Back to top

AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

AGREEMENT AND PLAN OF MERGER | Document Parties: Allion Healthcare, Inc | BIOMED AMERICA, INC | BIOMED HEALTHCARE, INC | Parallex LLC You are currently viewing:
This Agreement and Plan of Merger involves

Allion Healthcare, Inc | BIOMED AMERICA, INC | BIOMED HEALTHCARE, INC | Parallex LLC

. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here.
Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Delaware     Date: 8/6/2009
Industry: Personal and Household Prods.     Law Firm: Fox Rothschild;Alston Bird     Sector: Consumer/Non-Cyclical

50 of the Top 250 law firms use our Products every day

 

 

 

 

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

 

 

 

 

 

by and among

 

ALLION HEALTHCARE, INC.,

 

BIOMED HEALTHCARE, INC.,

 

BIOMED AMERICA, INC.

 

and

 

PARALLEX LLC

 

 

 

 

Dated March 13, 2008

 

 

 

 

 

 

 

 

 


 

Exhibit 2.1

 

TABLE OF CONTENTS

 

   

 

ARTICLE 1 – THE MERGER

2

 

1.01 – The Merger

2

 

1.02 – Time and Place of Closing

2

 

1.03 – Effective Time

2

 

1.04 – Certificate of Incorporation and Bylaws of the Surviving Corporation

2

 

1.05 – Directors and Officers

2

 

 

 

ARTICLE 2 – EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE COMPANY AND MERGER SUB

3

 

2.01 – Effect on Shares of Merger Sub Capital Stock

3

 

2.02 – Effect on Shares of the Company Common Stock

3

 

2.03 – Dissenting Shares

3

 

2.04 – Fractional Shares

4

 

2.05 – Tax and Accounting Consequences

4

 

 

 

ARTICLE 3 – CALCULATION AND PAYMENT OF THE EFFECTIVE TIME MERGER CONSIDERATION

4

 

3.01 – Effective Time Merger Consideration

4

 

3.02 – Payment Procedures

5

 

3.03 – Net Working Capital Adjustments

7

 

 

 

ARTICLE 4 – CALCULATION AND PAYMENT OF THE EARN OUT MERGER CONSIDERATION

9

 

4.01 – Earn Out Determination

9

 

4.02 – Earn Out Mechanics

11

 

 

 

ARTICLE 5 – REPRESENTATIONS AND WARRANTIES OF THE COMPANY

13

 

5.01 – Organization, Authority and Capacity

13

 

5.02 – Authorization of Transactions

13

 

5.03 – Absence of Conflicts; Required Governmental Filings and Consents

14

 

5.04 – Governing Documents

14

 

5.05 – Capitalization of the Company

14

 

5.06 – Financial Statements

15

 

5.07 – Absence of Changes

15

 

5.08 – No Undisclosed Liabilities

16

 

5.09 – Litigation

16

 

5.10 – No Violation of Law

16

 

5.11 – Title to and Sufficiency of Assets

17

 

5.12 – Real and Personal Property

17

 

5.13 – Intellectual Property

17

 

5.14 – Contracts and Commitments

18

 

5.15 – Employment and Labor Matters

19

 

5.16 – Employee Benefit Matters

20

 

5.17 – Insurance Policies

22

 

5.18 – Environmental Matters

23

 

5.19 – Taxes

24

 

5.20 – Licenses, Authorizations and Provider Programs

26

 

5.21 – Inspections and Investigations

27

 

5.22 – Certain Relationships

27

 

5.23 – Stark; Fraud and Abuse; False Claims; HIPAA

28

 

5.24 – Rates and Reimbursement Policies

29

 

5.25 – Controlled Substances

29

 

5.26 – Accounts Receivable; Inventories

29

 

5.27 – Business Relationships

29

 

5.28 – Absence of Certain Practices

30

 

5.29 – Subsidiaries, Investments and Predecessors

30

 

5.30 – Charter Provisions

31

 

5.31 – No Brokers

31

 

5.32 – Solvency

31

 

5.33 – Affiliate Transactions

31

 

5.34 – Indebtedness

31

 

5.35 – Information Supplied

31

 

5.36 – Statements True and Correct

31

 

 

 

ARTICLE 6 – REPRESENTATIONS AND WARRANTIES OF THE OWNER

32

 

6.01 – Ownership Interest Held and Conveyed

32

 

6.02 – Organization, Authority and Capacity

32

 

6.03 – Authorization and Validity

32

 

6.04 – Absence of Conflicting Agreements or Required Consents

32

 

6.05 – Interested Transactions

32

 

6.06 – Investment Representations; Restricted Securities

32

 

 

 

ARTICLE 7 – REPRESENTATIONS AND WARRANTIES OF PARENT

33

 

7.01 – Organization, Authority and Capacity of Parent

33

 

7.02 – Authorization of Transactions

33

 

7.03 – Absence of Conflicts; Required Governmental Filings and Consents

33

 

7.04 – Governing Documents

34

 

7.05 – Authority of Merger Sub

34

 

7.06 – Capitalization

34

 

7.07 – Parent Capital Stock

34

 

7.08 – Litigation

34

 

7.09 – Material Agreements

35

 

7.10 – Taxes

35

 

7.11 – Inspections and Investigations

35

 

7.12 – Stark; Fraud and Abuse; False Claims; HIPAA

36

 

7.13 – Controlled Substances

36

 

7.14 – SEC Filings; Parent Financial Statements; No Undisclosed Liabilities

36

 

7.15 – Debt Financing

37

 

7.16 – No Brokers

37

 

7.17 – Statements True and Correct

37

 

 

 

ARTICLE 8 – ADDITIONAL AGREEMENTS

37

 

8.01 – No Solicitation or Negotiation

37

 

8.02 – Audit

38

 

8.03 – Antitrust Notification; Consents of Governmental Authorities

38

 

8.04 – Agreement as to Efforts to Consummate

39

 

8.05 – Confidentiality; Public Announcements

40

 

8.06 – Resignations and Releases

40

 

8.07 – Filing the Certificate of Merger

40

 

8.08 – Notification of Changes

40

 

8.09 – Notice of Appraisal Rights and Stockholder Action by Written Consent in Lieu of Meeting

41

 

8.10 – Directors and Officers Indemnification

41

 

8.11 – Stockholder Meeting; Parent Proxy Statement

41

 

8.12 – Nasdaq Listing

42

 

8.13 – Debt Financing Transaction

42

 

8.14 – Certain Tax Matters

43

 

8.15 – Transition Services Agreement

45

 

8.16 – Nasdaq Guidance on Certificate of Designation

45

 

 

 

ARTICLE 9 – CONDUCT OF BUSINESS PRIOR TO THE CLOSING

46

 

9.01 – Access to Information

46

 

9.02 – Affirmative Covenants of the Company

46

 

9.03 – Negative Covenants of the Company

47

 

9.04 – Payment of RAM Capital Fees Prior to the Closing

48

 

 

 

ARTICLE 10 – CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE

49

 

10.01 – Conditions to Obligations of Each Party

49

 

10.02 – Conditions to Obligations of Parent and Merger Sub

49

 

10.03 – Conditions to Obligations of the Company

52

 

 

 

ARTICLE 11 – TERMINATION

53

 

11.01 – Termination

53

 

11.02 – Effect of Termination

54

 

 

 

ARTICLE 12 – INDEMNIFICATION

54

 

12.01 – Indemnification by the Owner

54

 

12.02 – Indemnification by the Stockholders

54

 

12.03 – Indemnification by Parent

55

 

12.04 – Notice and Opportunity to Defend

56

 

12.05 – Indemnification Limits

56

 

12.06 – Survival; Insurance

58

 

12.07 – Adjustment to Earn Out

58

 

12.08 – Exclusive Remedy

58

 

 

 

ARTICLE 13 – CERTAIN DEFINITIONS

59

 

13.01 - Definitions

59

 

 

 

ARTICLE 14 – MISCELLANEOUS PROVISIONS

66

 

14.01 – Notices

66

 

14.02 – Stockholders’ Representative

67

 

14.03 – Further Assurances

68

 

14.04 – Waiver

68

 

14.05 – Assignment

69

 

14.06 – Binding Effect

69

 

14.07 – Headings

69

 

14.08 – Entire Agreement

69

 

14.09 – Governing Law; Severability

69

 

14.10 – Counterparts

70

 

14.11 – Brokers

70

 

14.12 – Expenses

70

 

14.13 – No Intention to Benefit Third Parties

70

 

 

 

 

 

 

 

 

 

 


 

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), is made and entered into as of March 13, 2008, by and among Allion Healthcare, Inc., a Delaware corporation (“ Parent ”), Biomed Healthcare, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), Biomed America, Inc., a Delaware corporation (the “ Company ”), and Parallex LLC, a Delaware limited liability company (the “ Owner ”).  

 

RECITALS

 

WHEREAS, the boards of directors of Parent, Merger Sub and the Company have approved the merger of the Company with and into Merger Sub (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement, and have determined that the Merger and the other transactions contemplated by this Agreement are in the best interests of their respective stockholders;

 

WHEREAS, this Agreement and the Merger has been approved by the affirmative written consent of holders of at least a majority of the outstanding shares of the Company’s Common Stock (the “ Requisite Consent ”), in accordance with Section 228 of the DGCL (the “ Requisite Consent Action ”).  In addition, on the date of this Agreement the Owner and certain of the other Stockholders has executed a counterpart signature page to the Requisite Consent Action approving the terms of this Agreement (including, without limitation, the appointment of the Stockholders’ Representative as set forth in Section 14.02 below) and the Merger;

 

WHEREAS, the transactions described in this Agreement are subject to the termination or expiration of the waiting period required under the HSR Act and the satisfaction of certain other conditions set forth in this Agreement;

 

WHEREAS, concurrent with the execution of this Agreement, as a condition and inducement to Parent and Merger Sub's willingness to enter into this Agreement, each of the Owner and Raymond A. Mirra, Jr. have entered into a restrictive covenant agreement with Parent and Merger Sub (copies of which are attached hereto as Exhibit A-1 through Exhibit A-2 ) that becomes effective automatically with the Closing;

 

WHEREAS, concurrent with the execution of this Agreement, as a condition and inducement to Parent and Merger Sub's willingness to enter into this Agreement, Raymond A. Mirra, Jr. has entered into an indemnification agreement with Parent and Merger Sub (a copy of which is attached hereto as Exhibit B ) that becomes effective automatically with the Closing;

 

WHEREAS, the parties intend that the Merger qualify as a “reorganization” within the meaning of Section 368(a)(1)(a)   of the Code, and this Agreement constitutes a “plan of reorganization” within the meaning of Section 1.368-1(c) of the Treasury Regulations and it is, therefore, contemplated and intended by the parties that the transactions contemplated by this Agreement will be non-taxable to the Company, and the receipt of Parent Capital Stock by the Stockholders will, therefore, be entitled to non-recognition treatment in accordance with Section 354 of the Code; and

 

WHEREAS, certain capitalized terms used in this Agreement and not defined elsewhere in this Agreement are defined in Article 13 .

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Parent, Merger Sub and the Company agree as follows:

 


ARTICLE 1                                 

 

 

 

THE MERGER

 

1.01   The Merger .  At the Effective Time, subject to the terms and conditions of this Agreement and in accordance with the provisions of the Delaware General Corporation Law (the “ DGCL ”), (i) the Company shall be merged with and into Merger Sub, (ii) the separate corporate existence of the Company shall cease, and (iii) Merger Sub shall continue as the surviving corporation and a wholly owned subsidiary of Parent. Merger Sub, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation ”.  The Merger shall be consummated pursuant to the terms of this Agreement, which has been approved by the respective Boards of Directors of the Company, Merger Sub and Parent and which will be approved on the date hereof by the stockholders of the Company.

 

1.02   Time and Place of the Closing .  Subject to the conditions contained in this Agreement, the closing of the Merger (the “ Closing ”) shall take place (i) at the offices of Alston & Bird LLP, 90 Park Avenue, New York, New York 10016, at 10:00 a.m., local time, on the date most promptly practicable following the satisfaction or waiver of the conditions set forth in Article 10 (other than those conditions requiring performance at the Closing), but in no event later than the third (3 rd ) business day following such date or (ii) at such other place and time and/or on such other date as the Company and Merger Sub may mutually agree in writing.  The date on which the Closing occurs is hereinafter referred to as the “ Closing Date ”.

 

1.03   Effective Time .  At the Closing, the parties shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger (the “ Certificate of Merger ”), executed in accordance with the relevant provisions of the DGCL.  The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as is agreed to by the Company and Merger Sub and specified in the Certificate of Merger (the time at which the Merger becomes effective is hereinafter referred to as the “ Effective Time ”).

 

1.04   Certificate of Incorporation and Bylaws of the Surviving Corporation .

 

(a)   The Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until duly amended in accordance with applicable Law and the Surviving Corporation’s Certificate of Incorporation and Bylaws.

 

(b)   The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation, until duly amended in accordance with applicable Law and the Surviving Corporation’s Certificate of Incorporation and Bylaws.

 

1.05   Directors and Officers .  The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal in accordance with applicable Law and the Surviving Corporation’s Certificate of Incorporation and Bylaws. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

 


ARTICLE 2                                 

 

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE COMPANY AND MERGER SUB

 

2.01   Effect on Shares of Merger Sub Capital Stock .  Each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time and shall represent one (1) share of Common Stock of the Surviving Corporation.  

 

2.02   Effect on Shares of the Company Common Stock .

 

(a)   Common Stock of the Company .  As of the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent or Merger Sub, or the stockholders of any of the foregoing, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) any Dissenting Shares, and (ii) those shares of Company Common Stock to be canceled pursuant to Section 2.02(b) ) shall be converted into the right to receive, upon surrender of the certificates representing such Company Common Stock in the manner provided for in Section 3.02(d) , from Parent in an amount equal to the Effective Time Per Share Merger Consideration and the Per Share Earn Out Payment, if applicable.  All such shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled, and each holder of a certificate or certificates representing shares of Company Common Stock shall cease to have any rights with respect to such shares of Company Common Stock, except the right to receive the Effective Time Per Share Merger Consideration.  In addition, each holder of Company Common Stock shall be entitled to receive its Ownership Percentage of the Escrow Amount, which will be released pursuant to the terms of the Escrow Agreement.  

 

(b)   Cancellation of Certain Shares of Common Stock .  As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock, the Company or Merger Sub, each share of Company Common Stock owned by the Company or any of its wholly-owned subsidiaries as treasury stock or otherwise immediately prior to the Effective Time shall automatically be canceled, and no cash or other consideration shall be delivered or deliverable in exchange for such shares of Company Common Stock.

 

2.03   Dissenting Shares .  The Owner hereby waives notice of and agrees not to seek or assert any dissenter's or appraisal rights, or any similar rights, to which the Owner would otherwise be entitled.  Notwithstanding anything in this Agreement to the contrary, but only in the circumstances and to the extent provided by the DGCL, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by Stockholders who did not vote such shares in favor of the Merger or consent to the Merger in writing prior to the Effective Time and who shall have properly and timely delivered to the Company, as the case may be, a written demand for appraisal of their shares of the Company Common Stock in accordance with Section 262 of the DGCL (“ Dissenting Shares ”) shall not be converted into the right to receive, or be exchangeable for, the Effective Time Per Share Merger Consideration or the contingent right to receive a proportionate percentage of the Escrow Amount or the Earn Out Payment, if any.  Instead, the holders of Dissenting Shares shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 262 of the DGCL; provided, however, that (i) if any holder of Dissenting Shares shall subsequently withdraw such holder’s demand for payment of the fair value of such Dissenting Shares, or (ii) if any holder fails to establish and perfect such holder’s entitlement to the relief provided in Section 262 of the DGCL, then the rights and obligations of such holder to receive such fair value shall terminate, and such Dissenting Shares shall thereupon be deemed to have been converted, as of the Effective Time, into the right to receive, and to have become exchangeable for, the Effective Time Per Share Merger Consideration and a contingent right to receive a proportionate percentage of the Escrow Amount or the Earn Out Payment, if any.  The Company shall give Parent (i) prompt written notice of all demands for payment under Section 262 of the DGCL, and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for payment under Section 262 of the DGCL.  The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any demands for payment under Section 262 of the DGCL, or agree to do any of the foregoing. If a holder of Company Common Stock demands appraisal of the fair value of shares of Company Common Stock under Section 262 of the DGCL after Closing and such shares become Dissenting Shares, and subsequently such holder receives payment for the fair value of such Dissenting Shares in lieu of the Effective Time Merger Consideration and the contingent right to receive a proportionate percentage of the Escrow Amount or the Earn Out Payment, if any, Parent shall be entitled to withdraw from the Effective Time Merger Consideration supplied to the Agent in accordance with Section 3.02(c) any portion of such Effective Time Merger Consideration with respect to such Dissenting Shares.

 


2.04   Fractional Shares .  Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock or Parent Preferred Stock (after taking into account all certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Parent Common Stock or Parent Preferred Stock multiplied by the ten (10)-day average closing price immediately prior to the date of this Agreement.  No such holder will be entitled to dividends, voting rights, or any other rights as a stockholder in respect of any fractional shares.

 

2.05   Tax and Accounting Consequences .  Each party hereby acknowledges and agrees that it has consulted with its own tax advisors and accountants with respect to the tax and accounting consequences, respectively, of the Merger.

 

ARTICLE 3                                

 

CALCULATION AND PAYMENT OF THE EFFECTIVE TIME MERGER CONSIDERATION

 

3.01   Effective Time Merger Consideration .

 

(a)   The aggregate merger consideration (the “ Effective Time Merger Consideration ”) to be paid by Parent to the Stockholders at or prior to the Effective Time, subject to the post-Effective Time payment procedures set forth in Section 3.02(d) below and the post-Effective Time working capital adjustment set forth in Section 3.03(b) below, in consideration for all of the capital stock and rights thereto of the Company shall be:

 

(i)   3,380,869 shares of Parent Common Stock (the “ Effective Time Common Stock Consideration Amount ”); provided, however, that the Company and the Owner each acknowledge and agree that (A) in no event shall the number of shares of Parent Common Stock issued hereunder exceed nineteen and 9/10 percent (19.9%) of the total number of issued and outstanding shares of Parent Common Stock immediately prior to the Effective Time (the “ Common Stock Cap ”) and (B) if for any reason whatsoever the number of shares of Parent Common Stock to be issued hereunder exceeds the Common Stock Cap, then any such excess shares shall be issuable to the Stockholders in the form of additional shares of Parent Preferred Stock and not Parent Common Stock;

 

(ii)   5,969,131 shares of Parent Preferred Stock (the “ Effective Time Preferred Stock Consideration Amount ”); provided, however, that the Company and the Owner each acknowledge and agree that the number of shares of Parent Preferred Stock issuable as part of the Effective Time Merger Consideration may increase pursuant to clause (B) of Section 3.01(a)(i) above; and

 


(iii)   Forty Eight Million Dollars ($48,000,000) in cash minus the Assumed Indebtedness Excess Amount, if applicable, minus the Escrow Amount and minus the Estimated Shortfall Amount, if applicable (the “ Effective Time Cash Consideration Amount ”).

 

(b)   In accordance with the payment procedures set forth in Section 3.02 below, at the Effective Time, each share of Company Common Stock shall be converted into the right to receive the following consideration (the “ Effective Time Per Share Merger Consideration ”):

 

(i)   that number of shares of Parent Common Stock determined by dividing the Effective Time Common Stock Consideration Amount (as such number may be adjusted pursuant to Section 3.01(a)(i) above) by the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, not including those shares referenced in Section 2.02(b) above;

 

(ii)   that number of shares of Parent Preferred Stock determined by dividing the Effective Time Preferred Stock Consideration Amount (as such number may be adjusted pursuant to Section 3.01(a)(ii) above) by the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, not including those shares referenced in Section 2.02(b) above; and

 

(iii)   that amount of cash determined by dividing the Effective Time Cash Consideration Amount by the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time, not including those shares referenced in Section 2.02(b) above.

 

(c)   On the Closing Date, the Company, the Owner, Parent and Merger Sub shall execute a certificate to document and certify the Assumed Indebtedness, the Estimated Shortfall Amount, if applicable, and any unpaid Company Transaction Expenses each as of the Closing Date, the Effective Time Merger Consideration and the amounts of cash, Parent Common Stock and Parent Preferred Stock payable to each Stockholder other than any such amounts payable in connection with the Earn Out Payment, if any (the “ Effective Time Merger Consideration Certificate ”).

 

(d)   Notwithstanding anything in Section 3.01(b) above to the contrary, Parent agrees to accommodate the Owner with regard to the Owner’s allocation of its Effective Time Per Share Merger Consideration among the shares of Company Common Stock held by the Owner at the time of the Closing.

 

3.02   Payment Procedures .

 

(a)   At or prior to the Effective Time, Parent shall deposit in an escrow account (the “ Escrow Account ”) with SunTrust Bank, as escrow agent (the “ Escrow Agent ”), an amount of cash equal to Four Million Dollars ($4,000,000) (the “ Escrow Amount ”).  The Escrow Account shall be held, invested and disbursed in accordance with the terms and conditions of the Escrow Agreement in substantially the form attached hereto as Exhibit 3.02 (the “ Escrow Agreement ”).

 

(b)   Each Stockholder that has surrendered prior to the Closing Date (an “ Effective Time Surrendering Stockholder ”) all of its certificate or certificates representing shares of Company Common Stock immediately prior to the Effective Time (the “ Certificates ”) shall be entitled to receive its portion of the Effective Time Merger Consideration at or prior to the Effective Time pursuant to this Section 3.02(b) .  Any Certificates so surrendered prior to the Closing Date shall be endorsed for transfer or accompanied by stock powers in favor of Parent and shall be accompanied by such letter of transmittal duly executed and completed in accordance with the instructions thereto and such other documents as may be required pursuant to such instructions.  At or prior to the Effective Time, Parent shall (i) wire in immediately available funds to each Effective Time Surrendering Stockholder the cash portion of the Effective Time Merger Consideration payable to such Effective Time Surrendering Stockholder and      (ii) cause to be issued to each Effective Time Surrendering Stockholder a duly authorized and validly issued Parent Common Stock certificate and a duly authorized and validly issued Parent Preferred Stock certificate issuable to such Effective Time Surrendering Stockholder, for each share of Parent Common Stock and Parent Preferred Stock represented by the surrendered Certificates.

 


(c)   At or prior to the Effective Time, Parent shall supply or cause to be supplied to Parent’s transfer agent or other exchange agent selected by Parent (the “ Agent ”), in trust for the benefit of the holders of Company Common Stock other than the Effective Time Surrendering Stockholders and for exchange pursuant to subsection (d) below, the aggregate Effective Time Merger Consideration (in cash, Parent Common Stock and Parent Preferred Stock) less the portion of the Effective Time Merger Consideration that is paid to the Effective Time Surrendering Stockholders pursuant to subsection (b) above.

 

(d)   Promptly (and in no event more than three (3) business days) after the Effective Time, Parent shall mail to each holder of record of a Certificate, except for the Effective Time Surrendering Stockholders, (i) a notice of the effectiveness of the Merger, (ii) a form letter of transmittal, in a form reasonably acceptable to Parent and the Company, which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Agent, and (iii) instructions for use in surrendering such Certificates and receiving the Effective Time Per Share Merger Consideration in respect thereof.  After the Effective Time, each such holder of Company Common Stock shall surrender the Certificate or Certificates representing shares of Company Common Stock owned by such Stockholder to the Agent.  Within three (3) business days (with respect to the cash portion of the Effective Time Merger Consideration) and five (5) business days (with respect to the stock portion of the Effective Time Merger Consideration) after such surrender of shares of Company Common Stock, together with a duly executed and completed transmittal letter, and such other documents as may reasonably be requested by Parent, the Agent shall deliver to such Stockholder the Effective Time Per Share Merger Consideration owed for each share surrendered in accordance with Section 3.01 above.  The Agent shall pay the cash portion of the Effective Time Per Share Merger Consideration by check or wire transfer in accordance with the instructions provided by the Stockholder.  No interest or dividends will be paid or accrued on the consideration payable upon the surrender of any Certificate.  The Agent shall not be obligated to deliver the consideration to which any former holder of Company Common Stock is entitled as a result of the Merger until such Person surrenders his, her or its Certificate or Certificates representing the shares of Company Common Stock for exchange as provided in this Section 3.02 or such Person provides an appropriate affidavit regarding loss of such Certificate or Certificates and an indemnification for loss in favor of Parent (as described below in this Section 3.02(d) ).  The Certificate or Certificates representing Company Common Stock so delivered shall be duly endorsed as Parent or the Agent may reasonably require.  If there has been a transfer of ownership of shares of Company Common Stock represented by Certificates that is not registered in the transfer records of the Company, then the Effective Time Per Share Merger Consideration may be issued to a transferee if the Certificate or Certificates representing such shares are delivered to the Agent, accompanied by all documents required to evidence such transfer and by evidence satisfactory to Parent and the Agent that any applicable stock transfer taxes have been paid.  If any Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of (i)  an affidavit of that fact from the holder claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii)  such bond, security or indemnity as Parent may reasonably require, and (iii)  any other documents necessary to evidence and effect the bona fide exchange thereof, then the Agent shall deliver to such holder the consideration into which the shares represented by such lost, stolen, mislaid or destroyed Certificate shall have been converted.

 


(e)   Each of the Agent, Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax Law.  To the extent that any amounts are so withheld by the Agent, Parent or the Surviving Corporation, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by the Agent, Parent or the Surviving Corporation, as the case may be.

 

(f)   At any time following the one (1)-year anniversary of the Effective Time, Parent shall be entitled to require the Agent to deliver to it any Effective Time Merger Consideration that had been made available to the Agent and not disbursed to holders of Company Common Stock (including, without limitation, all interest and other income received by the Agent in respect of all cash funds made available to it, free and clear of all claims, liens or interest of any Person previously entitled thereto), and, thereafter, such holders shall be entitled to look to Parent (subject to abandoned property, escheat and other similar Laws) only as general creditors thereof with respect to any consideration payable upon due surrender of the Certificates held by them.  Notwithstanding the foregoing, neither Parent nor the Agent shall be liable to any holder of Company Common Stock for any consideration delivered in respect of such Company Common Stock to a public official pursuant to any abandoned property, escheat or other similar Law.

 

(g)   At the Effective Time, the stock transfer books of the Company shall be closed as to holders of Company Common Stock immediately prior to the Effective Time and no transfer of Company Common Stock by any such holder shall thereafter be made or recognized.  Until surrendered for exchange in accordance with the provisions of this Article 3 , each Certificate theretofore representing shares of Company Common Stock, excluding any Dissenting Shares, shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in Section 3.01 without interest.

 

(h)   Notwithstanding anything in this Agreement to the contrary, the Effective Time Merger Consideration shall be adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend, reclassification, redenomination, recapitalization, split-up, combination, exchange of shares or other similar transaction with respect to the Company Common Stock, Parent Common Stock or Parent Preferred Stock, as applicable, occurring or having a record date or effective date between the date of this Agreement and the Effective Time.

 

3.03   Net Working Capital Adjustments .

 

(a)   Estimated Net Working Capital Closing Statement .

 

(i)   At least five (5) business days but no more than ten (10) business days prior to the Closing Date, the Company shall deliver to Parent a statement certified by the Chief Financial Officer of the Company (the “ Estimated Closing Statement ”) setting forth the Company’s reasonable, good faith estimate of the Net Working Capital (the “ Estimated Closing Net Working Capital ”) as of the close of business on the Closing Date.  Prior to the Closing, the Company and Parent shall discuss the estimates set forth in the Estimated Closing Statement and make revisions thereto as they may mutually agree.  The Estimated Closing Statement shall be prepared in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements.

 


(ii)   If the Estimated Closing Net Working Capital is less than the Target Net Working Capital, the Effective Time Cash Consideration Amount shall be decreased by the amount of such shortfall.  The amount of any such decrease shall be referred to as the “ Estimated Shortfall Amount ”.

 

(b)   Final Net Working Capital Closing Statement .

 

(i)   Within sixty (60) calendar days following the Closing Date, the Stockholders’ Representative shall prepare and shall deliver to Parent, or cause to be prepared and delivered to Parent, a statement (the “ Final Closing Statement ”), setting forth the Stockholders’ Representative’s determination of Net Working Capital as of the close of business on the Closing Date.   The Final Closing Statement shall be prepared in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements.

 

(ii)   Following receipt of the Final Closing Statement, Parent will be afforded a period of thirty (30) calendar days (the “ 30-Day Period ”) to review the Final Closing Statement.  At or before the end of the 30-Day Period, Parent will either (i) accept the Final Closing Statement, and the computation of Net Working Capital, in its entirety or (ii) deliver to the Stockholders’ Representative a written notice (the “ Objection Notice ”) containing a detailed written explanation of those items in the Final Closing Statement which Parent disputes, in which case the items specifically identified by Parent shall be deemed to be in dispute.  The failure by Parent to deliver the Objection Notice within the 30-Day Period shall constitute Parent’s acceptance of the Final Closing Statement and the computation of Net Working Capital as of the close of business on the Closing Date.  If Parent delivers the Objection Notice in a timely manner, then, within a further period of thirty (30) calendar days from the end of the 30-Day Period, the parties and, if desired, their accountants will attempt to resolve in good faith any disputed items and reach a written agreement (the “ Settlement Agreement ”) with respect thereto.  Failing such resolution, the unresolved disputed items will be referred for final binding resolution to a mutually agreeable nationally recognized accounting firm with whom neither Parent nor any Company Entity nor any of their respective Affiliates has had a relationship during the eighteen (18)-month period prior to the date hereof, which such firm will be mutually agreed upon prior to the Closing, or such other Persons as the parties may mutually agree (the “ Accounting Arbitrator ”), the fees and expenses of which shall be shared equally between Parent, on the one hand, and the Stockholders’ Representative, on the other hand. The Accounting Arbitrator shall be given reasonable access to all relevant records to calculate the Net Working Capital as of the close of business on the Closing Date.  Such determination by the Accounting Arbitrator (the “ Accountant’s Determination ”) shall be (i) in writing, (ii) furnished to the parties as soon as practicable after the items in dispute have been referred to the Accounting Arbitrator, (iii) made in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements, and (iv) nonappealable and incontestable by the parties hereto and each of their respective Affiliates and successors and assigns and not subject to collateral attack for any reason other than manifest error or fraud.  As used herein “ Final Closing Net Working Capital ” means the Net Working Capital as finally determined in accordance with this Section 3.03(b)(ii) .

 

(iii)   For purposes of this Agreement, the “ Final Determination Date ” shall mean the earliest to occur of (w) the thirty-first (31 st ) day following the receipt by Parent of the Final Closing Statement if Parent shall have failed to deliver the Objection Notice to the Stockholders’ Representative within the 30-Day Period, (x) the date on which either Parent or the Stockholders’ Representative gives the other a written notice to the effect that such party has no objection to the other party’s determination of the Final Closing Statement, (y) the date on which Parent and the Stockholders’ Representative execute and deliver a Settlement Agreement and (z) the date as of which Parent and the Stockholders’ Representative shall have received the Accountant’s  Determination.

 

 


 

(c)   Post-Effective Time Working Capital Adjustment .

 

(i)   If the Effective Time Cash Consideration Amount is reduced at the Closing due to the Estimated Closing Net Working Capital being less than the Target Net Working Capital and the Final Closing Net Working Capital is greater than the Estimated Closing Net Working Capital and equal to or greater than the Target Net Working Capital, then additional payment of the Estimated Shortfall Amount shall, within three (3) business days after the Final Determination Date, be paid by Parent to the Stockholders by Parent paying each Stockholder via wire transfer of immediately available funds an amount equal to the Estimated Shortfall Amount multiplied by such Stockholder’s Ownership Percentage.

 

(ii)   If the Effective Time Cash Consideration Amount is reduced at the Closing due to the Estimated Closing Net Working Capital being less than the Target Net Working Capital and the Final Closing Net Working Capital is greater than the Estimated Closing Net Working Capital but less than the Target Net Working Capital, then additional payment of the difference between the Estimated Closing Net Working Capital and the Final Closing Net Working Capital (the “ Adjusted Shortfall Amount ”) shall, within three (3) business days after the Final Determination Date, be paid by Parent to the Stockholders by Parent paying each Stockholder via wire transfer of immediately available funds an amount equal to the Adjusted Shortfall Amount multiplied by such Stockholder’s Ownership Percentage.

 

(iii)   If the Effective Time Cash Consideration Amount is reduced at the Closing due to the Estimated Closing Net Working Capital being less than the Target Net Working Capital and the Final Closing Net Working Capital is less than the Estimated Closing Net Working Capital, then additional payment of the difference between the Estimated Closing Net Working Capital and the Final Closing Net Working Capital (the “ Additional Shortfall Amount ”) shall, within three (3) business days after the Final Determination Date, be paid by the Stockholders to Parent.  Parent, in Parent’s sole discretion, shall have the right to recover the Additional Shortfall Amount directly from the Stockholders’ Representative, who shall then have the right to seek contribution from the Stockholders for their proportionate share of such amount, or from the Escrow Account, without any further action on the part of the Stockholders’ Representative.

 

(iv)   If the Effective Time Cash Consideration Amount is not reduced at the Closing due to the Estimated Closing Net Working Capital being greater than the Target Net Working Capital and the Final Closing Net Working Capital is less than the Target Net Working Capital, then additional payment of the difference between the Target Closing Net Working Capital and the Final Net Working Capital (the “ Actual Shortfall Amount ”) shall, within three (3) business days after the Final Determination Date, be paid by the Stockholders to Parent.  Parent, in Parent’s sole discretion, shall have the right to recover the Actual Shortfall Amount directly from the Stockholders’ Representative, who shall then have the right to seek contribution from the Stockholders for their proportionate share of such amount, or from the Escrow Account, without any further action on the part of the Stockholders’ Representative.

 


ARTICLE 4                                

 

CALCULATION AND PAYMENT OF THE EARN OUT MERGER CONSIDERATION

 

4.01   Earn Out Determination .

 

(a)   If for the first full twelve (12) calendar month period following the Effective Time (the “ Earn Out Period ”) the EBITDA of the Acquired Business is equal to or less than Fourteen Million Seven Hundred Fifty Thousand Dollars ($14,750,000), then Parent shall not be obligated to pay the Stockholders any Earn Out Payment.    

 

(b)   If for the Earn Out Period, the EBITDA of the Acquired Business is greater than Fourteen Million Seven Hundred Fifty Thousand Dollars ($14,750,000), then Parent shall be obligated to pay the Stockholders additional merger consideration in an amount of the difference between the EBITDA of the Acquired Business and Fourteen Million Seven Hundred Fifty Thousand Dollars ($14,750,000) multiplied by eight (8) (the “ Earn Out Payment Amount ”).  The portion of the Earn Out Payment Amount payable to each Stockholder shall be the Earn Out Payment Amount multiplied by each Stockholder’s Ownership Percentage (the “ Per Share Earn Out Payment ”).  Subject to Sections 4.01(c) , 4.01(d) and 4.01(e) below with regard to the cash portion of the Earn Out Payment, the first Forty-Two Million Dollars ($42,000,000) of any Earn Out Payment Amount will be payable (i) one-half in cash within three (3) business days after the Earn Out Determination Date, which shall be paid by Parent to each Stockholder by wire transfer of immediately available funds pursuant to wire transfer instructions received from such Stockholder and (ii) one-half in Parent Preferred Stock within five (5) business days after the Earn Out Determination Date, which Parent shall cause to be issued a duly authorized and validly issued certificate representing such Parent Preferred Stock and delivered to such Stockholder to its then-current mailing address.  Any Earn Out Payment Amount exceeding Forty-Two Million Dollars ($42,000,000) shall be payable pursuant to the above-referenced time periods in a mixture of cash and Parent Preferred Stock to be determined in Parent’s sole discretion.  Notwithstanding anything in this Section 4.01(b) to the contrary, in the event the holders of Parent’s Common Stock approve the Conversion Approval Proposal prior to the expiration of the Earn Out Period, then the capital stock component of any Earn Out Payment hereunder shall be paid in shares of Parent’s Common Stock and not in shares of Parent’s Preferred Stock.

 

(c)   Notwithstanding anything in Section 4.01(b) above to the contrary, the parties acknowledge and agree that, with regard to the cash portion of the Earn Out Payment, if any, to the extent that (i) Parent does not have sufficient available cash on hand net of reasonable reserves for the continued operation of the Acquired Business (which the amount of such reserves must be mutually agreed to between the Stockholders’ Representative and Parent) together with sufficient availability under any credit facility extended to the Parent (a “ Credit Facility ”) to pay such cash portion in cash, provided that Parent is not prohibited from paying such cash portion under the terms of any existing Credit Facility and (ii) if the conditions in (i) are not met and Parent is not able to obtain financing of such cash portion on terms reasonably acceptable to Parent or is prohibited from incurring such additional financing under the terms of any existing Credit Facility, then Parent shall have the option, instead of paying such cash portion in cash, to pay such amount by issuing (x) one or more promissory notes in substantially the form attached hereto as Exhibit 4.01(c) (which in any event shall contain subordination provisions required under the terms of any Credit Facility) or (y) shares of Parent Preferred Stock (or Parent Common Stock if the holders of Parent’s Common Stock approve the Conversion Approval Proposal prior to the expiration of the Earn Out Period), with the decision to issue the notes or Parent Capital Stock to be at the sole discretion of Parent.  Notwithstanding anything in this Agreement, including this Article 4 , to the contrary, the parties acknowledge and agree that under no circumstances will Parent be required to issue Parent Capital Stock to the Stockholders in an amount that would result in the Stockholders collectively holding in excess of forty-nine percent (49%) of (i) Parent’s then outstanding Parent Capital Stock or (ii) Parent Capital Stock with the power to direct the management and policies of Parent.

 

(d)   Notwithstanding anything in Section 4.01(b) above to the contrary, the parties acknowledge and agree that the payment of an Alliance Ambulatory Earn Out Payment during the Earn Out Period by Parent, the Surviving Company or any of their respective Affiliates, successors or assigns shall be accounted for as an adjustment to the Aggregate Merger Consideration and may be used to reduce or offset against the cash portion of the Earn Out Payment, if any, and if no Earn Out Payment is due or is to be paid in cash under the terms of this Agreement then Parent and the Stockholders’ Representative on behalf of all of the Stockholders shall submit a joint written instruction to the Escrow Agent instructing the Escrow Agent to disburse an amount equal to the Alliance Ambulatory Earn Out Payment to Parent out of the Escrow Account.

 


(e)   For purposes of determining the number of shares of Parent Preferred Stock (or Parent Common Stock if the holders of Parent’s Common Stock approve the Conversion Approval Proposal prior to the expiration of the Earn Out Period) to be issued in connection with any portion of the Earn Out Payment to be paid in shares of Parent Capital Stock (the “ Earn Out Share Amount ”), Parent shall divide the Earn Out Share Amount by the most recent ten (10)-day average of the closing price of Parent’s Common Stock as of the last day of the Earn Out Period; provided, however, that in the event the most recent ten (10)-day average of the closing price of Parent’s Common Stock is less than Eight Dollars ($8.00) per share (the “ Floor Amount ”), then the number of shares of Parent Preferred Stock (or Parent Common Stock if the holders of Parent’s Common Stock approve the Conversion Approval Proposal prior to the expiration of the Earn Out Period) to be issued shall be the quotient obtained by dividing the Earn Out Share Amount by the Floor Amount; provided, further, that that in the event the most recent ten (10)-day average of the closing price of Parent’s Common Stock is greater than Ten Dollars ($10.00) per share (the “ Ceiling Amount ”), then the number of shares of Parent Preferred Stock (or Parent Common Stock if the holders of Parent’s Common Stock approve the Conversion Approval Proposal prior to the expiration of the Earn Out Period) to be issued shall be the quotient obtained by dividing the Earn Out Share Amount by the Ceiling Amount.          

 

4.02   Earn Out Payment Mechanics .

 

(a)   No later than sixty (60) calendar days after the expiration of the Earn Out Period, Parent shall prepare and deliver to the Stockholders’ Representative a certificate (the “ Earn Out Payment Certificate ”) certified by the Chief Financial Officer of Parent certifying the EBITDA of the Acquired Business for the Earn Out Period.  If applicable, the Earn Out Payment Certificate will also include Parent’s calculation of any additional merger consideration payable in the form of an Earn Out Payment pursuant to Section 4.01 above.

 

(b)   Parent shall keep customary records with respect to its EBITDA of the Acquired Business calculation and shall furnish any information that the Stockholders’ Representative may reasonably request from time to time to enable the Stockholders’ Representative and his legal, financial and other professional advisors and representatives to review the EBITDA of the Acquired Business during the Earn Out Period.  The Stockholders’ Representative shall have the right at any time during or after the Earn Out Period, upon no less than two (2) business days’ prior written notice and at its sole expense, to examine, during normal business hours, and make copies of such records and accounts as may be relevant to determining the EBITDA of the Acquired Business during the Earn Out Period.  In the event that the Stockholders’ Representative believes that an error has been made in the computation of the EBITDA of the Acquired Business or in the amount of any additional merger consideration payable in the form of an Earn Out Payment as each are reflected on the Earn Out Payment Certificate, the Stockholders’ Representative shall give written notice setting forth the basis for such belief in reasonable detail (an “ Earn Out Objection Notice ”) within forty-five (45) calendar days after receipt of the Earn Out Payment Certificate.  The failure to deliver an Earn Out Objection Notice within forty-five (45) calendar days after receipt of the Earn Out Payment Certificate shall be deemed to constitute a final and binding agreement by the Stockholders’ Representative and the Stockholders with Parent’s computation of the EBITDA of the Acquired Business and, if applicable, the amount of any additional merger consideration payable in the form of an Earn Out Payment, each as set forth in the Earn Out Payment Certificate.

 


(c)   If the Stockholders’ Representative delivers an Earn Out Objection Notice to Parent in a timely manner, then Parent and the Stockholders’ Representative (on behalf of all of the Stockholders) shall attempt in good faith to resolve such dispute within thirty (30) calendar days from the date of the Earn Out Objection Notice.  If Parent and the Stockholders’ Representative cannot reach agreement within such thirty (30)-day period (or such longer period as they may mutually agree), then either party shall have the unilateral right to request that the matter be referred to the Accounting Arbitrator on behalf of both parties to establish independently the EBITDA of the Acquired Business for the Earn Out Period and, if applicable, the amount of any additional merger consideration payable in the form of an Earn Out Payment.  The Accounting Arbitrator may conduct such proceedings as it reasonably considers being appropriate and shall, within sixty (60) calendar days following its engagement, deliver to Parent and the Stockholders’ Representative a written report setting forth its determination of the EBITDA of the Acquired Business for the Earn Out Period and, if applicable, the amount of any additional merger consideration payable in the form of an Earn Out Payment.  Each party shall cooperate with and timely respond to any requests for information from such Accounting Arbitrator.  The determination of the Accounting Arbitrator shall be conclusive and binding upon the parties.  In connection with the resolution of any dispute, each party shall pay its own legal and accounting fees and expenses and the fees and expenses of the Accounting Arbitrator shall be allocated equally between Parent, on the one hand, and the Stockholders, on the other hand.

 

(d)   For purposes of this Agreement, the term “ Earn Out Determination Date ” shall mean the date on which the Earn Out Payment Certificate, including the EBITDA of the Acquired Business amount and the Earn Out Payment Amount, if any, set forth therein, shall be deemed to constitute a final and binding agreement of the parties with regard to such amounts either pursuant to Section 4.02(b) or 4.02(c) above.

 

(e)   Notwithstanding anything in this Section 4.02 to the contrary, in the event that a Fundamental Parent Transaction occurs after the six (6)-month anniversary of the Closing Date but prior to the expiration of the Earn Out Period and at the time of such Fundamental Parent Transaction the EBITDA of the Acquired Business is greater than Fourteen Million Seven Hundred Fifty Thousand Dollars ($14,750,000), the provisions of this Section 4.02(e) shall apply for purposes of calculating and paying any portion of the Earn Out Payment Amount earned and payable to the Stockholders as of the effective date of the Fundamental Parent Transaction.  As soon as reasonably practicable prior to the occurrence of a Fundamental Parent Transaction, Parent shall prepare and deliver to the Stockholders’ Representative an interim Earn Out Payment Certificate certified by the Chief Financial Officer of Parent certifying the EBITDA of the Acquired Business for that portion of the Earn Out Period ending on the last day of the month preceding the month in which the Fundamental Parent Transaction is to occur (the “ Interim Earn Out Payment Certificate ”).  In the event that Parent and the Stockholders’ Representative are able to mutually agree on the amount, if any, of the portion of the Earn Out Payment Amount earned for the period set forth in the Interim Earn Out Payment Certificate (the “ Interim Earn Out Payment Amount ”) prior to the closing of the transaction contemplated by the Fundamental Parent Transaction, then Parent shall pay in connection with the closing of the Fundamental Parent Transaction the portion of the Interim Earn Out Payment Amount payable to each Stockholder determined by multiplying the Interim Earn Out Payment Amount by each Stockholder’s Ownership Percentage.  If for any reason whatsoever Parent and the Stockholders’ Representative are unable to mutually agree on the Interim Earn Out Payment Amount prior to the closing of the transaction contemplated by the Fundamental Parent Transaction, then the Interim Earn Out Payment Certificate and the Interim Earn Out Payment Amount shall be subject to the dispute resolution provisions set forth in Sections 4.02(b) and 4.02(c) above.  For the avoidance of doubt, nothing in this Section 4.02(e) nor the payment of an Interim Earn Out Payment Amount to the Stockholders shall relieve Parent or any of its successors or assigns from the obligation to pay the Stockholders any additional earn out payment payable for the remainder of the Earn Out Period, if any.  In the event an Interim Earn Out Payment is made pursuant to this Section 4.02(e) , all of the provisions of Section 4.01 above relating to (i) the payment of the Earn Out Payment Amount in cash, Parent Capital Stock and/or Parent promissory notes, (ii) Parent’s set off right related to the payment of an Alliance Ambulatory Earn Out Payment and (iii) the determination of the number of shares of Parent Capital Stock to issue as part of an Earn Out Payment Amount, including the Floor Amount and the Ceiling Amount, shall apply to any Interim Earn Out Payment.           

 


ARTICLE 5                                

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company and the Owner hereby represents and warrants to Parent and Merger Sub as follows:

 

5.01   Organization, Authority and Capacity .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder.  The Company has full power and authority necessary to own and operate its properties and to carry on its business as now conducted.  The Company is duly qualified to do business and is in good standing in each jurisdiction listed on Schedule 5.01 attached hereto, which includes every jurisdiction in which a failure to be so qualified or in good standing would have a Company Material Adverse Effect.

 

5.02   Authorization of Transactions .

 

(a)   The Company has the corporate power and authority necessary to execute and deliver this Agreement and the other Transaction Documents to which it is a party.  The Company has the corporate power and authority to perform its obligations under this Agreement and to consummate the Merger, all in accordance with this Agreement and applicable Law.  The execution, delivery and performance of this Agreement and the other Transaction Documents, as well as the consummation of the transactions contemplated herein and therein, including the Merger, have been duly and validly authorized by all necessary corporate action in respect thereof on the part of the Company.  The Company has duly executed and delivered this Agreement and this Agreement and the other Transaction Documents represent legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms.

 

(b)   The Board of Directors of the Company, pursuant to action taken by unanimous written consent, duly adopted resolutions (i) approving and adopting this Agreement, the other Transaction Documents, the Merger and the other transactions contemplated hereby and thereby,           (ii) determining that the terms of the Merger are in the best interests of the Company and the Stockholders and that the other transactions contemplated by this Agreement and the other Transaction Documents are in the best interests of the Company and the Stockholders, (iii) recommending that the Stockholders adopt and approve this Agreement and the Merger, and (iv) declaring that the Merger and this Agreement are advisable.  No state takeover statute or similar statute or resolution applies or purports to apply to the Company with respect to this Agreement, the other Transaction Documents, the Merger or any other transaction expressly contemplated hereby.

 

(c)   The only vote of holders of any class or series of the Company’s stock necessary to approve and adopt this Agreement, the other Transaction Documents and the Merger is the Requisite Consent.  The Requisite Consent may be obtained by written consent of the holders of the Company’s capital stock.  The Company, promptly following the execution and delivery of this Agreement shall deliver to Parent a certificate of the Secretary of the Company certifying that the Requisite Consent has been obtained by written consent in compliance with the Company’s Certificate of Incorporation and Bylaws and the DGCL.

 


5.03   Absence of Conflicts; Required Governmental Filings and Consents .

 

(a)   The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to be executed and delivered by it: (i) will not conflict with any provision of the Company's Certificate of Incorporation or Bylaws or other governing documents; (ii) will not conflict with or result in a violation of any Law or Order of any court or Governmental Authority to which the Company is a party or by which the Company or any of its properties is bound; (iii) will not result in the creation of any Lien upon the Company Common Stock or the assets of any Company Entity; and (iv) except as set forth on Schedule 5.03(a) attached hereto, will not conflict with, constitute grounds for termination of, result in a breach of, constitute a default under, require any notice under, or accelerate or permit the acceleration of any performance required by the terms of any material agreement, instrument, license or permit to which any Company Entity is a party or by which any of the properties of any Company Entity are bound.

 

(b)   Except as set forth in Schedule 5.03(b) attached hereto, the execution and delivery by the Company of this Agreement do not, and the performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby, including the Merger, will not, require any consent, approval, authorization or permit of, or filing with or notification to, any domestic (federal, state or local) or foreign government or governmental, regulatory or administrative authority, agency, instrumentality or commission, or any court, tribunal, or judicial or arbitral body (each, a “ Governmental Authority ”), except for (i) applicable requirements, if any, of the HSR Act, the Exchange Act, the Securities Act, and the rules and regulations thereunder, (ii) requirements under the rules of the Nasdaq National Market, and (iii) the filing and recordation of appropriate merger documents as required by the DGCL and the business organization laws of the jurisdictions where the Company is qualified to do business as a foreign corporation.

 

5.04   Governing Documents .  True and correct copies of the organizational documents and all amendments thereto of each of the Company Entities (certified by the Secretary of State of the jurisdiction of its organization) have been provided to Parent.  Parent has previously been provided with access to the minutes of each of the Company Entities, and such minutes accurately reflect all proceedings of the respective Boards of Directors of the Company Entities (and all committees thereof).  The record books of the Company Entities, which have been made available to Parent for review, contain true, complete and accurate records of the ownership of the Company Entities.

 

5.05   Capitalization of the Company .  The authorized capital stock and outstanding capital stock of the Company is set forth in Schedule 5.05 attached hereto.  Except as set forth in Schedule 5.05 attached hereto, all of the issued and outstanding shares of capital stock of the Company have been duly authorized, are validly issued, fully paid, and nonassessable, are owned of record and beneficially free and clear of all Liens, and are not subject to, and were not issued in violation of, any preemptive rights or rights of first refusal.  There are no outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights or other agreements or commitments to which the Company is a party or which are binding upon the Company providing for the issuance, disposition or acquisition of any of the capital stock of the Company (other than this Agreement).  There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company.  Except as specifically authorized by this Agreement or described on Schedule 5.05 attached hereto, there are no voting trusts, proxies or any other agreements or understandings with respect to the voting of the capital stock of the Company, and the Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock.  There are no outstanding rights to demand registration of securities of the Company or to sell securities of the Company in connection with a registration by the Company under the Securities Act.  None of the Company Entities have ever declared, set aside or paid any dividends or made any other distributions (whether in cash or kind) with respect to any shares of capital stock or other equity security of any Company Entity.

 


5.06   Financial Statements .  Attached hereto as Schedule 5.06(a) are the unaudited consolidated financial statements of the Company as of and for the year ended December 31, 2007 and the one (1)-month period ending January 31, 2008, which reflect the financial condition, and the results of operations and cash flows of the Company for such periods and at such dates; which consolidated financial statements shall include the Company, Atlas Respiratory Services, Inc. (“ Atlas ”), and Access Therapeutics, Inc. (“ Access ”) (collectively, the " Financial Statements ").   Attached hereto as Schedule 5.06(b) are the separate unaudited financial statements of Atlas and Access as of and for the year ended December 31, 2006 (the “ Acquisition Financial Statements ”), which Acquisition Financial Statements reflect the financial condition, results of operations and cash flows of Atlas and Access for such period and as of such date.  The Financial Statements and the Acquisition Financial Statements have been prepared in accordance with GAAP consistently applied except for (i) the omission of notes to unaudited Financial Statements and the Acquisition Financial Statements, and (ii) the fact that unaudited Financial Statements and the Acquisition Financial Statements are subject to normal and customary year-end adjustments which, in the aggregate, will not be material to the Financial Statements or the Acquisition Financial Statements taken as a whole.  Except as specifically set forth in Schedule 5.06(c) , the Financial Statements and the Acquisition Financial Statements present fairly in accordance with GAAP the financial position of the entities included within such financial statements as of the dates indicated, present fairly the results of the operations of such entities for the periods then ended and are in accordance with the books and records of such entities, which have been properly maintained and are complete and correct in all material respects.  None of the Company Entities is, or at any time has been, subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.

 

5.07   Absence of Changes .  Except as set forth in Schedule 5.07 attached hereto and except as contemplated by this Agreement, since December 31, 2007, the Company Entities have been operated only in the ordinary course, and no Company Entity has:

 

(a)   suffered any material adverse change in working capital, condition (financial or otherwise), assets, liabilities, reserves, business or operations;

 

(b)   redeemed or repurchased, directly or indirectly, any shares of capital stock or other equity security or declared, set aside or paid any dividends or made any other distributions (whether in cash or kind) with respect to any shares of capital stock or other equity security of the Company or any of its Subsidiaries;

 

(c)   issued, sold or transferred any equity securities, any securities convertible, exchangeable or exercisable into shares of capital stock or other equity securities, or warrants, options or other rights to acquire shares of capital stock or other equity securities, of any of the Company Entities;

 

(d)   paid, discharged or satisfied any Liability other than in the ordinary course of business;

 

(e)   written off as uncollectible any account receivable other than in the ordinary course of business;

 

(f)   compromised any debts, claims or rights or disposed of any of its properties or assets other than in the ordinary course of business;

 


(g)   entered into any commitments or transactions not in the ordinary course of business involving aggregate value in excess of One Hundred Thousand Dollars ($100,000) or made aggregate capital expenditures or commitments in excess of Fifty Thousand Dollars ($50,000);

 

(h)   made any material change in any method of accounting or accounting practice;

 

(i)   sold, assigned or transferred any material tangible assets other than in the ordinary course of business or any material Intellectual Property or other intangible assets;

 

(j)   subjected any of its assets, tangible or intangible, to any material Lien (other than Permitted Liens);

 

(k)   increased any salaries, wages or employee benefits or made any arrangement for payment of any bonus or special compensation for any officer or key  employee or fees to any medical director other than in the ordinary course of business;

 

(l)   hired or committed to hire any key employee or contracted or committed to contract with any medical director, or terminated or had resign any key employee or medical director;

 

(m)   terminated or amended any material contract, license or other instrument or suffered any loss or termination or threatened loss or termination of any existing material business arrangement or supplier; or

 

(n)   agreed, whether or not in writing, to take any action described in this Section 5.07 .

 

5.08   No Undisclosed Liabilities .  Except as listed in Schedule 5.08 attached hereto, the Company Entities do not have any material liabilities or obligations, whether accrued, absolute, contingent or otherwise, except for liabilities and obligations reflected in the Financial Statements or incurred in the ordinary course of business since the date of the most recent balance sheet included in the Financial Statements.

 

5.09   Litigation .  There is no Litigation pending, or, to the Knowledge of the Company, threatened, against any of the Company Entities, which would be reasonably likely to have a Company Material Adverse Effect, and, to the Knowledge of the Company, there is no basis for any such Litigation.   Schedule 5.09 attached hereto identifies all Litigation pending or threatened against the Company Entities. Except as listed in Schedule 5.09 attached hereto, there are no judgments against or consent decrees binding on the Company Entities, and there are no judgments or consent decrees relating to or which affect the Company Entities.  Except as listed in Schedule 5.09 attached hereto, there is no pending Litigation in which a Company Entity is a plaintiff or other applicant for relief, and there is no Litigation that any Company Entity intends to initiate against any other person.

 

5.10   No Violation of Law .  Except as listed in Schedule 5.10 attached hereto:

 

(a)   None of the Company Entities has been or is currently in material violation of any applicable foreign, federal, state or local Law, order, injunction or decree of any court, or any other requirement of any Governmental Authority.

 

(b)   None of the Company Entities is subject to any fine, penalty, Liability or disability as the result of a failure to comply with any requirement of foreign, federal, state or local Law, and no Company Entity has received any notice of such noncompliance.

 


5.11   Title to and Sufficiency of Assets .

 

(a)   Except as set forth in Schedule 5.11(a) attached hereto, the Company Entities have valid title to all of the personal and mixed, tangible and intangible property, rights and assets which the Company Entities purport to own, and a Company Entity owns such rights, assets and personal property free and clear of all Liens (other than Permitted Liens).   All of the assets of the Company Entities, whether owned or leased, will be in the possession and control of the Company Entities at the Closing, except for inventory and supply items used in the ordinary course of business prior to Closing.

 

(b)   Except as disclosed in Schedule 5.11(b) attached hereto, the Company Entities own all rights, properties, interests in properties and assets that are material to allowing the Surviving Corporation to continue the business and operations of the Company Entities after the Closing in a manner consistent with past practices.

 

5.12   Real and Personal Property .

 

(a)   Schedule 5.12(a) attached hereto contains a true and correct list of all real property leases involving the Company Entities, as lessee or lessor, of any real property (the “ Leased Real Property ”) and reflects its title, the date thereof, the names of the parties thereto at execution and street address of the leased premises, and including similar information with regard to any amendments to or assignments of such leases.  Each Company Entity, as applicable, has valid and binding leases for each such Leased Real Property, true and complete copies of such leases have been made available to Parent, and each party to such leases, whether a Company Entity or third party, (i) is current with respect to payments due under such leases, and (ii) has complied in all material respects with their respective obligations under such leases.  There are no material defaults under any such leases that remain uncured and no condition exists which, with the lapse of time or giving of notice, or both, would give rise to a material default under any such lease by any of the Company Entities or, to the Knowledge of the Company, any other party to such lease.

 

(b)   None of the Company Entities owns any real property or is obligated to acquire any real property.  Except as set forth in Schedule 5.12(b) attached hereto, to the Knowledge of the Company, the present zoning, subdivision, building and other ordinances and regulations applicable to the Leased Real Properties listed in Schedule 5.12(a) attached hereto permit the continued operation, use, and occupancy of such Leased Real Property for the conduct of the business of the Company Entities substantially in accordance with past practices, and, with respect to such Leased Real Property, the Company Entities are in material compliance with, and have received no notices of material violations of, any applicable zoning, subdivision or building regulation, ordinance or other Law or requirement.  To the Knowledge of the Company, no portion of the Leased Real Property listed in Schedule 5.12(a) attached hereto or any building, structure, fixture or improvement thereon, is the subject of, or affected by, any condemnation, taking, eminent domain or inverse condemnation proceeding currently instituted or pending, and none of the foregoing are, or, to the Knowledge of the Company will be, the subject of, or affected by, any such proceedings.

 

(c)   The tangible property of the Company Entities, whether real, personal or mixed, is in good operating condition and repair, ordinary wear and tear excepted.

 

5.13   Intellectual Property .

 

(a)   The Company Entities own or have a valid license or right to use, and upon consummation of the transactions contemplated by this Agreement will continue to own or have a valid license or right to use on the same terms and conditions as before the Closing.  Except as set forth in Schedule 5.13(a) attached hereto, all of the Intellectual Property is free and clear of all Liens and claims of infringement.  All material licenses for Intellectual Property are in full force and effect, and there exists no breach or violation of or default under any of such licenses by the Company Entities or, to the Knowledge of the Company, any other party to any such licenses or any event which, with or without notice or the lapse of time or both, would create a material breach or violation thereof or default thereunder by the Company Entities or, to the Knowledge of the Company, any other party to any such licenses.

 


(b)   Each Company Entity is not currently in receipt of any notice of any violation or infringement of, and has no reason to believe that the Intellectual Property materially violates or infringes, the rights of others with respect to any such matter.  No proceedings have been instituted or are pending or threatened, which challenge the rights of any of the Company Entities with respect to the Intellectual Property.  Except as set forth in Schedule 5.13(b) attached hereto, none of the Company Entities are obligated to pay any material recurring royalties or use fees to any Person with respect to Intellectual Property.  To the Knowledge of the Company, no Person or Persons are infringing any Intellectual Property right of any of the Company Entities.

 

5.14   Contracts and Commitments .

 

(a)   Schedule 5.14(a) attached hereto contains a complete and accurate list of all contracts, agreements, commitments, instruments and obligations (whether written or oral, proposed, contingent or otherwise) of the Company Entities concerning the following matters (collectively, the “ Company Agreements ”):

 

(i)           the lease, as lessee or lessor, or license, as licensee or licensor, or purchase or sale of any material personal property (tangible or intangible);

 

(ii)           the employment or engagement of any officer, director or employee, or any consultant or agent, other than those terminable at will without any severance obligation, and any covenant not to compete or separation agreement with any current or former officer, director or employee;

 

(iii)           the engagement of any medical director and any covenant not to compete or separation agreement with any current or former medical director;

 

(iv)           the provision for any payments or other benefits, directly or indirectly, as a result of a change in control of any of the Company Entities, including, without limitation, the transaction contemplated by this Agreement;

 

(v)           the incurrence of indebtedness or making of any loans or the granting of any Lien on any Company Entity’s assets;

 

(vi)           any arrangement between any Company Entity and any Affiliate of the Company Entities or any immediate family member of any such Affiliate;

 

(vii)           any arrangement limiting the freedom of any Company Entity to compete, solicit customers or solicit employees in any manner in any geographic area or line of business, or requiring any Company Entity to share profits;

 

(viii)           any arrangement not in the ordinary course of business under which any Company Entity has agreed to assume Liabilities of another party or indemnify or hold harmless another party;

(ix)           any charitable commitment in excess of Fifty Thousand Dollars ($50,000) in any calendar year;

 


(x)           any arrangement that would be reasonably likely to have a Company Material Adverse Effect;

 

(xi)           any power of attorney, whether limited or general, granted by or to any Company Entity;

 

(xii)           any joint venture agreement, acute services agreement or facility management agreement;

 

(xiii)           any arrangement with customers, patients, managed care organizations, third party payors, pharmacy benefit managers, or suppliers (including pharmaceutical and drug suppliers) that requires financial payments in the aggregate in excess of Fifty Thousand Dollars ($50,000) or performance over a period of more than ninety (90) calendar days; and

 

(xiv)           any other arrangement not in the ordinary course of business that requires performance for a period of more than ninety (90) calendar days or that requires aggregate payments in excess of Fifty Thousand Dollars ($50,000).

 

(b)   The Company has delivered or made available to Parent or its representatives true and complete copies of all of the written Company Agreements. Except as indicated in Schedule 5.14(b) attached hereto, the Company Agreements are valid and effective in accordance with their terms, and there is not under any of such Company Agreements (i) any existing or claimed default by any Company Entity or event which, with the notice or lapse of time, or both, would constitute a default by any Company Entity thereunder, or (ii) to the Knowledge of the Company, any existing or claimed default by any other party thereto or event which with notice or lapse of time, or both, would constitute a material default by any such party.  Except as indicated in Schedule 5.14(b) attached hereto, the continuation, validity and effectiveness of the Company Agreements will not be affected by the Merger, and the Merger will not result in a breach of or default by the Company Entities under, or require the Consent of any other party to, any of the Company Agreements.  There is no actual or written threatened termination, cancellation or limitation of any of the Company Agreements.

 

5.15   Employment and Labor Matters

 

(a)   The Company Entities are in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages and hours, and occupational safety and health, including Laws concerning unfair labor practices within the meaning of Section 8 of the National Labor Relations Act and the employment of non-residents under the Immigration Reform and Control Act of 1986; and the Company Entities have not received any written notice that they are subject to any fine, penalty, Liability or disability as the result of any violation of or failure to comply with any such Law.

 

(b)   Except as disclosed in Schedule 5.15(b) attached hereto, the Company Entities have not, directly or indirectly, extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan, to or for any director, officer or employee.

 

(c)   Except as disclosed in Schedule 5.15(c) attached hereto:

 


(i)           there are no material charges, governmental audits, investigations, administrative proceedings or complaints concerning the employment practices of the Company Entities pending or threatened before any federal, state or local agency or court and, to the Knowledge of the Company, no basis for any such matter exists;

 

(ii)           there are no material inquiries, investigations or monitoring of activities pending or threatened by any state professional board or agency charged with regulating the professional activities of any licensed, registered, or certified professional personnel employed by, credentialed or privileged by, or otherwise affiliated with the Company Entities;

 

(iii)           no Company Entity is a party to any union or collective bargaining agreement, no union attempts to organize its employees have been made, and no such attempts are now, to the Knowledge of the Company, threatened;

 

(iv)           none of the Company Entities has experienced any organized slowdown, work interruption, strike or work stoppage by any of its employees;

 

(v)           none of the Company Entities will incur any material Liability to any employee or violate any applicable Laws respecting employment and employment practices as a result of the Merger; and

 

(vi)           all persons and entities that have been treated as independent contractors by the Company Entities are properly treated as independent contractors under all applicable Laws, and none should have been treated as employees under applicable Law.

 

5.16   Employee Benefit Matters .

 

(a)   The Company has made available to Parent prior to the execution of this Agreement copies of all pension, retirement, profit-sharing, life insurance, medical, hospitalization, holiday, vacation, disability, dental, or vision plans, any written or unwritten incentive compensation, fringe benefit, payroll or employment practice, bonus, severance, sick pay, salary continuation, deferred compensation, supplemental executive compensation, employment agreements and consulting agreements, including "employee benefit plans" as that term is defined in Section 3(3) of ERISA, adopted, maintained by, sponsored in whole or in part by, or contributed to at any time by any of the Company Entities or any of their ERISA Affiliates for the benefit of employees of any of the Company Entities or retirees, their dependents or spouses, and directors, independent contractors, or other beneficiaries (collectively, the " Benefit Plans ").  Any Benefit Plan that is an "employee pension benefit plan," as that term is defined in Section 3(2) of ERISA, or an “employee welfare benefit plan,” as that term is defined in Section 3(1) of ERISA, is referred to herein as an " ERISA Plan ."  Each ERISA Plan that is also a "defined benefit plan" (as defined in Code Section 414(j)) is referred to herein as a " Pension Plan ."

 

(b)   For each Benefit Plan, the Company has delivered or made available to Parent true, correct and complete copies of all (i) trust agreements or other funding arrangements for such Benefit Plan (including insurance contracts) and all amendments thereto; (ii) determination letters (including determination letters for each prior version of such Benefit Plan and each plan that has been merged into such Benefit Plan), rulings, opinion letters, information letters or advisory opinions issued by the IRS, the Department of Labor or the Pension Benefit Guaranty Corporation; (iii) annual reports or returns, audited or unaudited financial statements, actuarial valuations and reports, and summary annual reports prepared for any Benefit Plan; (iv)  summary plan descriptions and any material modifications thereto; (v) copies of any filings with the IRS; (vi) all personnel, payroll and employment manuals and policies; (vii) all collective bargaining agreements; (viii) all contracts with third-party administrators, actuaries, investment managers, consultants and other independent contractors that relate to Benefit Plans; and (ix) IRS Forms 5500 filed for each of the most recent three plan years for Benefit Plans, including all schedules thereto and opinions of independent accountants.

 


(c)   All Benefit Plans are in material compliance with the applicable terms of ERISA, the Code, all applicable state and federal securities laws, and any other applicable Laws.  Each ERISA Plan (and all prior versions) that is intended to be qualified under Code Section 401(a) has received a favorable determination letter from the IRS, and neither any of the Company Entities nor any ERISA Affiliate is aware of any circumstances likely to result in revocation of any such favorable determination letter.  All plan documents, annual reports or returns, audited or unaudited financial statements, actuarial valuations, summary annual reports and summary plan descriptions issued with respect to all ERISA Plans have been timely filed with the IRS, the Department of Labor or distributed to participants, as required by Law.

 

(d)   No Pension Plan is or has been, and neither any of the Company Entities nor any ERISA Affiliate has withdrawn from, a multiemployer plan within the meaning of Section 3(37) of ERISA.  Except as disclosed in Schedule 5.16(d) attached hereto, neither the Company Entities nor any ERISA Affiliate has any liability to the Pension Benefit Guaranty Corporation with respect to any Pension Plan.  No Pension Plan that is subject to the minimum funding standards of Code Section 412 has an "accumulated funding deficiency" as defined in Code Section 412 and Section 302 of ERISA, whether or not waived.  No Pension Plan has any "unfunded current liability," as that term is defined in Section 302(d)(8)(A) of ERISA or a "liquidity shortfall," as defined in Code 412, and the fair market value of the assets of any such plan exceeds the present value of all benefits (whether vested or not) accrued to date by all present and former participants in such Pension Plan determined on a plan termination basis.  No lien exists or can be expected to exist under Code Section 412(n) or ERISA 302(f), and no tax has been imposed or can be expected to be imposed under Code Section 4971, with respect to any Pension Plan.  Neither any of the Company Entities nor any ERISA Affiliate has provided, or is required to provide, security to any Pension Plan pursuant to Code Section 401(a)(29).

 

(e)   Since the date of the most recent actuarial valuation, there has been (i) no material change in the financial position of any Pension Plan, (ii) no change in the actuarial assumptions with respect to any Pension Plan, and (iii) no increase in benefits under any Pension Plan as a result of plan amendments or changes in applicable Law that is reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect or to materially adversely affect the funding status of any such plan.

 

(f)   No "party in interest" (as defined in Section 3(14) of ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of the Code) with respect to any Benefit Plan has engaged in any nonexempt "prohibited transaction" (described in Section 4975(c) of the Code or Section 406 of ERISA).  No Liability under Subtitle C or D of Title IV of ERISA has been or is reasonably expected to be incurred by any of the Company Entities or any ERISA Affiliate with respect to any ongoing, frozen, or terminated single-employer plan.  There has been no (i) "reportable event" (as defined in Section 4043 of ERISA), or event described in Section 4041, 4042, 4062 (including 4062(e)), Section 4063, 4064 or 4069 of ERISA); or (ii) termination or partial termination or withdrawal or partial withdrawal with respect to any Benefit Plan that any of the Company Entities or any ERISA Affiliate maintains or contributes to or has maintained or contributed to.

 

(g)   Except as disclosed in Schedule 5.16(g) attached hereto or as required under Section 601 et. seq. of ERISA or Code Section 4980B, neither any of the Company Entities nor any ERISA Affiliate maintains or has ever maintained a Benefit Plan providing welfare benefits (as defined in ERISA Section 3(1)) to employees after retirement or other separation from service.

 


(h)   There are no restrictions on the rights of any of the Company Entities or any ERISA Affiliate to amend or terminate any Benefit Plan without incurring any Liability thereunder.  No tax under Code Sections 4980B or 5000 has been incurred with respect to any Benefit Plan and no circumstances exist that could give rise to such taxes.

 

(i)   Except as disclosed in Schedule 5.16(i) attached hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, or otherwise) becoming due to any director or any employee of any of the Company Entities or any ERISA Affiliate from any of the Company Entities or any ERISA Affiliate under any Benefit Plan or otherwise; (ii) increase any benefits otherwise payable under any Benefit Plan; or (iii) result in any acceleration of the time of payment or vesting of any such benefit.  Except as disclosed in Schedule 5.16(i) attached hereto, no payment that is owed or may become due to any stockholder, director, officer, employee or agent of any of the Company Entities or an ERISA Affiliate will be non-deductible or subject to tax under Code Section 280G or 4999; and none of the Company Entities and any ERISA Affiliate be required to “gross up” or otherwise compensate such individuals because of the imposition of any excise tax upon payment to such individual.  No event has occurred or circumstances exist that could result in a material increase in premium costs of any Benefit Plans that are insured, or a material increase in any benefit costs of any Benefit Plans that are self-insured.

 

(j)   The Company Entities and all ERISA Affiliates have performed all of their respective obligations under the Benefit Plans.  The Company Entities and/or their ERISA Affiliates have made all required contributions and payments under each Benefit Plan for all periods through and including the Closing Date.  Other than routine claims for benefits, no claim against or legal proceeding involving any Benefit Plan is pending or, to the Knowledge of the Company or any ERISA Affiliate, threatened.

 

(k)   Except as disclosed in Schedule 5.16(k) attached hereto, all individuals participating in (or eligible to participate in) any ERISA Plan maintained or contributed to by any of the Company Entities or any ERISA Affiliate are common-law employees of such Company Entity or ERISA Affiliate.

 

(l)   Neither any of the Company Entities nor any ERISA Affiliate maintains or sponsors or has ever maintained or sponsored any plan providing for the issuance, transfer or grant of any capital stock of any of the Company Entities or any interest in respect of any capital stock of any of the Company Entities (including any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock-based performance units).

 

5.17   Insurance Policies .

 

(a)   Schedule 5.17 attached hereto lists each such insurance policy, the holder of the insurance policy, the named insured(s) on such insurance policy, the type of coverage, the amount of coverage, the deductible or self-insurance provision and the retroactive date of such insurance policy.  Correct and complete copies of such policies have been made available to Parent by the Company on or before the date of this Agreement.  All such policies are in full force and effect and enforceable in accordance with their terms.  The Company Entities are not currently in default regarding the provisions of any such policy, including, without limitation, failure to make timely payment of all premiums due thereon, and none of the Company Entities have failed to file any notice or present any claim thereunder in due and timely fashion.  The Company Entities have not been refused, or denied renewal of, any insurance coverage by insurance companies offering such insurance in connection with the ownership or use of the assets or the operation of the Company Entities.  The Company Entities have provided to Parent correct and complete copies of all insurance audit reports, loss prevention reports, all claims made and loss history reports in respect of any insurance maintained by the Company Entities or any predecessor of the Company Entities, including under any organized plan of self insurance during the past five (5) years.

 


(b)     To the Knowledge of the Company, the licensed professional employees of the Company Entities (i) have not, in the last seven (7) years or such shorter period as they have been employed by the Company Entities or their predecessor companies, filed a written application for professional malpractice insurance coverage which has been denied by an insurance agency or carrier;  (ii) have been continuously insured for professional malpractice claims during the same period; and     (iii) are not in default with respect to any provision contained in any such policy and none of them has failed to give any notice or present any claim under any such policy in due and timely fashion.

 

5.18   Environmental Matters .

 

(a)   Except as set forth in Schedule 5.18(a) attached hereto, the Company Entities and their Leased Real Property are, and have been, in material compliance with Environmental Laws.  Except as disclosed in Schedule 5.18(a) attached hereto, there is no Litigation pending or threatened before any Governmental Authority or other forum in which the Company Entities or any of their Leased Real Property has been, or with respect to pending Litigation, may be named as a defendant (i) for alleged noncompliance or with Liability under any Environmental Law, or (ii) relating to the release, discharge, spillage, or disposal into the environment of any Hazardous Material, whether or not occurring at, on, under, adjacent to, or affecting a site currently or formerly leased, or operated by the Company Entities or any of their Leased Real Property.

 

(b)   Except as disclosed in Schedule 5.18(b) attached hereto, during the period of the Company Entity’s operation of any of their current Leased Real Property, there have been no releases, discharges, spillages, or disposals of Hazardous Material in, on, under, adjacent to, or affecting such Leased Real Property. Prior to the period of the Company Entity’s operation of any of its current Leased Real Property, to the Knowledge of the Company, there were no releases, discharges, spillages, or disposals of Hazardous Material in, on, under or affecting any such properties.

 

(c)   None of the Company Entities have at any time been named as or alleged in writing to be a responsible party or potentially responsible party under any Environmental Law in connection with the release, disposal, transportation or arrangement for the release, disposal or transportation of Hazardous Materials.

 

(d)   The Company Entities have obtained all permits, licenses, approvals, Consents, Orders, and authorizations which are required under any Environmental Law in connection with the ownership, use, or lease of its assets (“ Environmental Permits ”).   Schedule 5.18(d) attached hereto contains a true, complete and accurate listing and description of, and the Company Entities have delivered, or caused to be delivered or made available, to Parent true and complete copies of each Environmental Permit.  Except as described in Schedule 5.18(d) attached hereto, the Company Entities are in compliance with each such Environmental Permit, and no Environmental Permit restricts the Company Entities from operating any equipment covered by such Environmental Permit as currently operated.

 


(e)   The Company has delivered, or caused to be delivered or made available, to Parent true and complete copies of each contract or agreement under which the Company Entities retained Liability for environmental matters, agreed to indemnify third parties with respect to environmental matters or is indemnified by a third party with respect to environmental matters.

 

5.19   Taxes .

 

(a)   Except as disclosed in Schedule 5.19(a) attached hereto, all Company Entities have timely filed with the appropriate Taxing authorities all Tax Returns in all jurisdictions in which Tax Returns are required to be filed, and such Tax Returns are correct and complete in all material respects.  None of the Company Entities is the beneficiary of any extension of time within which to file any Tax Return.  All Taxes of the Company Entities (whether or not shown on any Tax Return) have been fully and timely paid.  There are no Liens for any Taxes (other than a Lien for current real property or ad valorem Taxes not yet due and payable) on any of the Assets of any of the Company Entities.  No claim has ever been made by an authority in a jurisdiction where any Company Entity does not file a Tax Return that such Company Entity is or may be subject to Taxes by that jurisdiction.  Except as disclosed in Schedule 5.19(a) attached hereto, all required estimated Tax payments sufficient to avoid any underpayment penalties have been made by or on behalf of the Company Entities.

 

(b)   All deficiencies asserted or assessments made as a result of any examinations by any Governmental Authority of the Tax Returns of, or including, any Company Entity have been fully paid, and there are no other audits or investigations by any Governmental Authority in progress, nor has any of the Company Entities received any notice from any Governmental Authority that it intends to conduct such an audit or investigation.  No issue has been raised by a Governmental Authority in any prior examination of any Company Entity which, by application of the same or similar principles, could reasonably be expected to result in a proposed deficiency for any subsequent taxable period.

 

(c)   Each Company Entity has complied with all applicable Laws, rules and regulations relating to the withholding of Taxes and the payment thereof to appropriate authorities, including Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee or independent contractor, and Taxes required to be withheld and paid pursuant to Sections 1441 and 1442 of the Code or similar provisions under foreign Law.

 

(d)   The unpaid Taxes of each Company Entity (i) did not, as of the most recent fiscal month end, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto) for such Company Entity and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of the Company Entities in filing their Tax Returns.

 

(e)   None of the Company Entities is a party to any Tax allocation or sharing agreement and none of the Company Entities has been a member of an affiliated group filing a consolidated federal income Tax Return or has any Tax Liability of any Person under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign Law, or as a transferee or successor, by contract or otherwise.

 

(f)   During the five-year period ending on the date hereof, none of the Company Entities was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

 


(g)   None of the Company Entities has made any payments, is obligated to make any payments, or is a party to any contract that could obligate it to make any payments that could be disallowed as a deduction under Section 280G or 162(m) of the Code.  None of the Company Entities has been or will be required to include any adjustment in taxable income for any Tax period (or portion thereof) pursuant to Section 481 of the Code or any comparable provision under state or foreign Tax Laws as a result of transactions or events occurring prior to the Closing.  The net operating losses of the Company Entities are not subject to any limitation on their use under the provisions of Sections 382 or 269 of the Code or any other provisions of the Internal Revenue Code or the Treasury Regulations dealing with the utilization of net operating losses other than any such limitations as may arise as a result of the consummation of the transactions contemplated by this Agreement.

 

(h)   Each of the Company Entities is in compliance with, and its records contain all information and documents (including properly completed IRS Forms W-9) necessary to comply with, all applicable information reporting and Tax withholding requirements under federal, state, and local Tax Laws, and such records identify with specificity all accounts subject to backup withholding under Section 3406 of the Code.

 

(i)   No Company Entity or any other Person on its behalf has (i) filed a consent pursuant to Section 341(f) of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003) or agreed to have Section 341(f)(2) of the Code (as in effect prior to the repeal under the Jobs and Growth Tax Reconciliation Act of 2003) apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by any Company Entity, (ii) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of Law or has any Knowledge that any Governmental Authority has proposed any such adjustment, or has any application pending with any Governmental Authority requesting permission for any changes in accounting methods that relate to a Company Entity, (iii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to a Company Entity, (iv) requested any extension of time within which to file any Tax Return, which Tax Return has since not been filed, (v) granted any extension or waived the statute of limitations for the assessment or collection of Taxes, which Taxes have not since been paid, or (vi) granted to any Person any power of attorney that is currently in force with respect to any Tax matter.

 

(j)   There is no taxable income of any Company Entity that will be required under applicable Tax Law to be reported by Parent or any of its Affiliates, including a Company Entity, for a taxable period beginning after the Closing Date which taxable income was realized prior to the Closing Date except for potential taxable income as a result of two installment sales of certain assets of Atlas Respiratory Services, Inc. described on Schedule 5.19(j) attached hereto.

 

(k)   No Company Entity has or has had in any foreign country a permanent establishment in any country other than the United States, or has engaged in a trade or business in any country other than the United States that subjected it to tax in such country.

 

(l)   Each of the Company Entities has disclosed on its federal income Tax Returns all positions taken therein that could give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Code.

 

(m)   No Company Entity has participated in any reportable transaction, as defined in Treasury Regulation Section 1.6011-4(b)(1), or a transaction substantially similar to a reportable transaction.

 

(n)   Neither the Company nor any of its Subsidiaries has an overall foreign loss within the meaning of Section 904(f)(2) of the Code.

 


5.20   Licenses, Authorizations and Provider Programs .

 

(a)   Except as set forth in Schedule 5.20(a) attached hereto, each of the Company Entities holds all material licenses, accreditations, permits and authorizations required by Law or ruling of any Governmental Authority necessary to operate the business of such Company Entity as it is presently conducted.  Except as disclosed in Schedule 5.20(a) attached hereto, each of the Company Entities is certified for participation and reimbursement under Titles XVIII and XIX of the Social Security Act (the “ Medicare and Medicaid Programs ”) (Medicare and Medicaid Programs and such other similar federal, state or local reimbursement or governmental programs for which the Company Entities are eligible are hereinafter referred to collectively as the “ Government Programs ”) and has current provider agreements for such Government Programs and with such private non-governmental programs, including without limitation any private insurance program, under which they are presently receiving payments (such non-governmental programs herein referred to as “ Private Programs ”).  The Company has provided to Parent a correct and complete list of such licenses, accreditations, permits and other authorizations, and has made available to Parent all provider agreements under Government Programs pursuant to which the Company Entities participate.  True, complete and correct copies of all surveys of the facilities operated by the Company Entities conducted in connection with any Government Program, Private Program or licensing or accrediting body during the past five (5) years have been made available to Parent.

 

(b)   Except as disclosed in Schedule 5.20(b) attached hereto, no material violation, default, order or deficiency exists with respect to any material licenses, accreditations, permits or authorizations required by Law or ruling of any Governmental Authority necessary to operate the business of the Company Entities as presently conducted.  To the Knowledge of the Company, no employee, agent or contractor of any Company Entity has been excluded from or prohibited from providing services under any federal or state health care program, including but not limited to Medicare or Medicaid.  Except as listed in Schedule 5.20(b) , none of the Company Entities has received any notice of any action pending or recommended by any state or federal agencies to revoke, limit, withdraw or suspend any license, right or authorization, or to terminate the participation of any Company Entity in any Government Program or material Private Program.  No event has occurred that, with the giving of notice, the passage of time, or both, would constitute grounds for a material violation, order or deficiency with respect to any material licenses, accreditations, permits or authorizations required by Law or ruling of any Governmental Authority necessary to operate the business of the Company Entities as presently conducted or to revoke, limit, withdraw or suspend any such license, accreditation, permit or authorization or to terminate or modify the participation of any Company Entity in any Government Program or material Private Program.  There has been no decision to terminate or not to renew any provider or third-party payor agreement of any Company Entity.  Except as listed in Schedule 5.20(b) attached hereto, no Consent or approval of, prior filing with or notice to, or any action by, any governmental body or agency or any other third party is required in connection with any such license, right or authorization, or Government or Private Program, by reason of the Merger, and the continued operation of the business of the Company Entities by the Surviving Corporation after Closing on a basis consistent with past practices.

 

(c)   Except as disclosed in Schedule 5.20(c) attached hereto, the Company Entities have timely filed all billings required to be filed prior to the date hereof with respect to the Government and Private Programs, all fiscal intermediaries and other insurance carriers.  All such billings are complete and accurate in all material respects and have been prepared in compliance with all applicable Laws and principles governing reimbursement and payment claims. Except as set forth on Schedule 5.20(c) attached hereto, the Company Entities have paid or caused to be paid all known and undisputed refunds, overpayments, discounts or adjustments that have become due pursuant to such billings, and no Company Entity has any material Liability under any Government Program or Private Program for any refund, overpayment, discount or adjustment, except for matters occurring in the ordinary course of business consistent with past practice and for which adequate reserves are reflected in the Financial Statements.  Except as set forth in Schedule 5.20(c) attached hereto, (i) there are no pending appeals, adjustments, challenges, audits, claims, or notices of intent to audit such prior billings, and (ii) during the last two years the Company Entities have not been audited, examined or otherwise by any Government or Private Program.  There are no reports required to be filed by the Company Entities in order to be paid under any Government or Private Program for services rendered in connection with the business of the Company Entities.   Except as set forth in Schedule 5.20(c) attached hereto, there are no payments being withheld by any Private or Government Program pending the resolution of any survey, audit, investigation or appeal with respect to the operations or billing practices of any facility owned, operated or managed by any of the Company Entities.

 


(d)   Except as disclosed in Schedule 5.20(d) attached hereto, the Company Entities are not subject to the terms of any corporate integrity agreements, corporate integrity programs, compliance plans or similar agreements with a Governmental Authority.

 

5.21   Inspections and Investigations .  Except as set forth and described in Schedule 5.21 attached hereto, (i) no Company Entity’s right to receive reimbursements pursuant to any Government Program or Private Program has been terminated or otherwise adversely affected in any material respect as a result of any investigation or action whether by any Governmental Authority or other third party, (ii) neither any of the Company Entities, nor to the Knowledge of the Company, any licensed professional or other individual who provides services in connection with the operation of the facilities operated by the Company Entities has, during the past three (3) years, been the subject of any inspection, investigation, survey, audit, monitoring or other form of review by any governmental regulatory entity, professional review organization, accrediting organization or certifying agency based upon any alleged improper activity on the part of such individual, and no Company Entity has received any notice of deficiency during the past three years that has not been corrected in the ordinary course of business, (iii) there are not presently, and at the Closing Date there will not be, any outstanding deficiencies of any governmental authority having jurisdiction over any of the Company Entities, or requiring conformity to any applicable agreement, statute, regulation, ordinance or bylaw, including but not limited to, the Government Programs and Private Programs, and (iv) there is not any written notice of any claim, requirement or demand of any licensing or certifying agency or other third party supervising or having authority over the Company Entities to rework or redesign any part thereof or to provide additional furniture, fixtures, equipment, appliances or inventory so as to conform to or comply with any existing law, code, rule, regulation or standard.  The Company has made available to Parent true, correct and complete copies of all reports, correspondence, notices and other documents relating to any matter described or referenced in this Section 5.21 .

 

5.22   Certain Relationships .  Except as set forth in Schedule 5.22 attached hereto, neither any of the Company Entities nor, to the Knowledge of the Company, any of their respective predecessors has:

 

(a)   Offered, paid, solicited or received anything of value, paid directly or indirectly, overtly or covertly, in cash or in kind (“ Remuneration ”) to or from any physician, family member of a physician, or an entity in which a physician or physician family member has an ownership or investment interest;

 

(b)   Offered, paid, solicited or received any Remuneration (excluding fair market value payments for equipment or supplies) to or from any healthcare provider, pharmacy, drug or equipment supplier, distributor or manufacturer;

 


(c)   Offered, paid, solicited or received any Remuneration to or from any person or entity in order to induce business, including, but not limited to, payments intended not only to induce referrals of patients, but also to induce the purchasing, leasing, ordering or arrangement for any good, facility, service or item;

 

(d)   Entered into any joint venture, partnership, co-ownership or other arrangement involving any ownership or investment interest by any physician, or family member of a physician, or an entity in which physician or physician family member has an ownership or investment interest, directly or indirectly, through equity, debt, or other means;

 

(e)   Entered into any joint venture, partnership, co-ownership or other arrangement involving any ownership or investment interest by any person or entity that is or was in a position to make or influence referrals, furnish items or services to, or otherwise generate business for any of the Company Entities; or

 

(f)   Entered into any agreement providing for the referral of any patient for the provision of goods or services by any of the Company Entities, or payments by any of the Company Entities as a result of any referrals of patients to any of the Company Entities.

 

5.23   Stark; Fraud and Abuse; False Claims; HIPAA .  Neither any of the Company Entities nor, to the Knowledge of the Company, any of their respective predecessors has engaged in any activities that are prohibited under 42 U.S.C. § 1320a-7b, 42 U.S.C. § 1395nn or 31 U.S.C. § 3729-3733 (or other federal or state statutes related to false or fraudulent claims) or the regulations promulgated thereunder pursuant to such statutes, or related state or local statutes or regulations, or which are prohibited by rules of professional conduct, including but not limited to the following: (a) knowingly and willfully making or causing to be made a false statement or representation of a fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a fact for use in determining rights to any benefit or payment; (c) failing to disclose Knowledge by a claimant 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 fraudulently to secure such benefit or payment; and (d) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash


SITE SEARCH

AGREEMENTS / CONTRACTS

Document Title:

Entire Document: (optional)

Governing Law:(optional)
 

CLAUSES

Search Contract Clauses >>

Browse Contract Clause Library>>

Close this window