<PAGE>
EXECUTION COPY
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by
and among
HHS MERGER CORP.
HEMOPHILIA HEALTH SERVICES, INC.
and
HRA HOLDING CORP.
June 4, 2004
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S>
<C>
ARTICLE I THE
MERGER..........................................................................
2
SECTION 1.01 The
Merger................................................................
2
SECTION 1.02 Effective
Time............................................................
2
SECTION 1.03 Effects of the
Merger.....................................................
2
SECTION 1.04 Certificate of Incorporation and
Bylaws...................................
3
SECTION 1.05
Directors.................................................................
3
SECTION 1.06
Officers..................................................................
3
ARTICLE II CONVERSION OF SECURITIES; MERGER
CONSIDERATION.....................................
3
SECTION 2.01 Capital
Stock.............................................................
3
SECTION 2.02 Payment
Procedures........................................................
7
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS................................
8
SECTION 3.01
Authority.................................................................
8
SECTION 3.02 Consents and Approvals; No
Violations.....................................
9
SECTION 3.03 Title to
Shares...........................................................
9
SECTION 3.04 Sole Representations and
Warranties.......................................
9
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE COMPANY......................................
9
SECTION 4.01 Organization; Good
Standing...............................................
10
SECTION 4.02 Capitalization; Title to
Shares........................................... 10
SECTION 4.03
Subsidiaries..............................................................
11
SECTION 4.04 Authority Relative to this
Agreement...................................... 11
SECTION 4.05 Consents and Approvals; No
Violations..................................... 11
SECTION 4.06 Financial Statements and Accounting
Controls.............................. 12
SECTION 4.07 Absence of Undisclosed
Liabilities........................................ 13
SECTION 4.08 Absence of Certain Changes or
Events...................................... 13
SECTION 4.09 Contracts and
Commitments.................................................
14
SECTION 4.10 Real
Property.............................................................
15
SECTION 4.11 Environmental
Matters.....................................................
16
SECTION 4.12 Intellectual Property
Rights.............................................. 17
SECTION 4.13
Licenses..................................................................
17
SECTION 4.14 Title to
Assets...........................................................
17
</TABLE>
i
<PAGE>
<TABLE>
<S>
<C>
SECTION 4.15 Corporate Minute
Books....................................................
18
SECTION 4.16
Taxes.....................................................................
18
SECTION 4.17 Employees; Benefit
Plans..................................................
20
SECTION 4.18
Insurance.................................................................
22
SECTION 4.19
Litigation................................................................
22
SECTION 4.20 Compliance with
Laws......................................................
22
SECTION 4.21 Customers and
Suppliers...................................................
23
SECTION 4.22 Certification for Reimbursement; Reimbursement from
Third-Party Payors.... 23
SECTION 4.23.
Notices..................................................................
24
SECTION 4.24 Inspections and
Investigations............................................
24
SECTION 4.25 Certain
Relationships.....................................................
24
SECTION 4.26 Stark; Fraud and Abuse; False Claims; Rates and
Reimbursement Policies.... 26
SECTION 4.27 Changes in
Laws...........................................................
26
SECTION 4.28 Controlled
Substances.....................................................
26
SECTION 4.29
Inventories...............................................................
27
SECTION 4.30 Absence of Certain Business
Practices..................................... 27
SECTION 4.31. Transactions with
Affiliates.............................................
27
SECTION 4.32 Notes; Accounts Receivable;
Indebtedness.................................. 28
SECTION 4.33 Brokers, Finders and Investment
Bankers................................... 28
SECTION 4.34 Sole Representations and
Warranties....................................... 28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUBSIDIARY................. 28
SECTION 5.01 Organization; Good
Standing...............................................
29
SECTION 5.02 Authority Relative to this
Agreement...................................... 29
SECTION 5.03 Consents and Approvals; No
Violations..................................... 29
SECTION 5.04
Litigation................................................................
29
SECTION 5.05 Brokers, Finders and Investment
Bankers................................... 30
ARTICLE VI CONDUCT AND TRANSACTIONS PRIOR
TO CLOSING.......................................... 30
SECTION 6.01 Conduct of
Business.......................................................
30
SECTION 6.02 Certain Changes or
Events.................................................
30
SECTION 6.03 Access to Information;
Confidentiality.................................... 32
</TABLE>
ii
<PAGE>
<TABLE>
<S>
<C>
SECTION 6.04 Additional
Agreements.....................................................
32
SECTION 6.05
Filings...................................................................
33
SECTION 6.06 Public
Disclosure.........................................................
33
SECTION 6.07 No Solicitation of
Transactions...........................................
34
SECTION 6.08 Supplements to
Schedules..................................................
34
SECTION 6.09
Insurance.................................................................
34
SECTION 6.10 Director and Officer
Indemnification...................................... 34
SECTION 6.11 Notification of
Changes...................................................
35
SECTION 6.12 Shareholder
Approval......................................................
35
SECTION 6.13 Drag
Along................................................................
36
SECTION 6.14 Additional Financial
Statements........................................... 36
SECTION 6.15 Efforts to Obtain
Consents................................................
36
ARTICLE VII CONDITIONS TO
CLOSING.............................................................
36
SECTION 7.01 Conditions to Obligations of Parent and Acquisition
Subsidiary............ 36
SECTION 7.02 Conditions to Obligations of the Company and the
Shareholders............. 38
ARTICLE VIII
CLOSING..........................................................................
38
SECTION 8.01 Closing
Date..............................................................
38
SECTION 8.02 Deliveries by the
Company.................................................
39
SECTION 8.03 Deliveries by Parent and Acquisition
Subsidiary........................... 39
SECTION 8.04 Further
Assurances........................................................
39
ARTICLE IX SURVIVAL;
INDEMNIFICATION..........................................................
40
SECTION 9.01 Survival Past
Closing.....................................................
40
SECTION 9.02 Indemnification by the
Shareholders....................................... 40
SECTION 9.03 Indemnification by Parent and Acquisition
Subsidiary...................... 41
SECTION 9.04 Limitation on
Indemnification.............................................
41
SECTION 9.05 Exclusive
Remedy..........................................................
42
SECTION 9.06 Indemnification
Procedures................................................
42
SECTION 9.07 Reduction in Purchase
Price............................................... 44
ARTICLE X TERMINATION OF
AGREEMENT............................................................
44
SECTION 10.01 Events of
Termination....................................................
44
SECTION 10.02 Effect of
Termination....................................................
45
SECTION 10.03 Delay of
Closing.........................................................
45
ARTICLE XI
NOTICES............................................................................
46
</TABLE>
iii
<PAGE>
<TABLE>
<S>
<C>
ARTICLE XII
MISCELLANEOUS.....................................................................
47
SECTION 12.01
Expenses.................................................................
47
SECTION 12.02 Entire
Agreement.........................................................
47
SECTION 12.03 Amendments and
Waivers...................................................
47
SECTION 12.04
Successors and
Assigns...................................................
48
SECTION 12.05 Governing
Law............................................................
48
SECTION 12.06
Severability.............................................................
48
SECTION 12.07 No Third-Party
Beneficiaries.............................................
48
SECTION 12.08
Remedies.................................................................
48
SECTION 12.09
Captions.................................................................
49
SECTION 12.10
Counterparts.............................................................
49
SECTION 12.11 Certain
References.......................................................
49
SECTION 12.12
Interpretation...........................................................
49
SECTION 12.13 Guaranty by
Parent.......................................................
49
SECTION 12.14 Shareholder
Representative...............................................
49
SECTION 12.15 Tax
Matters..............................................................
51
SECTION 12.16 Employee Benefit
Matters.................................................
52
SECTION 12.17 Effect of
Investigation..................................................
52
SECTION 12.18 Defined
Terms............................................................
52
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement
and plan of merger dated as of June 4, 2004 (this "Agreement")
by and among Hemophilia Health Services,
Inc., a Tennessee corporation
("Parent"), HHS Merger Corp., a New Jersey
corporation ("Acquisition
Subsidiary") and a wholly owned subsidiary
of the Parent, HRA Holding Corp., a
New Jersey corporation (the "Company"), and
those shareholders of the Company
listed on the signature pages hereto (the
"Shareholders").
W I T N E S S E T H:
WHEREAS,
Hemophilia Resources of America, Inc. ("HRA"), a New Jersey
corporation, is a wholly-owned subsidiary
of the Company;
WHEREAS,
HRA is engaged in the business (the "Business") of providing
comprehensive services for the treatment
and management of hemophilia;
WHEREAS,
the Company engaged an investment banking firm to solicit
offers
to acquire the Company and, as a result of
a structured auction process, the
Company, with the assistance of its
investment banker, has chosen Parent from
among several interested parties to acquire
the Company;
WHEREAS,
Acquisition Subsidiary desires to merge with and into the
Company
and the Company desires to merge with
Acquisition Subsidiary, upon the terms and
subject to the conditions set forth herein,
whereby each issued and outstanding
share of common stock, no par value per
share, of the Company (the "Company
Common Stock") and each issued and
outstanding share of preferred stock, par
value $.01 per share, of the Company (the
"Company Preferred Stock", together
with the Company Common Stock, the "Company
Capital Stock") will be converted
into cash and each outstanding option or
similar right to purchase shares of
Company Capital Stock (a "Company Stock
Right") will be canceled and the holders
thereof will receive cash, in such amounts,
in such proportion and in such
manner as hereinafter described;
WHEREAS,
the Boards of Directors of the Company, Parent and Acquisition
Subsidiary have each (i) determined that
the Merger (as defined in Section 1.01)
is advisable, fair and in the best
interests of their respective shareholders
and (ii) approved the Merger upon the terms
and subject to the conditions set
forth in this Agreement;
WHEREAS,
Parent, as the sole shareholder of Acquisition Subsidiary, has
approved this Agreement, the Merger and the
transactions contemplated by this
Agreement;
WHEREAS,
this Agreement and the Merger have been approved by the
affirmative vote of holders of at least a
majority of the outstanding shares of
Voting Common Stock, Series A Preferred
Stock and Series B Preferred Stock
voting together as a single class and by a
majority of the outstanding shares of
Voting Common Stock, Series A Preferred
Stock and Series B Preferred Stock each
voting separately as a single class
(collectively, the "Requisite Vote"), which
vote has occurred on the date hereof by
means of a written consent in accordance
with Section 14A:5-6 of the NJBCA with
notice to all other holders of Voting
Common Stock, Series A Preferred Stock and
Series B Preferred Stock to be sent
to such holders in accordance with Section
14A:5-6 of the NJBCA as described in
Section 6.12 hereof; and
<PAGE>
WHEREAS,
concurrent with the execution of this Agreement, (i) Mr.
Scudiery
has agreed to terminate his existing
employment agreement and has entered into a
consulting agreement with Parent, (ii)
Messrs. Scudiery, Gleason, Smith and
Bernocchi have entered into non-competition
agreements with Parent, (iii)
Messrs. Smith and Bernocchi have agreed to
terminate their existing employment
agreements and have entered into new
employment agreements with the Company, and
(iv) certain other employees of the Company
or HRA have entered into
non-competition agreements with the Company
or HRA, respectively, all of which
will become effective only if and when the
Effective Time shall occur.
NOW
THEREFORE, in consideration of the promises and the mutual
agreements,
covenants, representations and warranties
herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION
1.01. The Merger. Upon the terms and subject to the conditions
set
forth in this Agreement, and in accordance
with the NJBCA, Acquisition
Subsidiary shall be merged with and into
the Company at the Effective Time (as
defined in Section 1.02) (the "Merger"). At
the Effective Time, the separate
corporate existence of Acquisition
Subsidiary shall cease and the Company shall
continue as the surviving corporation (the
"Surviving Corporation") and shall
succeed to and assume all the rights and
obligations of Acquisition Subsidiary
in accordance with the NJBCA.
SECTION
1.02. Effective Time. The parties shall prepare, execute and
deliver a certificate of merger and/or
other appropriate documents (in any such
case, the "Certificate of Merger") in
accordance with the relevant provisions of
the NJBCA and file same with the Secretary
of State of the State of New Jersey.
The Merger shall become effective upon the
filing of the Certificate of Merger
with the Secretary of State of the State of
New Jersey or at such subsequent
time or date as Parent and the Company
shall agree and specify in the
Certificate of Merger (the "Effective
Time").
SECTION
1.03. Effects of the Merger. At and after the Effective Time,
the
Surviving Corporation shall possess all the
rights, privileges, powers,
immunities, purposes and franchises, both
public and private, of each of the
Company and Acquisition Subsidiary; all
real property and personal property,
tangible and intangible, of every kind and
description, belonging to each of the
Company and the Acquisition Subsidiary
without further act or deed and the title
to any real estate, or any interest
therein, vested in the Company or
Acquisition Subsidiary shall not revert or
be in any way impaired by reason of
the Merger; the Surviving Corporation shall
be liable for all the obligations
and liabilities of each of the Company and
Acquisition Subsidiary; any claim
existing or action or proceeding pending by
or against the Company or
Acquisition Subsidiary may be enforced as
if the Merger had not taken place; and
neither the rights of creditors nor any
liens upon, or security interests in,
the property of either the Company or
Acquisition Subsidiary shall be impaired
by the Merger.
2
<PAGE>
SECTION
1.04. Certificate of Incorporation and Bylaws.
(a) The
Certificate of Incorporation of the Company amended and
restated as of the Effective Time in
substantially the form set forth in Exhibit
A hereto shall be the Certificate of
Incorporation of the Surviving Corporation.
(b) The Bylaws
of the Acquisition Subsidiary immediately prior to
the Effective Time shall be the Bylaws of
the Surviving Corporation until duly
amended or repealed.
SECTION
1.05. Directors. The directors of the Acquisition Subsidiary
immediately prior to the Effective Time
shall be the directors of the Surviving
Corporation until the earlier of their
resignation or removal or such time as
their respective successors are duly
elected and qualified.
SECTION
1.06. Officers. The officers of the Acquisition Subsidiary
immediately prior to the Effective Time
shall be the officers of the Surviving
Corporation until the earlier of their
resignation or removal or such time as
their respective successors are duly
elected and qualified.
ARTICLE II
CONVERSION OF SECURITIES; MERGER CONSIDERATION
SECTION
2.01. Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part
of the holder of any shares of capital
stock of the Company, Parent or Acquisition
Subsidiary:
(a) Capital
Stock of Acquisition Subsidiary. Each issued and
outstanding share of common stock, par
value $.01 per share, of Acquisition
Subsidiary shall be converted into and
become one validly issued, fully paid and
non-assessable share of common stock, par
value $.01 per share, of the Surviving
Corporation.
(b) Cancellation
of Treasury Stock, Etc. Each share of Company
Capital Stock that is owned by Parent or
the Acquisition Subsidiary or by the
Company as treasury stock immediately prior
to the Effective Time shall
automatically be canceled and retired and
shall cease to exist and no
consideration shall be delivered in
exchange therefor.
(c) Payment of Merger
Consideration.
(i) The total
amount of consideration to be paid for all of
the shares of Company Common Stock and
Company Preferred Stock and in respect of
all Company Stock Rights shall be One
Hundred Fifty Nine Million Dollars
($159,000,000.00), as adjusted pursuant to
Section 2.01(f) below, less Net
Indebtedness for Borrowed Money
(collectively, the "Aggregate Merger
Consideration"), which shall be paid in
cash, without interest as follows:
(A) Each issued
and outstanding share of Series A
Redeemable
Preferred Stock of the Company, par value $.01 per share (the
"Series A
Preferred Stock"), shall be converted into the right to receive
an amount
in cash equal to (1) $100,
3
<PAGE>
plus (2)
the amount equal to a yield of 8% on $100 compounded annually
and
accrued
from the date of issuance through the Closing Date, to the
extent
not yet
paid (the "Series A Payment Amount").
(B) Each issued
and outstanding share of Series B
Redeemable
Preferred Stock of the Company, par value $.01 per share (the
"Series B
Preferred Stock") shall be converted into the right to receive
an amount
in cash equal to (1) $100, plus (2) the amount equal to a yield
of 8% on
$100 compounded annually and accrued from the date of issuance
through
the Closing Date (the "Series B Payment Amount"). The Series A
Payment
Amount and the Series B Payment Amount are collectively
referred
to as the
"Preferred Payment Amount".
(C) Subject to
Section 2.02(a), each issued and
outstanding share of Company Common Stock shall be converted into
the
right to
receive an amount in cash equal to X (the "Merger Consideration
Per Common
Share"), where
X = (AMC - PPA) + AEP
-----------------
CS + VCR
and the
abbreviations in the equation above have the following
meanings:
AMC =
Aggregate Merger Consideration
PPA =
Preferred Payment Amount
AEP =
Aggregate exercise price for the Vested Company Stock Rights
CS =
Number of Shares of Company Common Stock
VCR =
Number of Vested Company Stock Rights.
(D) Each Vested
Company Stock Right outstanding at the
Effective
Time shall be converted into the right to receive an amount in
cash as
set forth in paragraph (d) below.
(ii) The amount of the
Aggregate Merger Consideration payable
to each share of Company Capital Stock or
Vested Company Stock Right pursuant to
this Section 2.01(c) is referred to as the
"Merger Consideration" with respect
to such share of Company Capital Stock or
Vested Company Stock Right.
(iii) As of the Effective Time, all shares of Company Capital
Stock shall no longer be outstanding and
shall automatically be canceled and
retired and shall cease to exist, and each
holder of any shares of Company
Capital Stock shall cease to have any
rights with respect thereto, except the
right to receive a portion of the Aggregate
Merger Consideration as provided in
this Section 2.01(c), in accordance with
Section 2.02.
(d) Stock
Rights. At the Effective Time (i) each Vested Company
Stock Right which is then outstanding shall
be canceled and (ii) in
consideration of such cancellation, Parent
shall pay to the holders of Vested
Company Stock Rights ("Optionholders") an
amount in respect of each Vested
Company Stock Right equal to the excess of
the Merger Consideration Per Common
Share (subject to any adjustment thereto
pursuant to Sections 2.01(e) and
2.01(f))
4
<PAGE>
over the exercise price of such Vested
Company Stock Right, if any (such payment
to be net of Taxes required by law to be
withheld with respect thereto). No
payment shall be made with respect to any
Company Stock Right having an exercise
price greater than the Merger Consideration
Per Common Share or with respect to
any Company Stock Right that is not vested,
and any such Company Stock Right
shall be cancelled without any right to
receive consideration.
(e) Working
Capital Escrow. Parent shall deposit in escrow with
the escrow agent identified in the form of
the Escrow Agreement attached hereto
as Exhibit 2.01(e) (the "Working Capital
Escrow Agreement"), Two Million Dollars
($2,000,000.00) (the "Working Capital
Escrow Amount") of the Aggregate Merger
Consideration issuable to the holders of
Company Common Stock in exchange for
such shares of Company Common Stock, which
amount shall be held and disbursed in
accordance with the terms of such Working
Capital Escrow Agreement following the
determination of the Working Capital (as
hereinafter defined).
(f) Working
Capital Adjustment.
(i) The parties
agree that the determination of the amount
of Aggregate Merger Consideration was based
on the Company's delivery of Working
Capital at the Closing in the amount of
Twelve Million Dollars ($12,000,000.00)
(the "Target Working Capital").
Accordingly, no less than three (3) business
days prior to the Closing Date, the Company
shall prepare and deliver to Parent
for Parent's review an estimated balance
sheet representing the Company's good
faith estimate of the Working Capital of
the Company as of the close of business
on the Closing Date, based on the books and
records of the Company and applied
on a basis consistent with the audited
balance sheet of the Company as of
December 31, 2003 ("Estimated Working
Capital"). "Working Capital" means the
current assets of the Company (excluding
Cash, but including, for the avoidance
of doubt, any Tax benefit arising out of
payments made or accrued by HRA or the
Company on or prior to the Closing Date as
a result of (i) payments made to the
holders of Vested Company Stock Rights
pursuant to Section 2.01(d) hereof, (ii)
bonus or non-competition payments made to
employees and (iii) the write-off of
expenses incurred in connection with
indebtedness for borrowed money paid off on
the Closing Date), less the current
liabilities of the Company (excluding the
current portion of indebtedness for money
borrowed and accrued interest thereon,
but including, for the avoidance of doubt,
any Transaction Expenses (to the
extent not paid), any special bonus or
noncompetition payments owing to
employees (other than those provided in the
agreements referenced in the
Preamble hereto), regular bonus amounts for
employees pro rated through the
Closing Date, all paid time off through the
Closing Date, and the items on
Schedule 2.01(f), all of which shall be
accrued as of the Closing Date unless
previously paid), calculated in accordance
with GAAP.
(ii) If the Estimated
Working Capital is less than the Target
Working Capital, then the Aggregate Merger
Consideration will be decreased on a
dollar-for-dollar basis by the amount of
such deficiency.
(iii) As promptly as practicable following the Closing Date,
but in any event within forty-five (45)
calendar days after the Closing Date,
Parent will prepare a working capital
statement of the Company as of the close
of business on the Closing Date in
accordance with GAAP applied on a basis
consistent with the audited balance sheet
of the Company at December 31, 2003,
(the "Parent Working Capital Statement").
Notwithstanding the foregoing,
5
<PAGE>
if Parent, together with its independent
accounting firm, determines that, in
order to comply with GAAP, the Parent
Working Capital Statement must be prepared
on a basis different from the audited
balance sheet of the Company as
December 31, 2003, Parent shall set forth
such changes and the reasons therefor
in the Parent Working Capital Statement and
accompanying correspondence. The
Shareholder Representative agrees to
provide reasonable assistance to Parent and
its advisors in connection with the
preparation of the Parent Working Capital
Statement. Parent shall deliver the Parent
Working Capital Statement to the
Shareholder Representative.
(iv) The Shareholder
Representative shall have forty-five
(45) calendar days following receipt of the
Parent Working Capital Statement
during which to notify the Parent of any
dispute of any item contained in the
Parent Working Capital Statement, which
notice shall set forth in reasonable
detail the basis for such dispute and the
Shareholder Representative's
calculation of the final working capital as
it differs from the calculation set
forth in the Parent Working Capital
Statement. If the Shareholder Representative
does not notify the Parent of any dispute
within such forty-five (45)
calendar-day period, the Parent Working
Capital Statement shall be deemed to be
the Final Closing Date Working Capital
Statement (as hereinafter defined). The
parties hereto shall cooperate in good
faith to resolve any dispute as promptly
as possible, and upon such resolution, the
Final Closing Date Working Capital
Statement shall be prepared in accordance
with the agreement of the parties
hereto.
(v) If the
parties are unable to resolve any dispute
regarding the Parent Working Capital
Statement within fifteen (15) calendar days
(or such longer period as the Parties shall
mutually agree in writing) of notice
of a dispute from the Shareholder
Representative, the parties shall engage the
Atlanta office of KPMG LLP (the
"Arbitrator") to resolve the issues having a
bearing on such dispute and such resolution
shall be final and binding on the
parties. The Arbitrator shall use
commercially reasonable efforts to complete
its work within thirty (30) calendar days
of its engagement. The expenses of the
Arbitrator shall be shared equally by
Parent and Shareholders. The Parent
Working Capital Statement as finally
determined pursuant to this Section 2.01(f)
is referred to herein as the "Final Closing
Date Working Capital Statement" and
the Working Capital amount stated in the
Final Closing Date Working Capital
Statement is referred to herein as the
"Final Working Capital."
(vi) Within ten (10)
days after the determination of the
Final Closing Date Working Capital
Statement in accordance with this Section
2.01(f), (w) if the Estimated Working
Capital was less than the Target Working
Capital and if Final Working Capital is
less than the Estimated Net Working
Capital, then the Shareholders shall pay to
Parent an aggregate amount equal to
the absolute difference between the Final
Working Capital and the Estimated
Working Capital, (x) if the Estimated
Working Capital was less than the Target
Working Capital but the Final Working
Capital is greater than the Estimated
Working Capital, then the Parent shall pay
to the Shareholders and Optionholders
in cash an aggregate amount equal to the
absolute difference between the Final
Working Capital and the Estimated Working
Capital, (y) if the Estimated Working
Capital was greater than the Target Working
Capital and the Final Working
Capital is less than the Target Working
Capital, then the Shareholders shall pay
to Parent an aggregate amount equal to the
absolute difference between the
Target Working Capital and the Final
Working Capital, and (z) if the Estimated
Working Capital is greater than the Target
Working Capital and the Final Working
Capital is greater than the Target
Working
6
<PAGE>
Capital, then Parent shall pay to the
Shareholders and Optionholders in cash an
aggregate amount equal to the absolute
difference between the Final Working
Capital and the Target Working Capital. Any
payments required to be made
pursuant to this Section 2.01(f) by the
Shareholders shall initially be made
from the Working Capital Escrow Amount in
accordance with the terms of the
Working Capital Escrow Agreement, and (a)
if the Working Capital Escrow Amount
is insufficient, payments required to be
made pursuant to this Section 2.01(f)
by the Shareholders shall be made from the
Indemnification Escrow Amount or (b)
if the Indemnification Escrow Amount is not
sufficient, the Shareholders shall
pay such deficiency in proportion to their
Proportional Amount, or (c) if the
Working Capital Escrow Amount is in excess
of the aggregate amount owed to
Parent, any remaining funds in the Working
Capital Escrow Account shall be
released promptly to the Shareholder
Representative for the benefit of the
holders of Company Capital Stock and Vested
Company Stock Rights.
(vii) Nothing in this Section 2.01(f), including the
preparation of the Final Working Capital
Statement or the agreement by the
parties on the Final Working Capital, shall
impair the ability of Parent to rely
on the representations and warranties of
the Company and HRA or diminish the
indemnification obligations of the Company
or HRA set forth in this Agreement.
(g) Shareholder Representative Account.
Parent shall pay to Shareholder
Representative out of the Merger
Consideration and for the benefit of holders of
the Company Capital Stock, to such account
as shall be specified in writing by
the Shareholder Representative, the amount
of Three Hundred Thousand Dollars
($300,000.00) which shall be used by the
Shareholder Representative in its sole
discretion to (i) pay any Transaction
Expenses which are not paid or accrued as
of the Closing Date, and (ii) to defray,
offset, settle or pay any Liabilities
or expenses of the Company or the
Shareholders incurred in connection with the
transactions contemplated by this Agreement
and to pay out-of-pocket expenses,
including reasonable fees and expenses of
advisers, incurred by the Shareholder
Representative in its capacity as such. At
such time as the Shareholder
Representative shall determine, in its sole
discretion, that it no longer needs
to hold funds for the purposes set forth in
the immediately preceding sentence,
the Shareholder Representative shall
distribute any remaining amounts received
under this Section 2.01(g) to the holders
of the Company's Common Stock in
proportion to the consideration received by
each such person for his Company
Common Stock. Parent and Acquisition
Subsidiary shall have no liability or
responsibility to the holders of Company
Capital Stock with respect to this
Section 2.01(g).
SECTION
2.02. Payment Procedures.
(a) Payment
Procedure. Immediately after the Effective Time, each
holder of record of outstanding shares of
Company Capital Stock, as represented
in the stock records of the Company
immediately prior to the Effective Time,
whose shares of Company Capital Stock were
converted into the right to receive
consideration pursuant to Section 2.01(c),
shall receive from the Surviving
Corporation, and the Parent shall cause the
Surviving Corporation to provide,
the consideration as set forth in Section
2.01(c). Immediately after the
Effective Time, each holder of record of a
Vested Company Stock Right whose
Vested Company Stock Rights were converted
into the right to receive
consideration pursuant to Section 2.01(d),
shall receive from the Surviving
Corporation, and the Parent shall cause the
Surviving Corporation to provide,
the
7
<PAGE>
consideration (net of Taxes required by law
to be withheld with respect thereto)
as set forth in Section 2.01(d). The
consideration otherwise payable to holders
of Company Common Stock and Vested Company
Stock Rights shall be reduced by the
amount payable pursuant to Section 2.01
(e). The consideration otherwise payable
to holders of Company Common Stock shall
also be reduced by the amount payable
pursuant to Sections 9.02(b) and 2.01 (g).
Merger Consideration shall be paid to
holders of Company Capital Stock and Vested
Company Stock Rights by mailing a
check to such address as the Company shall
specify in writing to Parent at least
five (5) business days prior to the Closing
Date (or, in the case of a holder
who receives at least One Hundred Thousand
Dollars ($100,000) of Aggregate
Merger Consideration, by wire transfer to
such account as may be specified by
the Company to Parent within such time
period).
(b) No Further
Ownership Rights in Company Capital Stock; Transfer
Books. The Merger Consideration paid in
accordance with the terms of this
Article II upon conversion of any shares of
Company Capital Stock or Vested
Company Stock Rights shall be deemed to
have been paid in full satisfaction of
all rights pertaining to such shares of
Company Capital Stock or Vested Company
Stock Rights and each Shareholder waives
any other claim or right in respect
thereto or otherwise in their capacity as a
holder of Company Capital Stock, and
after the Effective Time there shall be no
further registration of transfers on
the stock transfer books of the Surviving
Corporation of shares of Company
Capital Stock or Company Stock Rights that
were outstanding immediately prior to
the Effective Time. As a condition to
receiving payment pursuant to Section 2.02
(a), each holder of a Vested Company Stock
Right shall deliver to the Company
for cancellation any agreement evidencing
such Vested Company Stock Right.
(c) Withholding
Rights. Parent, Acquisition Subsidiary or the
Surviving Corporation shall be entitled to
deduct and withhold from the
consideration otherwise payable to any
holder of Company Capital Stock or a
Vested Company Stock Right pursuant to this
Agreement, such amounts as may be
required to be deducted and withheld with
respect to the making of such payment
under the Code, or under any provision of
state, local or foreign Tax law. To
the extent that amounts are so deducted and
withheld by Parent, Acquisition
Subsidiary, or the Surviving Corporation,
such deducted and withheld amounts
shall be treated for all purposes of this
Agreement as having been paid to the
holder of the shares of Company Capital
Stock or Vested Company Stock Rights in
respect of which such deduction and
withholding was made by Parent, Acquisition
Subsidiary or the Surviving
Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of
the Shareholders, severally but not jointly, hereby represents
and
warrants, as of the date of this Agreement,
as follows:
SECTION
3.01. Authority. Such Shareholder has all requisite power and
authority to enter into this Agreement and
the documents and instruments to be
executed and delivered by the Shareholders
pursuant hereto, and to perform its
obligations hereunder and thereunder. The
execution, delivery and performance by
such Shareholder of this Agreement and the
documents
8
<PAGE>
and instruments to be executed and
delivered by it pursuant hereto have been
duly authorized by all requisite action
(including all corporate, trust or
similar action if necessary), and no other
proceedings on the part of such
Shareholder are necessary to approve this
Agreement or the documents and
instruments to be executed and delivered by
it pursuant hereto, or to consummate
the transactions contemplated hereby or
thereby. This Agreement and the
documents and instruments to be executed
and delivered pursuant hereto are and
will be duly executed and delivered by such
Shareholder and are and will be the
legal, valid and binding obligations of
such Shareholder, enforceable against
such Shareholder in accordance with their
terms, except that (a) such
enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium
(whether general or specific) or other
similar laws now or hereinafter in effect
relating to creditors' rights generally and
(b) the remedy of specific
performance and injunctive and other forms
of equitable relief may be subject to
equitable defenses and the discretion of
the court before which any proceeding
therefor may be brought.
SECTION
3.02. Consents and Approvals; No Violations. Neither the
execution
and delivery of this Agreement or the
documents and instruments to be executed
and delivered pursuant hereto by such
Shareholder nor the consummation by such
Shareholder of the transactions
contemplated hereby or thereby, nor compliance
by such Shareholder with any of the
provisions hereof or thereof, does or will
(i) conflict with or result in any breach
of any provision of the organization
documents of such Shareholder (if such
Shareholder is not an individual), (ii)
result in a violation or breach of, or
constitute (with or without due notice or
lapse of time or both) a default, or result
in the creation of any Lien in or
upon any of the properties or assets of
such Shareholder under, or give rise to
any increased, additional, accelerated or
guaranteed rights or entitlements
under, or require any consent, approval or
notice under, any of the terms,
conditions or provisions of any agreement
to which such Shareholder is a party
or (iii) violate any order, writ,
injunction, decree, statute, law, rule or
regulation applicable to such Shareholder
or such Shareholder's properties or
assets.
SECTION
3.03. Title to Shares. Such Shareholder is the beneficial and
record owner of the shares of Company
Capital Stock owned by him, her or it as
set forth on Schedule 4.02(a). All shares
of Company Capital Stock owned by such
Shareholder are duly authorized, validly
issued, fully paid and nonassessable.
Such Shareholder owns good and marketable
title to his, her or its shares of
Company Capital Stock, free and clear of
all Liens.
SECTION
3.04. Sole Representations and Warranties. The representations
and
warranties set forth in this Article III,
together with any certificate or other
statement made by the Shareholders pursuant
to this Agreement, constitute the
only representations and warranties of the
Shareholders in connection with this
Agreement and the transactions contemplated
hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants, as of the date of this
Agreement as follows:
9
<PAGE>
SECTION
4.01. Organization; Good Standing. The Company and HRA are each
corporations duly organized, validly
existing and in good standing under the
laws of the State of New Jersey, have all
requisite power and authority to own
and operate their respective property
(including the operation of leased
property) and to carry on their respective
businesses as they are now being
conducted, and are duly qualified or
licensed as foreign corporations to do
business and are in good standing in each
jurisdiction (all of which
jurisdictions, if any, are listed on
Schedule 4.01 hereto) in which the
character of the property owned or the
nature of the business transacted by them
makes such qualification or licensing
necessary, except as would not reasonably
be expected to have a Material Adverse
Effect. True and complete copies of each
of the Company's and HRA's Certificate of
Incorporation and Bylaws (including
all amendments thereto), as in effect on
the date hereof, have been delivered,
or made available, to Parent and
Acquisition Subsidiary.
SECTION
4.02. Capitalization; Title to Shares.
(a) The
authorized Company Capital Stock consists solely of
8,000,000.0000 shares of Company Common
Stock and 400,000.0000 shares of Company
Preferred Stock. As of the date hereof, (i)
5,634,158.6442 shares of Company
Common Stock are issued and outstanding
(consisting of 5,501,258.9242 shares of
Class A Voting Common Stock, no par value
per share (the "Voting Common Stock")
and 132,899.7200 shares of Class B
Non-Voting Common Stock, no par value per
share (the "Non-Voting Common Stock")),
(ii) 87,007.4267 shares of Company
Preferred Stock are issued and outstanding
(consisting of 52,007.4262 shares of
Series A Redeemable Preferred Stock, $.01
par value per share, and 35,000.0005
shares of Series B Redeemable Preferred
Stock, $.01 par value per share), (iii)
no shares of Company Common Stock or
Company Preferred Stock are held by the
Company as treasury shares, and (iv)
291,560.51 shares of Company Common Stock
are reserved for issuance upon the exercise
of outstanding Company Stock Rights.
All outstanding shares of Company Common
Stock and Company Preferred Stock (a)
are validly issued, fully paid and
non-assessable, (b) are free and clear of all
Liens, and (c) were not issued in violation
of the preemptive rights of any
Person or any agreement or laws, statutes,
orders, decrees, rules, regulations
and judgments of any Governmental Entity by
which the Company, at the time of
issuance, was bound. Schedule 4.02(a) is a
true and complete list of all
outstanding Company Capital Stock, the
names of the record holders thereof, and
the number of shares of each class or
series of Company Capital stock held of
record by each such holder.
(b) Schedule
4.02(b) is a true and complete list of all
outstanding Company Stock Rights, the
number of shares subject to each such
Company Stock Right, the amount vested, the
grant dates and exercise prices
thereof and the names of the holders
thereof. The Company has taken all required
action, including, without limitation,
obtaining all necessary consents and
adopting all necessary resolutions to
terminate as of the Effective Time all
Stock Plans and to cause each Company Stock
Right to be cancelled or converted
in the manner contemplated by Section
2.01(d).
(c) Except as
set forth above, there are no outstanding
subscriptions, options, rights, warrants or
other commitments entitling any
person to purchase or otherwise subscribe
for or acquire any shares of the
Company Capital Stock or any security
convertible into or exchangeable for
shares of the Company Capital Stock, nor is
there presently outstanding any
10
<PAGE>
security convertible into or exchangeable
for shares of the Company Capital
Stock, nor has the Company entered into any
agreement with respect to any of the
foregoing. Except as set forth in the
Company's Certificate of Incorporation,
the Company has no obligation to
repurchase, redeem or otherwise acquire any
shares of the Company Capital Stock of, or
other equity or voting interests in,
the Company or to pay any dividend or make
any other distribution in respect
thereof. There are no irrevocable proxies
and no voting agreements to which the
Company is a party with respect to any
shares of the Company Capital Stock or
other voting securities of the Company.
Except as set forth on Schedule 4.02(c),
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
laws.
SECTION
4.03. Subsidiaries. Except as set forth in Schedule 4.03, the
Company does not have, nor has the Company
ever had, any subsidiaries, and the
Company does not own, nor has the Company
ever owned, directly or indirectly,
any capital stock of, or other equity or
voting interests in, any corporation,
partnership, limited liability company,
joint venture, association or other
entity.
SECTION
4.04. Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to
enter into this Agreement and the
documents and instruments to be executed
and delivered by the Company pursuant
hereto, and to perform its obligations
hereunder and thereunder. The execution,
delivery and performance by the Company of
this Agreement and the documents and
instruments to be executed and delivered by
it pursuant hereto have been duly
authorized by the Company's Board of
Directors (including any committees of the
Board of Directors, to the extent
applicable) and holders of the Company's
Capital Stock (subject to the right of the
holders of the Company's Capital
Stock to revoke their consent pursuant to
Section 14A:5-6 of the NJBCA) and no
other corporate proceedings on the part of
the Company are necessary to approve
this Agreement or the documents and
instruments to be executed and delivered by
it pursuant hereto, or to consummate the
transactions contemplated hereby or
thereby. The only vote of holders of any
class or series of the Company's
Capital Stock necessary to approve and
adopt this Agreement and the Merger is
the Requisite Vote. In furtherance of the
foregoing, the Board of Directors of
the Company, at a meeting duly called and
held, approved and adopted this
Agreement, the Merger and the other
transactions contemplated hereby, determined
that the terms of the Merger are fair to
and in the best interests of the
Company and its shareholders, and
recommended that the shareholders of the
Company adopt and approve this Agreement.
Holders of the Company's Capital Stock
do not have dissenters' or "appraisal"
rights under New Jersey law. This
Agreement and the documents and instruments
to be executed and delivered
pursuant hereto are and will be duly
executed and delivered by the Company and
are and will be the legal, valid and
binding obligations of the Company,
enforceable against the Company in
accordance with their terms, except that (a)
such enforcement may be subject to
bankruptcy, insolvency, reorganization,
moratorium (whether general or specific) or
other similar laws now or
hereinafter in effect relating to
creditors' rights generally and (b) the remedy
of specific performance and injunctive and
other forms of equitable relief may
be subject to equitable defenses and the
discretion of the court before which
any proceeding therefor may be brought.
11
<PAGE>
SECTION
4.05. Consents and Approvals; No Violations.
(a) Except for
applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as
amended ("HSR Act"), and the filing and
recordation of the Certificate of Merger as
required by the NJBCA, no filing or
registration with, and no permit,
authorization, consent or approval of, any
federal, state or local government, or any
court, administrative or regulatory
agency or commission or other governmental
authority or agency, domestic or
foreign, including courts of competent
jurisdiction ("Governmental Entity"), is
necessary on the Company's part for the
consummation by the Company of the
transactions contemplated by this
Agreement.
(b) Except as
set forth on Schedule 4.05(b), neither the execution
and delivery of this Agreement or the
documents and instruments to be executed
and delivered pursuant hereto by the
Company nor the consummation by the Company
of the transactions contemplated hereby or
thereby, nor compliance by the
Company with any of the provisions hereof
or thereof, will (i) conflict with or
result in any breach of any provision of
the Certificate of Incorporation or
Bylaws or similar constituent document of
the Company or HRA, (ii) result in a
violation or breach of, or constitute (with
or without due notice or lapse of
time or both) a default, or result in the
creation of any Lien in or upon any of
the properties or assets of the Company or
HRA under, or give rise to any
increased, additional, accelerated or
guaranteed rights or entitlements under,
or require any consent, approval or notice
under, any of the terms, conditions
or provisions of any Contract to which the
Company or HRA is a party or by which
their properties are bound, or (iii)
violate any order, writ, injunction,
decree, statute, law, rule or regulation
applicable to the Company or HRA or the
Company's or HRA's properties or
assets.
SECTION
4.06. Financial Statements and Accounting Controls.
(a) Schedule
4.06(a) contains true, correct and complete copies of
(i) the audited consolidated balance sheets
of the Company as of December 31,
2003, 2002 and 2001, respectively, and the
related audited consolidated
statements of income, retained earnings and
cash flow for the fiscal years then
ended, together with the notes thereto (the
"Audited Statements"); and (ii) the
unaudited consolidated balance sheet of the
Company as of March 31, 2004, and
the related unaudited consolidated
statements of income, retained earnings and
cash flow for the three-month period then
ended, prepared by the Company (the
"Unaudited Statements"). All such
statements (collectively, the "Financial
Statements") have been prepared from, and
are in accordance with, the books and
records of the Company, which books and
records are maintained in accordance
with GAAP consistently applied, and such
books and records have been maintained
on a basis consistent with the past
practice of the Company. The Financial
Statements have been prepared in conformity
with generally accepted accounting
principles ("GAAP") applied on a consistent
basis and fairly present the
financial position of the Company as of the
dates indicated and the results of
the Company's operations and cash flows for
the periods then ended (subject, in
the case of the Unaudited Statements, to
normal year-end audit adjustments
(which in the aggregate will not be
material) and the lack of footnotes).
For the
purposes hereof, the audited consolidated balance sheet of the
Company as at December 31, 2003 is referred
to as the "Balance Sheet" and
December 31, 2003 is referred to as the
"Balance Sheet Date".
12
<PAGE>
(b) The Company
and HRA (i) have in place appropriate financial
controls and procedures, (ii) have complied
with such procedures in all material
respects, and (iii) have not received a
written notification from any
accountants, independent auditors or other
consultants engaged by the Company or
HRA challenging the adequacy or requesting
modification of such financial
controls and procedures. Such controls and
procedures (A) are sufficient to
ensure that all material information is
included in the Financial Statements or
otherwise known to management and (B)
contain no deficiencies in the design or
operation of such controls and procedures
that are reasonably likely to
materially adversely affect the ability of
the Company or HRA to record,
process, summarize and report financial and
other relevant information.
SECTION
4.07. Absence of Undisclosed Liabilities. Except as disclosed
in
the Balance Sheet or Schedule 4.07, neither
the Company nor HRA has any
Liabilities other than Liabilities incurred
in the Ordinary Course of Business
after the Balance Sheet Date and
Transaction Expenses.
SECTION
4.08. Absence of Certain Changes or Events. Since December 31,
2003, the Company and HRA have conducted
their respective businesses only in the
Ordinary Course of Business and
there has not been:
(a) an event,
change, occurrence or circumstance that has had or
could reasonably be expected to have a
Material Adverse Effect;
(b) any material
damage, destruction, or loss (whether or not
covered by insurance) affecting the
Company's or HRA's properties, assets,
business, or prospects, or any known threat
to take by condemnation or eminent
domain any Real Property;
(c) any
executory purchase commitment which is in any material
respect in excess of normal business
requirements;
(d) the
declaration or payment of any dividend or distribution on
any of the Company's capital stock other
than in cash;
(e) any grant of
an increase or any commitment to increase the
salary or wages paid to or benefits
provided to and any bonus paid or payable to
any director or employee of the Company or
HRA, except for increases of salary
or wages granted at such times and in such
amounts as are consistent with the
past practice of the Company or HRA;
(f) any
Indebtedness incurred, aside from trade payables incurred
in the Ordinary Course of Business;
(g) any
Liability incurred or assumed, or any Contract entered
into or assumed involving more than one
hundred thousand dollars ($100,000) in
each instance, except in the Ordinary
Course of Business;
(h) any loan or
advance to a third party or advances to employees
other than in the Ordinary Course of
Business;
13
<PAGE>
(i) any payment
of, or commitment to pay, any severance or
termination pay to any officer, director,
consultant, agent, employee or
shareholder;
(j) any change
in accounting methods or practices or any change in
depreciation or amortization policies or
rates;
(k) any
purchase, sale, abandonment or other disposition of
material assets or properties in
anticipation of this Agreement, or any
purchase, lease, sale, abandonment or other
disposition of assets, except in the
Ordinary Course of Business;
(l) any
acquisition of all or any substantial part of the stock or
the business or operating assets of any
other Person;
(m) any waiver
or release of any material rights;
(n) any
cancellation or compromise of any debts owed to the
Company or HRA or known claims against
others exceeding $25,000 or any payment
of any debts owed by the Company or HRA by
others on behalf of the Company or
HRA;
(o) any sale,
transfer, grant or expiration of any material rights
under any Contract with respect to any
Intellectual Property Rights; or
(p) any
redemption, purchase or acquisition of any shares of the
Company's or HRA's capital stock or any
issuance of any shares of the Company's
or HRA's capital stock or securities
convertible into its capital stock, other
than the grant of Company's options in the
Ordinary Course of Business.
SECTION
4.09. Contracts and Commitments. Schedule 4.09 lists each of
the
following Contracts to which the Company or
HRA is a party except for any
contracts that may be terminated without
liability or penalty on not more than
ninety (90) days' notice (collectively,
"Material Contracts"):
(a) Contracts
with any present or former shareholder, director,
officer, employee, partner or
consultant;
(b) Contracts
for the purchase or sale of supplies or products, or
for the performance of services by a third
party, in excess of $100,000 in any
individual case;
(c) Contracts
relating to the incurrence of Indebtedness or the
making of any loans, in each case involving
amounts in excess of $100,000;
(d) Contracts
limiting or restraining the Company or HRA from
engaging or competing in any line of
business or any geographical area;
(e) Contracts
relating to any material license, franchise or
distributorship, or copyright, or to any
ideas, technical assistance or other
know-how of or used by the Company or
HRA;
14
<PAGE>
(f) Contracts
for capital expenditures or the acquisition or
construction of fixed assets requiring
payment by the Company or HRA of $100,000
individually, or $500,000 in the
aggregate;
(g) any Contract
that provides for an increased payment or
benefit, or accelerated vesting, upon the
execution of this Agreement or the
Closing or in connection with the
transactions contemplated hereby;
(h) any Contract
granting any third party a Lien on all or any
material part of any assets;
(i) any Contract
for the cleanup, abatement or other actions in
connection with, or the remediation of, any
existing environmental condition or
relating to the performance of any
environmental audit or study;
(j) any Contract
granting to any third party an option or a first
refusal, first-offer or similar
preferential right to purchase or acquire any
assets;
(k) any joint
venture or partnership Contract or other contract
providing for the sharing of profits;
(l) any
arrangement not in the Ordinary Course of Business; and
(m) all powers
of attorney given to any Person.
True and
complete copies of all Material Contracts have been made
available to Parent. Except as set forth in
Schedule 4.09, the Company, HRA and,
to the Company's Knowledge, each other
party to each Material Contract has
performed each material term, covenant, and
condition of each Material Contract
which is to be performed by them at or
before the date hereof and there is not
an existing or claimed default thereunder.
Each of the Material Contracts is in
full force and effect and constitutes the
legal, binding and enforceable
obligation of the Company or HRA, and to
the Company's Knowledge, the other
parties thereto. There is no actual or, to
the Company's Knowledge, threatened
termination, cancellation or limitation of
any Material Contract.
Section
4.10. Real Property.
(a) Neither the
Company nor HRA owns any real property. Schedule
4.10 contains a true and correct
description of all real property (the "Real
Property") leased by the Company or HRA,
including all improvements located
thereon. The Company and HRA have valid and
binding leases for each such
property (the "Real Property Leases"), and
there are no defaults by the Company
or HRA, or to the Company's Knowledge, by
any other party thereto, which might
curtail in any material respect the present
use by the Company and HRA of any
Real Property, except as set forth on
Schedule 4.10 hereto. Parent and
Acquisition Subsidiary have been provided
with true and complete copies of such
Real Property Leases. There are no
condemnation or expropriation or similar
proceedings pending or, to the Company's
Knowledge, threatened, against any of
the Real Property or the improvements
thereon. There are no encroachments,
leases, easements, covenants, restrictions,
reservations or other burdens of any
15
<PAGE>
nature which may impair in any material
respect the use of any such Real
Property in a manner consistent with past
practices, nor does any part of any
building structure or any other improvement
thereon encroach on any other
property.
(b) There is no
material violation by the Company or HRA of any
law, regulation or ordinance (including,
without limitation, laws, regulations
or ordinances relating to zoning, city
planning or similar matters) relating to
any Real Property.
SECTION
4.11. Environmental Matters.
(a) The Company
and HRA, the Business operations and their
respective properties (whether currently or
formerly owned, leased or operated
by the Company or HRA or any of their
predecessors) are, and have been, in
material compliance with all federal, state
and local environmental Laws, there
are no present or past Environmental
Conditions relating to or which could
reasonably be expected to adversely affect
the Company or HRA, or their
respective businesses or condition
(financial or otherwise), nor are there any
proceedings, pending or threatened,
alleging that the Company or HRA is a
responsible party or potentially
responsible party under any federal, state or
local environmental Law or otherwise
related to any alleged Environmental
Condition. For the purposes of this
Agreement, "Environmental Condition" means
(i) the introduction into the environment
of any pollution, including without
limitation any contaminant, irritant or
pollutant or other toxic or hazardous
substance, in violation of any federal,
state or local law, ordinance or
governmental rule or regulations, as a
result of any spill, discharge, leak,
emission, escape, injection, dumping or
release of any kind whatsoever of any
substance or exposure of any type in any
work places or to any medium, including
without limitation air, land, surface
waters or ground waters, or from any
generation, transportation, treatment,
discharge, storage or disposal of waste
materials, raw materials, hazardous
materials, toxic materials or products of
any kind or from the storage, use or
handling of any hazardous or toxic
materials or other substances, and (ii) any
noncompliance with any federal,
state or local environmental Law or order
as a result of or in connection with
any of the foregoing.
(b) Each of the
Company and HRA has obtained any permits,
licenses, approvals, consents, orders, and
authorizations which are required by
any federal, state or local environmental
Law in connection with the ownership,
use, or lease of its assets ("Environmental
Permits"). Schedule 4.11(b) contains
a true, complete and accurate listing and
description of, and, promptly
following execution hereof, the Company
will make available to Parent true and
complete copies of any Environmental
Permit. Except as described in Schedule
4.11(b), the Company and HRA are in
compliance with each such Environmental
Permit, and no Environmental Permit
restricts the Company or HRA from operating
any equipment covered by such Environmental
Permit as currently conducted.
(c) 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 or HRA 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.
16
<PAGE>
SECTION
4.12. Intellectual Property Rights.
(a) Each of the
Company and HRA owns, or is validly licensed or
otherwise has the right to use all patents,
patent applications, trademarks,
trademark rights, trade names, trade name
rights, domain names, service marks,
service mark rights, copyrights, technical
know-how and other proprietary
intellectual property rights and computer
programs (collectively, "Intellectual
Property Rights") which are material to the
Business, taken as a whole, all of
which are listed on Schedule 4.12.
(b) No claims
are pending or, to the Company's Knowledge,
threatened that the Company or HRA is
infringing (including with respect to the
manufacture, use or sale by the Company or
HRA of their respective commercial
products) any material right of any person
with regard to any Intellectual
Property Right. As of the date of this
Agreement, to the Knowledge of the
Company, no person or persons are
infringing any material right of the Company
or HRA with respect to any Intellectual
Property Right.
(c) No claims
are pending or, to the Company's Knowledge,
threatened with regard to the ownership by
the Company or HRA of any of their
respective material Intellectual Property
Rights.
SECTION
4.13. Licenses. Schedule 4.13 is a true and complete list of
all
licenses, notifications, permits,
franchises, certificates, approvals,
exemptions, classifications, registrations
and other similar documents and
authorizations, and applications therefor
held by and necessary for the conduct
of the operations of the Company and HRA
(including those necessary for the
Company and HRA to receive reimbursement
from the Medicare program, Medicaid
program or other federal health care
programs or state health care programs) and
issued by, or submitted by the Company or
HRA to, any Governmental Entity or
other Person (collectively, the
"Licenses"). Each of the Company and HRA owns or
possesses all of the Licenses which are
necessary or required to enable it to
carry on its operations in the manner
conducted by them. All Licenses are valid,
binding, and in full force and effect. No
License has been revoked, conditioned
or restricted, nor have the Company or HRA
received any notice of any pending
action or recommendation to do any of the
foregoing. Except as set forth in
Schedule 4.13, the execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated hereby will not adversely affect
any License.
SECTION
4.14. Title to Assets.
(a) Each of the
Company and HRA has good and marketable title to,
or valid leasehold interests in, all its
properties and other assets it purports
to own. Except as set forth in Schedule
4.14(a), all such properties and other
assets, other than properties and other
assets in which the Company or HRA has a
leasehold interest, are free and clear of
all Liens. The Company and HRA hold
all rights, properties and assets that are
necessary to permit the Surviving
Corporation to continue the business and
operations of the Company and HRA after
the Effective Time in a manner consistent
with past practice.
17
<PAGE>
(b) Each of the
Company and HRA has complied with the terms of all
leases to which it is a party and under
which it is in occupancy, and all such
leases are in full force and effect.
This
Section 4.14 does not relate to any matters with respect to
intellectual property, which are addressed
solely in Section 4.12.
SECTION
4.15. Corporate Minute Books. The minute books of the Company
and
HRA contain materially accurate records of
all meetings and other corporate
actions of its shareholders and directors
and committees of directors (if any).
Promptly following execution hereof, the
Company will make available to Parent
true and complete copies of such minute
books.
SECTION
4.16. Taxes.
(a) Each of the
Company and HRA has timely filed, or has caused to
be timely filed on its behalf (taking into
account any extension of time within
which to file), all income Tax Returns and
all other material Tax Returns
required to be filed by it and such Tax
Returns are correct and complete in all
respects and have been prepared in
compliance with all applicable laws and
regulations. Each of the Company and HRA
has paid all Taxes owed by it (whether
or not shown on any Tax Return), and has
adequately reflected in accordance with
GAAP as a reserve for Taxes in the most
recent Financial Statements all Taxes
accrued but not yet owed by it. No claim
has been made by any authority in a
jurisdiction where the Company or HRA does
not file a Tax Return that such
entity may be subject to Taxes by that
jurisdiction. As of the date hereof,
neither the Company nor HRA currently is
the beneficiary of any extension of
time within which to file any Tax Return,
except as set forth on Schedule 4.16.
There are no liens for Taxes (other than
Taxes not yet due and payable or Taxes
the validity of which is being contested in
good faith) upon any of the assets
of the Company or HRA.
(b) As of the
date hereof, (i) no deficiency with respect to Taxes
has been proposed, asserted or assessed
against the Company or HRA which has not
been fully paid or for which funds have not
been adequately reserved, and (ii)
neither the Company nor HRA has waived any
statute of limitations in respect of
Taxes or agreed to any extension of time
with respect to a Tax assessment or
deficiency.
(c) No officer
(or employee responsible for Tax matters) of any of
the Company or HRA expects any authority to
assess any additional Taxes for any
period for which Tax Returns have been
filed. No foreign, federal, state or
local tax audits are pending or being
conducted with respect to the Company or
HRA. Neither Company nor HRA has received
from any foreign, federal, state, or
local taxing authority (including
jurisdictions where Company or HRA have not
filed Tax Returns) any (i) notice
indicating an intent to open an audit or other
review, (ii) request for information
related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any
amount of Tax proposed, asserted, or
assessed by any taxing authority against
Company or HRA. Schedule 4.16(i) lists
all federal, state, local, and foreign Tax
Returns filed with respect to Company
or HRA that have been audited, and
indicates those Tax Returns that currently
are the subject of audit.
18
<PAGE>
(d) The Company
has provided or otherwise made available to Parent
(i) all federal income Tax Returns relating
to the three preceding taxable years
and (ii) all audit reports issued within
the three preceding taxable years
relating to federal income Taxes due from
or with respect to the Company or HRA.
(e) The Company
and HRA have duly withheld and paid in compliance,
with applicable Laws, rules and
regulations, all Taxes that it is required to
withhold and pay relating to amounts
heretofore paid or owing to any employee,
independent contractor, creditor,
stockholder or any other Person.
(f) Neither
Company nor HRA has filed a consent under Code Section
341(f) concerning collapsible corporation
(as in effect prior to the repeal
under the Jobs and Growth Tax
Reconciliation Act of 2003). Neither Company nor
HRA is a party to any agreement, contract,
arrangement or plan that has resulted
or would result, separately or in the
aggregate, in the payment of any "excess
parachute payment" within the meaning of
Code Section 280G or any corresponding
provision of state, local or foreign Tax
law. Neither Company nor HRA has been a
United States real property holding
corporation within the meaning of Code
Section 897(c)(2) during the applicable
period specified in Code Section
897(c)(1)(A)(ii). Each of Company and HRA
has disclosed on its federal income
Tax Returns all positions taken therein
that could give rise to a substantial
understatement of federal income Tax within
the meaning of Code Section 6662.
Neither Company nor HRA is a party to or
bound by any Tax allocation or sharing
agreement. Neither Company nor HRA (A) has
been a member of an Affiliated Group
filing a consolidated federal income Tax
Return (other than a group the common
parent of which was Company) or (B) has any
liability for the Taxes of any
Person (other than any of Company and HRA)
under Treas. Reg. Section 1.1502-6(or
any similar provision of state, local, or
foreign law), as a transferee or
successor, by contract, or otherwise.
(g) The unpaid
Taxes of Company and HRA (A) did not, as of March
31, 2004, 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
unaudited consolidated balance sheet of the
Company as of March 31, 2004 (rather than
in any notes thereto) and (B) do not
exceed that reserve as adjusted for the
passage of time through the Closing Date
in accordance with the past custom and
practice of Company and HRA in filing
their Tax Returns. Since March 31, 2004,
neither Company nor HRA has incurred
any liability for Taxes arising from
extraordinary gains or losses, as that term
is used in GAAP, outside the Ordinary
Course of Business consistent with past
custom and practice.
(h) Neither
Company nor HRA will be required to include any item
of income in, or exclude any item of
deduction from, taxable income for any
taxable period (or portion thereof) ending
after the Closing Date as a result of
any (A) change in method of accounting for
a taxable period ending on or prior
to the Closing Date; (B) "closing
agreement" as described in Code Section 7121
(or any corresponding or similar provision
of state, local or foreign income Tax
law) executed on or prior to the Closing
Date; (C) intercompany transactions or
any excess loss account described in
Treasury Regulations under Code Section
1502 (or any corresponding or similar
provision of state, local or foreign
income Tax law) with respect to taxable
periods (or portions thereof) ending on
or prior to the Closing Date; (D)
installment sale or open transaction
19
<PAGE>
disposition made on or prior to the Closing
Date; or (E) prepaid amount received
on or prior to the Closing Date.
(i) Neither
Company nor HRA has distributed stock of another
Person, or has had its stock distributed by
another Person, in a transaction
that was purported or intended to be
governed in whole or in part by Code
Section 355.
(j) For purposes
of this Agreement: (i) "Tax" or "Taxes" shall
mean any federal, state, local, or foreign
income, gross receipts, license,
payroll, employment, excise, severance,
stamp, occupation, premium, windfall
profits, environmental (including taxes
under Code Section 59A), customs duties,
capital stock, franchise, profits,
withholding, social security (or similar),
unemployment, disability, real property,
personal property, sales, use,
transfer, registration, value added,
alternative or add-on minimum, estimated,
or other tax of any kind whatsoever,
including any interest, penalty, or
addition thereto, whether disputed or not
and including any obligations to
indemnify or otherwise assume or succeed to
the Tax liability of any other
Person, as well as liability for the taxes
of any other Person under Treas. Reg.
Section 1.1502-6; (ii) "Tax Return" shall
mean any return, declaration, report,
claim for refund, or information return or
statement relating to Taxes,
including any schedule or attachment
thereto, and including any amendment
thereof; and (iii) "Affiliated Group" shall
mean any affiliated group within the
meaning of Code Section 1504(a) or any
similar group defined under a similar
provision for state, local or foreign Tax
law.
SECTION
4.17. Employees; Benefit Plans.
(a) Schedule
4.17(a) lists each "employee benefit plan" (as
defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974,
as amended ("ERISA")) and any other
material employee plan or agreement
maintained by the Company or HRA (each, a
"Company Benefit Plan"). The Company
has made available to Parent correct and
complete copies of (i) each Company
Benefit Plan (or, in the case of any such
Company Benefit Plan that is
unwritten, descriptions thereof), (ii) the
most recent annual reports on Form
5500 required to be filed with the Internal
Revenue Service (the "IRS") with
respect to each Company Benefit Plan (if
any such report was required), (iii)
the most recent summary plan description
for each Company Benefit Plan for which
such summary plan description is required
and (iv) each trust agreement and
insurance or group annuity contract
relating to any Company Benefit Plan. Each
Company Benefit Plan maintained,
contributed to or required to be contributed to
by the Company or any of its Subsidiaries
has been administered in all material
respects in accordance with its terms. The
Company, HRA and the Company Benefit
Plans are in material compliance with the
applicable provisions of ERISA, the
Code and all other applicable Laws.
(b) All Company
Benefit Plans that are "employee pension plans"
(as defined in Section 3(3) of ERISA) that
are intended to be tax qualified
under Section 401(a) of the Code (each, a
"Company Pension Plan") that are
maintained, contributed to or required to
be contributed to by the Company or
HRA are so qualified and, to the Knowledge
of the Company, no event has occurred
since the date of the most recent
determination letter or application therefor
relating to any such Company Pension Plan
that would adversely affect the
qualification of such Company Pension Plan.
The Company has made available to
Parent a correct and complete copy of the
most recent determination letter
received with respect to each Company
20
<PAGE>
Pension Plan maintained, contributed to or
required to be contributed to by the
Company or HRA, as well as a correct and
complete copy of each pending
application for a determination letter, if
any.
(c) All
contributions, premiums and benefit payments under or in
connection with the Company Benefit Plans
that are required to have been made as
of the date hereof in accordance with the
terms of the Company Benefit Plans
have been timely made or have been
reflected on the most recent Financial
Statements. No Company Pension Plan has an
"accumulated funding deficiency" (as
such term is defined in Section 302 of
ERISA or Section 412 of the Code),
whether or not waived.
(d) Collective
Bargaining Agreements; Labor Relations. Except as
set forth on Schedule 4.17(d),
(i) none of the
Company's or HRA's employees is covered by a
collective bargaining agreement and there
is no union or other organization
seeking or claiming to represent any such
employees;
(ii) there is no labor
dispute, strike, work stoppage or
lockout, or, to the Company's Knowledge,
threat thereof, by or with respect to
any employee;
(iii) the Company and HRA have not engaged in any unfair labor
practice, and the Company is not aware of
any pending or threatened labor board
proceeding of any kind, including any such
proceeding against the Company or
HRA;
(iv) no grievance or
arbitration demand or proceeding has
been filed, or to the Company's Knowledge,
is threatened against the Company or
HRA;
(v) no citation
has been issued by "OSHA" against the
Company or HRA and no notice of contest,
claim, complaint, charge, investigation
or other administrative enforcement
proceeding involving the Company or HRA has
been filed or is pending or, to the
Company's Knowledge, threatened against the
Company or HRA under OSHA or any other
applicable law relating to occupational
safety and health;
(vi) neither the
Company nor HRA has not taken any action
that would constitute a "mass layoff,"
"mass termination" or "plant closing"
within the meaning of the United States
Worker Adjustment and Retraining
Notification Act or otherwise trigger
notice requirements or liability under any
federal, local, state or
