.5 Intellectual Property; Patents; Trademarks,
Trade Names. All Intellectual Property and all contracts, agreements,
commitments, arrangements, undertakings and understandings relating to the
use or license of technology, know-how or processes by Seller that are part
of the Purchased Assets (the "Intellectual Property Licenses") are listed
in Schedule 1.1(a)(vi). Except as disclosed in Schedule 4.5 with respect to
all Intellectual Property that is included in the Purchased Assets; (a)
Seller owns, or has the sole and exclusive right to use, all Intellectual
Property, whether under Intellectual Property Licenses or otherwise, used
in or necessary for the ordinary conduct of its business; (b) the
consummation of the transactions contemplated by this Agreement will not
alter or impair any such rights; and (c) no Intellectual Property owned,
licensed or used by Seller, or Intellectual Property License of Seller is
the subject of a lawsuit or any other proceeding, nor has any party
challenged or, to Seller's and Shareholders' Knowledge, threatened to
challenge Seller's respective right to use such Intellectual Property or
Intellectual Property License or application for any of the foregoing; and,
to Seller's and Shareholders' Knowledge, there is no basis for any such
challenge.
4.6 Loans and Contracts.
--------------------
(a) Indebtedness. Schedule 4.6(a) sets forth (i) a complete and accurate list
or description of all instruments or other documents ("Debt Instruments")
relating to any direct or indirect indebtedness for borrowed money of
Seller, as well as indebtedness by way of capital leases, lease-purchase
arrangements, guarantees, undertakings on which others rely in extending
credit and all conditional sales contracts, chattel mortgages and other
security arrangements with respect to personal property used or owned by
Seller and (ii) a list of all loans of money to the respective officers,
affiliates employees of Seller or Shareholders (specifically excluding
travel and similar advances in the ordinary course of business).
(b) Client Contracts; Client Accounts.
(i) Seller has delivered to Buyer true, complete and accurate copies of
all of the Client Contracts and Assumed Contracts. All Client
Contracts and Assumed Contracts are legal, valid, binding, in full
force and effect and enforceable against Seller, and, to the Knowledge
of Seller and Shareholders, against each other party thereto. There
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does not exist under any Client Contract or Assumed Contract any
violation, breach or event of default, or event or condition that,
after notice or lapse of time or both, would constitute a violation,
breach or event of default thereunder, on the part of Seller or, to
the Knowledge of Seller and Shareholders, any other person. The
enforceability of all Client Contracts and Assumed Contracts will not
be affected in any manner by the execution, delivery or performance of
this Agreement (except that any Client Contract and Assumed Contract
assumed by Buyer may be enforceable by Buyer and not Seller), and no
Client Contract or Assumed Contract contains any assignment or change
in control or similar terms or conditions that will become applicable
as a result of the consummation of the transactions contemplated by
this Agreement; provided, however, it is understood that certain of
the Client Contracts and/or Assumed Contracts may
require the consent of the other parties thereto to assign the same,
which consents Seller shall obtain prior to the Closing.
(ii) Except as set forth on Schedule 4.6(b), no Client Account has
materially delayed or decreased or terminated, or to Seller's or
Shareholders' Knowledge, threatened to materially delay or decrease or
terminate, or given notice of its intention to materially delay or
decrease or terminate its usage of Seller's services.
(iii)All consents (if they are required) from Seller's present customers
needed to enable Buyer to assume the Client Contracts and the Assumed
Contracts and continue the Business without interruption shall be
received prior to the Closing. Only those Client Accounts listed on
Schedule 4.6(b) hereto require consent before the assignment of their
Client Contract.
(c) Insurance. All insurance policies of Seller now in force (including
comprehensive general liability, personal and professional liability,
comprehensive general casualty and extended coverage, automobile, boiler
and machinery, fire and lightning, marine, endowment, life, and worker's
compensation) ("Insurance Policies") are listed in Schedule 4.6(c), and
such policies will be through Closing.
(d) Status. Except as disclosed on Schedule 4.6(d): (i) Seller has not assigned
any of its rights or obligations under (and is not otherwise restricted for
any reason from enjoying the full benefits under) any Intellectual Property
License, Debt Instrument, Client Contract or Assumed Contract; (ii) neither
Seller nor, to Seller's and Shareholders' Knowledge, any other party is in
material default in connection with any Intellectual Property License, Debt
Instrument, Client Contract or Assumed Contract; (iii) to Seller's and
Shareholders' Knowledge, no act or event has occurred which, with notice or
lapse of time or both, would constitute a material default under any
Intellectual Property License, Debt Instrument, Client Contract or Assumed
Contract; (iv) to Seller's and Shareholders' Knowledge, there is no basis
for any claim of material default under any Intellectual Property License,
Debt Instrument, Client Contract or Assumed Contract; (v) there is no
outstanding notice of cancellation or termination received by Seller in
connection with any Intellectual Property License, Debt Instrument, Client
Contract or Assumed Contract; (vi) each Intellectual Property License, Debt
Instrument, Client Contract and Assumed Contract is the valid and binding
agreement of the parties thereto which is in full force and effect and is
enforceable in accordance with its terms except, with respect to such other
party, to the extent that such enforceability may be limited by, or subject
to: (A) the effect of any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforceability of creditors' rights generally, (B) the
availability of specific performance or injunctive relief, which may be
subject to the discretion of the court before which any proceeding for such
remedies may be brought, and (C) the exercise by any court of equitable
judicial discretion before which any proceeding may be brought; and (vii)
neither Seller nor any of Shareholders has received any communication
proposing any termination, material amendment or change to any Intellectual
Property License, Debt Instrument, Client Contract or Assumed Contract.
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4.7 Officers and Managers; Employment Relationships. Schedule 4.7
------------------------------------------------ ------------
sets forth a true and complete list of all of the officers and managers of
Seller, specifying their office and annual rate of compensation, and a true and
complete list of employees of Seller as of the date of this Agreement, setting
forth each such employee's title, compensation and date of hire. Schedule 4.7
sets forth Seller's policies and practices with respect to scheduling and
eligibility of employee compensation increases and bonuses. All compensation
increases and bonuses awarded by Seller during the twelve month period prior to
the date hereof have been in compliance with such policies and practices.
4.8 Employee and Fringe Benefit Plans.
----------------------------------
Except as set forth in Schedule 4.8, Seller, with respect to employees, former
employees or agents of Seller, does not maintain, is not required to contribute
to and does not otherwise participate in (and has not since its inception
maintained, contributed to or otherwise participated in) either: (i) any
employee pension benefit plan ("Pension/Profit Sharing Plan"), any employee
welfare benefit plan ("Welfare Plan") or any multi-employer plan
("Multi-Employer Plan") (as such terms are defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), including any pension,
profit sharing, retirement, thrift, stock purchase or stock option plan; or (ii)
any other compensation, welfare, fringe benefit or retirement plan, program,
policy, understanding or arrangement of any kind whatsoever, whether formal or
informal, providing for benefits for or the welfare of any or all of the current
or former employees or agents of Seller or their beneficiaries or dependents.
True and complete copies of the following documents with respect to the
plans set forth on Schedule 4.8 have been delivered to Buyer: (i) the most
recent plan document and trust agreement (including any amendments thereto and
prior plan documents, if amended within the last three years), (ii) the last
five years IRS Form 5500 filings and schedules thereto, (iii) the most recent
IRS determination letter, (iv) all summary plan descriptions, (v) each written
communication to employees intended to describe a plan or any benefit provided
in such plans, and (vi) all correspondence with the IRS or Department of Labor
concerning any controversy with respect to such plans.
Each plan listed on Schedule 4.8 is and has been maintained in compliance
in all material respects with applicable law, including but not limited to ERISA
and the Code and with any other applicable contractual obligations.
Each plan listed on Schedule 4.8 that is intended to be tax qualified under
Code section 401(a) has been determined by the Internal Revenue Service to be
exempt from tax under the provisions of Code section 501(a) and, to Seller's and
Shareholders' Knowledge, nothing has occurred, including the adoption or failure
to adopt any plan amendment, which would adversely affect its qualification or
tax-exempt status.
Except as reflected on Schedule 4.10, there are no pending or, to Seller's
or Shareholders' Knowledge, threatened claims, actions or lawsuits, other than
routine claims for benefits in the ordinary course, asserted or instituted
against (i) any plan or its assets or (ii) any fiduciary with respect to any
plan for with Seller, it subsidiaries or affiliates, may be directly liable
through indemnification obligations or otherwise.
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4.9 Labor Relations.
----------------
Seller is (and, at all times, has been) in material compliance with all federal,
state, local and other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours. There is
(and, at all times, has been) no unfair labor practice, complaint, charge or
other matter against or involving employees, former employees or agents of
Seller pending or threatened before any Governmental Authority. There is no
(and, at all times, has not been) labor strike, dispute, organizing effort, slow
down, stoppage or other labor difficulty pending, involving or, to Seller's and
Shareholders' Knowledge, threatened, against or affecting the employees, former
employees or agents of Seller. No grievance which might have an adverse effect
on Seller or on the conduct of the Business nor any arbitration proceeding
arising out of or under collective bargaining agreements relating to employees
of Seller is pending, and no claim therefor exists. There is (and, at all times,
has been) no collective bargaining agreement which is binding on Seller.
4.10 Litigation.
-----------
Except as set forth on Schedule 4.10, Seller is not (and, at all times, has not
been) (i) engaged in, a party to, subject to or, to Seller's and Shareholders'
Knowledge, threatened with any claim, legal or equitable action, or other
proceeding (whether as plaintiff, defendant or otherwise and regardless of the
forum or the nature of the opposing party) which seeks damages, an injunction or
other relief against Seller, which action, individually or collectively with
such other actions, would have a Material Adverse Effect on the Business or the
Purchased Assets; (ii) to Seller's and Shareholders' Knowledge, subject to any
unasserted claim, the assertion of which is likely and which, if asserted, will
seek damages, an injunction or other relief against Seller which claim
individually or collectively with such other unasserted claims if made would
have a Material Adverse Effect on the Business or the Purchased Assets; or (iii)
a party to or subject to any judgment, order or decree against Seller or the
Purchased Assets. There has been no reservation of rights by any insurance
carrier, and, to Seller's and Shareholders' Knowledge, no such reservation is
threatened, concerning the coverage of Seller with respect to any matter
described in this Section 4.10.
4.11 Compliance with Laws.
---------------------
(a) Generally. Except as set forth in Schedule 4.11(a) attached hereto, and
except with respect to compliance with Environmental Laws which is
addressed under Section 4.11(c) below, Seller is in full compliance in all
material respects with all applicable laws, rules, regulations including,
without limitation, the Health Care Laws (as defined below), ordinances or
orders of any court or federal, state, county, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, and Seller has not received any notice, written or
otherwise, of noncompliance with respect thereto. All financial records,
patient records and other documents required to be maintained by Seller
have been continuously maintained by Seller for a period of at least five
(5) years from the date of creation of such document. For purposes of this
Agreement, the term "Health Care Laws" shall mean all applicable federal,
state or local health care laws, rules and regulations, including without
limitation those relating to the payment or receipt of illegal
remuneration, including 42 U.S.C. ss. 1320a-7b(b) (the Medicare/Medicaid
anti-kickback statute), 42 U.S.C. 1395nn (the Stark Statute), 42 U.S.C. ss.
1320a-7a, 42 U.S.C. ss. 1320a-7b(a), 42 U.S.C. ss. 1320a-7b(c) and any
applicable state laws governing kickbacks and matters similar to such
federal statutes.
(b) Permits. Without limiting the foregoing, except for those failures that
would not reasonably be expected to have a Material Adverse Effect: (i)
Seller has all material occupancy certificates and other licenses, permits
and certificates ("Permits") required in connection with its ownership,
possession, use, occupancy or operation of any of the Purchased Assets
owned, leased or used by it; (ii) all of the Permits are in full force and
effect; (iii) Seller is (and has been) in material compliance with the
Permits; and (iv) none of the Permits will be materially affected by, or
require the consent of any party by reason of, the transactions
contemplated by this Agreement. Schedule 4.11(b) sets forth a complete and
accurate listing of all Permits required for the conduct of Seller's
business, except for those Permits, the failure of which to obtain, would
not reasonably be expected to have a Material Adverse Effect.
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(c) Environmental. Except as set forth on Schedule 4.11(c), to Seller's and
Shareholders' Knowledge, no person or party (including, but not limited to,
any Governmental Authority) has asserted any claim or, to Seller's and
Shareholders' Knowledge, has any basis for any action or proceeding against
Seller relating to any violation of Environmental Law (as defined below),
relating to any existing or prior act, omission, condition or state of
facts. To Seller's and Shareholders' Knowledge, Seller has not received
oral or written notice of, nor does Seller or Shareholders have reason to
believe there is, any existing or pending violation, citation, claim or
complaint relating to the business of Seller or any facility now or
previously owned or operated by Seller arising under any Environmental Law.
For purposes of this Agreement, the term "Environmental Law" means federal,
state and local environmental statutes, laws, ordinances, orders, rules,
regulations, moratoria, judgments and consent decrees, or any licenses,
authorizations, waivers, closures, or approvals required pursuant thereto,
relating to human health and the environment, including, without
limitation, the Clean Air Act, as amended; the Federal Water Pollution
Control Act, as amended; the Safe Drinking Water Act, as amended; the
Resource Conservation and Recovery Act, as amended; the Hazardous Material
Transportation Act, as amended; the Occupational Safety and Health Act of
1970, as amended; the Comprehensive Environmental Response, Compensation
and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act of 1986, as amended.
4.12 Transactions with Affiliates.
-----------------------------
Except as disclosed in Schedule 4.12, no Shareholder, officer or director of
Seller, nor any "affiliate" or "associate" (as such terms are defined in the
rules and regulations of the Securities and Exchange Commission under the
Securities Act of 1933, as amended) of any of the foregoing:
(a) has been a party to any lease, sublease, contract, agreement, commitment,
understanding or other arrangement of any kind whatsoever, involving any
such person and Seller;
(b) owns directly or indirectly, in whole or in part, any property that Seller
uses or otherwise has rights in respect of; or
(c) has any cause of action or other claim whatsoever against, or owes any
amount to, Seller other than (i) for compensation (including fringe
benefits) to officers and employees disclosed pursuant to Section 4.7 and
for reimbursement of ordinary and necessary expenses incurred in connection
with employment by Seller; and (ii) as otherwise disclosed pursuant to this
Agreement.
4.13 Accounts Receivable. Schedule 4.13
-------------------- -------------
attached hereto sets forth all Accounts Receivable in existence as of March 31,
2004 for Seller and all such Accounts Receivable, notes receivable and claims
arising from such date through Closing, represent or will represent, valid
claims against the obligors thereof which arose in the ordinary course of
business and no entitlements to or claims of offset or reduction have been made
or exist except to the extent specifically set forth in Schedule 4.13.
4.14 Commissions.
------------
No person, firm or corporation is entitled to any commission or broker's or
finder's fee in connection with the transactions contemplated by this Agreement
by reason of any act or omission of Seller or Shareholders.
-16-
4.15 Generally.
----------
(a) No representation or warranty by Seller or Shareholders in this Agreement
or in any Exhibit, Schedule or closing certificate furnished or to be
furnished to Buyer pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact, necessary to make the statements herein or therein not
misleading.
(b) As used in this Agreement, the term "Knowledge" shall mean, in the case of
each Shareholder, the Shareholder's actual awareness without the duty to
investigate beyond what a reasonably prudent shareholder would be expected
to discover, and in the case of Seller, the actual awareness of the
officers and directors of Seller without a duty to investigate beyond what
a reasonably prudent individual would be expected to discover in the course
of carrying out the duties of his or her office.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
--------------------------------------------------
Buyer and Parent hereby jointly and severally represent and warrant
to Seller and Shareholders as of the date of this Agreement as follows:
5.1 Status of Buyer.
----------------
(a) Corporate Existence and Status. Buyer is a corporation duly incorporated,
organized, entitled to conduct business and validly existing in good
standing under the laws of the State of Delaware.
(b) Corporate Power. Buyer has the corporate power to own and lease its
properties and otherwise to conduct its business.
(c) Qualification. Buyer is qualified to do business as a foreign corporation
in each jurisdiction in which the nature of or the manner in which Buyer
conducts its business, the character or location of the properties which
Buyer owns, leases or uses or the actions or location of Buyer's employees
or agents either requires Buyer to be qualified or subjects Buyer to any
cost, restriction or penalty for failing to qualify (including assessment
of taxes, fees or penalties for prior periods).
(d) Authorization.
(i) Buyer has the right, power and authority to enter into this Agreement
and the related agreements referred to herein to which it is a party
and to consummate the transactions contemplated by, and otherwise to
comply with and perform its obligations under, this Agreement and the
related agreements referred to herein;
(ii) The execution and delivery by Buyer of this Agreement and the related
agreements referred to herein to which Buyer is a party and the
consummation by Buyer of the transactions contemplated by, and other
compliance with and performance of its obligations under, this
Agreement and the related agreements referred to herein have been duly
authorized by all necessary corporate action on the part of Buyer in
compliance with governing or applicable agreements, instruments or
other documents (including its Articles or Certificate of
Incorporation and Bylaws (each as amended)) and applicable law; and
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(iii)Each of this Agreement and the related agreements referred to herein
to which Buyer is a party constitutes the valid and binding agreement
of Buyer that is enforceable against Buyer in accordance with its
terms.
(e) Absence of Violations or Conflicts. The execution and delivery of this
Agreement by Buyer and the consummation of the transactions contemplated
by, or other compliance with or performance under, this Agreement and the
related agreements referred to herein do not and will not with the passage
of time or giving of notice or both:
(i) constitute a violation of, be in conflict with, constitute a default
or require any payment under, permit a termination of, require any
consent under, or result in the creation or imposition of any lien,
encumbrance or other adverse claim or interest upon any of the
properties of Buyer under (A) any material contract, agreement,
commitment, undertaking or understanding to which Buyer is a party or
to which Buyer or any of its assets or properties are subject or
bound, (B) any judgment, decree or order of any governmental authority
to which Buyer or any of its properties are subject or bound, (C) any
applicable law, or (D) any governing or applicable agreements,
instruments or other documents to which Buyer is a party (including
Articles or Certificate of Incorporation and Bylaws (each as
amended)); or
(ii) create, or cause the acceleration of the maturity of, any debt,
obligation or liability of Buyer.
(f) No Governmental Consents Required. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental authority on the part of Buyer is required in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated by, or other compliance with or performance
under, this Agreement by Buyer.
5.2 Commissions and Fees.
---------------------
Except for A.G. Edwards & Sons, Inc., whose fee will be paid by Parent, no
person, firm or corporation is entitled to any commission or broker's or
finder's fee in connection with the transactions contemplated by this Agreement
by reason of any act or omission of Buyer or Parent.
5.3 Generally.
----------
No representation or warranty by Buyer in this Agreement or in any Exhibit,
Schedule or closing certificate furnished or to be furnished to Seller pursuant
to this Agreement or in connection with the transactions contemplated by this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact, necessary to make the statements
herein or therein not misleading.
-18-
ARTICLE 6
---------
COVENANTS OF SELLER
-------------------
6.1 Conduct of Business by Seller.
------------------------------
From the date hereof to the Closing Date, except for transactions contemplated
by this Agreement or which are expressly approved in writing by Buyer, Seller
shall refrain from and Shareholders shall ensure that Seller refrains from:
(a) subjecting any of the Purchased Assets to any lien, encumbrance or other
claim of any kind;
(b) modifying, amending, altering or terminating (whether by written or oral
agreement, or any manner of action or inaction) any of the Client Contracts
or Assumed Contracts; and
(c) taking or permitting any other action that, if taken or permitted
immediately prior to the execution of this Agreement, would constitute a
breach of or an exception to the representations and warranties in ARTICLE
4 hereof or the covenants in ARTICLE 6 and ARTICLE 7 hereof.
6.2 Affirmative Covenants Relating to Seller and Shareholders.
----------------------------------------------------------
From the date hereof to the Closing Date, Seller and Shareholders shall use
their reasonable best efforts to ensure that Seller shall:
(a) maintain Seller's property and professional insurance in amounts and with
coverage at least as great as the amounts and coverage in effect on the
date of this Agreement;
(b) keep in Seller's employ the present officers and key employees, including
the professional staff, of Seller to preserve the goodwill of those having
business relations with Seller;
(c) maintain the books, accounts and records of Seller in a manner consistent
with past practice;
(d) allow, upon the prior consent of Seller, which consent shall not be
unreasonably withheld, Buyer and Buyer's employees, attorneys, auditors,
accountants and other authorized representatives, free and full access
during Seller's normal business hours to the facilities, plants,
properties, books, records, documents and correspondence of Seller,
including, but not limited to, historical financial information with
respect to the Client Contracts and Assumed Contracts and employment
records with respect to the Retained Employees, in order that Buyer may
have full opportunity to make such investigation as Buyer may desire of the
Business; provided, however, that such access shall not unreasonably
interfere with the operations of Seller, and any contractual
confidentiality requirements between Buyer and Seller or Shareholders
existing prior to this Agreement shall remain in full force and effect, as
supplemented hereby, except as otherwise required by law (including any
required disclosure of the execution of this Agreement);
(e) (i) comply with all applicable law relating to Seller, or to the conduct of
the Business, and (ii) conduct such Business in such a manner so that on
the Closing Date the representations and warranties contained in this
Agreement shall be materially true as though such representations and
warranties were made on and as of such date, except for changes permitted
or contemplated by the terms of this Agreement;
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(f) provide Buyer with prompt written notice of any change in the assets,
operations, liabilities, earnings, business or condition (financial or
otherwise) of Seller which would have a Material Adverse Effect; and
(g) operate the Business only in the ordinary course with the objective of
preserving Seller's business organizations intact, including using its best
efforts to retain the services of Seller's present officers and employees
and the goodwill of its customers and others having business relations with
Seller.
6.3 Consents and Closing Conditions.
--------------------------------
Seller and Shareholders shall use their reasonable best efforts (a) to obtain
such third party and governmental consents, authorizations, approvals, releases
and terminations as may be required hereunder, and to take such other actions as
may be appropriate in order to fulfill the closing conditions contained in
Section 8.1 hereof, and (b) to cause the representations and warranties of
Seller in ARTICLE 4 to be true and correct on and as of the Closing Date.
6.4 Obligations Concerning Employees.
---------------------------------
(a) From the date hereof through the Closing Date, Buyer shall have the right
upon reasonable notice to Seller during normal business hours and without
undue disruption of the operation of the Business, to interview the
employees of Seller, perform drug tests on said employees and otherwise
conduct hiring procedures with regard to its possible hiring of the
employees of Seller. Subject to the satisfactory completion of Buyer's
employment screening process, Buyer shall offer employment at Closing to
the employees of Seller listed on Schedule 6.4(a) (the "Retained
Employees").
(b) On or prior to the Closing Date, at such time as shall be reasonably
acceptable to Buyer, Seller shall notify all of the employees of Seller
that the assets of Seller are being sold to Buyer, that the Retained
Employees will be offered employment by Buyer, and that any decisions by
Buyer regarding its hiring procedures or the hiring of Seller's employees
will be communicated to the employees by Buyer.
(c) As soon as practicable after the Closing Date, Seller shall issue to all
employees of Seller as of the Closing Date payroll checks, for all earned
salary, wages, incentive bonuses, accrued sick pay, vacation or paid time
off and other compensation and benefits (net of usual withholdings) owed or
accruing to such employees for their services rendered through 11:59 p.m.
on the Closing Date.
(d) Seller shall comply with all provisions of federal and state law relating
to the continuation of health insurance benefits for terminated employees.
Seller shall be responsible for providing Worker Adjustment and Retraining
Notification Act, 29 U.S.C. ss. 2101 et. seq. ("WARN Act") notices, if and
to the extent required, in connection with any terminations of Seller's
employees effected pursuant to this Agreement, and shall be solely
responsible for, and will, hold Buyer harmless from, any WARN Act liability
arising as a result of any employee termination(s) occurring on or after
the Closing Date.
6.5 Negotiations with Others.
-------------------------
During the period from the date of this Agreement to the Closing Date, or until
such date as this Agreement may be terminated in accordance with its terms,
neither Seller nor any of Seller's members, managers, officers, counsel,
accountants, auditors or other agents retained by or acting on behalf of Seller,
will (i) seek, solicit, initiate, encourage or otherwise facilitate (including
by way of furnishing information) the submission of inquiries, proposals or
offers from any corporation, partnership, person or other entity or group (other
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than Buyer) relating to the possible acquisition of stock or equity interests of
Seller or the possible purchase of all or substantially all of the Purchased
Assets, or any tender or exchange offer, merger, reverse merger, consolidation,
business combination, recapitalization, spin-off, liquidation, dissolution, or
similar transaction involving, directly or indirectly, Seller (each an
"Acquisition Proposal"), (ii) enter into, participate or cooperate in or
consider or pursue any discussions or negotiations regarding or that reasonably
may be expected to lead to an Acquisition Proposal or furnish to any person or
entity information concerning Seller for purposes of facilitating any
Acquisition Proposal, or (iii) otherwise solicit or cooperate in any way with,
or assist, participate in, facilitate or encourage any effort or attempt by any
person to make or enter into an Acquisition Proposal. Seller shall notify Buyer
in writing within 24 hours following receipt of any unsolicited Acquisition
Proposal or request for information from any third party. Such written
notification shall describe in reasonable detail any such occurrence and
identify the person or persons involved.
6.6 Employment Agreements.
----------------------
John H. Short, Ph.D. shall enter into a Termination Compensation Agreement with
Parent on or before the Closing Date, such agreement to be in substantially the
form set forth as Exhibit C hereto and incorporated herein by reference (the
"Short Employment Agreement"). Each other Shareholder and each associate partner
of Seller shall enter into an Employment Agreement with Buyer on the Closing
Date in substantially the form set forth as Exhibit D hereto and incorporated
herein by reference (the "Phase 2 Employment Agreements").
6.7 Disposition of Performance Bonus Pursuant to Consulting Agreement.
------------------------------------------------------------------
Seller and Shareholders, on the one hand, and Parent and Buyer, on the other,
agree that after the Closing Date, the performance bonus due Seller under that
certain letter agreement for consulting services effective as of June 3, 2003 by
and between Seller and Parent (the "Consulting Letter") for the first quarter
2004, if any, shall be computed and paid to Shareholders by Parent as soon as
practicable after such computation. No performance bonuses for any period
subsequent to the first quarter of 2004 shall be computed or paid to Seller or
Shareholders.
ARTICLE 7
---------
COVENANTS REGARDING TAX MATTERS
-------------------------------
7.1 Returns and Payment of Taxes.
-----------------------------
Each party shall be responsible for filing Forms W-2 with respect to the 2004
taxable year in accordance with the "Standard Procedure" described in Rev. Proc.
96-60, 1996-2.C.B. 399. The responsibility for all other information Returns
shall be allocated similarly. Seller shall be responsible for payment of any
sales or use tax liability or other Taxes resulting from the sale of the
Purchased Assets as contemplated by this Agreement.
7.2 Cooperation and Records Retention.
----------------------------------
Seller shall cause its accountants and other representatives to provide to Buyer
on a timely basis the information (including but not limited to all work papers
and records relating to Seller) that Seller or its accountants or other
representatives have within their control and that may be reasonably necessary
in connection with the preparation of any and all Returns required to be filed
by Buyer or any other examination by any taxing authority or administrative
proceeding relating to Taxes. Seller agrees that it will cooperate with Buyer,
its accountants and its other representatives, in a prompt and timely manner, in
connection with the preparation and filing of any and all Returns required to be
filed by Buyer or any other examination by any taxing authority or
administrative proceeding relating to Taxes. Seller and Buyer shall retain or
cause to be retained, until the applicable statutes of limitations (including
any extensions and carryovers) have expired, copies of all Returns for all tax
periods beginning before the Closing Date, together with supporting work
schedules and other records or information that may be relevant to such Returns.
-21-
7.3 Employee Benefit Plans.
-----------------------
(a) 401(k) Plan. The parties agree as follows with respect to the 401(k) Plan:
(i) Buyer shall (A) assume sponsorship of the 401(k) Plan effective as of
the Closing Date, (B) continue the 401(k) Plan for the maximum period
permitted under Code section 410(b)(6)(C), and (C) fund the 401(k) Plan on
substantially the same terms as past practice; provided, however, in no
event shall the 401(k) Plan be operated in a manner that would cause the
401(k) Plan to lose its tax-qualified status; (ii) the 401(k) Plan shall be
amended to provide that (A) Seller shall make a contribution to the 401(k)
Plan for all eligible employees of Seller who are employed by Seller as of
the day immediately preceding the Closing Date based on such eligible
employee's compensation paid during the current plan year up to and
including the day immediately prior to the Closing Date, (B) Buyer shall
make a contribution to the 401(k) Plan for all eligible employees of Seller
who are employed by Buyer as of December 31, 2004 based on the compensation
of such eligible employees from the Closing Date up to and including
December 31, 2004; provided, however, that the aggregate contribution for
any participant for the plan years commencing on January 1, 2004 and ending
on December 31, 2005 shall be substantially the same as past practice, (C)
this transaction does not constitute a severance of employment and will not
permit participants to receive a distribution from the 401(k) Plan, and (D)
any other modifications deemed necessary by Buyer or required by the IRS to
maintain the 401(k) Plan's tax-qualified status.
(b) Health Plan. Subject to the consent of the insurance company providing
benefits under the Health Plan, Buyer agrees to assume sponsorship of the
Health Plan and to continue its coverage for the plan year after the
current plan year, provided that the costs to Parent increase at no greater
rate than the costs associated with Parent's other health care plans.
ARTICLE 8
---------
CONDITIONS TO CLOSING
---------------------
8.1 Buyer's Conditions to Closing.
------------------------------
The obligations of Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment to Buyer's reasonable satisfaction
of each of the following conditions on or prior to the Closing Date:
(a) Continued Truth of Warranties. The representations and warranties of each
of Seller and Shareholders contained herein shall be true in all respects
on and as of the Closing Date with the same force and effect as though made
as of such date, except for any variations permitted by this Agreement.
(b) Performance of Covenants. Each of Seller and Shareholders shall have
performed in all respects all covenants and obligations and complied in all
respects with all conditions required by this Agreement to be performed or
complied with by it and them on or prior to the Closing Date.
(c) No Material Adverse Effect. There shall have been no change in the assets,
operations, liabilities, earnings, business or condition (financial or
otherwise) of Seller having a Material Adverse Effect on the Purchased
Assets or the Business since the date of the Reference Balance Sheet.
-22-
(d) Permits and Consents. The parties hereto shall have secured all appropriate
orders, consents, approvals and clearances, in form and substance
satisfactory to Buyer, by and from all third parties reasonably requested
by Buyer, including but not limited to governmental authorities, whose
order, consent and approval or clearance is required by contract or
applicable law for the consummation of the transactions herein
contemplated.
(e) Action or Proceeding. No action or proceeding before a court of any other
governmental agency or body shall have been instituted or threatened which
would restrain or prohibit the transactions contemplated by this Agreement.
(f) Fairness Opinion. The disinterested members of the Parent's Board of
Directors shall have received a written opinion from their financial
advisor for the asset purchase transaction contemplated in this Agreement,
A.G. Edwards & Sons, Inc., to the effect that the consideration paid in
such transaction is fair to Parent from a financial point of view.
(g) Closing Documents. Each of Seller and Shareholders shall have delivered all
documents required to be delivered by it or them at the Closing, as more
specifically set forth in ARTICLE 9, in each case in form and substance
satisfactory to Buyer.
8.2 Seller's and Shareholders' Conditions to Closing.
-------------------------------------------------
The obligations of Seller and Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment to Seller's
and Shareholders' reasonable satisfaction of the following conditions on or
prior to the Closing Date:
(a) Continued Truth of Warranties. The representations and warranties of Buyer
herein contained shall be true in all material respects on and as of the
Closing Date with the same force and effect as though made as of such date,
except for any variations permitted by this Agreement.
(b) Performance of Covenants. Buyer shall have performed in all material
respects all covenants and obligations and complied in all material
respects with all conditions required by this Agreement to be performed or
complied with by it on or prior to the Closing Date.
(c) Permits and Consents. The parties hereto shall have secured all appropriate
orders, consents, approvals and clearances, in form and substance
reasonably satisfactory to Seller and Shareholders, by and from all third
parties, including but not limited to governmental authorities, whose
order, consent, approval or clearance is required by contract or applicable
law for the consummation of the transactions herein contemplated.
(d) Action or Proceeding. No action or proceeding before a court of any
governmental agency or body shall have been instituted or threatened which
would restrain or prohibit the transactions contemplated by this Agreement.
(e) Closing Documents. Buyer shall have delivered the Purchase Price and all
documents required to be delivered by it at the Closing, as more
specifically set forth in ARTICLE 9, in form and substance reasonably
satisfactory to each of Seller and Shareholders.
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ARTICLE 9
---------
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
9.1 Documents to be Delivered by Seller. At the Closing, Seller shall:
------------------------------------
(a) Execute and deliver to Buyer any and all instruments of sale, assignment
and transfer and other documents reasonably requested by Buyer in order to
effect the transfer of the Purchased Assets to Buyer, to effect the
assumption of the Assumed Liabilities by Buyer or otherwise to facilitate
the transactions contemplated hereby;
(b) Deliver to Buyer a certificate of incumbency and copies of the resolutions
adopted by the board of directors of Seller and Shareholders, authorizing
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, duly certified as of the Closing Date by
the Secretary of Seller;
(c) Deliver to Buyer a certificate of Seller, dated as of the Closing Date, to
the effect that the representations and warranties of Seller and
Shareholders as contained in ARTICLE 4 of this Agreement are true and
correct as of such Closing Date, and that the covenants of Seller as
contained in ARTICLE 6 and ARTICLE 7 of this Agreement required to be
performed or complied with on or prior to the Closing Date have been so
performed or complied with;
(d) Deliver to Buyer a certificate of good standing or its equivalent, dated
not more than ten (10) days prior to the Closing Date, attesting to the
good standing of Seller as a corporation under the laws of the State of
Utah;
(e) To the extent any assignments, consents or approvals shall be necessary to
any of the transactions herein contemplated, including but not limited to
the transfer of the Contracts from Seller to Buyer, deliver to Buyer copies
of all such assignments, consents or approvals; and
(f) Deliver to Buyer the definitive Short Employment Agreement and the Phase 2
Employment Agreements duly executed by all parties thereto.
9.2 Documents to be Delivered by Buyer. At the Closing, Buyer shall:
----------------------------------
(a) Execute and deliver to Seller any and all documents identified in Section
9.1(a), to the extent appropriate in order to effect the transactions
contemplated hereby;
(b) Deliver to Seller a certificate of Buyer, dated as of the Closing Date, to
the effect that the representations and warranties of Buyer as contained in
ARTICLE 5 of this Agreement are true and correct as of such Closing Date;
(c) To the extent any consents or approvals shall be necessary to any of the
transactions herein contemplated, Buyer shall deliver to Seller upon
request copies of all such consents or approvals as obtained by Buyer;
(d) Deliver to Seller the Purchase Price;
(e) Deliver to Seller the definitive Short Employment Agreement and the Phase 2
Employment Agreements duly executed by all parties thereto.
-24-
ARTICLE 10
----------
INDEMNIFICATION
---------------
10.1 Indemnification of Buyer.
-------------------------
Subject to the provisions of this Article 10, by execution of this Agreement,
Shareholders hereby acknowledge that each Shareholder shall jointly and
severally indemnify Buyer and its officers, directors, employees, agents,
representatives, affiliates, successors and assigns (collectively, the "Buyer
Parties") and hold each of them harmless from and against and pay on behalf of
or reimburse such Buyer Parties in respect of the following:
(a) any and all loss, liability or damage (including judgments and settlement
payments) (a "Loss"), incurred by Buyer incident to, arising in connection
with or resulting from any misrepresentation, breach, nonperformance or
inaccuracy of any representation, warranty or covenant of Seller or
Shareholders made or contained in this Agreement or in any Exhibit,
Schedule, certificate or other document executed and delivered to Buyer by
Shareholders or by or on behalf of Seller under or pursuant to this
Agreement or the transactions contemplated herein;
(b) any Excluded Liability;
(c) any and all reasonable costs and expenses and all other Losses incurred in
claiming, contesting or remedying any breach, misrepresentation,
nonperformance or inaccuracy described in this Section 10.1, or in
enforcing the Buyer Parties' rights to indemnification hereunder,
including, by way of illustration and not limitation, all reasonable legal
and accounting fees, other reasonable professional expenses and all filing
fees and reasonable collection costs incident thereto and all such
reasonable fees, costs and expenses incurred in defending claims which, if
successfully prosecuted, would have resulted in a Loss.
Buyer's remedy for any indemnification of Losses hereunder may be satisfied by
proceeding against one or more of the Shareholders individually for all or any
portion of such Loss. Notwithstanding the preceding sentence, Buyer agrees to
use commercially reasonably efforts to pursue its remedies against each of the
Shareholders individually in a manner consistent with the amount of the Purchase
Price distributed to each Shareholder by Seller hereunder.
10.2 Indemnification of Shareholders.
--------------------------------
Subject to the provisions of this Article 10, by execution of this Agreement,
Buyer hereby acknowledges that Buyer shall indemnify each Shareholder and each
of their respective agents, representatives, affiliates, successors and assigns
(collectively, the "Seller Parties") and hold each of them harmless from and
against and pay on behalf of or reimburse such Seller Parties in respect of the
following
(a) any and all Losses incurred by Shareholders incident to, arising in
connection with or resulting from any misrepresentation, breach,
nonperformance or inaccuracy of any representation, warranty or covenant by
Buyer made or contained in this Agreement or in any Exhibit, Schedule,
certificate or other document executed and delivered to Shareholders by
Buyer;
(b) the Assumed Liabilities;
(c) any liability or obligation relating to the Business or Purchased Assets
arising out of any event or occurrence arising after the Closing Date; and
-25-
(d) any and all reasonable costs and expenses and all Losses incurred in
claiming, contesting or remedying any breach, misrepresentation,
nonperformance or inaccuracy described in this Section 10.2, or in
enforcing the Seller Parties' rights to indemnification hereunder,
including, by way of illustration and not limitation, all reasonable legal
and accounting fees, other reasonable professional expenses and all filing
fees and reasonable collection costs incident thereto and all such
reasonable fees, costs and expenses incurred in defending claims which, if
successfully prosecuted, would have resulted in a Loss.
10.3 Notice of and Procedures for Collecting Indemnification.
-------------------------------------------------------
(a) Initial Claim Notice. When either Buyer, on the one hand, or Shareholders,
on the other hand, becomes aware of a situation which may result in damages
for which it or they would be entitled to be indemnified hereunder, Buyer,
on the one hand, or Shareholders, on the other (the "Indemnitee") shall
submit promptly a written notice (the "Initial Claim Notice") to the other
party from which indemnification may be forthcoming pursuant to Section
10.1 or 10.2 (the "Indemnitor") to such effect after first becoming aware
of such matter and shall furnish the Indemnitor with such information as is
available demonstrating a right or possible right to receive indemnity. If
the potential claim is predicated on, or later results in, the filing by a
third party of any action at law or in equity (a "Third Party Claim"), the
Indemnitee shall provide promptly to the Indemnitor a supplemental Initial
Claim Notice not later than twenty (20) calendar days prior to the date on
which a responsive pleading must be filed, and shall also furnish a copy of
such claim (if made in writing) and of all documents received from the
third party in support of such claim. In addition, each Initial Claim
Notice shall name, when known, the person or persons making the assertions
which are the basis for such claim. Failure by the Indemnitee to deliver an
Initial Claim Notice or an update thereof in a timely manner shall not
relieve the Indemnitor of any of its obligations under this Agreement
except to the extent of actual and material prejudice to the Indemnitor.
(b) Rights of Indemnitor. If, prior to the expiration of 30 calendar days from
the mailing of an Initial Claim Notice (the "Claim Answer Period"), the
Indemnitor shall request in writing that such claim not be paid, the same
shall not be paid, and the Indemnitor shall settle, compromise or litigate
in good faith such claim, and employ attorneys of its choice to do so;
provided, however, that Indemnitee shall not be required to refrain from
paying any claim which has matured by court judgment or decree, unless
appeal is taken therefrom and proper appeal bond posted by the Indemnitor,
nor shall it be required to refrain from paying any claim where such action
would result in the foreclosure of a lien upon any of its assets or a
default in a lease or other contract except a lease or other contract which
is the subject of the dispute. The Indemnitee shall cooperate fully to make
available to the Indemnitor and its attorneys, representatives and agents,
all pertinent information under its control. The Indemnitee shall have the
right to elect to settle or compromise all other contested claims with
respect to which the Indemnitor has not, within the Claim Answer Period,
acknowledged in writing (i) liability therefor, and (ii) its election to
assume full responsibility for the settlement, compromise, litigation and
payment of such claim.
(c) Final Claims Statement. At such time as damages for which the Indemnitor is
liable hereunder are incurred by Indemnitee by actual payment thereof or by
entry of a final judgment, the Indemnitee shall forward a Final Claims
Statement to the Indemnitor setting forth the amount of such damages in
reasonable detail on an itemized basis. The Indemnitee shall supplement the
Final Claims Statement with such supporting proof of loss (e.g. vouchers,
canceled checks, accounting summaries, judgments, settlement agreement,
etc.) as the Indemnitor may reasonably request in writing within thirty
(30) calendar days after receipt by Indemnitor of a Final Claims Statement.
All amounts reflected on Final Claims Statements shall be paid promptly by
the Indemnitor to the Indemnitee and the Indemnitee shall have the right to
immediate payment of proceeds from insurance policies paid to Indemnitor in
connection with the claim for which the indemnification right arose.
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10.4 Payment of Claims for Indemnification.
--------------------------------------
Any amounts payable to Buyer Parties pursuant to the provisions of Section 10.1
shall be the responsibility of Shareholders. Any additional amounts shall be
paid promptly upon notice of Buyer to Shareholders of incurrence of such loss,
liability, cost, expense or damage and an explanation of the losses for Buyer's
demand for indemnification under Article 10 of this Agreement. Any amounts
payable to Seller Parties pursuant to the provisions of Section 10.2 of this
Agreement shall be the responsibility of Buyer and shall be paid promptly upon
notice of Shareholders to Buyer of incurrence of such loss, liability, cost,
expense or damage and an explanation of the losses for Shareholders' demand for
indemnification under Section 10.2 of this Agreement.
10.5 Exclusive Remedy.
-----------------
The sole and exclusive remedy of the Buyer Parties and the Seller Parties
hereunder, under the Agreement or otherwise in connection with the transactions
contemplated hereby will be restricted to the indemnification rights set forth
in this Article 10.
10.6 Certain Limitations.
--------------------
(a) The representations and warranties contained in Sections 4.3 (Taxes), 4.8
(Employee And Fringe Benefits), and 4.11(a) and (c) (Compliance with Laws)
shall survive until ninety (90) days after the expiration of the statute of
limitations period applicable thereto. The representations and warranties
contained in Sections 4.1 (Status of Seller), 4.14 (Commissions), 5.1
(Status of Buyer) and 5.2 (Commissions and Fees) shall survive
indefinitely. There shall be no time limitations on claims for indemnity
based upon the payment by the party seeking indemnification of any Excluded
Liability or Assumed Liability that is the obligation of the other party
under this Agreement. All other representations and warranties, covenants
and agreements contained in this Agreement shall survive until the first
anniversary of the Closing Date provided that any representation, warranty,
covenant or agreement with respect to which indemnity may be sought under
this Article 10 shall survive the time that it would otherwise terminate if
notice of the breach thereof giving rise to the right to indemnity shall
have been given to the party against which indemnity is sought prior to
such date.
(b) No damages shall be recoverable by the Seller Parties or Buyer Parties
pursuant to the provisions of this Article 10, and no claim therefor will
be asserted for any purpose whatsoever hereunder, unless the amount of the
Seller Parties' or Buyer Parties', as the case may be, damages equals at
least Fifty Thousand and 00/100 Dollars ($50,000.00) in the aggregate but
upon exceeding Fifty Thousand and 00/100 Dollars ($50,000.00) in the
aggregate, the party seeking indemnification shall be entitled to be
indemnified from the first dollar.
(c) The aggregate amount of damages recoverable pursuant to this Article 10 for
breaches of representations and warranties will be limited to One Million
Five Hundred Thousand and 00/100 Dollars ($1,500,000.00). Such limitation
shall not apply to claims for indemnity based upon the payment by the party
seeking indemnification of any Excluded Liability or Assumed Liability that
is the obligation of the other party under this Agreement or to any claim
in which the party seeking indemnification has established fraud and/or
intentional misrepresentation.
-27-
(d) The amount which any Indemnitor is or may be required to pay any Indemnitee
pursuant to this Article 10 shall be reduced by any insurance proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in
reduction of the related Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnitor in respect of a Loss
and shall subsequently actually receive insurance proceeds or other amounts
in respect of such Loss, then such Indemnitee shall pay to such Indemnitor
a sum equal to the amount of such insurance proceeds or other amounts
actually received (net of any expenses in obtaining the same).
ARTICLE 11
----------
MISCELLANEOUS
-------------
11.1 Notices.
--------
Any notices or other communications required or permitted hereunder to any party
hereto shall be sufficiently given if delivered in person or sent by certified
or registered mail, postage prepaid, addressed as follows:
In the case of Buyer:
RehabCare Group, Inc.
7733 Forsyth Boulevard, Suite 2300
St. Louis, Missouri 63105
Attn: H. Edwin Trusheim, Chairman of the Board
With a copy to:
Thompson Coburn LLP
One US Bank Plaza
St. Louis, Missouri 63101
Attn: Robert M. LaRose, Esq.
In the case of Seller and Shareholders:
Phase 2 Consulting, Inc.
2120 South 2100 East, 3rd Floor
Salt Lake City, Utah 84101
Attn: John H. Short, Ph.D., Managing Director
With a copy to:
Jones, Waldo, Holbrook & McDonough
170 South Main Street, Suite 1500
Salt Lake City, Utah 84101
Attn: Bruce E. Babcock, Esq.
or such substituted address as any party shall have given notice to the others
in writing in the manner set forth in this Section 11.1.
-28-
11.2 Amendment.
----------
This Agreement may be amended or modified in whole or in part only by an
agreement in writing executed by all parties hereto and making specific
reference to this Agreement.
11.3 Waiver; Investigation.
----------------------
The parties hereto may, by written agreement: (a) extend the time for the
performance of any of the obligations or other acts of the parties hereto; (b)
waive any inaccuracies in the representations contained in this Agreement; (c)
waive compliance with, or modify, any of the covenants or conditions contained
in this Agreement; and (d) waive or modify performance of any of the obligations
of any of the parties hereto; provided, however, that no such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall operate as a waiver of, or an estoppel with respect to, any
subsequent insistence upon such strict compliance other than with respect to the
matter so waived or modified. Buyer acknowledges that its officers, employees
and authorized representatives and agents have been given an opportunity to
examine the agreements, instruments, documents and other information relating to
Seller that they have requested to examine. Any inspection, preparation, or
compilation of information or Schedules, or audit of the receivables, payables,
properties, financial condition, or other matters relating to Seller conducted
by or on behalf of Buyer pursuant to this Agreement shall in no way limit,
affect, or impair the ability of Buyer to rely upon the representations,
warranties, covenants, and agreements of Seller set forth herein or seek
indemnification for any matter as set forth in ARTICLE 10 hereof.
11.4 Termination.
------------
This Agreement may be terminated by the parties hereto prior
to Closing as follows:
(a) by mutual written consent of Buyer, Seller and Shareholders;
(b) upon written notice from Buyer to Seller and Shareholders if any of the
conditions precedent to Buyer's obligations hereunder shall have become
incapable of fulfillment through no fault of Buyer;
(c) upon written notice from Shareholders to Buyer if any of the conditions
precedent to Seller's or Shareholders' obligations hereunder shall have
become incapable of fulfillment through no fault of Seller or Shareholders,
as the case may be;
(d) by Buyer, on the one hand, or Seller and Shareholders, on the other hand,
in the event of a breach by the other party to this Agreement of any
representation, warranty or agreement contained herein, which breach is not
cured to the reasonable satisfaction of the non-breaching party within
fifteen (15) business days after written notice thereof is given to the
breaching party by the non-breaching party or is not waived by the
non-breaching party during such period; or
(e) at the election of Buyer or Seller and Shareholders if the Closing has not
occurred on or prior to June 30 2004.
In the event of such termination as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of any of
Shareholders, Seller or Buyer or their respective officers and directors, except
for liabilities arising from a breach of this Agreement prior to such
termination; provided, however, that the provisions of the confidentiality
agreement between the parties shall continue in full force and effect.
-29-
11.5 Counterparts.
-------------
This Agreement may be executed in one or more counterparts, all of which taken
together shall constitute one instrument.
11.6 Binding on Successors and Assigns.
----------------------------------
This Agreement shall be binding upon, inure to the benefit of and be enforceable
by and against the parties hereto and their respective successors and assigns in
accordance with the terms hereof. No party hereto may assign its interest under
this Agreement without the prior written consent of the other parties hereto;
provided, however, that Buyer may assign its interest herein to any affiliate or
subsidiary of Buyer without obtaining the prior consent of Seller or
Shareholders.
11.7 Severability.
-------------
In the event that any one or more of the provisions contained in this Agreement
or any application thereof shall be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions of
this Agreement and any other application thereof shall not in any way be
affected or impaired thereby; provided, however, that to the extent permitted by
applicable law, any invalid, illegal, or unenforceable provision may be
considered for the purpose of determining the intent of the parties in
connection with the other provisions of this Agreement.
11.8 Headings.
---------
The headings in the sections and subsections of this Agreement and in the
Schedules are inserted for convenience only and in no way alter, amend, modify,
limit or restrict the contractual obligations of the parties.
11.9 Expenses of Litigation.
-----------------------
In the event of any litigation arising from the breach of this Agreement, the
prevailing party in such litigation shall be entitled to recover reasonable
attorneys' fees and costs, including appeals.
11.10 List of Exhibits and Schedules.
-------------------------------
As mentioned in this Agreement, there are attached hereto or delivered herewith,
the following Exhibits and Schedules:
EXHIBITS
--------
Section
Exhibit Document Reference
------- -------- ---------
A Articles of Incorporation 4.1(b)
B Bylaws 4.1(b)
C Short Employment Agreement 6.6 and 9.1(f)
D Phase 2 Employment Agreements 6.6 and 9.1(f)
SCHEDULES
---------
Schedule
No. Schedule Caption
-------- ----------------
1.1(a)(i) Client Accounts and Contracts
1.1(a)(ii) Leases
1.1(a)(iii) Personal Property
1.1(a)(iv) Assumed Contracts
1.1(a)(vi) Intellectual Property
1.3 Balance Sheet
4.1(e) Foreign Qualifications
4.1(g) Violations or Conflicts
4.2 Seller Financial Statements
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4.3(b) Tax Matters
4.4(a) Title to Purchased Assets
4.4(b) Leases
4.4(c) Adequacy
4.5 Exceptions to Intellectual Property
4.6(a) Indebtedness
4.6(b) Client Account Notices
4.6(c) Insurance
4.6(d) Status
4.7 Officers and Directors
4.8 Employee and Fringe Benefit Plans
4.10 Litigation
4.11(a) Compliance with Laws
4.11(b) Permits
4.11(c) Environmental
4.12 Transactions With Affiliates
4.13 Accounts Receivable
6.4(a) Retained Employees
Each of the foregoing Exhibits and Schedules is incorporated herein by this
reference and expressly made a part hereof.
11.11 Expenses.
---------
Each of the parties hereto shall bear its own expenses incurred in connection
with this Agreement and the transactions herein contemplated, including, but not
limited to, legal and accounting fees and expenses.
11.12 Further Assurances and Cooperation.
-----------------------------------
Seller and Shareholders shall execute, acknowledge and deliver to Buyer any and
all other assignments, consents, approvals, conveyances, assurances, documents
and instruments reasonably requested by Buyer at any time and shall take any and
all other actions reasonably requested by Buyer at any time for the purpose of
more effectively assigning, transferring, granting, conveying and confirming to
Buyer, the Purchased Assets. After consummation of the transactions contemplated
herein, the parties agree to cooperate with each other in regard to all matters
arising from the purchase by Buyer of the Purchased Assets.
11.13 Confidentiality and Publicity.
------------------------------
The parties hereto shall hold in confidence the information contained in this
Agreement and all information related to this Agreement, which is not otherwise
known to the public, shall be held by each party hereto as confidential and
proprietary information and shall not be disclosed without the prior written
consent of the other parties. Accordingly, Buyer and Shareholders shall not
discuss with, or provide nonpublic information to, any third party (except for
such party's attorneys, accountants, directors of an affiliate of any party
hereto, and other consultants and professional advisors) concerning this
transaction prior to the Closing, except: (i) as required in governmental
filings, securities filing or judicial, administrative or arbitration
proceedings; or (ii) pursuant to public announcements made with the prior
written approval of Shareholders and Buyer.
11.14 Fair Meaning.
-------------
This Agreement shall be construed according to its fair meaning and as if
prepared by all parties hereto.
11.15 Gender and Number and Construction.
-----------------------------------
All references to the neuter gender shall include the feminine or masculine
gender and vice versa, where applicable, and all references to the singular
shall include the plural and vice versa, where applicable. Unless otherwise
expressly provided, the word "including" followed by a listing does not limit
the preceding words or terms and shall mean "including, without limitation."
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11.16 Tax Effect.
-----------
Neither of the parties (nor such party's counsel or accountants) has made or is
making any representations to any other party (nor such party's counsel or
accountant) concerning any of the tax effects of the transactions provided for
in this Agreement and each party hereto represents that it has obtained, or may
obtain, independent tax advice with respect thereto and upon which it, if so
obtained, has solely relied.
11.17 Time is of the Essence.
-----------------------
Time is of the essence for all dates and time periods set forth in this
Agreement and each performance called for in this Agreement.
11.18 Entire Agreement.
-----------------
All prior negotiations and agreements among the parties hereto are superseded by
this Agreement, and there are no representations, warranties, understandings or
agreements other than those expressly set forth herein or in an Exhibit or
Schedule delivered pursuant hereto, except as modified in writing concurrently
herewith or subsequent hereto.
11.19 Governing Law.
--------------
This Agreement shall be governed by and construed and interpreted according to
the laws of the State of Missouri, determined without reference to conflicts of
law principles. To the extent permitted by law, each of the parties hereto
hereby irrevocably submits to the jurisdiction of any Missouri state court or
United States federal court, in either case sitting in Missouri over any suit,
action or other proceeding brought by any party arising out of or relating to
this Agreement, and each of the parties hereto irrevocably agrees that all
claims with respect to any such suit, action or other proceeding shall be heard
and determined in such courts.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives on the day and year first
above written.
Buyer: Seller:
PHASE 2 CONSULTING, INC. PHASE 2 CONSULTING, INC.
By /s/ Vincent L. Germanese By /s/ John H. Short, Ph.D.
---------------------------------- ------------------------------------
Vincent L. Germanese John H. Short, Ph.D.
President
Parent: Shareholders:
/s/ John H. Short, Ph.D.
REHABCARE GROUP, INC. --------------------------------------
John H. Short, Ph.D.
By /s/ H. Edwin Trusheim /s/ Peter F. Singer
---------------------------------- --------------------------------------
H. Edwin Trusheim Peter F. Singer
Chairman of the Board
/s/ Howard W. Salmon
--------------------------------------
Howard W. Salmon
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Exhibit A
Articles of Incorporation
Exhibit B
Bylaws
Exhibit C
Short Employment Agreement
Exhibit D
Phase 2 Employment Agreements