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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 31, 2002
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MIM Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-28740 05-0489664
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(State of incorporation) (Commission File Number) (IRS Employer
Identification No.)
100 Clearbrook Road, Elmsford, NY 10523
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 460-1600
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(Former name or former address, if changed since last report)
Item 2. Acquisitions or Disposition of Assets.
On January 31, 2002, MIM Corporation (the "Company") acquired from Marc
Wiener and Barbara Kammerer all of the issued and outstanding common stock of
Vitality Home Infusion Services, Inc., a New York corporation ("Vitality"),
pursuant to a Stock Purchase Agreement dated as of January 9, 2002 (the
"Purchase Agreement") among Vitality Home Infusion Services, Inc., Marc Wiener,
Barbara Kammerer and the Company. Vitality, located in Roslyn Heights, New York,
distributes specialty pharmaceutical products, on a national basis, to the
chronically ill and genetically impaired, particularly focusing on Oncology,
Infections Disease, Immunology and Rheumatory Disease.
The aggregate purchase price for Vitality was $45 million, consisting
of $35 million in cash and the balance in Company common stock, a portion of
which is being held in escrow to secure potential indemnification claims for
breaches of Vitality and/or the individual seller's representations and
warranties and covenants under the Purchase Agreement. The purchase price was
determined based on negotiations between the Company and the shareholders of
Vitality. The cash portion of the purchase price was funded through borrowings
under the Company's existing $45 million revolving credit facility with HFG
Healthco-4 LLC, an affiliate of Healthcare Finance Group. The transaction will
be accounted for as a purchase.
The description of the transaction contained herein is qualified in its
entirety by reference to the Purchase Agreement attached hereto as Exhibit 2.1
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. The financial statements
required by this item will be filed on or before April 16, 2002.
(b) Pro Forma Financial Information. The financial information required by this
item will be filed on or before April 16, 2002.
(c) Exhibits.
2.1 Purchase Agreement, dated as of January 9, 2002, among Vitality Home
Infusion Services, Inc., Marc Wiener, Barbara Kammerer and MIM
Corporation.
99.1 Press Release, dated January 31, 2002, issued by MIM Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 5, 2002 MIM Corporation
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By: /s/ Barry A. Posner
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Name: Barry A. Posner
Title: Executive Vice President
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EXHIBIT INDEX
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Exhibit No. Exhibit
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2.1 Purchase Agreement, dated as of January 9, 2002, among Vitality
Home Infusion Services, Inc., Marc Wiener, Barbara Kammerer and
MIM Corporation.
99.1 Press Release, dated January 31, 2002, issued by MIM Corporation.
EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
by and among
VITALITY HOME INFUSION SERVICES, INC.
MARC WIENER
BARBARA KAMMERER
and
MIM CORPORATION
Dated as of January 9, 2002
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TABLE OF CONTENTS
Page
1. Definitions...........................................................1
2. Purchase and Sale of Shares...........................................5
3. Purchase Price and Payment............................................5
3.1. Purchase Price...............................................5
3.2. Closing Financial Statements.................................6
3.3. Method of Payment............................................6
3.4. Release of Escrowed Shares...................................7
4. Representations and Warranties Concerning Sellers.....................7
4.1. Power and Capacity of Sellers................................7
4.2. Ownership of the Shares......................................7
4.3. No Conflicts.................................................8
4.4. Consents and Approvals.......................................8
4.5. No Litigation................................................8
4.6. Investment Representations...................................8
4.7. Residency of Sellers.........................................9
5. Representations and Warranties of the Company and Sellers.............9
5.1. Organization and Qualification of the Company................9
5.2. Authority and Validity.......................................9
5.3. Subsidiaries................................................10
5.4. Charter Documents; Corporate Records........................10
5.5. No Conflicts................................................10
5.6. Consents, Approvals, Etc....................................10
5.7. Capitalization..............................................10
5.8. Financial Statements........................................11
5.9. Absence of Undisclosed Liabilities..........................11
5.10. Absence of Certain Changes..................................11
5.11. Taxes.......................................................12
5.12. Accounts Receivable; Accounts Payable.......................14
5.13. Officers, Directors and Employees; Labor Relations..........14
5.14. Litigation..................................................15
5.15. Compliance with Laws; Company Permits.......................15
5.16. Title to Assets; Absence of Encumbrances....................17
5.17. Real Property; Leases.......................................18
5.18. Intellectual Property.......................................18
5.19. Bank Accounts...............................................19
5.20. Employee Benefit Plans......................................19
5.21. Indebtedness................................................20
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5.22. Environmental Laws..........................................20
5.23. Insurance...................................................20
5.24. Contracts...................................................21
5.25. Certain Payments............................................22
5.26. Customers...................................................22
5.27. Inventory...................................................23
5.28. Condition and Sufficiency of Properties and Assets..........23
5.29. Pharmaceutical Regulation...................................23
5.30. Disclosures.................................................23
6. Representations and Warranties of Buyer..............................24
6.1. Organization and Authority; Due Authorization and Execution.24
6.2. Consents, Approvals, Etc....................................24
6.3. No Conflicts................................................24
6.4. Issuance of Buyer Stock.....................................24
6.5. Buyer Reports...............................................25
6.6. Absence of Material Adverse Change..........................25
6.7. Litigation..................................................25
6.8. Monetary Consideration......................................25
6.9. Disclosures.................................................25
7. Covenants of the Parties.............................................25
7.1. Operation of the Business Pending Closing...................25
7.2. Covenant of Parties' Efforts and Good Faith.................27
7.3. Diligence Review............................................27
7.4. Further Assurances..........................................28
7.5. Certain Tax Matters.........................................28
7.6. Notice of Developments......................................30
7.7. No Shop.....................................................31
7.8. Listing of Buyer Stock......................................31
7.9. Pharmacy Insurance..........................................31
7.10. Rule 144....................................................31
7.11. Employees...................................................32
7.12. Audit Representation Letter.................................32
7.13. Inventory Valuation.........................................32
7.14. Employee Benefit Plans......................................32
7.15. Insurance Coverage..........................................32
7.16. Assignment of Automobile Leases.............................32
7.17. Assignment of Domain Name...................................33
7.18. Bad Debt Schedule...........................................33
8. Conditions Precedent.................................................33
8.1. Conditions Precedent to Buyer's Obligations.................33
8.2. Conditions Precedent to Sellers' Obligations................34
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9. Closing..............................................................35
9.1. Closing Date and Place of Closing...........................35
9.2. Sellers' Deliveries.........................................36
9.3. Buyer's Deliveries..........................................36
10. Termination..........................................................37
10.1. Right of Parties to Terminate...............................37
10.2. Effect of Termination.......................................37
11. Indemnification......................................................38
11.1. Indemnity...................................................38
11.2. Limitations.................................................38
11.3. Notice of Claim; Right to Participate in and
Defend Third Party Claims; Non-Third Party Claims.........40
12. Miscellaneous........................................................41
12.1. Binding Effect; Assignment..................................41
12.2. Notices.....................................................41
12.3. Severability................................................43
12.4. Brokerage...................................................43
12.5. Governing Law...............................................43
12.6. Consent to Jurisdiction.....................................43
12.7. Representations and Covenants of the Company and Sellers....43
12.8. Entire Agreement............................................44
12.9. Additional Acts and Documents...............................44
12.10. No Waiver...................................................44
12.11. Counterparts; Facsimile Signatures..........................44
12.12. Press Releases..............................................44
12.13. No Third-Party Beneficiaries................................44
12.14. Fees and Expenses...........................................45
12.15. Headings....................................................45
12.16. Knowledge...................................................45
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of January 9, 2002 by and among Vitality Home Infusion Services, Inc., a New
York corporation (the "Company"), Marc Wiener ("Wiener") and Barbara Kammerer
("Kammerer") (each, a "Seller" and collectively, the "Sellers"), and MIM
Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers own all of the issued and outstanding capital stock of the
Company;
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, all of the issued and outstanding capital stock of the Company
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of each of the Company and Buyer has
authorized it to execute, deliver and perform this Agreement on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, covenants, representations and warranties contained herein, the
parties, intending to be legally bound, agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the indicated meanings:
"2001 Financial Statements" has the meaning set forth in Section 3.2
hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the Preamble hereto.
"Bad Debt Schedule" means a schedule prepared by or on behalf of the
Company, on a basis consistent with the 2001 Financial Statements, that sets
forth accounts receivables that were outstanding as of December 31, 2001 for
more than 60 days, which were written off as bad debts as of December 31, 2001.
"Basket" has the meaning set forth in Section 11.2 hereof.
"Business Day" means a day other than Saturday, Sunday or a day on which
banks in New York, New York are not required to be open or are authorized to
remain closed.
"Buyer" has the meaning set forth in Preamble hereto.
"Buyer Due Diligence Information" has the meaning set forth in Section 7.3
hereof.
"Buyer Reports" means the reports required to be filed by Buyer, including
all exhibits filed with such reports, pursuant to the Exchange Act and the rules
and regulations promulgated thereunder.
"Buyer Representatives" has the meaning set forth in Section 7.3 hereof.
"Buyer Stock" has the meaning set forth in Section 3.1 hereof.
"Claim Notice" has the meaning set forth in Section 11.3 hereof.
"Closing" has the meaning set forth in Section 9.1 hereof.
"Closing Balance Sheet" has the meaning set forth in Section 3.2 hereof.
"Closing Financial Statements" has the meaning set forth in Section 3.2
hereof.
"Closing Date" has the meaning set forth in Section 9.1 hereof.
"Closing Share Value" has the meaning set forth in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the Recitals hereof.
"Company Permits" has the meaning set forth in Section 5.15 hereof.
"Confidentiality Agreement" has the meaning set forth in Section 7.3
hereof.
"Contracts" has the meaning set forth in Section 5.24 hereof.
"Customers" has the meaning set forth in Section 5.26 hereof.
"DEA" means the United States Drug Enforcement Administration.
"Due Diligence Information" has the meaning set forth in Section 7.3
hereof.
"Employee Benefit Plan" has the meaning given in Section 3(3) of ERISA.
"Environment" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life and any other environmental medium
or natural resource.
"Environmental Laws" means all applicable Laws that relate to protection of
the Environment, pollution control, Hazardous Materials or Hazardous Activity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder, as amended.
"Escrow Agent" has the meaning set forth in Section 3.1 hereof.
"Escrow Agreement" has the meaning set forth in Section 3.1 hereof.
"Escrow Shares" has the meaning set forth in Section 3.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Health Care Program" has the meaning given in Section 1128B(f) of
the Social Security Act.
"Final Escrow Certificate" has the meaning set forth in Section 3.4 hereof.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Authority" means any United States federal, state or local or
foreign government or governmental, regulatory or administrative authority,
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department, agency, commission, entity or other political subdivision thereof or
any court, tribunal, or judicial or arbitral body including, without limitation,
any entity primarily engaged in regulating the health insurance or medical
industries or the practice of pharmacy.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use of Hazardous
Materials in, or under, about or from any facility owned or leased by the
Company into the Environment.
"Hazardous Materials" means any waste or other substance that is listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including, without limitation, petroleum and all derivatives thereof or
synthetic substitutes therefor, and asbestos or asbestos-containing materials.
"Historical Financial Statements" has the meaning set forth in Section 5.8
hereof.
"Indebtedness" means (i) all obligations for borrowed money or with respect
to advances of any kind (other than trade credit incurred in the ordinary of
business); (ii) all obligations evidenced by bonds, debentures, notes or similar
instruments; and (iii) guarantees of the indebtedness of others.
"Indemnitee" means the Person making a claim under Section 11 hereof.
"Indemnifying Party" means the Person against whom a claim under Section 11
hereof is asserted.
"Intellectual Property" has the meaning set forth in Section 5.18 hereof.
"Interim Financial Statements" has the meaning set forth in Section 5.8
hereof.
"Last Balance Sheet" has the meaning set forth in Section 5.8 hereof.
"Law" means any law, statute, ordinance, rule, regulation, order,
injunction, writ or decree of any Governmental Authority.
"Lease Agreement" means the Lease Agreement to be entered into by Bar-Marc
Realty, LLC, as landlord, and the Company, as tenant, for the premises located
at 10 Powerhouse Road, Roslyn Heights, NY 11577, including the guaranty thereof
by Buyer, which Lease Agreement shall be reasonably satisfactory to the landlord
and Buyer.
"Liabilities" means any and all debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured or determined or
determinable, including those arising under any Laws and those arising under any
contract, agreement, arrangement, commitment or undertaking.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, claim, security interest or other encumbrance in respect of such asset.
"Losses" has the meaning set forth in Section 11.1 hereof.
"Material Adverse Effect" means, with respect to any Person, the occurrence
of any event or the existence of any circumstance that represents a change in,
or effect on, such Person or its business that, individually or in the aggregate
with any other such changes in, or effects on, such Person or its business is,
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or could reasonably likely be, materially adverse to the business, operations,
assets, Liabilities, results of operations or the condition (financial or
otherwise) of such Person, individually or in the aggregate. For purposes of
this Agreement, events, changes, circumstances or effects relating in general to
the businesses or industries in which a Person operates shall not be deemed to
have a Material Adverse Effect on such Person.
"Medical Reimbursement Programs" means all private and government
reimbursement programs, including, but not limited to, Medicare, Medicaid,
CHAMPUS and all other programs that qualify as a Federal Health Care Program.
"Order" means any order, judgment, injunction, award, decree or writ of any
Governmental Authority.
"Permitted Liens" means: (i) Liens for Taxes, assessments or other
governmental charges or levies that are not yet due or payable; (ii) Liens for
Taxes, assessments or other governmental charges or levies that are being
contested in good faith by appropriate proceedings and are set forth on Schedule
1 hereto; (ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen, repairmen and other Liens imposed by statute; (iii)
Liens incurred or deposits made in connection with worker's compensation,
unemployment insurance or other types of social security; and (iv) minor
imperfections of title or similar liens which do not impair the value of the
property subject to such lien or interfere with the use of such property.
"Person" means any natural person, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization or Governmental Authority.
"Plan" means the Vitality Home Infusion Services, Inc. Profit Sharing Plan.
"Pro Rata Basis" means with respect to any liability or entitlement of
Sellers under this Agreement, the proportionate amount payable by or to each
Seller, as the case may be, which shall be determined by multiplying the total
liability or entitlement of the Sellers by a percentage that is equal to, in the
case of Wiener, 66 2/3%, and, in the case of Kammerer, 33 1/3%.
"Purchase Price" has the meaning set forth in Section 3.1 hereof.
"Related Person" means: (i) one or more Sellers; (ii) the spouses, children
and other lineal descendants and any other member of the immediate family, as
defined in Rule 16a-1 under the Exchange Act, of any Seller; (iii) any
corporation, partnership, joint venture or other entity or other enterprise
owned or controlled by any Seller or by any Related Person of a Seller; and (iv)
any trust of which any Seller or member of the immediate family of a Seller is a
grantor or beneficiary.
"Release" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping or other releasing into the Environment, whether
intentional or unintentional.
"Scrip Solutions" means Scrip Solutions, Inc., a Delaware corporation and a
wholly-owned subsidiary of Buyer.
"Section 338(h)(10) Election" has the meaning set forth in Section 7.5
hereof. "Securities Act" means the Securities Act of 1933, as amended.
"Selected Accounting Firm" has the meaning set forth in Section 3.2 hereof.
"Seller" and "Sellers" have the meaning set forth in the Preamble hereto.
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"Seller Due Diligence Information" has the meaning set forth in Section 7.3
hereof.
"Sellers' Representatives" has the meaning set forth in Section 7.3 hereof.
"Tax Controversy" has the meaning set forth in Section 7.5 hereof.
"Taxes" means all income, franchise, capital stock, real property, personal
property, tangible, employment, withholding, transfer, sales, use, excise, gross
receipts, alternative minimum and all other taxes (including interest, penalties
or additions associated therewith) for which the Company has liability imposed
by any Governmental Authority.
"Tax Return" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment, collection or
payment of Taxes or in connection with the administration, implementation, or
enforcement of or compliance with any applicable Law relating to Taxes.
"Termination Date" has the meaning set forth in Section 10.1 hereof.
"Third Party Claim" has the meaning set forth in Section 11.3 hereof.
"Transaction Document" means any agreement, certificate, instrument or
other document executed by the Company and/or a Seller and/or Buyer pursuant to
this Agreement, in each case only applicable to the relevant party or parties to
such Transaction Document, as indicated by the context in which such term is
used.
2. Purchase and Sale of Shares. Subject to and upon the terms and
conditions set forth in this Agreement, at the Closing each Seller shall sell,
transfer, assign and deliver to Buyer all of the shares of capital stock of the
Company owned by such Seller, free and clear of all Liens, and Buyer shall
purchase such shares of capital stock from each Seller. The number of shares of
capital stock of the Company owned by each Seller is set forth across from such
Seller's name on Schedule 5.7 hereto. If at any time prior to the Closing any
Seller acquires any further right, title or interest in any additional shares of
capital stock of the Company or any other equity security of the Company or any
right of any kind to have such equity security issued, such Seller agrees that
such right, title or interest shall become subject to and shall be sold under
this Agreement for no additional consideration.
3. Purchase Price and Payment.
3.1. Purchase Price. Subject to Section 3.2 hereof, the aggregate purchase
price for all of the shares of capital stock of the Company to be purchased
hereunder shall be $45,000,000 (the "Purchase Price"). The Purchase Price shall
be paid by delivery at the Closing to Sellers, on a Pro Rata Basis, of the
following:
(a) $35,000,000 in cash; and
(b) a number of shares of common stock of Buyer, par value $.0001 per share
(the "Buyer Stock"), as is determined by dividing $10,000,000 by the average of
the closing sale price of a share of Buyer Stock as reported by the NASDAQ Stock
Market for each of the 20 consecutive trading days ending on the date of this
Agreement (the "Closing Share Value"), of which a number of shares (the "Escrow
Shares") of Buyer Stock (rounded to the nearest whole share) having a value of
$4,400,000 shall be placed in escrow pursuant to the terms of an Escrow
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Agreement reasonably satisfactory to Buyer and Sellers (the "Escrow Agreement")
by and among Buyer, Sellers and the escrow agent named therein (the "Escrow
Agent") in order to secure Sellers' indemnification obligations under Section
11.
3.2. Closing Financial Statements.
(a) Within 45 calendar days after the Closing Date, Sellers, at the expense
of the Company, shall prepare or cause to be prepared (i) an unaudited balance
sheet of the Company as of December 31, 2001 and unaudited statements of income,
shareholders' equity and cash flows of the Company for the year ended December
31, 2001 and (collectively, the "2001 Financial Statements"), and (ii) an
unaudited balance sheet of the Company as of the close of business on the
Closing Date (the "Closing Balance Sheet") and unaudited statements of income,
shareholders' equity and cash flows of the Company for the period January 1,
2002 through the close of business on the Closing Date (together with the
Closing Balance Sheet collectively the "Closing Financial Statements"). Except
as set forth on Schedule 3.2, the 2001 Financial Statements and the Closing
Financial Statements shall be prepared in accordance with GAAP applied in a
manner and using policies consistent with those utilized in preparing the
Historical Financial Statements to the extent such application and policies are
consistent with GAAP.
(b) Promptly after receipt of the Closing Financial Statements, Sellers
shall deliver to Buyer a copy thereof. Sellers shall provide Buyer and its
accountants with reasonable access (for a period of not more than 45 days after
receipt by Buyer of the Closing Financial Statements) to the work papers and
other documents prepared by, or on behalf of, Sellers or Frendel, Brown &
Weissman relating to the preparation of the Closing Financial Statements for the
purpose of reviewing and determining whether to accept or dispute the Closing
Financial Statements. If Buyer does not dispute any amount set forth on the
Closing Financial Statements, the Closing Financial Statements shall be final,
conclusive and binding on all of the parties hereto. If Buyer disputes any
amount set forth on the Closing Financial Statements, it shall so notify Sellers
in writing within 45 calendar days after delivery of the Closing Financial
Statements, specifying its objections and the reasons therefor in reasonable
detail (the "Dispute Notice"). Buyer and Sellers shall use reasonable efforts to
resolve the dispute. If the dispute is not resolved within 20 calendar days
after delivery of the Dispute Notice, Buyer and Sellers shall promptly submit
the dispute to David Berdon & Co. LLP (the "Selected Accounting Firm") with a
request to resolve the items subject to dispute and deliver its report thereon
to Buyer and Sellers within 20 calendar days of its appointment. The Closing
Financial Statements, as finally determined pursuant to this Section 3.2(b),
shall be referred to as the Final Closing Financial Statements. The fees and
expenses of the Selected Accounting Firm shall be shared equally by Buyer, on
the one hand, and Sellers, on the other hand (on a Pro Rata Basis).
3.3. Method of Payment. The parties agree that all cash payments to be made
by one party to another hereunder shall be made by wire transfer of immediately
available funds to such bank account as shall be designated in writing to the
payor or payors by the Person entitled to receive such payment. Whenever any
payment hereunder shall be stated to be due on or by no later than a day that is
not a Business Day, such payment shall be made on or by no later than the next
succeeding Business Day.
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3.4. Release of Escrowed Shares. Within 30 days following the delivery to
Buyer by Buyer's independent accountants of Buyer's audited financial statements
for its fiscal year ended December 31, 2002 but in no event later than April 30,
2003, Buyer shall deliver to the Escrow Agent a certificate (the "Final Escrow
Certificate") identifying, in reasonable detail, each outstanding claim for
indemnification under Section 11 with respect to which a Seller is an
Indemnifying Party together with Buyer's good faith estimate of the amount of
such claim. To the extent that the aggregate estimated amount of any claims
identified by Buyer in the Final Escrow Certificate is less than the value of
the Escrowed Shares held in escrow (valued at the Closing Share Value), then
Buyer shall direct the Escrow Agent to deliver to Sellers, on a Pro Rata Basis,
all of the Escrow Shares then held in escrow less such number of Escrow Shares
having a value (based on the Closing Share Value) equal to the aggregate
estimated amount of such identified claims. In the event that the Final Escrow
Certificate does not identify any such claims, or in the event that the Final
Escrow Certificate is not delivered to the Escrow Agent by the time required
under this Section 3.4, then the Escrow Agent shall release all of the Escrow
Shares to Sellers, on a Pro Rata Basis. The parties agree that each Escrow Share
to be released from escrow, whether upon termination of the escrow or upon
payment of a claim for indemnification, shall be valued at the Closing Share
Value.
4. Representations and Warranties Concerning Sellers. Each Seller,
severally and not jointly, represents and warrants to Buyer as follows:
4.1. Power and Capacity of Sellers. Each Seller has the full right, power,
capacity and authority to execute and deliver this Agreement and each
Transaction Document to which such Seller is a party, to consummate the
transactions contemplated hereby and thereby and to perform his or her
obligations hereunder and thereunder. This Agreement is, and each of the
Transaction Documents to which such Seller is a party has been, or at the
Closing will be, duly and validly executed and delivered by each Seller. This
Agreement constitutes, and each of the Transaction Documents to which such
Seller is a party when executed will constitute, the legal, valid and binding
obligation of such Seller, enforceable against each Seller in accordance with
its respective terms.
4.2. Ownership of the Shares. Each Seller is the owner, beneficially and of
record, of the number of shares of capital stock of the Company set forth across
from such Seller's name on Schedule 5.7 hereof and has good and marketable title
to such shares of capital stock, free and clear of any Lien, and such shares
have been duly and validly issued and are fully paid and nonassessable (except
as provided in Section 630 of the New York Business Corporation Law). Other than
the number of shares of capital stock of the Company set forth across from such
Seller's name on Schedule 5.7 hereof, such Seller owns no other shares of
capital stock of the Company or any other equity security of the Company or
right of any kind to have any such equity security issued. At the Closing, Buyer
will obtain good and valid title to all shares of capital stock of the Company
owned by each Seller, free and clear of any Liens. Each Seller has the exclusive
right, power and authority to transfer, sell, assign, encumber and vote the
shares of capital stock of the Company owned by such Seller. No Seller is a
party to or bound by any agreement affecting or relating to such Seller's right
to transfer, sell, assign, encumber or vote the shares of capital stock of the
Company owned by such Seller.
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4.3. No Conflicts. Neither the execution and delivery of this Agreement or
any of the Transaction Documents to which such Seller is a party, the
performance by such Seller of his or her obligations hereunder and thereunder,
nor the consummation of the transactions contemplated hereby or thereby, will,
with or without the giving of notice or the lapse of time, or both, (i) assuming
the consents, approvals and authorizations set forth on Schedule 4.4 are
obtained, violate any provision of any Law to which such Seller is subject; (ii)
violate any Order applicable to such Seller; or (iii) result in the creation or
imposition of any Lien upon the shares of capital stock of the Company owned by
such Seller or any of the properties or assets of the Company.
4.4. Consents and Approvals. Except as set forth on Schedule 4.4, no
consent, approval or authorization of, declaration, filing or registration with,
or notice to, any Governmental Authority or other third party on the part of
such Seller is required to be made or obtained by such Seller in connection with
the execution or delivery of this Agreement or the Transaction Documents to
which such Seller is a party, the performance by such Seller of such Seller's
obligations hereunder or thereunder, or the consummation by such Seller of the
transactions contemplated hereby or thereby.
4.5. No Litigation. There is no action, suit, investigation or proceeding
pending, or, to the knowledge of such Seller, threatened, against or affecting
such Seller before any Governmental Authority which in any manner challenges, or
seeks to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement and the Transaction Documents.
4.6. Investment Representations.
(a) Such Seller is acquiring the shares of Buyer Stock to be issued
pursuant to Section 3.1(b) hereof solely for investment, for such Seller's own
account and not with a view to, or for resale in connection with, any
distribution of any of the shares of Buyer Stock in violation of the Securities
Act or any applicable state securities laws. Such Seller covenants and agrees
that if such Seller makes a gift of Buyer Stock to one or more Related Persons
and/or employees of the Company, each such Related Person and/or employee shall
make in writing the investment representation in this Section 4.6(a) and agree
to be bound by the restrictions on transfer of Buyer Stock contained in this
Agreement. Such Seller understands that the shares of Buyer Stock to be issued
pursuant to Section 3.1(b) hereof have not been registered under the Securities
Act or any applicable state securities laws by reason of specified exemptions
therefrom that depend upon, among other things, the bona fide nature of such
Seller's investment intent as expressed herein and as explicitly acknowledged
hereby and that under such Laws such securities may not be resold without
registration under the Securities Act and applicable state securities laws
unless an applicable exemption from registration is available;
(b) Such Seller is not a party to any other agreement or arrangement for
the disposition of any Buyer Stock;
(c) Such Seller is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated under the Securities Act;
-8-
(d) Such Seller, by reason of his or her business and financial experience,
has such knowledge, sophistication and experience in financial and business
matters as to be capable of evaluating the merits and risks of acquiring the
shares of Buyer Stock, is able to bear the economic risk thereof, and is able to
afford a total loss of his or her investment in the Buyer Stock; and
(e) Such Seller has had an adequate opportunity to ask questions of and
receive answers from the officers of Buyer concerning any and all matters
relating to the transactions contemplated hereby, and has asked all questions of
the nature described in preceding clause, and all those questions have been
answered to his or her satisfaction.
4.7. Residency of Sellers. Such Seller is a resident of the State of New
York for state income tax purposes.
5. Representations and Warranties of the Company and Sellers. The Company
and Sellers hereby represent and warrant to Buyer as follows:
5.1. Organization and Qualification of the Company. The Company is a
corporation duly organized, validly existing and in good standing under, and by
virtue of, the laws of the State of New York. The Company has the requisite
corporate power and all lawful authority to own, lease and operate its
properties and assets and to carry on its business as presently conducted. The
Company is qualified or licensed to do business and is in good standing in each
jurisdiction where the character of its properties or the nature of its business
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed would not have a Material Adverse Effect on the
Company. Schedule 5.1 sets forth a complete and correct list of all
jurisdictions in which the Company is qualified or licensed to do business as a
foreign corporation.
5.2. Authority and Validity. The Company has all requisite corporate power
and all lawful authority to execute and deliver this Agreement and the
Transaction Documents to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery by the Company of this Agreement and the
Transaction Documents to which it is a party, the performance by the Company of
its obligations hereunder and thereunder and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
the Company. No other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery by the Company of this
Agreement and the Transaction Documents to which it is a party or the
performance by the Company of its obligations hereunder or thereunder. This
Agreement is, and each of the Transaction Documents to which the Company is a
party has been, or, at the Closing will be, duly and validly executed and
delivered by the Company. This Agreement constitutes, and each of the
Transaction Documents to which the Company is a party when executed will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms.
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5.3. Subsidiaries. Except as set forth on Schedule 5.3, at all times from
the date of its incorporation the Company has not owned or controlled, directly
or indirectly, any interest in any other Person, and will not do so up to and
including the Closing Date.
5.4. Charter Documents; Corporate Records. The Company has previously
delivered to Buyer true, correct and complete copies of the Certificate of
Incorporation and By-Laws of the Company as in effect as of the date of this
Agreement. The copies of minutes of directors' and shareholders' meetings and
the stock books of the Company that have previously been delivered to Buyer are
the true, complete and correct records of directors' and shareholders' meetings
and stock issuances through and including the date of this Agreement.
5.5. No Conflicts. Except as set forth on Schedule 5.5, neither the
execution and delivery of this Agreement or any of the Transaction Documents by
the Company, the consummation of the transactions contemplated hereby and
thereby, nor the performance by the Company of its obligations hereunder or
thereunder will, with or without the giving of notice or the lapse of time, or
both, (i) violate or conflict with any of the provisions of the Certificate of
Incorporation or By-Laws of the Company; (ii) violate, conflict with, result in
a breach or default under, or cause the termination or acceleration of any
mortgage, indenture, material contract, Company Permit, instrument, trust
document or other agreement or document to which the Company is a party or by
which the Company or any of its assets or properties are bound; (iii) violate
any provision of any Law to which the Company is subject; (iv) violate any Order
applicable to the Company; (v) result in the revocation or suspension of any
Company Permit; or (vi) result in the creation or imposition of any Lien upon
any properties or assets of the Company.
5.6. Consents, Approvals, Etc. Except as set forth on Schedule 5.6 hereof,
no approval of, declaration, filing or registration with, or notice to, any
Governmental Authority or other third party on the part of the Company is
required to be made or obtained in connection with the execution and delivery by
the Company of this Agreement and the Transaction Documents, the consummation of
the transactions contemplated hereby or thereby or the performance by the
Company of its obligations hereunder or thereunder.
5.7. Capitalization. The authorized capital stock of the Company and the
number of issued and outstanding shares thereof is set forth on Schedule 5.7
hereof. All of the issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable with no personal liability attached to the ownership thereof,
except as provided in Section 630 of the New York Business Corporation Law.
Except as set forth on Schedule 5.7, (i) there are no outstanding subscriptions,
options, warrants, calls, contracts, demands, commitments or other agreements or
arrangements of any character or nature whatsoever under or pursuant to which
the Company is or may become obligated to issue any shares of its capital stock;
(ii) there are no outstanding obligations (contingent or otherwise) of the
Company to purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or to pay any dividend or make any distribution in
respect thereof; (iii) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company; and
(iv) there are no outstanding obligations (contingent or otherwise) of the
Company to issue any subscription, option, warrant, convertible security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidence of indebtedness or assets of the Company. All of the
issued and outstanding shares of capital stock of the Company have been issued
-10-
in compliance with all applicable Laws, including, without limitation, all
federal and state securities laws. There are no shares of capital stock of the
Company held in the Company's treasury. The Company has never redeemed or
repurchased any shares of its capital stock. The Sellers have no liability for
wages under Section 630 of the New York Business Corporation Law.
5.8. Financial Statements.
(a) The Company has delivered to Buyer correct and complete copies of (i)
the Company's balance sheet and related statement of income, retained earnings
and cash flows for the fiscal year ended December 31, 2000, as audited by
Frendel, Brown & Weissman, as shown in its report thereon attached thereto
(collectively, the "Historical Financial Statements") and (ii) the Company's
unaudited balance sheet and related statements of income, retained earnings and
cash flows for the nine month period ended September 30, 2001 (collectively, the
"Interim Financial Statements"). The balance sheet as at September 30, 2001
included in the Interim Financial Statements is referred to herein as the "Last
Balance Sheet".
(b) The Historical Financial Statements and the Interim Financial
Statements (i) were prepared from the books and records of the Company; (ii)
present fairly, in all material respects, the financial condition and results of
operations of the Company as of the date or dates and for the period or periods
therein specified, subject to the qualifications indicated in the accountants'
report; and (iii) have been prepared in accordance with GAAP applied on a
consistent basis, except as noted or disclosed in such financial statements, and
except that the Interim Financial Statements do not contain notes and are
subject to normal recurring year end adjustments.
(c) The books of account and other financial records of the Company (i)
reflect all material items of income and expense and all material assets and
Liabilities required to be reflected therein and (ii) are in good order and have
been properly maintained in all material respects in accordance with good
business and accounting practices.
5.9. Absence of Undisclosed Liabilities. There are no material Liabilities
of the Company and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in any material
Liabilities, other than Liabilities (i) shown, noted or reflected on or reserved
against on the Last Balance Sheet; (ii) incurred since the date of the Last
Balance Sheet in the ordinary course of business consistent with past practice;
(iii) incurred in connection with the transactions contemplated hereby; and (iv)
that are set forth on Schedule 5.9 hereto. There are no reserves for Liabilities
of the Company required to be reflected on the Last Balance Sheet in accordance
with GAAP applied on a basis consistent with past practices of the Company that
are not so reflected.
5.10. Absence of Certain Changes. Except as set forth on Schedule 5.10,
since the date of the Last Balance Sheet, there has not been:
(i) any change in the financial condition or business of the Company which
has had or would reasonably be expected to have a Material Adverse Effect on the
Company;
-11-
(ii) any merger or consolidation or agreement to merge or consolidate with
any other Person involving the Company or any acquisition of, or agreement to
sell or acquire, any substantial part of the stock, business, property or assets
of, any other Person, to which the Company was a party;
(iii) any issuance of any shares of capital stock of the Company, or any
options, warrants or other rights to acquire any shares of capital stock of the
Company;
(iv) any declaration or payment of, or any agreement to declare or pay, any
dividend or distribution in respect of any shares of capital stock of the
Company or any redemption, purchase or other acquisition of any shares of
capital stock of the Company ;
(v) any split, combination or reclassification of any outstanding shares of
the Company's capital stock or any issuance or authorization of any other
securities in respect of, in lieu of or in substitution for the outstanding
shares of the Company's capital stock;
(vi) any material change in any method of accounting or accounting practice
used by the Company, except as required by Law or resulting from a change in
GAAP;
(vii) any increase in compensation, bonus or other benefits payable or to
become payable by the Company to any of its directors, officers or employees,
other than in the ordinary course of business;
(viii) except for advances of business expenses in the ordinary course of
business (not to exceed $25,000 in the aggregate), any making by the Company of
any loan or advance to any Seller, any Related Person, any officer or director
of, or consultant to, the Company, or any other loan or advance; or
(ix) any sale, abandonment or other disposition of any of the Company's
properties or assets, other than in the ordinary course of business.
5.11. Taxes.
(a) The Company has, or in the case of Tax Returns becoming due prior to
the Closing Date will have, prior to the Closing Date, duly and timely filed
with the appropriate Governmental Authorities all Tax Returns required to be
filed by it on or before the Closing Date with respect to all applicable Taxes.
On the date of this Agreement, the Company is not the beneficiary of any
extension of time within which to file any Tax Return. All of the Company's Tax
Returns are (or, in the case of returns becoming due after the date hereof and
on or before the Closing Date, will be) accurate and complete in all material
respects. The Company has paid or established (or, in the case of amounts
becoming due after the date hereof will have prior to the Closing Date paid or
established), in conformity with GAAP applied on a basis consistent with prior
practice in preparation of the Historical Financial Statements, adequate
reserves for the payment of all Taxes due or claimed to be due by any
Governmental Authority in connection with any of the Company's Tax Returns. The
Company has not been notified by a Governmental Authority in a jurisdiction
where the Company does not file Tax Returns that the Company is or may be
-12-
subject to taxation by that jurisdiction. There are no Liens on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Except for Taxes arising in the ordinary course of business after the
date of the Interim Financial Statements, the Company, either in its own right
or as a transferee, does not have any liability for Taxes payable for or with
respect to any periods prior to and including the Closing Date in excess of the
amounts actually paid prior to the Closing Date, or reserved for on the Closing
Balance Sheet, all amounts for such period required to be paid, withheld or
collected by the Company for income taxes, social security taxes, unemployment
insurance taxes and other employee withholding taxes have been so paid, withheld
or collected, and either paid to the respective Governmental Authority or set
aside for such purpose and accrued and reserved against and entered upon the
Closing Balance Sheet. Except as disclosed on Schedule 5.11(b) (with respect to
periods prior to the date of this Agreement) or on the Closing Balance Sheet
(with respect to periods ending on or prior to the Closing Date), there exists
no proposed Tax assessment against the Company.
(c) There is no action, suit, proceeding, audit, investigation or claim
pending or, to the knowledge of Sellers, threatened in respect of any Taxes for
which the Company is or may become liable, nor, to the knowledge of Sellers, has
any deficiency or claim for any such Taxes been proposed or asserted. The
Company has not consented to any waivers or extensions of any statute of
limitations with respect to any taxable year of the Company. There is no
agreement, waiver or consent providing for an extension of time with respect to
the assessment or collection of any Taxes against the Company and no power of
attorney granted by the Company with respect to any Tax matters is currently in
force.
(d) The Company and Sellers have made available to Buyer for inspection
complete and correct copies of all Tax Returns filed by the Company with any
Governmental Authority, and all material written communications relating to any
such Tax Returns, for each taxable year ending on or after December 31, 1997.
Schedule 5.11(d) sets forth a complete list of all jurisdictions in which the
Company files Tax Returns.
(e) Except as set forth on Schedule 5.11(e), at all times during its
existence, the Company (and any predecessor of the Company) has had a valid S
corporation election in effect under Sections 1361 and 1362 of the Code and
Section 660 of the New York State Tax Law. Schedule 5.11(e) sets forth all
jurisdictions in which the Company is required to pay Taxes. The Company will be
a valid S corporation under Sections 1361 and 1362 of the Code and Section 660
of the New York State Tax Law up to and including the Closing Date.
(f) The Company will not be liable for any Tax under Section 1374 of the
Code in connection with the deemed sale of the Company's assets caused by a
Section 338(h)(10) Election made at the option of Buyer. The Company has not in
the past 10 years (A) acquired assets from another corporation in a transaction
in which the Company's Tax basis for the acquired assets was determined, in
whole or in part, by reference to the Tax basis of the acquired assets (or any
other property) in the hands of the transferor or (B) acquired the stock of any
corporation which is a qualified subchapter S subsidiary.
-13-
5.12. Accounts Receivable; Accounts Payable.
(a) Schedule 5.12 sets forth an aged list of the accounts receivable of the
Company at September 30, 2001. All such accounts receivable, and all accounts
receivable which have arisen since September 30, 2001 (i) arose in the ordinary
course of business and, subject to the Company's allowance for doubtful accounts
as reflected in the Last Balance Sheet, are fully collectible; (ii) represent
monies due for goods sold and delivered or services rendered in the ordinary
course of business; and (iii) are not subject to any refunds or adjustments,
asserted or threatened defenses, rights of set-off or counterclaims, or
assignment, restrictions or Liens, except that they may be subject to deduction,
refund, rights of set-off, claims arising out of contractual audit rights
contained in the Company's provider contracts, delays in payment and other
offsets and reductions in the ordinary course of business of the Company. Except
as set forth on Schedule 5.12, (i) to the knowledge of Sellers, as of the date
of this Agreement, there is no factual basis for any deduction, refund, rights
of set-off, claims arising out of contractual audit rights contained in the
Company's provider contracts, delays in payment or other offsets and reductions;
(ii) all such accounts receivable were current at September 30, 2001; and (iii)
to the knowledge of Sellers, at the date of this Agreement there is no dispute
regarding the collectibility of any such accounts receivable.
(b) All accounts payable of the Company which are reflected in the Last
Balance Sheet, and all such payables which have arisen since the date thereof,
have arisen only from bona fide transactions in the ordinary course of business.
5.13. Officers, Directors and Employees; Labor Relations.
(a) Schedule 5.13 sets forth a complete and correct list of (i) the
officers and directors of the Company and the total compensation, including
bonuses, of each officer and director of the Company for the year 2001; (ii) the
name of each other employee, including each employee on leave of absence or
layoff status, consultant, independent contractor, agent or other representative
of the Company who received $50,000 or more in any form of compensation from the
Company in 2000 and/or is expected to receive in excess of $50,000 during 2001;
(iii) any commitment or agreement made by the Company to increase wages or to
modify the conditions or terms of retention by the Company of any of the Persons
referred to in clause (ii) above; and (iv) any notice of termination of
employment or resignation since July 1, 2001 given by any Person required to be
listed on Schedule 5.13.
(b) The Company is currently in compliance in all material respects with
all Laws relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, collective bargaining,
occupational safety and health, and plant closing. The Company is not liable for
the payment of any material compensation, damages, Taxes, fines, penalties, or
other amounts, however designated, for any failure to comply with any of the
foregoing Laws. No unfair labor practice complaint against the Company is
pending before the National Labor Relations Board.
(c) The Company has not been the subject of any union organizing activity,
and there has not been any strike called, or, to the knowledge of Sellers,
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threatened to be called against the Company. The Company has no agreement with
any union or collective bargaining group.
(d) Except as set forth in Schedule 5.13 (i) the consummation of the
transactions contemplated hereby will not cause the Company to incur or suffer
any Liability relating to, or obligation to pay severance, termination or other
payments to any Person, and (ii) no employee of the Company has any contractual
right to continued employment by the Company.
(e) None of the arrangements and other agreements described in this Section
5.13 or set forth on Schedule 5.13 violate in any material respect any
applicable Law and the Company is not in any material breach of any of its
obligations under any such arrangements or agreements. The Company has no
obligations to provide any compensation or benefits to any individual which is
comparable to the compensation or benefits described in the agreements and
arrangements set forth on Schedule 5.13 (other than the severance arrangements
described thereon) except as expressly set forth in such schedule. The annual
cost to the Company to provide the life insurance and perquisites described
under the heading "Additional Benefits" on Schedule 5.13 does not exceed $50,000
and, except as described on Schedule 5.13, all such agreements and arrangements
can be terminated at any time following the Closing without liability.
5.14. Litigation. Except as set forth on Schedule 5.14, as of the date of
this Agreement there is no action, suit, proceeding, inquiry or investigation
pending or, to the knowledge of Sellers, threatened against or involving the
Company or its assets (whether or not covered by insurance) and to the knowledge
of Sellers, there exists no basis for the commencement of any action, suit,
proceeding or investigation against the Company. There is no Order outstanding
against the Company or related to its properties or assets. There is no action,
suit, proceeding, inquiry or investigation pending or, to the knowledge of
Sellers, threatened against or affecting the Company before any Governmental
Authority which seeks to restrain, prohibit or otherwise challenge the execution
and delivery of this Agreement or any of the Transaction Documents, the
performance by the Company of its obligations hereunder or thereunder, or the
consummation, legality or validity of any of the transactions contemplated
hereby or thereby.
5.15. Compliance with Laws; Company Permits.
(a) The business and operations of the Company have been conducted in
compliance, and are currently in compliance, in all material respects, with all
applicable Laws and Orders (including, without limitation, Laws and Orders
relating to businesses operating in the health care industry, consumer
protection, third-party administrative services, insurance, Medicare, Medicaid,
confidentiality of health information, third-party reimbursement laws including
under any Medical Reimbursement Program, zoning, environmental matters and the
safety and health of employees) except for any non-compliance which has not had,
and would not reasonably be expected to have, a Material Adverse Effect on the
Company or for any non-compliance which would not result in cost to the Company
in excess of $25,000 in the aggregate. Except as set forth in Schedule 5.15, (i)
neither Sellers nor the Company has been charged with or, to the knowledge of
Sellers, is now under investigation with respect to, a violation of any
applicable Law, Order or other requirement of a Governmental Authority; (ii)
neither Sellers nor the Company is a party to, or bound by, any Order or
-15-
corporate integrity agreement or other formal or informal agreement with a
Governmental Authority; (iii) Sellers and the Company have filed all reports
required to be filed with any Governmental Authority as to which the failure to
file such reports could be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company; and (iv) all such reports
are accurate and complete in all material respects.
(b) The Company has all material permits, certificates, licenses,
registrations, certifications, qualifications, approvals and other
authorizations from Governmental Authorities (collectively, "Company Permits")
required in connection with the operation of its business, including, without
limitation, all Company Permits required by the New York State Department of
Health, and all Company Permits necessary for the Company to obtain payment
under the Medical Reimbursement Programs in which the Company participates, all
of which are listed on Schedule 5.15. All Company Permits held by the Company
are valid and in good standing, non-probationary, non-provisional and in full
force and effect except as set forth on Schedule 5.15. The Company is not
subject to any governmental restrictions on its operations that adversely affect
the conduct of its business, other than restrictions that apply to all providers
of the services or goods furnished by the Company in the relevant jurisdiction.
There are no actions or proceedings pending against the Company to revoke,
withdraw, terminate or suspend any Company Permit, and neither any Seller nor
the Company has received any written notice or other written communication
threatening any of the foregoing (other than notices and communications that
have been withdrawn or otherwise resolved), and Sellers have no knowledge of any
reason why any Company Permit is likely not to be renewed by the applicable
Governmental Authority in the ordinary course.
(c) Except as set forth on Schedule 5.15, the Company has filed all
material claims or other reports required to be filed with respect to the
purchase of services, products and supplies in connection with the Medical
Reimbursement Programs, in accordance with all Laws and requirements applicable
to the Medical Reimbursement Programs. Neither the Company nor any of its
officers, directors, shareholders, employees or contractors (acting on behalf
of, or in the scope of their employment or retention by, the Company) has been
charged with, convicted of, or, to the knowledge of Sellers, is the target or
subject of any current or potential investigation relating to, any Medicare,
Medicaid or other Federal Health Care Program-related offense, or has been
debarred, excluded or suspended from participation in Medicare, Medicaid or any
other Federal Health Care Program, or is currently listed on the General
Services Administration published list of parties excluded from Federal
procurement programs and non-procurement programs.
(d) Neither the Company nor any of its officers, directors, shareholders,
or employees (acting on behalf of, or in the scope of their employment or
retention by, the Company) (i) has been charged with or convicted of any
criminal offense relating to the delivery of an item or service under Medicare,
Medicaid or other Federal Health Care Program, or relating to the unlawful
distribution, prescription, dispensing or delivery of a controlled substance;
(ii) except as set forth on Schedule 5.15, has been debarred, excluded or
suspended from participation in Medicare, Medicaid or other Federal Health Care
Program; (iii) has had a civil monetary penalty assessed against it under
Section 1128A of the Social Security Act; or (iv) is currently listed on the
General Services Administration published list of parties excluded from federal
procurement programs and non-procurement programs.
-16-
(e) None of (i) the Sellers, or (ii) the Company and the Company's
directors, officers and employees (acting on behalf of, or in the scope of their
employment or retention by, the Company) have engaged in any activities which
are in violation of the federal Medicare or federal or state Medicaid statutes,
Sections 1128, 1128A, 1128B, 1128C or 1877 of the Social Security Act (42
U.S.C.ss.ss.1320a-7, 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the federal
CHAMPUS statute (10 U.S.C.ss. 1071 et seq.), the False Claims Act (31 U.S.C.ss.
3729 et seq.), the False Statements Accountability Act (18 U.S.C.ss. 1001), the
Program Fraud Civil Remedies Act (31 U.S.C.ss.3801 et seq.), the anti-fraud and
related provisions of the Health Insurance Portability and Accountability Act of
1996 (e.g., 18 U.S.C.ss.ss. 1035 and 1347), or related regulations or other
federal or state laws and regulations, including, but not limited to, the
following:
(i) knowingly and willfully making or causing to be made a false statement
or representation of a material fact in any application for any benefit or
payment;
(ii) knowingly and willfully making or causing to be made a false statement
or representation of a material fact for use in determining rights to any
benefit or payment;
(iii) failure to disclose knowledge by a Medicare or Medicaid claimant or a
claimant under any Medical Reimbursement Program of the occurrence of any event
affecting the initial or continued right to any benefit or payment on its own
behalf or on behalf of another, with intent to fraudulently secure such benefit
or payment;
(iv) knowingly and willfully offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe, or rebate), directly or indirectly,
overtly or covertly, in cash or kind (i) in return for referring an individual
to a person for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by any Federal Health
Care Program; or (ii) in return for purchasing, leasing, or ordering, or
arranging, or arranging for or recommending purchasing, leasing, or ordering any
good, facility, service, or item for which payment may be made in whole or in
part by any Federal Health Care Program; or
(v) any other activity which violates any state or federal law relating to
prohibiting fraudulent, abusive or unlawful practices connected in any way with
the provision of health care items or services or the billing for such items or
services provided to a beneficiary of any Medical Reimbursement Program.
(f) The Company is duly accredited as a home infusion and dispensing
pharmacy by the Joint Commission on Accreditation of Health Care Organizations
with an Updated Overall Evaluation Score of 94. Except as set forth on Schedule
5.15, there are no actions or proceedings to revoke, withdraw, terminate or
suspend such accreditation and Sellers have no knowledge of any reason why such
accreditation is not likely to be renewed in the ordinary course.
5.16. Title to Assets; Absence of Encumbrances. Except as set forth on
Schedule 5.16 and as set forth in Section 5.18 with respect to Intellectual
Property, the Company has good and valid title to all of the properties and
-17-
assets shown as owned by the Company on its books and records, including,
without limitation, all of the properties and assets shown on the Last Balance
Sheet or thereafter acquired, except for assets sold or otherwise transferred or
disposed of in the ordinary course of business since the date of the Last
Balance Sheet, in each case free and clear of all Liens, other than Permitted
Liens. All of the properties and assets owned or leased by the Company are
adequate and sufficient for the current operations of the business of the
Company and such properties and assets now being used by the Company in its
business and operations, whether leased or owned, are in good working order and
repair, except for ordinary wear and tear.
5.17. Real Property; Leases.
(a) The Company does not own any real property or any outstanding options
or rights of first refusal to purchase any real property.
(b) Except for the leases set forth on Schedule 5.17(b), true and complete
copies of which have heretofore been delivered by the Company to Buyer, the
Company is not a party to any lease or agreement under which the Company is a
lessee or lessor of, or holds, manages or operates, any property, real or
personal, owned by any third party, or under which any property, real or
personal, owned by the Company is held, operated or managed by a third party.
The Company is the owner and holder of all leasehold estates purported to be
granted by such leases. Each such lease is in full force and effect and
constitutes a valid and binding obligation of, and is enforceable in accordance
with its terms against, the respective parties thereto. The Company has
performed all obligations required to be performed by it to date under such
leases so as not to be in default thereunder, and there has not occurred any
event which (with or without the giving of notice or lapse of time, or both)
would constitute such a default. Except as disclosed on Schedule 5.17(b), no
consent is required of any landlord or other party to any lease or any third
party to consummate the transactions contemplated hereby.
5.18. Intellectual Property.
(a) Schedule 5.18 sets forth a list of (i) all trademarks, trade names,
brand names, service names, service marks, copyrights, patents, all software and
other licenses, invention disclosures, applications pending and to be filed for
any and all of the foregoing and registration thereof and other intangible
intellectual property ("Intellectual Property") owned by the Company; (ii) all
material agreements pursuant to which the Company has authorized the use, in any
business or commercial activity, of any Intellectual Property owned by the
Company; and (iii) all licenses granted to the Company for the use of any
Intellectual Property of any third Person, other than licenses arising from the
purchase of "off the shelf" or standard products. To the knowledge of Seller,
the Company is not in material violation of the terms of any license granted to
it for the use of any Intellectual Property of any third Person.
(b) To the knowledge of Sellers, the Company has not infringed upon, or
otherwise violated, the intellectual property rights of any third party. The
Company has not received any written claim alleging any such infringement or
violation. To the knowledge of Sellers, no third party is infringing upon or
otherwise violating the intellectual property rights of the Company.
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5.19. Bank Accounts. Schedule 5.19 sets forth a list of all of the
Company's bank accounts and other accounts with financial institutions and of
the Persons authorized to sign checks or who hold powers of attorney with
respect to any of such accounts.
5.20. Employee Benefit Plans. Except as set forth on Schedule 5.20:
(a) There are no plans, programs, policies or arrangements (whether written
or oral) providing cash or other compensation or benefits of any kind or
description whatsoever (whether current or deferred) to, or on behalf of, any
employees, former employees, directors, officers, consultants, independent
contractors, contingent workers or leased employees of the Company or the
dependents of any of them under which the Company has any liability, duty or
obligation whatsoever, whether fixed or contingent, including but not limited
to, any employment, consulting or severance agreement and any Employee Benefit
Plan.
(b) The Company has furnished to Buyer (i) a correct, complete and current
copy of (A) each written Employee Benefit Plan and all amendments to such plan
together with any trust agreements or other contracts or agreements which are a
part of such plan, and (B) all Internal Revenue Service and Department of Labor
rulings or determinations, annual reports, summary plan descriptions, actuarial
and other financial reports for all periods ending on or after December 31, 1997
with respect to each such Employee Benefit Plan and (ii) an accurate written
summary of all material provisions of each unwritten Employee Benefit Plan.
(c) All of the assets which have been set aside in a trust account to
satisfy any obligations under any Employee Benefit Plan are shown on the books
and records of each such trust and each such trust account at their current fair
market value as of the most recent valuation date.
(d) Each Employee Benefit Plan has been established, maintained, operated
and administered in compliance in all material respects with all applicable
laws, and all applicable reporting and disclosure requirements with respect to
each Employee Benefit Plan have been satisfied on a timely basis, including all
such requirements under the Code and ERISA. No Employee Benefit Plan is
described in ERISA Sections 3(37), 4(b)(4), 4063 or 4064 or is subject to Code
Section 412, ERISA Section 302, or Title IV of ERISA, and the Company and any
controlled group member within the meaning of Code Sections 414(b), (c), (m), or
(o), has never maintained or contributed directly or indirectly to (or had an
obligation to contribute directly or indirectly to) such a plan. No Employee
Benefit Plan which is described in ERISA Section 3(1) provides medical,
surgical, hospitalization, death or similar benefits after a termination of
employment except to the extent such benefits are required to satisfy the
minimum requirements under Part 6 of Title I of ERISA.
(e) There are no pending or, to the knowledge of Sellers, threatened claims
with respect to an Employee Benefit Plan (other than routine claims for benefits
made in the ordinary course of the plan's operations) or with respect to the
terms and conditions of employment or termination of employment of any employee
or former employee of the Company, which claims could reasonably be expected to
result in any material liability to the Company, and no audit or investigation
by any domestic or foreign governmental or other law enforcement agency is
pending or, to the knowledge of Sellers, has been proposed with respect to any
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Employee Benefit Plan. All material obligations regarding each Employee Benefit
Plan have been satisfied, and there are no outstanding material defaults or
violations by any party to any Employee Benefit Plan. No taxes, penalties or
fees are owing under any Employee Benefit Plan.
(f) Each Employee Benefit Plan which the Company has treated as satisfying
the requirements of Code Section 401 and each trust which the Company has
treated as satisfying the requirements of Code Section 501 have at all times in
fact satisfied such requirements in all material respects.
(g) There have been no prohibited transactions or breaches of fiduciary
duty under ERISA or prohibited transactions under the Code for which the Company
has any liability or for which the Company has any indemnification obligation to
any other Person.
(h) The Company has the right pursuant to the terms of each Employee
Benefit Plan and all agreements related to such plan unilaterally to terminate
such plan (or its participation in such plan) or to amend the terms of such plan
at any time without triggering a penalty or an obligation to make any additional
contributions to such plan.
(i) The transactions contemplated by this Agreement will not result in any
additional payments to or benefit accruals for, or any increase in the vested
interest of, any current or former officer, employee, director, consultant,
independent contractor, contingent worker, or leased employee or their
dependents under any Employee Benefit Plan or result in any obligation of the
Company to pay severance, unemployment compensation, or any other payment to any
such persons. The transactions contemplated by this Agreement will not result in
any payments to any current or former officer, employee or director of the
Company, which will be subject to Code Section 280G.
5.21. Indebtedness. Schedule 5.21 sets forth a list of all Indebtedness of
the Company as of the date of this Agreement. The Company is not in default on
the payment of any principal amount of, or interest on, any such Indebtedness or
of any of the other material covenants of the Company contained therein.
5.22. Environmental Laws. The Company has not engaged, at any facility
owned or leased by it, in any Hazardous Activity, nor has it engaged in any
activity requiring identification, permitting, licensing or authorization for
the generation, treatment, storage or disposal of Hazardous Waste, except as
disclosed on Schedule 5.22. The Company is in compliance in all material
respects with the requirements of all Environmental Laws applicable to it. There
has not been any reportable release by the Company of Hazardous Waste at any
facility previously owned or leased by the Company, nor any release by the
Company triggering a remediation obligation under applicable Law, during its
ownership or lease of any such facility. There has not been any reportable
release of Hazardous Waste at any facility currently owned or leased by the
Company, nor any release triggering a remediation obligation under applicable
Law, during its ownership or lease of any such facility.
5.23. Insurance. Schedule 5.23 sets forth a complete and correct list and
description of all insurance policies in force naming the Company as an insured
or beneficiary or as a loss payable payee or for which the Company has paid or
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is obligated to pay all or part of the premiums. Except as set forth on Schedule
5.23, there are no pending claims against such insurance by the Company as to
which insurers have denied liability.
5.24. Contracts.
(a) Schedule 5.24 sets forth a complete and correct list, as of November
30, 2001, of each obligation, contract, agreement, commitment or arrangement
(collectively, "Contracts") to which the Company is a party or by which the
Company or its assets is bound, whether written or oral, and which:
(i) is likely to involve an aggregate amount of consideration of more than
$50,000 (other than Contracts with third party payors, patients and Customers,
which are described in clause (a)(viii) below, and employee compensation
arrangements, which are described in Section 5.13);
(ii) was not made in the ordinary course of business, consistent with past
practice;
(iii) relates to or evidences Indebtedness or a security interest or
mortgage in the property or assets of the Company;
(iv) under which the Company assumes any Liability or obligations
(including Indebtedness) of any other Person;
(v) grants to any Person the authority to execute agreements or otherwise
act on behalf of the Company;
(vi) grants to any Person the right to use any property or property right
of the Company;
(vii) is with a Related Person;
(viii) is with any of the Customers; or
(ix) limits or purports to limit the ability of the Company to engage in
any line of business or with any Person or in any geographic area or during any
period of time.
(b) The Company has heretofore delivered to Buyer a substantially complete
and correct copy of each such written Contract, including any amendment,
modification or supplement thereto, in the Company's possession. However, in
certain cases the Contracts are by their terms or otherwise deemed proprietary
and confidential information of a third party or may be subject to express
confidentiality and non-disclosure agreements or require the prior written
consent of a third party for disclosure, in which case the Company has provided
redacted copies or limited information concerning such Contracts. Except as
disclosed on Schedule 5.24, each Contract:
(i) To the knowledge of Sellers, is valid and binding on the respective
parties thereto and is in full force and effect, enforceable in accordance with
its terms; and
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(ii) Assuming all required consents and approvals are obtained and notices
are given, upon consummation of the transactions contemplated by this Agreement,
shall continue in full force and effect, enforceable in accordance with its
terms, without termination, penalty or other adverse consequence.
(c) The Company is not in material breach of, or material default under,
any Contract. To the knowledge of the Company and Sellers, no other party to any
Contract is in material breach thereof or material default thereunder. There is
no Contract granting any Person any preferential right to purchase, other than
in the ordinary course of business consistent with past practice, any of the
properties or assets of the Company. Except as described on Schedule 5.24,
neither Sellers nor the Company has received any written notice that any
Contract will not be renewed or terminated by the other party thereto in the
foreseeable future (including as a result of the consummation of the
transactions contemplated hereby).
(d) Except as set forth on Schedules 5.24 and 5.13, the Company has no
outstanding Contract with any officer, employee, agent, consultant, advisor,
salesman, manufacturer's representative, distributor, dealer, subcontractor,
broker or any other Person that is not cancelable by the Company on notice of
not longer than ninety (90) days and without liability, penalty or premium of
any kind, or any Contract providing for the payment of any material bonus or
commission based on sales or earnings.
5.25. Certain Payments. Since January 1, 1999, neither the Company nor any
shareholder, director or officer of the Company, or to the knowledge of the
Company and Sellers, any employee of the Company or any other authorized Person
acting for or on behalf of the Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment to any Person, private or public, regardless of form, whether in money,
property or services (i) to obtain favorable treatment in securing business;
(ii) to pay for favorable treatment for business secured; (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company; or (iv) in violation of any applicable Law; or (b)
except as set forth on Schedule 5.25(b), established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
5.26. Customers. Schedule 5.26 identifies the names and locations of the
customers (i.e, third party payors and other Persons responsible for payment) of
the Company that collectively represent more than 95% of the revenue of the
Company recorded for the eleven months ended November 30, 2001, including each
such customer that represented more than 1% of such revenues (the "Customers"),
and the amount for which each Customer was invoiced during such period. Except
as described on Schedule 5.26, the Company has previously provided to Buyer a
copy of every written Contract between the Company and each Customer and every
amendment, modification or supplement thereto, in the Company's possession,
other than routine purchase orders and requisitions and prescriptions. Except as
described on Schedule 5.26, as of November 30, 2001, there are no material oral
Contracts between the Company and any Customer and neither Sellers nor the
Company has received any written or oral notice that any Customer has ceased,
or, in the reasonably foreseeable future, will cease, to use the services of the
Company, or has substantially reduced, or, in the reasonably foreseeable future,
will substantially reduce, the use of such services at any time (including as a
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result of the consummation of the transactions contemplated hereby).
Notwithstanding any provisions of this Agreement to the contrary, no
representation or warranty is made by Sellers or the Company with respect to
continued future purchases from the Company by any Customer, or the amount,
level or rate of such purchases, if any.
5.27. Inventory. The inventories of the Company as shown on the Last
Balance Sheet and the inventories acquired subsequent to the date of the Last
Balance Sheet consist of items of a quality and quantity usable and saleable in
the ordinary course of business, and the value of obsolete goods and goods below
standard quality have been written down on the Company's books of account to
realizable market value or adequate reserves have been provided therefor, and
such goods are valued on the Company's books of account at the lower of cost or
realizable market value, on a first in first out basis, all in accordance with
GAAP.
5.28. Condition and Sufficiency of Properties and Assets. The physical
properties and assets of the Company are in good operating condition and repair
(reasonable wear and tear excepted), and are adequate for the uses to which they
are being put, and none of such physical properties or assets is in need of
maintenance and repairs, except for ordinary and customary capital expenditures
consistent with past practice and any other ordinary, routine maintenance and
repairs that are not material in nature or cost. The physical properties and
assets of the Company are sufficient for the continued conduct of the Company's
business after the Closing in substantially the same manner as conducted prior
to the Closing.
5.29. Pharmaceutical Regulation.
(a) As of the date of this Agreement, the Company has provided to Buyer all
state and federal regulatory agency forms, reports, notices, orders or
correspondence received since January 1, 1999 from each such regulatory agency
relating to any investigations, inspections, examinations, audits or other
compliance or enforcement activities by or on behalf of such regulatory
agencies, and all responses by or on behalf of the Company to such forms,
reports or correspondence.
(b) As of the date of this Agreement, the Company has provided to Buyer all
warning letters, other regulatory letters, notices of violation, notices of
hearing or adverse findings received by the Company since January 1, 1999
identifying potential violations of, or deviations from any federal or state
agency regulatory requirements, and all responses by or on behalf of the Company
to such letters and notices.
(c) As of the date of this Agreement, the Company has not had any
regulatory audits by any outside auditor.
(d) Sellers have no knowledge of any acts taken by or on behalf of the
Company that furnish a reasonable basis for a warning letter or other regulatory
letter, other adverse federal or state agency regulatory communication or action
(which communications or actions seek to impose restrictions on the Company's
business or fines in excess of $2,500 individually or $25,000 in the aggregate),
or civil or criminal investigation or action.
5.30. Disclosures. To Sellers' knowledge, none of this Agreement, the
Transaction Documents or any of the Exhibits or Schedules attached hereto or
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thereto nor any other written document, certificate or statement furnished by
Sellers or the Company to Buyer in connection herewith or therewith contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. Neither Sellers nor
the Company makes any representation or warranty regarding the adequacy or
accuracy of any financial forecasts or projections or any other forward-looking
statements that may have been delivered to Buyer at any time by or on behalf of
Sellers or the Company.
6. Representations and Warranties of Buyer. Buyer represents and warrants
to Sellers as follows:
6.1. Organization and Authority; Due Authorization and Execution. Buyer is
a corporation duly organized, validly existing and in good standing under, and
by virtue of, the laws of the State of Delaware. Buyer has all necessary
corporate power and authority to enter into this Agreement and the Transaction
Documents, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery by
Buyer of this Agreement and the Transaction Documents, the performance by Buyer
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Buyer. No other corporate proceedings on the part of Buyer are necessary to
authorize the execution and delivery by Buyer of this Agreement and the
Transaction Documents or the performance by Buyer of its obligations hereunder
or thereunder. This Agreement is, and each of the Transaction Documents has
been, or at the Closing will be, duly and validly executed and delivered by
Buyer. This Agreement constitutes, and each of the Transaction Documents when
executed will constitute, the valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
6.2. Consents, Approvals, Etc. Except as set forth on Schedule 6.2, no
consents, approvals, authorizations, filings with, or notices to, any
Governmental Authority, or any third Person under any contracts or agreements to
which Buyer is a party or is subject, is required to be made or obtained in
connection with the execution and delivery Buyer of this Agreement or any of the
Transaction Documents, the performance by Buyer of its obligations hereunder or
thereunder or the consummation by Buyer of the transactions contemplated hereby
or thereby.
6.3. No Conflicts. Except as set forth on Schedule 6.3, neither the
execution, delivery and performance by Buyer of this Agreement and the
Transaction Documents, nor the consummation of the transactions contemplated
hereby and thereby will (i) violate any provision of the Certificate of
Incorporation or By-Laws of Buyer; (ii) violate, conflict with, result in a
breach or default under, or cause the termination or acceleration of any
material mortgage, indenture, contract, license, permit, instrument, trust
document or other agreement or document to which Buyer is a party or by which
Buyer or any of its assets or properties is bound; (iii) violate any provisions
of any Law to which Buyer is subject; or (iv) violate any Order applicable to
Buyer.
6.4. Issuance of Buyer Stock. All shares of Buyer Stock which are to be
issued pursuant to the provisions of Section 3.1(b) hereof will be, when issued
in accordance with the terms hereof, duly and validly issued, fully paid and
non-assessable.
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6.5. Buyer Reports. Buyer has previously furnished to Sellers copies of all
Buyer Reports (excluding the exhibits thereto) filed with the Securities and
Exchange Commission during 2001 up to and including the date of this Agreement.
Buyer shall provide Sellers with copies of all Buyer Reports filed with the
Securities and Exchange Commission, and any registration statements filed by
Buyer with the Securities and Exchange Commission under the Securities Act,
between the date hereof and the Closing Date. As of their respective dates, the
Buyer Reports and any registration statements that may be filed under the
Securities Act were (or will be) prepared in all material respects in accordance
with the requirements of the Securities Act, and the rules and regulations
thereunder, and the Exchange Act, and the rules and regulations thereunder, as
applicable, and did not (and will not), when filed, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.6. Absence of Material Adverse Change. Since September 30, 2001, there
has occurred no event or development which has had, or could reasonably be
expected to have, a Material Adverse Effect on Buyer.
6.7. Litigation. Except as disclosed in the Buyer Reports, there is no
action, suit, investigation or proceeding (including, without limitation, any
investigation or other proceeding by Medicare or Medicaid) which is pending or,
to Buyer's knowledge, threatened against Buyer or any subsidiary of Buyer which,
if determined adversely to Buyer or such subsidiary, could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Buyer or which in any manner challenges or seeks to prevent, enjoin, alter or
delay the transactions contemplated by this Agreement.
6.8. Monetary Consideration. Buyer will have available to it on the Closing
Date sufficient funds in order to permit it to pay the cash portion of the
Purchase Price.
6.9. Disclosures. To the knowledge of Buyer, none of this Agreement, the
Transaction Documents or any of the Exhibits or Schedules attached hereto or
thereto nor any other written document, certificate or statement furnished by
Buyer to Sellers in connection herewith or therewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.
7. Covenants of the Parties.
7.1. Operation of the Business Pending Closing. From the date hereof to the
Closing Date or earlier termination of this Agreement, except as otherwise
contemplated or permitted by this Agreement, and except as set forth on Schedule
7.1, Sellers shall cause the Company to conduct its business in substantially
the same manner in which it is presently conducted and, unless consented to by
Buyer, which consent shall not be unreasonably withheld, delayed or conditioned,
shall cause the Company to:
(a) operate its business substantially in the ordinary course, and to the
extent consistent with such operation, use its commercially reasonable efforts
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to: (i) preserve its business organization intact; and (ii) preserve its present
relationships with suppliers, lessors and Customers in accordance with past
practice over the past 12 months.
(b) maintain its books, accounts and records in the usual and ordinary
manner.
(c) keep in effect casualty, public liability, worker's compensation and
other insurance policies in coverage amounts not less than those in effect on
the date of this Agreement.
(d) maintain all physical properties and assets in good repair and
operating condition, reasonable wear and tear excepted, in each case, consistent
with past practice.
(e) not sell, transfer or otherwise dispose of any of the Company's assets,
other than in the ordinary course of business consistent with past practice.
(f) not (i) issue, sell, pledge, dispose of or encumber any additional
shares of the Company's capital stock or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of the Company's capital stock; (ii) amend its
Certificate of Incorporation or By-Laws; (iii) declare, set aside or pay any
dividends or distributions of any kind to its shareholders or make any direct or
indirect redemption, retirement, purchase or other acquisition of any equity
interests, other than distributions to Sellers of cash in an amount not to
exceed $1,457,955 in the aggregate, plus such additional amount not to exceed an
amount that equals $600,000 for each month occurring after December 31, 2001 and
prior to the Closing Date, such amount to be pro-rated in the month in which the
Closing occurs based on the number of days in such month up to and including the
Closing Date); (iv) split, combine or reclassify any of the Company's
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for outstanding shares
of the Company's capital stock; (v) acquire any Person or acquire any assets of
any Person, other than inventory and equipment in the ordinary course of
business consistent with past practice; (vi) be a party to any merger or
consolidation; (vii) create or permit to be created any Lien on any of its
assets, other than Permitted Liens; (viii) except with respect to Indebtedness
for trade payables incurred in the ordinary course of business, incur any
Indebtedness for borrowed money or guarantee any such Indebtedness of another
Person; (ix) cancel any Indebtedness; (x) except in the ordinary course of
business, amend in any material manner or terminate any Contract to which the
Company is a party; (xi) establish, amend in any material manner or terminate
any Employee Benefit Plan; (xii) amend any material Contract or other
arrangement other than in the ordinary course of business consistent with past
practice; (xiii) enter into or amend in any material respect any employment or
severance agreement with any employee, except for merit increases in the
ordinary course of business consistent with past practice; (xiv) make (or commit
to make) any increase in the compensation payable to any officer or director or
prepay any loans from the Company to such Person; (xv) except as required by Law
or resulting from a change in GAAP, change any method of accounting or any
accounting practice or policy used by the Company; (xvi) voluntarily take any
action which would cause any of the representations and warranties made by the
Company and Sellers in this Agreement not to be true and correct in all material
respects on and as of the Closing Date; or (xvii) agree to any of the foregoing.
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7.2. Covenant of Parties' Efforts and Good Faith. Each party will use its
reasonable best efforts and act in good faith to cause to be satisfied as
promptly as practicable after the date hereof all conditions to Closing and to
cause the transactions contemplated by this Agreement to be consummated prior to
February 28, 2002. Without limiting the generality of the foregoing, each party
shall make all filings with and give all notices to third Persons and
Governmental Authorities that may be necessary in order to consummate the
transactions contemplated by this Agreement and shall use its reasonable best
efforts to obtain all consents and approvals of third Persons and Governmental
Authorities necessary in order to consummate the transactions contemplated by
this Agreement.
7.3. Diligence Review.
(a) The Company and Sellers agree that through January 21, 2002, upon the
reasonable request of Buyer, the Company and Sellers shall permit, and shall
cause the Company's officers, directors, employees, agents and representatives
to permit, Buyer and its employees, agents, attorneys, accountants and
representatives (collectively, the "Buyer Representatives") to conduct a due
diligence review with respect to the Company including, without limitation, (i)
providing access during normal business hours and on reasonable notice to all
data, records and other information necessary for Buyer and the Buyer
Representatives to conduct a complete business, financial, accounting, tax,
environmental and legal audit of all aspects of the business and financial
condition of the Company (such data, records, and other information referred to
herein as "Seller Due Diligence Information"); and (ii) affording Buyer and the
Buyer Representatives a reasonable opportunity to discuss the affairs, finances
and operations of the Company with officers, directors, management, key
employees and accountants of the Company and such Seller. In addition to the
foregoing, the Company and Sellers shall, at the reasonable request of Buyer,
introduce Buyer and the Buyer Representatives to the Company's principal
customers, principal suppliers and key employees for the purpose of completing
its due diligence review; provided, that there shall not be more than two Buyer
Representatives present at any meetings with such Persons and that any such
meetings shall include a Seller Representative. All contacts and arrangements
for such review shall be made through Wiener and/or Kammerer and shall be
conducted in a manner that does not unreasonably disrupt or adversely affect the
Company's business.
(b) Buyer agrees that through January 21, 2002, upon the reasonable request
of Sellers, it shall permit, and shall cause its officers, directors, employees,
agents and representatives to permit, Sellers and their agents, attorneys,
accountants and representatives (collectively, the "Sellers' Representatives")
to conduct a due diligence review with respect to Buyer, including, without
limitation, (i) providing access during normal business hours to all data,
records and other information necessary for Sellers and the Sellers'
Representatives to conduct a review of the business, financial and legal
condition of the Company (such data, records, and other information referred to
herein as "Buyer Due Diligence Information" and together with the Seller Due
Diligence Information the "Due Diligence Information"); and (ii) affording
Sellers and the Sellers' Representatives a reasonable opportunity to discuss the
affairs, finances and operations of Buyer with officers, directors, management,
employees and accountants of Buyer. In addition, through the Closing Date Buyer
will provide Sellers access to Buyer's primary lender solely for the purpose of
confirming the availability at the Closing of the cash portion of the Purchase
Price.
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(c) During the period beginning on the date of completion of the parties
due diligence review as set forth above (as such date may be extended pursuant
to the provisions of Section 8.1(f)) each party shall afford to the other,
reasonable access at all reasonable times to its officers, directors,
management, key employees, accountants, properties, offices, other facilities
and all books and records (including tax returns) and shall furnish to the other
party such financial, operating and other data and information as the other
party may reasonably request.
(d) Each party agrees that the Due Diligence Information shall be held in
confidence pursuant to the Confidentiality Agreement dated May 21, 2001 (the
"Confidentiality Agreement") between the Company and Buyer. In addition, that
parties acknowledge that under applicable privacy laws and certain contractual
provisions access to certain Due Diligence Information may be limited or
restricted. The Company and Sellers shall use reasonable efforts to obtain
consents of third parties to the disclosure to Buyer and the Buyer
Representatives of such restricted Due Diligence Information and until obtained
will provide to Buyer and the Buyer Representatives summary information (if
permitted under the privacy laws or the restricted contracts) concerning such
restricted Due Diligence Information.
7.4. Further Assurances. Each of the parties shall execute such documents
and other instruments and take such further actions as may reasonably be
required to carry out the provisions hereof and the transactions contemplated
hereby.
7.5. Certain Tax Matters.
(a) Sellers, at the Company's expense, shall prepare or cause to be
prepared and file or cause to be filed, on a timely basis, all Tax Returns for
the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date (including on extension). Sellers shall permit
Buyer to review and comment on each such Tax Return described in the preceding
sentence not less than 30 days prior to the anticipated filing date thereof and
will not file any such Tax Returns without the prior written consent of Buyer
(which consent shall not be unreasonably withheld or delayed). To the extent
required by applicable law, Sellers shall include any income, gain, loss,
deduction or other tax items for such periods on their Tax Returns in a manner
consistent with the Schedule K-1s furnished by Company to Sellers for such
periods. Buyer shall pay or cause to be paid all Taxes imposed upon the Company
as an entity shown as due on such Tax Returns. Sellers shall reimburse Buyer for
Taxes of the Company with respect to such periods within fifteen (15) days after
payment by Buyer or the Company of such Taxes to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the Closing Balance Sheet.
(b) Subject to the provisions of Section 7.5(h), Buyer shall prepare or
cause to be prepared and file or cause to be filed any Tax Returns of the
Company for Tax periods which begin before the Closing Date and end after the
Closing Date. Sellers shall pay to Buyer within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the reserve
for Tax Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the face of the
Closing Balance Sheet. For purposes of this paragraph, in the case of any Taxes
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that are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such taxable period ending on the Closing Date shall
(x) in the case of any taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such tax for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing Date under
the closing of the books method. All terminations necessary to give effect to
the foregoing allocations shall be made in a manner consistent with prior
practice of the Company. Sellers shall also promptly advise Buyer of any
extension of time, or application therefor, within which to file any Tax Return
to which the Company becomes a beneficiary after the date hereof.
(c) Buyer, the Company and Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with any audit,
litigation, or other proceeding (a "Tax Controversy") with respect to Taxes,
provided, that Buyer shall control any Tax Controversy over such Taxes except
for Tax Controversies relating to net income or New York State franchise Taxes
for periods ending on or prior to the Closing Date, which Tax Controversies
shall be controlled by Sellers. If Buyer receives a written notice of audit by a
Governmental Authority with respect to a Tax for a taxable period ending on or
prior to the Closing Date, Buyer shall notify Sellers within 15 days of receipt
(but Buyer's right to indemnification under Section 11 shall not be affected by
the failure to give notice, except to the extent that such delay is materially
prejudicial to the defense of any such audit). Buyer shall cooperate fully with
Sellers in connection with any Tax Controversy with respect to Tax Returns for
prior taxable years, and shall retain and provide to Sellers copies of all Tax
Returns, supporting work schedules, books and records, and other information
that may be relevant to any such Tax Controversy. In connection with any Tax
Controversy with respect to Tax Returns for prior taxable years, Sellers shall
pay the reasonable fees and expenses of outside tax advisors or tax counsel
retained by the Company to the extent reasonably believed by the Company to be
necessary to assist the Company in fulfilling its obligations to cooperate fully
with Sellers in connection with such Tax Controversy. Sellers' shall pay the
Company's reasonable out-of-pocket expenses, including copying costs relating to
any such Tax Controversy. Without limiting the generality of the foregoing,
Buyer shall retain, until the expiration of the applicable statute of
limitations (including any extensions thereof), copies of all Tax Returns,
supporting work schedules and other books and records relating to prior taxable
years. In the event Buyer determines to dispose of any books and records
relating to Tax matters, Buyer shall give Sellers at least 30 days written prior
written notice to such effect and Sellers may, at Sellers' cost and expense,
make copies of all or any part of such books and records as Sellers may select.
(d) At Buyer's option, Company and each Seller will join with Buyer in
making an election under Section 338(h)(10) of the Code (and any corresponding
election under state, local, and foreign tax law) with respect to the purchase
and sale of the stock of the Company hereunder (a "Section 338(h)(10)
Election"). Sellers will include any income, gain, loss, deduction, or other tax
item resulting from the Section 338(h)(10) Election on their Tax Returns to the
extent determined by applicable Law. Sellers shall also pay any tax imposed on
the Company attributable to the making of the Section 338(h)(10) Election,
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including, but not limited to, (i) any Tax imposed under Section 1374 of the
Code; (ii) any Tax imposed under Treas. Reg. ss. 1.338(h)(10)-1(d)(4) and (5);
and (iii) any state, local, or foreign Tax imposed on the Company's income or
gain. In the event that Sellers shall pay any Taxes under clause (iii) of the
preceding sentence that are attributable to the deemed sale of assets by the
Company in states other than New York, Buyer shall reimburse Sellers within
fifteen days after payment of such Taxes by Sellers, to the extent that the
aggregate amount of such Taxes exceeds the amount of Taxes the Sellers would
have incurred if the sale of the Company's assets had been taxed solely by New
York State.
(e) If a Section 338(h)(10) Election is made, Buyer, the Company and
Sellers agree that the Purchase Price, as adjusted, and the liabilities of the
Company (plus other relevant items) will be allocated to the assets of the
Company for all purposes (including Tax and financial accounting) as shown on
Schedule 7.5(e) hereto. Buyer, the Company and Sellers will file all Tax Returns
(including amended returns and refund claims) and information reports in a
manner consistent with such allocation.
(f) Prior to the Closing, the Company and Sellers will not revoke the
Company's election to be taxed as an S corporation under Sections 1361 and 1362
of the Code and Section 660 of the New York State Tax Law. The Company and
Sellers will not take any action (other than the sale of the Company's stock
pursuant to this Agreement) that would result in the termination of the
Company's S corporation election under Sections 1361 and 1362 of the Code or
Section 660 of the New York State Tax Law.
(g) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with the transfer by Sellers of the capital stock of the Company to
Buyer under this Agreement shall be paid by Sellers when due, and Sellers will,
at their own expense, file all necessary Tax Returns and other documentation
with respect to all such Taxes and fees and, if required by applicable Law,
Buyer and the Company will join in the execution of any such Tax Returns and
other documentation.
(h) Following the Closing, Buyer will not permit the Company to file any
Tax Returns or amended Tax Returns with respect to net income Taxes or franchise
Taxes in lieu of net income Taxes for periods ending on or prior to the Closing
Date without the written consent of the Sellers. Sellers hereby give written
consent in advance to the filing of any amended net income or franchise Tax
Return or original Tax Return with respect to such Taxes for periods ending on
or prior to the Closing Date if such amended or original Tax Return is required
to be filed because of final audit adjustments by a Governmental Authority to
the Company's or either Seller's Tax Returns.
7.6. Notice of Developments. (a) Prior to the Closing, the Company and
Sellers shall promptly notify Buyer in writing of (i) all events, circumstances,
facts and occurrences arising subsequent to the date of this Agreement which in
Sellers' reasonable judgment would result in any breach of a representation,
warranty or covenant of the Company or Sellers in this Agreement or which could
have the effect of making any representation or warranty of the Company or
Sellers in this Agreement untrue or incorrect in any material respect and (ii)
all other material developments which in Sellers' reasonable judgment materially
affects the assets, Liabilities, business, financial condition, operations,
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results of operations, customer, supplier or employee relations, projections or
prospects of the Company. No investigation (or any disclosure made at any time
by the Sellers or the Company to Buyer that is not a part of this Agreement as
of the date of initial execution) shall limit or modify in any way, or act or
result in a waiver of, the Sellers' obligations with respect to any breach of
their representations, warranties, covenants or agreements contained herein
(including, without limitation, conditions to Closing or indemnification
obligations).
(b) Prior to the Closing, Buyer shall promptly notify Sellers in writing of
(i) all events, circumstances, facts and occurrences arising subsequent to the
date of this Agreement which in Buyer's reasonable judgment would result in any
breach of a representation, warranty or covenant of Buyer in this Agreement or
which could have the effect of making any representation or warranty of Buyer in
this Agreement untrue or incorrect in any material respect and (ii) all other
material developments which in Buyer's reasonable judgment materially affects
the assets, Liabilities, business financial condition, operations, results of
operations, customer, supplier or employee relations, projections or prospects
of Buyer. No investigation (or any disclosure made at any time by Buyer to
Sellers that is not a part of this Agreement as of the date of initial
execution) shall limit or modify in any way, or act or result in a waiver of
Buyer's obligations with respect to any breach of their representations,
warranties, covenants or agreements contained herein (including, without
limitation, conditions to Closing or indemnification obligations).
7.7. No Shop. From the date of this Agreement until the earlier of the
Closing Date or the date on which this Agreement is terminated pursuant to
Section 10 hereof, neither the Company nor the Sellers shall (i) directly or
indirectly through any other party encourage or engage in any negotiations with
or provide any information to any other person, firm or corporation, or enter
into any agreement or understanding, with respect to an acquisition transaction
involving the Company or its business or (ii) directly or indirectly through any
other party solicit, initiate or encourage any proposal relating to, or enter
into any agreement or understanding with respect to, the acquisition of, or
other major transaction involving, its business, or (iii) dispose of any
material assets other than in the ordinary course of business. Each of the
Company and the Sellers shall promptly provide oral and written notice to Buyer
of (a) the receipt of any proposal relating to a transaction of the type
described in clauses (i), (ii) and (iii) of the preceding sentence and (b) the
material terms and conditions of such proposal.
7.8. Listing of Buyer Stock. Buyer shall use its reasonable efforts to
authorize for quotation on the NASDAQ National Market the Buyer Stock to be
issued to Sellers under this Agreement.
7.9. Pharmacy Insurance. During the period from the Closing Date until all
claims are barred by the applicable statute of limitations, Buyer shall cause
the Company or any successor to maintain pharmacy professional liability
insurance (covering the Company or any successor and its pharmacists and other
employees) comparable in amount and scope as currently maintained by the Company
and in effect on the date hereof.
7.10. Rule 144. With a view to making available to the Sellers the benefits
of Rule 144 promulgated under the Securities Act, and any other similar rules
and regulations of the SEC which may at any time permit the Sellers to sell or
distribute without registration the Buyer Stock, Buyer agrees to file, for a
period of at least two (2) years after the Closing Date, with the Securities and
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Exchange Commission in a timely manner all reports and other documents required
to be filed by it under the Exchange Act and, upon reasonable request, to take
any other reasonable actions necessary or appropriate to permit the Buyer Stock
to be sold under Rule 144, including, but not limited to, furnishing any
requested opinions of counsel to Buyer's transfer agent and the removal of any
restrictive legends from stock certificates.
7.11. Employees. Following the Closing, Buyer shall use its best efforts to
retain as employees of the Company those key employees mutually agreed upon by
Sellers and Buyer for at least one year, with at least the same compensation,
and with comparable fringe benefits, as are provided by the Company on the
Closing Date, subject to the right of Buyer to discharge any employee for cause.
7.12. Audit Representation Letter. In connection with the audit of Buyer's
financial statements for the year ended December 31, 2001 and the audit of the
Company's financial statements for the three years ended December 31, 2001,
Sellers shall execute and deliver to Arthur Andersen an Audit Representation
Letter substantially in the form attached as Exhibit 7.12 hereto.
7.13. Inventory Valuation. Sellers shall provide, or cause to be provided,
to Buyer on or before the opening of business on January 11, 2002 the valuation
of the Company's inventory for which the physical inventory count was performed
on or about December 30, 2001. In addition, at the Company's expense, Sellers
shall perform, or cause to be performed, under the observation of Buyer or Buyer
Representatives, a physical inventory count of the Company's inventory as of the
close of business on the Closing Date and shall provide, or cause to be
provided, to Buyer within seven Business Days of the Closing Date, a valuation
of such inventory.
7.14. Employee Benefit Plans. Not later than 10 business days prior to the
Closing Date, Sellers shall provide to Buyer a true, correct and current copy of
the Plan, the summary plan description for the Plan, Forms 5500 for the Plan for
the preceding 3 years, and the most recent statement of account balances for
each participant in the Plan. In addition, at the request of Buyer given not
less than five days prior to the Closing Date, Sellers shall cause the Company
to adopt a resolution of the Board of Directors terminating the Plan effective
immediately prior to the Closing.
7.15. Insurance Coverage. Sellers shall reasonably cooperate with Buyer in
obtaining, at the expense of Buyer, additional insurance increasing the scope
and amount of coverage from that provided under the Company's existing insurance
policies.
7.16. Assignment of Automobile Leases. The Company shall use its reasonable
best efforts to assign to Sellers the automobile leases set forth on Schedule
5.17(b) and Sellers shall cooperate with the Company in effecting such
assignments, including in connection with obtaining the consents of the
respective leasing companies necessary to effect such assignments, and shall
assume and discharge when due all liabilities and obligations of the Company
arising under such leases.
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7.17. Assignment of Domain Name. The Company shall use its reasonable best
efforts to cause Telesens Communications Corp. to transfer registration of the
"www.vitalitypharmaceutical.com" domain name to the Company.
7.18. Bad Debt Schedule. Sellers shall deliver, or cause to be delivered to
Buyer, the Bad Debt Schedule within seven Business Days of the date of this
Agreement.
8. Conditions Precedent.
8.1. Conditions Precedent to Buyer's Obligations. The obligations of Buyer
under this Agreement to consummate the transactions contemplated hereby at the
Closing are subject to the fulfillment, at or prior to Closing, of each of the
following conditions, any of which may be waived by Buyer:
(a) The representations and warranties of the Company and Sellers set forth
in Sections 4 and 5 of this Agreement shall be true and correct in all material
respects (except that any thereof which are qualified as to knowledge or
materiality shall be true and correct as written) on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the such date, except for those representations and warranties
given as of a particular date, which shall be true and correct in all material
respects (except that any thereof which are qualified as to knowledge or
materiality shall be true and correct as written) as of such date, subject to
changes contemplated by this Agreement, and Buyer shall have received a
certificate at the Closing from the Company and Sellers to that effect;
(b) The Company and Sellers shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
to be performed or complied with by them at or prior to the Closing, and Buyer
shall have received a certificate at the Closing from the Company and Sellers to
that effect;
(c) All consents and approvals of the third Persons listed on Schedule 8.1
(c) and all Governmental Authorities necessary in order to consummate the
transactions contemplated by this Agreement shall have been obtained;
(d) There shall have been no Law or Order promulgated, enacted, entered or
enforced by any Governmental Authority that shall remain in effect that
restrains, prohibits or delays the performance of this Agreement;
(e) The Company shall not have suffered any Material Adverse Effect
(whether or not such effect is referred to or described in any Schedule);
(f) Buyer shall be satisfied with its business, legal accounting and
financial due diligence investigation of the Company no later than January 21,
2002, and shall have advised Sellers in writing to such effect on or prior to
such date; provided, that, if Sellers and the Company have not complied in all
material respects with the provisions of Section 7.3(a) or the first sentence of
Section 7.13, such date shall be extended for any periods of delay caused by
Sellers or the Company;
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(g) No action, suit or proceeding shall be pending or threatened before any
Governmental Authority to restrain or prohibit, or to obtain damages in respect
of, this Agreement or the consummation of the transactions contemplated hereby,
in each such case which action, suit or proceeding would reasonably be expected
to have a Material Adverse Effect on the Company or materially and adversely
affect the ability of Sellers to consummate the transactions contemplated by
this Agreement;
(h) All agreements, certificates and other documents delivered to Buyer
hereunder shall be in form and substance satisfactory to counsel for Buyer, in
the exercise of such counsel's reasonable judgment;
(i) All officers and directors of the Company shall have delivered to Buyer
their resignations as officers and directors of the Company, effective as of the
Closing Date;
(j) Sellers shall have entered into the Non-Competition, Non-Solicitation
and Non-Disclosure Agreement substantially in the form of Exhibit 8.1(j) hereto;
(k) Marc Wiener shall have entered into an Employment Agreement with Scrip
Solutions substantially in the form of Exhibit 8.1(k) hereto;
(l) Barbara Kammerer shall have entered into an Employment Agreement with
Scrip Solutions substantially in the form of Exhibit 8.1(l) hereto;
(m) Sellers shall have entered into the Escrow Agreement;
(n) The landlord of the Company's premises shall have entered into the
Lease Agreement;
(o) The Company shall have caused such Persons designated by Buyer to
become authorized to sign checks on behalf of the Company;
(p) Employees of the Company who are trustees of the Company's Employee
Benefit Plans shall have resigned as trustees of such Employee Benefit Plans
effective as of the Closing; and
(q) The Company shall have obtained the consent of Vitality Drug Corp.,
substantially in the form of Exhibit 8.1(q) hereto, to use the "Vitality" name.
8.2. Conditions Precedent to Sellers' Obligations. The obligations of
Sellers under this Agreement to consummate the transactions contemplated hereby
at the Closing are subject to the fulfillment, at or prior to Closing, of each
of the following conditions, any of which may be waived by Sellers:
(a) The representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects (except that any thereof
which are qualified as to knowledge or materiality shall be true and correct as
written) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the such date and
Sellers shall have received a certificate at the Closing from Buyer to that
effect;
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(b) Buyer shall have performed and complied in all material respects with
all covenants and agreements contained in this Agreement to be performed or
complied with it at or prior to the Closing, and Sellers shall have received a
certificate at the Closing from Buyer to that effect;
(c) All consents and approvals of the third Persons listed on Schedule 8.1
(c) and all Governmental Authorities necessary in order to consummate the
transactions contemplated by this Agreement shall have been obtained;
(d) There shall have been no Law or Order promulgated, enacted, entered or
enforced by any Governmental Authority that shall remain in effect that
restrains, prohibits or delays the performance of this Agreement;
(e) No action, suit or proceeding shall be pending or threatened before any
Governmental Authority to restrain or prohibit, or to obtain damages in respect
of, this Agreement or the consummation of the transactions contemplated hereby,
in each such case which action, suit or proceeding would reasonably be expected
to have a Material Adverse Effect on Buyer or materially and adversely affect
the ability of Buyer to consummate the transactions contemplated by this
Agreement;
(f) All agreements, certificates and other documents delivered to the
Company and Sellers hereunder shall be in form and substance satisfactory to
counsel for the Company and Sellers, in the exercise of such counsel's
reasonable judgment.
(g) Scrip Solutions shall have entered into the Employment Agreements
referred to in Sections 8.1(k) and 8.1(l) hereof;
(h) Buyer shall have entered into the Escrow Agreement;
(i) The Company shall have entered into the Lease Agreement and Buyer shall
have executed the guaranty attached to such agreement;
(j) The Buyer Stock to be issued to Sellers under this Agreement shall have
been authorized for quotation on the Nasdaq National Market upon official notice
of issuance; and
(k) Buyer shall not have suffered a Material Adverse Effect.
9. Closing.
9.1. Closing Date and Place of Closing. Subject to the prior termination of
this Agreement under Section 10, and unless otherwise agreed to by the parties
in writing, the consummation of the transactions described herein (the
"Closing") shall take place at 10:00 a.m. on the third Business Day immediately
following the date on which the conditions to the Closing have been first
satisfied or waived (the "Closing Date"), at the offices of King & Spalding,
1185 Avenue of the Americas, New York, New York 10036, or at such other time or
location as may be mutually agreed to by the parties.
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9.2. Sellers' Deliveries. At the Closing, the Company and Sellers shall
execute (where appropriate) and deliver, or cause to be delivered, to Buyer:
(a) All certificates required to be delivered by the Company and Sellers
pursuant to the terms of this Agreement;
(b) Stock certificates representing all of the issued and outstanding
shares of capital stock of the Company, duly endorsed in blank or accompanied by
stock powers duly executed in blank, in proper form for transfer;
(c) The Non-Competition, Non-Solicitation and Non-Disclosure Agreement
referred to in Section 8.1(j) hereto;
(d) The Employment Agreements referred to in Sections 8.1(k) and 8.1(l)
hereto;
(e) The Escrow Agreement;
(f) The Lease Agreement and related guaranty;
(g) Internal Revenue Service Form 8023 (or any successor form) properly
executed by all shareholders of the Company;
(h) The consent to use the "Vitality" name referred to in Section 8.1(q)
hereto;
(i) A receipt for the Purchase Price; and
(j) All other documents and instruments required to be delivered hereunder
or as Buyer may reasonably request in connection with the Closing of the
transactions contemplated hereby, all such documents and instruments to be
reasonably satisfactory to Buyer and its counsel.
9.3. Buyer's Deliveries. At the Closing, Buyer shall execute (where
appropriate) and deliver, or cause to be delivered, to Sellers:
(a) all certificates required to be delivered by Buyer pursuant to the
terms of this Agreement;
(b) the Purchase Price (less the number of Escrow Shares which will be
delivered to the Escrow Agent to be held and disbursed in accordance with the
terms of the Escrow Agreement);
(c) the Non-Competition, Non-Solicitation and Non-Disclosure Agreement
referred to in Section 8.1(j) hereto;
(d) the Employment Agreements referred to in Sections 8.1(k) and 8.1(l)
hereto;
(e) the Escrow Agreement (and the Escrow Shares to the Escrow Agent);
(f) The Lease Agreement and related guaranty; and
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(g) all other documents and instruments required to be delivered hereunder
or as Sellers may reasonably request in connection with the Closing of the
transactions contemplated hereby, all such documents and instruments to be
reasonably satisfactory to Sellers and their counsel.
10. Termination.
10.1. Right of Parties to Terminate. This Agreement may be terminated prior
to the Closing Date:
(a) By the mutual written consent of Buyer and Sellers;
(b) By Sellers in writing, without liability, if Buyer shall (i) fail to
perform in any material respect its agreements contained herein required to be
performed by it on or prior to the Closing Date; or (ii) materially breach any
of its representations, warranties or covenants contained herein, which failure
or breach is not cured within ten (10) Business Days after Sellers have notified
Buyer of their intent to terminate this Agreement pursuant to this subparagraph
(b);
(c) By Buyer in writing, without liability, if (i) either the Company or
Sellers shall (A) fail to perform in any material respect their agreements
contained herein required to be performed by them on or prior to the Closing
Date or (B) materially breach any of their representations, warranties or
covenants contained herein, which failure or breach is not cured within ten (10)
Business Days after Buyer has notified Sellers of its intent to terminate this
Agreement pursuant to this subparagraph (c); or (ii) if Buyer has the right not
to consummate the transactions contemplated hereby as a result of the failure to
satisfy the conditions to closing as set forth in Section 8.1(f);
(d) By either Sellers or Buyer in writing, without liability, if there
shall be any order, writ, injunction or decree of any court or governmental or
regulatory agency binding on Buyer and/or Sellers, which prohibits or restrains
Buyer and/or Sellers from consummating the transactions contemplated hereby,
provided that Buyer and Sellers shall have used their reasonable best efforts to
have any such order, writ, injunction or decree lifted and the same shall not
have been lifted within 30 days after entry, by any such court or governmental
or regulatory agency; or
(e) By either Sellers or Buyer, in writing, without liability, if for any
reason the Closing has not occurred by February 28, 2002 (the "Termination
Date"); provided, however, that the right to terminate this Agreement under this
Section 10.1(e) shall not be available to any party whose willful failure to
fulfill or perform any obligation under this Agreement or any Transaction
Document has been a substantial cause of, or has substantially resulted in, the
failure of the Closing to occur on or before such date.
10.2. Effect of Termination. In the event of a termination pursuant to
Section 10.1, this Agreement shall become void and there shall be no liability
or obligation on the part of any party hereto, except for this Section 10 and
Sections 12.12 and 12.14, which shall survive such termination; provided,
however, that termination pursuant to subparagraphs (b), (c) or (e) of Section
10.1 shall not relieve a defaulting or breaching party from any liability to the
other parties hereto.
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11. Indemnification.
11.1. Indemnity.
(a) Sellers shall, on a Pro Rata Basis, indemnify, defend and hold Buyer
and its directors, officers and employees harmless, from and against all claims,
losses, liabilities, damages, judgments, reasonable costs or reasonable expenses
incurred by any of them (including reasonable attorneys' fees and expenses)
(collectively, "Losses") incurred by them as a result of or arising from (i) any
misrepresentation or breach of warranty made by the Company and Sellers in this
Agreement, in any of the Transaction Documents, Exhibits or Schedules, or in any
certificate or document delivered by or on behalf of the Company and/or Sellers
pursuant to this Agreement or (ii) the non-performance (in whole or in part) by
the Company and/or Sellers of any of their respective covenants, obligations or
agreements contained in this Agreement.
(b) Buyer shall indemnify, defend and hold Sellers harmless, on a Pro Rata
basis, from and against all Losses incurred by them as a result of or arising
from (i) any misrepresentation or breach of warranty made by Buyer in this
Agreement, in any of the Transaction Documents, Exhibits or Schedules, or in any
certificate or document delivered by or on behalf of Buyer pursuant to this
Agreement; or (ii) the non-performance (in whole or in part) by Buyer of any of
its covenants, obligations or agreements contained in this Agreement.
(c) Any indemnification payments made hereunder shall be treated as an
adjustment to the Purchase Price.
11.2. Limitations. The indemnification obligations set forth herein shall
be limited as follows:
(a) All representations and warranties contained in this Agreement or in
any certificate or other document delivered pursuant hereto or in connection
herewith shall survive until April 30, 2003, except for the representations and
warranties contained in (i) Section 5.11, which shall survive for 180 days after
the applicable statute of limitations, including any extensions executed by the
taxpayer and agreed to by Sellers; (ii) Sections 5.20 and 5.22, which shall
survive for the applicable statute of limitations (but not less than two years
from the Closing Date); (iii) Section 5.15(e), which shall survive for three
years from the Closing Date; and (iv) Sections 4.2 and 5.7, which shall survive
indefinitely (or if such indefinite survival is not permitted by applicable law,
then the maximum period permitted by applicable law). Any representation,
warranty or indemnity which is the subject of a claim or dispute asserted in
writing (or the subject of a proceeding) prior to the expiration of the
applicable survival period shall survive with respect to such claim or dispute
until the resolution thereof. No claim for indemnification shall be made or
asserted for the first time after the applicable survival period has expired. No
investigation or other examination by a party shall affect the term of survival
of the representations and warranties set forth above.
(b) The indemnification provided for in this Section 11 shall be subject to
the following additional limitations:
(i) Buyer shall make no claim against Sellers for indemnification under
this Section 11 unless and until the aggregate amount of such claims against
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Sellers exceeds $250,000 before taxes (the "Basket"), in which event Buyer may
claim indemnification only for all Losses incurred in excess of the amount of
the Basket; provided that claims arising out of a breach of the representations,
warranties, covenants and agreements contained in Section 4 and Sections 5.7,
5.11, 7.1, 7.5 and 12.4 shall not be subject to the Basket.
(ii) Notwithstanding anything in this Agreement to the contrary and subject
to the provisions of Section 11.2(b)(iii) hereof, Sellers shall not be obligated
under any circumstance to make any indemnification payment under this Section 11
for breaches of any of the representations and warranties of the Company and
Sellers hereunder in excess of $6,750,000; provided, however, that the foregoing
limitation shall not apply to any claims for indemnification with respect to any
breach by the Company or Sellers of any of the representations and warranties
set forth in Sections 4.1, 4.2, 4.3, 4.4, 5.7 and 5.11 hereof, in which case the
aggregate amount of Sellers' indemnification obligations for such breaches shall
be capped at the Purchase Price (less the amount of any indemnification payments
made pursuant to the first clause of this subsection).
(iii) Notwithstanding the provisions of Section 11.2(b)(ii) hereof, in the
event of any breach by the Company or Sellers of the representations and
warranties set forth in Section 5.15(e) hereof, Sellers' indemnification
obligation with respect thereto shall be capped at $2,250,000; provided, that
such amount will be reduced dollar-for-dollar by any amounts collected by the
Company after December 31, 2001 (A) in payment of accounts receivables which
were outstanding as of December 31, 2001 for more than 90 days; (B) with respect
to accounts receivable that were outstanding as of December 31, 2001 for more
than 60 but less than 91 days (the "60 Day Receivables"), which exceed the gross
60 Day Receivables less the amount reserved for doubtful accounts with respect
to such 60 Day Receivables as reflected in the 2001 Financial Statements; and
(C) in payment of accounts receivable which are set forth on the Bad Debt
Schedule; and, provided, further, that if Sellers make an indemnification
payment to an Indemnified Party on account of any Losses incurred as a result of
any breach of the representations and warranties set forth in Section 5.15(e)
hereof, Buyer shall repay to Sellers, on a Pro Rata Basis, the amount (the
"Refund Amount"), if any, by which such indemnification payments by Sellers
exceeds the indemnification obligation cap under this Section 11.2(b)(iii) (as
such indemnification cap is reduced from time to time prior to the date of
payment of such indemnification amount determined in accordance with clauses
(A), (B) and (C) of this subsection and further reduced by any amounts
determined in accordance with this Section 11.2(b)(iii) that are collected by
the Company during the six month period following the date of payment by Sellers
of the indemnification payment, such payment to be made within five days of the
date of determination of such Refund Amount).
(iv) The rights of the parties under this Section 11 and the Escrow
Agreement shall be the exclusive remedy of the parties and the Indemnitees with
respect to claims and Losses arising under this Agreement.
(v) The liability of the Indemnifying Party shall be net of any Tax
benefits received by the Indemnitee (or in the case of indemnification by
Sellers, of Tax benefits received by the Company or Buyer) in respect of the
Loss giving rise to the claim for indemnification.
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(vi) No Losses shall be recoverable by an Indemnitee with respect to any
matter that is covered by insurance to the extent proceeds of such insurance are
paid (net of any costs incurred in connection with the collection thereof) to
the Indemnitee. The Indemnitee hereby agrees to seek all reasonable remedies
against all applicable insurers prior to seeking to recover any Losses under
this Agreement. The Indemnitee shall give notice to the Indemnifying Party of
Losses which may be so covered by insurance.
11.3. Notice of Claim; Right to Participate in and Defend Third Party
Claims; Non-Third Party Claims.
(a) The Indemnitee shall give prompt notice (the "Claim Notice") to the
Indemnifying Party of any claim, including any claim, action, suit, proceeding
or investigation by a third party (a "Third Party Claim"), that may result in a
Loss. Subject to Section 11.2, the failure to deliver a Claim Notice shall not
relieve the Indemnifying Party of its obligations hereunder except to the extent
that the resulting delay is materially prejudicial to the defense of any such
claim. The Claim Notice shall describe the claim in detail, and shall indicate
the amount (estimated, if necessary) of the Loss that has been or may be
suffered by the Indemnitee.
(b) If the claim set forth in the Claim Notice involves a Third Party
Claim, the Indemnifying Party will have the right to assume (subject to the
limitations of this Section 11) and thereafter conduct the defense of such Third
Party Claim with counsel of its choice (and reasonably acceptable to the
Indemnitee) if it acknowledges to the Indemnitee in writing that it has
reasonably determined in good faith that the predominant elements of the Third
Party Claim on their face could give rise to an indemnification obligation
hereunder; provided, that the Indemnifying Party shall exercise its right to
assume such defense within twenty (20) days of its receipt of the Claim Notice.
If the Indemnifying Party does not assume the defense of a Third Party Claim,
the Indemnitee may defend such Third Party Claim in such manner as it deems
appropriate; provided, that the Indemnitee will not settle any Third Party Claim
without the consent of the Indemnifying Party (such consent not to be
unreasonably withheld, delayed or conditioned). Notwithstanding the foregoing,
if a Third Party Claim results from or arises out of a breach of the
representations and warranties of Sellers set forth in Section 5.15(e), Sellers
shall not have the right to assume or control the defense of such Third Party
Claim but may, at their own expense, participate with Buyer in the defense
thereof.
(c) If the Indemnifying Party assumes the defense of any Third Party Claim,
the Indemnitee shall be entitled to participate in but not control the defense
of such Third Party Claim with its own counsel and at its own cost and expense;
provided, however, that if, in the opinion of counsel for the Indemnitee, there
is likely to exist a conflict of interest that would make it inappropriate for
the same counsel to represent both the Indemnitee and the Indemnifying Party,
then the Indemnifying Party shall reimburse the Indemnitee for the reasonable
fees and expenses of separate counsel reasonably acceptable to the Indemnifying
Party, to the extent such fees and expenses are incurred solely in connection
with the matters with respect to which there is a conflict of interest.
Notwithstanding anything in this Section 11.3 to the contrary, the Indemnifying
Party will not, without the written consent of the Indemnitee: (i) settle or
compromise any Third Party Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the delivery by the claimant
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or plaintiff to the Indemnitee of a written release from all liability in
respect of such Third Party Claim; or (ii) settle or compromise any Third Party
Claim in any manner that (A) involves the sale, forfeiture or loss of, or the
creation of any Lien on, any property of such Indemnitee, (B) involves an award
which together with previous awards would exceed the available amount of the
indemnity hereunder, or (C) involves equitable remedies against the Indemnitee
or any of its Affiliates.
(d) All parties hereto shall cooperate reasonably in the defense of any
Third Party Claim and shall use its reasonable efforts to furnish all witnesses
and testimony, records, materials and other information, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith.
(e) If the claim set forth in a Claim Notice does not involve a Third Party
Claim, the Indemnifying Party shall notify the Indemnitee within thirty (30)
days of its receipt of the Claim Notice whether or not the Indemnifying Party
disputes such claim. If the Indemnifying Party does not timely notify the
Indemnitee that it disputes such claim, as provided above, the claim specified
by the Indemnitee in the Claim Notice will be deemed a Liability of the
Indemnifying Party hereunder. If the Indemnifying Party timely disputes such
claim such dispute will be resolved by litigation in an appropriate court of
competent jurisdiction.
(f) All payments required to be made by an Indemnifying Party to an
Indemnitee under this Section 11 shall be made in cash; provided, however, that
if at any time any payment of indemnification is required to be made by Sellers,
or either of them, and the Escrow Agent is holding Escrow Shares, then the
Sellers shall first cause the Escrow Agent to deliver Escrow Shares, in lieu of
cash, with such Escrow Shares to be valued at the Closing Share Price. If at any
time any payment of indemnification is required to be made by Sellers, or either
of them, and the Escrow Agent is no longer holding Escrow Shares or the number
of Escrow Shares then held by the Escrow Agent is not sufficient to satisfy such
payment obligation, Sellers shall satisfy such indemnification obligation (to
the extent not satisfied by the delivery to Buyer of Escrow Shares) by the
delivery to Buyer, at Sellers' option, of cash or a combination of cash and
shares of Buyer Stock (valued at the Closing Share Price); provided, that the
amount of cash to be delivered to Buyer as part of such payment not otherwise
satisfied through the delivery of Escrow Shares shall not be less than 77.8% of
such payment.
12. Miscellaneous.
12.1. Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their successors and permitted
assigns. Without the prior written consent of Buyer, Sellers may not assign
their rights, duties or obligations hereunder or any part thereof to any other
Person. Buyer may assign its rights hereunder, without the consent of Sellers,
to any corporation all of the outstanding capital stock of which is owned or
controlled, directly or indirectly, by Buyer; provided that Buyer shall not be
released from any of its duties or obligations hereunder by reason of such
assignment.
12.2. Notices. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications under this Agreement shall be in
writing and shall be conclusively deemed delivered and effective (i) when hand
delivered to the other party; (ii) when received after being sent by registered
or certified mail, return receipt requested, postage prepaid; (iii) one business
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day after being sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery; or (iv) in the case of a facsimile
transmission, upon receipt by the recipient and the issuance by the transmitting
machine of a confirmation slip confirming that the number of pages constituting
the notice have been transmitted without error; provided, however, that the
sender shall contemporaneously mail a copy of the notice to the addressee by the
method provided for in (i) or (ii) above, but such mailing shall in no way alter
the time at which the notice sent by facsimile transmission is deemed received,
in each case to the intended recipient as set forth below:
If to Buyer:
MIM Corporation
100 Clearbrook Road
Elmsford, NY 10523
Attention: Barry Posner
Facsimile: (914) 460-1670
with a copy (which shall not constitute notice) given in the aforesaid manner to
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attention: E. William Bates, II
Facsimile: (212) 556-2222
If to Sellers by notice to:
Barbara Kammerer
221-30 58th Avenue
Bayside, New York 11364
and
Marc Wiener
2 Madison Place
Jericho, New York 11753
with a copy (which shall not constitute notice) given in the aforesaid manner
to:
Taylor, Colicchio & Silverman, LLP
99 Park Avenue
New York, NY 10016
Attn: Stephen B. Silverman, Esq.
Facsimile: (212) 661-5060
Any party may change the address to which notices, requests, consents or
other communications hereunder are to be delivered by giving the other parties
notice in the manner set forth in this Section.
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12.3. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any current or future law, and if the
rights or obligations of the parties under this Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Agreement, a legal
provision as may be possible, and the parties hereto request the court or any
arbitrator to whom disputes relating to this Agreement are submitted to reform
the otherwise illegal, invalid or unenforceable provision in accordance with
this Section 12.3.
12.4. Brokerage. Seller represents and warrants to Buyer that, other than
Adams, Harkness & Hill, Inc., no broker, investment banker, financial advisor or
other Person is entitled to receive from the Company, Sellers or any of their
Affiliates, any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement.
Sellers agree to pay such fee. Buyer represents and warrants to Seller that,
other than Compass Partners International, LLC, no broker, investment banker,
financial advisor or other Person is entitled to receive from Buyer any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement. Buyer agrees to
pay such fee.
12.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York in all respects without giving
effect to the principles of conflicts of law thereof. No provision of this
Agreement or any Transaction Document shall be construed against or interpreted
to the disadvantage of any party hereto by any court or other Governmental
Authority by reason of such party's having or being deemed to have structured or
drafted such provision.
12.6. Consent to Jurisdiction. Each party to this Agreement hereby
expressly (a) submits itself to the personal jurisdiction of any Federal or
state court located in the City of New York, State of New York in connection
with any action, suit or proceeding brought against such party in connection
with any dispute that arises out of, or relates to, this Agreement, the
Transaction Documents or the transactions contemplated hereby or thereby; (b)
agrees that it shall not attempt to deny or defeat such personal jurisdiction or
venue by motion or other request for leave from any such court, and (c) agrees
that it shall not bring any action related to this Agreement, the Transaction
Documents or any of the transactions contemplated hereby or thereby in any court
other than a Federal or state court sitting in the City of New York, State of
New York.
12.7. Representations and Covenants of the Company and Sellers. If the
Closing occurs, all representations, warranties, covenants and agreements of the
Company and Sellers made pursuant to this Agreement shall be deemed to be
representations, warranties, covenants and agreements solely of Sellers for all
purposes hereunder, including, without limitation, Section 11 hereof, and
Sellers shall be responsible for any breach thereof in accordance with the terms
of, and subject to the limitations set forth in, this Agreement.
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12.8. Entire Agreement. This Agreement, the Transaction Documents and the
Schedules and Exhibits attached hereto and the Confidentiality Agreement embody
the entire agreement of the parties hereto relating to the subject matter hereof
and supersede all prior oral or written agreements between said parties with
respect to said subject matter. No amendment or modification of this Agreement
shall be valid or binding upon the parties hereto unless same is made in writing
and signed by each of the parties hereto.
12.9. Additional Acts and Documents. Each party hereto agrees to do such
things, take all such actions, and make, execute and deliver such other
documents and instruments, as shall be reasonably requested to carry out the
provisions, intent and purpose of this Agreement, in each case, at the sole
expense of the party or parties so requested.
12.10. No Waiver. Failure of any party to this Agreement to require
performance by another of any provision expressed herein shall in no way affect
that party's right to thereafter enforce such provision; nor shall the waiver by
any party of any breach of any provision expressed herein be taken or held to be
a waiver of any succeeding or other breach of such provision or as a waiver of
the provision itself or of any other provision; provided, that, if the parties
consummate the transactions contemplated by this Agreement, the parties hereby
waive all claims for Losses as a result of or arising from any failure of the
Company or Sellers to obtain any required consent of, make any required filing
with, or provide notification to (i) any third party payor or manufacturer or
supplier of pharmaceutical products identified on Schedule 5.5 or (ii) any
Governmental Authority having jurisdiction over the licenses and permits held by
the Company and identified on Schedule 5.6. Moreover, Buyer's decision to close
this transaction notwithstanding its constructive or actual knowledge of the
breach by Sellers of one or more of its representations, warranties or
obligations hereunder shall not relieve Sellers of their indemnification
obligations hereunder with respect to such breach unless the executive officers
of Buyer have actual knowledge of such breach and such breach would entitle
Buyer not to consummate the transaction hereunder. In such case, Buyer is
specifically relying on Sellers' indemnification obligation, as well as the
underlying representation, warranty or obligation.
12.11. Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of counterparts, each of which so executed shall be deemed an
original and all of which, when taken together, shall constitute one and the
same instrument. This Agreement may be executed by facsimile signature.
12.12. Press Releases. Except as may be required by law or by the rules of
the securities market through which Buyer's securities are quoted, no party
hereto shall make, issue or release a public announcement, press release, public
statement or public acknowledgment of the existence, or reveal publicly, the
terms, conditions and status of the transactions provided for herein without the
prior written consent of the other party as to the content and time of the
release of and the media in which such statement or announcement is to be made,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, either party may make such disclosure if advised in writing by
counsel that it is legally required to do so.
12.13. No Third-Party Beneficiaries. With the exception of the parties to
this Agreement, there shall exist no right of any Person to claim a beneficial
interest in this Agreement or any rights occurring by virtue of this Agreement.
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12.14. Fees and Expenses. Each of Buyer and Sellers shall pay all their
respective fees and expenses in connection with the transactions contemplated by
this Agreement, including, without limitation, all due diligence examination
fees, attorneys' fees, accountant's fees and investment banker's fees. All such
expenses incurred by the Company or Sellers in connection with this Agreement
and the transactions contemplated hereby shall be paid by Sellers from the
proceeds of the Purchase Price and not by the Company or Buyer.
12.15. Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
12.16. Knowledge. As used herein, the terms "Sellers' knowledge" and "to
the knowledge of Sellers" with respect to Sellers shall mean the knowledge of
the Sellers. Knowledge shall include actual knowledge as well as the knowledge a
reasonable business person would have obtained after making reasonable inquiry
of the Company's key employees and key consultants and after exercising
reasonable diligence with respect thereto.
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IN WITNESS WHEREOF, the undersigned have hereunto executed this
Agreement as of the day and year first above written.
MIM CORPORATION
By: /s/ Richard H. Friedman
-----------------------
Name: Richard H. Friedman
Title: Chief Executive Officer
VITALITY HOME INFUSION
SERVICES, INC.
By: /s/ Marc A. Wiener
-----------------------
Name: Marc A. Wiener
Title: Vice President
SHAREHOLDERS
/s/ Marc Wiener
------------------------
Marc Wiener
/s/ Barbara Kammerer
-----------------------
Barbara Kammerer
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EXHIBIT 99.1
[GRAPHIC OMITTED]
MIM Closes Vitality Acquisition
ELMSFORD, NY - January 31, 2002 - MIM Corporation (NASDAQ: MIMS)
(CBOE:OQX), a pharmaceutical healthcare organization, today announced that it
has completed its acquisition of Vitality Pharmaceutical Services, a national
specialty pharmaceutical provider based in Roslyn Heights, New York.
"We are pleased to have closed the acquisition so swiftly," stated MIM
Chairman and Chief Executive Officer, Richard H. Friedman. "Vitality is expected
to be immediately accretive and our specialty team is eager to continue the
integration process. The acquisition brings our specialty lives to approximately
11,700 and we look forward to further growth."
MIM has acquired all of the stock of Vitality for $45 million, $35
million in cash and $10 million in MIM common stock (based on a trailing 20-day
average). The MIM common stock issued to the Vitality stockholders is not
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.
MIM Corporation (www.mimcorporation.com) is a pharmaceutical healthcare
organization delivering innovative pharmacy benefit and healthcare solutions
that provide results beyond expectations. We excel by harnessing our clinical
expertise, sophisticated data management, and therapeutic fulfillment
capability, and combine it with our dedicated, responsive team of professionals
that understands our partners' needs. The result is cost-effective solutions
enhancing the quality of patient life.
This press release may contain statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding the intent, belief or current expectations
of the Company, its directors, or its officers with respect to the future
operating performance of the Company. Investors are cautioned that any such
forward looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those in the forward looking statements as a result of various factors.
Important factors that could cause such differences are described in the
Company's periodic filings with the Securities and Exchange Commission.
Contacts:
Barry A. Posner Rachel Levine
Executive Vice President Investor Relations
MIM Corporation The Anne McBride Co.
914-460-1638 212-983-1702
Email: investor_relations@mimcorporation.com Email: rlevine@annemcbride.com