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EXHIBIT 10.9
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STOCK PURCHASE AGREEMENT
by and among
COLORADO CNS RESPONSE, INC.,
NEURO-THERAPY CLINIC, P.C.,
AND
DANIEL A. HOFFMAN, M.D.
dated January 11, 2008
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS..........................................................1
1.1 DEFINED
TERMS................................................1
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1.2 CONSTRUCTION OF CERTAIN TERMS AND
PHRASES....................6
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ARTICLE II PURCHASE AND SALE OF
STOCK..........................................6
2.1 SALE OF COMPANY STOCK BY DR.
HOFFMAN.........................6
------------------------------------
2.2 PURCHASE OF COMPANY STOCK BY
CNSR............................6
---------------------------------
2.3 EXCLUDED AND ASSUMED ASSETS AND
LIABILITIES..................7
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2.4
CLOSING......................................................7
-------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF DR. HOFFMAN ABOUT
THE COMPANY...9
3.1 ORGANIZATION OF THE
COMPANY..................................9
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3.2 CAPITAL STOCK OF THE
COMPANY.................................9
----------------------------
3.3 AUTHORITY OF THE
COMPANY.....................................9
------------------------
3.4 NO
AFFILIATES................................................9
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3.5 NO
CONFLICTS.................................................9
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3.6 CONSENTS AND GOVERNMENTAL APPROVALS AND
FILINGS.............10
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3.7 BOOKS AND
RECORDS...........................................10
-----------------
3.8 FINANCIAL STATEMENTS AND ACCOUNTS
RECEIVABLE................10
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3.9 ABSENCE OF
CHANGES..........................................11
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3.10 NO UNDISCLOSED
LIABILITIES..................................11
--------------------------
3.11 TANGIBLE PERSONAL
PROPERTY..................................11
--------------------------
3.12 BENEFIT PLANS;
ERISA........................................11
--------------------
3.13 REAL
PROPERTY...............................................12
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3.14 INTELLECTUAL PROPERTY
RIGHTS................................12
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3.15
LITIGATION..................................................12
----------
3.16 COMPLIANCE WITH
LAW.........................................12
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3.17
CONTRACTS...................................................13
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3.18 OCCUPATIONAL
MATTERS........................................13
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3.19
PERMITS.....................................................13
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3.20
EQUIPMENT...................................................13
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3.21
INSURANCE...................................................14
---------
3.22 TAX
MATTERS.................................................14
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3.23 LABOR AND EMPLOYMENT
RELATIONS..............................15
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3.24 CERTAIN
EMPLOYEES...........................................15
-----------------
3.25 ABSENCE OF CERTAIN
DEVELOPMENTS.............................15
-------------------------------
3.26
PATIENTS....................................................17
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3.27 PAYOR CLAIMS AND COST
REPORTS...............................17
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3.28 NECESSARY
PROPERTY..........................................17
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3.29 BANK
ACCOUNTS...............................................17
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3.30
BROKERS.....................................................18
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3.31 MATERIAL MISSTATEMENTS AND
OMISSIONS........................18
------------------------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DR.
HOFFMAN......................18
4.1 OWNERSHIP OF COMPANY
STOCK..................................18
--------------------------
4.2 AUTHORITY OF DR.
HOFFMAN....................................18
------------------------
4.3 NO
CONFLICTS................................................18
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4.4
BROKERS.....................................................19
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4.5 MATERIAL MISSTATEMENTS AND
OMISSIONS........................19
------------------------------------
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
CNSR..............................19
5.1 ORGANIZATION OF
CNSR........................................19
--------------------
5.2 AUTHORITY OF
CNSR...........................................19
-----------------
5.3 CONSENTS AND GOVERNMENTAL APPROVALS AND
FILINGS.............19
-----------------------------------------------
5.4 NO
CONFLICTS................................................20
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5.5 COMPLIANCE WITH
LAW.........................................20
-------------------
5.6
LITIGATION..................................................20
----------
5.7
BROKERS.....................................................20
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5.8 MATERIAL MISSTATEMENTS AND
OMISSIONS........................20
------------------------------------
ARTICLE VI CONDITIONS TO
CLOSING..............................................21
6.1 CONDITIONS TO THE CLOSING OF THE COMPANY AND DR.
HOFFMAN....21
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6.2 CONDITIONS TO THE OBLIGATIONS OF
CNSR.......................21
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ARTICLE VII ACTIONS BY THE PARTIES AFTER THE
CLOSING..........................22
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES,
ETC................22
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7.2
INDEMNIFICATION.............................................22
---------------
7.3
OFFSET......................................................25
------
7.4 LIMITATIONS ON
INDEMNIFICATION..............................27
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7.5 POST-CLOSING OBLIGATIONS OF DR.
HOFFMAN.....................28
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7.6 POST-CLOSING OBLIGATIONS OF CNSR.
--------------------------------
CNSR shall cooperate with the Company and Dr. Hoffman to
consummate all the transactions contemplated herein and
to permit the Company and Dr. Hoffman to fulfill their
obligations
hereunder................................................28
7.7 KNOWN EXCLUDED
LIABILITIES..................................28
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7.8 REPURCHASE
OPTION...........................................28
-----------------
7.9 FURTHER
ASSURANCES..........................................29
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7.10 HIPAA
REQUIREMENTS..........................................29
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ARTICLE VIII
MISCELLANEOUS....................................................30
8.1
TERMINATION.................................................30
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8.2
NOTICES.....................................................30
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8.3 ENTIRE
AGREEMENT............................................31
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8.4
WAIVER......................................................32
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8.5
AMENDMENT...................................................32
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8.6 NO THIRD PARTY
BENEFICIARY..................................32
--------------------------
8.7 NO ASSIGNMENT; BINDING
EFFECT...............................32
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8.8
HEADINGS....................................................32
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8.9
SEVERABILITY................................................32
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8.10 GOVERNING
LAW...............................................32
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8.11 CONSENT TO JURISDICTION AND FORUM
SELECTION.................32
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8.12
EXPENSE.....................................................33
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8.13
PRO-RATIONS.................................................33
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8.14
CONSTRUCTION................................................33
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8.15
COUNTERPARTS................................................33
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SCHEDULES AND EXHIBITS
SCHEDULES
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Schedule 2.2 - Allocation of Purchase Price
Schedule 2.3(a) - Excluded Assets
Schedule 2.3(c) - Assumed Assets
Schedule 8.2(d) - Arbitration Procedure
Company Disclosure Schedule
EXHIBITS
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Exhibit A - Dr. Hoffman Non-Solicitation Agreement
Exhibit B - Company Officer Certificate
Exhibit C - Dr. Hoffman Certificate
Exhibit D - Company Secretary Certificate
Exhibit E - Employment Agreement
Exhibit F - CNSR Officer Certificate
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into
as
of January 11, 2008 by and among Colorado CNS Response, Inc., a
Colorado
corporation and wholly-owned subsidiary of CNS Response, Inc.
("CNSR"),
Neuro-Therapy Clinic, P.C., a Colorado professional medical
corporation (the
"Company"), and Daniel A. Hoffman, M.D., an individual ("Dr.
Hoffman") (each a
"Party" and collectively, the "Parties").
RECITALS
WHEREAS, Dr. Hoffman owns all of the issued and outstanding
capital stock of the Company, consisting of Ten Thousand
(10,000) shares of
common stock, no par value per share (the "Company Stock");
and
WHEREAS, Dr. Hoffman desire to sell the Company Stock to
CNSR,
and CNSR desires to purchase the Company Stock from Dr. Hoffman,
on the terms
and conditions and for the consideration set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and promises contained herein, and for other
good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the
Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following
defined terms have the meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration, Order (as defined below), inquiry, hearing,
assessment with respect
to fines or penalties or litigation (whether civil, criminal,
administrative,
investigative or informal) commenced, brought, conducted or
heard by or before,
or otherwise involving, any Governmental or Regulatory Authority
(as defined
below).
"ACCOUNTING PRINCIPLES" means generally accepted accounting
principles of the Company, applied in a manner consistent with
the past
practices of the Company.
"AFFILIATE" means, with respect to any Person, another
Person
that directly, or indirectly through one or more intermediaries,
controls, is
controlled by or is under common control with such Person.
"AGREED AMOUNT" has the meaning set forth in SECTION 7.2(D).
"ASSETS AND PROPERTIES" and "ASSETS OR PROPERTIES" of any
Person each means all assets and properties of every kind,
nature, character and
description (whether real, personal or mixed, whether tangible
or intangible,
whether absolute, accrued, contingent, fixed or otherwise and
wherever
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situated), including the goodwill related thereto, operated,
owned or leased by
such Person, including, without limitation, cash, cash
equivalents, accounts and
notes receivable, chattel paper, documents, instruments, general
intangibles,
real estate, equipment, inventory, goods and Intellectual
Property.
"ASSUMED ASSETS" has the meaning set forth in SECTION
2.3(C).
"ASSUMED LIABILITIES" has the meaning set forth in SECTION
2.3(C).
"BENEFIT PLAN" means any Plan established, arranged or
maintained by the Company or any corporate group of which the
Company, is or was
a member, existing at the Closing Date or prior thereto, to
which the Company
contributes or has contributed, or under which any employee,
officer, director
or former employee, officer or director of the Company or any
beneficiary
thereof is covered, is eligible for coverage or has benefit
rights.
"BOOKS AND RECORDS" of any Person means all files,
documents,
instruments, papers, books, computer files (including but not
limited to files
stored on a computer's hard drive or on floppy disks),
electronic files and
records in any other medium relating to the business, operations
or condition of
such Person.
"BUSINESS DAY" means a day other than Saturday, Sunday or
any
day on which banks located in the State of Colorado are
authorized or obligated
to close.
"LICENSES AND CERTIFICATION" means the Medicare Provider
Certification, the Medicaid Certification and related licenses
and permits
necessary for the operation of the Company's business.
"CASH PURCHASE PRICE" has the meaning set forth in SECTION
2.2(B).
"CLAIM NOTICE" has the meaning set forth in SECTION 7.2(D).
"CLAIMED AMOUNT" has the meaning set forth in SECTION
7.2(D).
"CLOSING" has the meaning set forth in SECTION 2.4(A).
"CLOSING DATE" has the meaning set forth in SECTION 2.4(A).
"CNSR PARTIES" has the meaning set forth in SECTION 7.2(A).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule
attached hereto which sets forth the exceptions to the
representations and
warranties contained in ARTICLE III hereof and certain other
information called
for by this Agreement.
"COMPANY INTELLECTUAL PROPERTY" means any Intellectual
Property relating to the Company and its business that is owned
or licensed to
the Company.
"COMPANY STOCK" has the meaning set forth in the first
recital
of this Agreement.
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"DAMAGES" has the meaning set forth in SECTION 7.2(A).
"DEFINED BENEFIT PLAN" means each Benefit Plan which is
subject to Part 3 of Title I of ERISA, Section 412 of the Code
or Title IV of
ERISA.
"EMPLOYMENT AGREEMENT" has the meaning set forth in SECTION
2.4(B)(VII).
"DISPUTE" has the meaning set forth in SECTION 7.2(D).
"ENCUMBRANCES" means any mortgage, pledge, assessment,
security interest, deed of trust, lease, lien, adverse claim,
levy, charge or
other encumbrance of any kind, or any conditional sale or title
retention
agreement or other agreement to give any of the foregoing in the
future.
"ENVIRONMENTAL AND OCCUPATIONAL LAWS" has the meaning set
forth in SECTION 3.19.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" means any entity which is a member of a
"controlled group of corporations" or which is or was under
"common control"
with the Company as defined in Section 414 of the Code.
"EXCLUDED A/RS" has the meaning set forth in SECTION 2.3(A).
"EXCLUDED ASSETS" has the meaning set forth in SECTION
2.3(A).
"EXCLUDED LIABILITIES" has the meaning set forth in SECTION
2.3(B).
"FINANCIAL STATEMENTS" means (i) the unaudited balance sheet
of the Company and the related unaudited statement of income and
retained
earnings for the period beginning October 1, 2006 and ending
September 30, 2007,
and (ii) the Interim Financial Statements for the Company.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court,
tribunal, arbitrator, authority, agency, commission, official or
other
instrumentality of the United States or other country, any
state, county, city
or other political subdivision.
"INTELLECTUAL PROPERTY" means (i) inventions (whether
patentable or unpatentable and whether or not reduced to
practice), all
improvements thereto, and all patents, patent applications and
patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations
thereof; (ii)
trademarks, service marks, trade dress, logos, trade names,
domain names and
corporate names, together with all translations, adaptations,
derivations and
combinations thereof and including all goodwill associated
therewith, and all
applications, registrations and renewals in connection
therewith, copyrightable
works, all copyrights and all applications, registrations and
renewals in
connection therewith; (iii) mask works and all applications,
registrations and
renewals in connection therewith; (iv) trade secrets and
confidential business
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information (including product specifications, data, know-how,
past, current and
planned research and development, current and planned research
and distribution
methodologies and processes, customer lists, current and
anticipated customer
requirements, price lists, market studies, business plans),
however documented;
(v) proprietary computer software and programs (including object
code and source
code) and other proprietary rights and copies and tangible
embodiments thereof
(in whatever form or medium); (vi) database technologies,
systems, structures
and architectures (and related processes, formulae,
compositions, improvements,
devices, know-how, inventions, discoveries, concepts, ideas,
designs, methods
and information) and any other related information, however,
documented; (vii)
any and all information concerning the business and affairs of a
Person (which
includes historical financial statements, financial projections
and budgets,
historical and projected sales, capital spending budgets and
plans, the names
and backgrounds of key personnel and personnel training and
techniques and
materials), however documented; (viii) any and all notes,
analysis,
compilations, studies, summaries, and other material prepared by
or for a Person
containing or based, in whole or in part, on any information
included in the
foregoing, however documented; (ix) all industrial designs and
any registrations
and applications therefor; (x) all databases and data
collections and all rights
therein; and (xi) any similar or equivalent rights to any of the
foregoing
anywhere in the world.
"INTERIM FINANCIAL STATEMENTS" means the unaudited balance
sheet and the related unaudited statement of income and retained
earnings for
the Company for period between October 1, 2007 and the Closing
Date.
"KEY EMPLOYEES" has the meaning set forth in SECTION 6.2(F).
"KNOWLEDGE OF THE COMPANY" or "KNOWN TO THE COMPANY" means
the
actual knowledge of Dr. Hoffman, including the knowledge Dr.
Hoffman would have
had in the exercise of reasonable diligence customary for a sole
shareholder and
chief executive officer.
"KNOWN EXCLUDED LIABILITIES" has the meaning set forth in
Section 7.7.
"LIABILITIES" means any liability (whether known or unknown,
whether asserted, or unasserted, whether absolute or contingent,
whether accrued
or unaccrued, whether liquidated or unliquidated, and whether
due or to become
due), including but not limited to any liability for Taxes (as
defined below).
"MATERIAL ADVERSE EFFECT" means, for any Person, a material
adverse effect whether individually or in the aggregate (a) on
the business,
operations, financial condition, Assets and Properties or
Liabilities of such
Person, or (b) on the ability of such Person to consummate the
transactions
contemplated hereby.
"NON-SOLICITATION AGREEMENT" has the meaning set forth in
SECTION 2.4(B)(II).
"OFFSET AMOUNT" has the meaning set forth in SECTION 7.3(A).
"OFFSET DISPUTE NOTICE" has the meaning set forth in SECTION
7.3(A).
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"ORDER" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in
each such case
whether preliminary or final).
"ORDINARY COURSE OF BUSINESS" means the action of a Person
that is consistent with the past practices of such Person and is
taken in the
ordinary course of the normal day-to-day operations of such
Person.
"PERMITS" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations and similar
consents
(including, without limitation, the Licenses and Certification)
granted or
issued by any Governmental or Regulatory Authority.
"PERMITTED ENCUMBRANCE" means (a) any Encumbrance for taxes
not yet due or delinquent or being contested in good faith by
appropriate
proceedings for which adequate reserves have been established in
accordance with
Accounting Principles, (b) any minor imperfection of title or
similar
Encumbrance which individually or in the aggregate with other
such Encumbrances
does not create a Material Adverse Effect, and (c) any
Encumbrances that would
be discoverable by a survey or from a review of the public
records.
"PERSON" means any natural person, corporation, general
partnership, limited partnership, limited liability company,
proprietorship,
other business organization, trust, union, association or
Governmental or
Regulatory Authority.
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock
purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave
of absence,
layoff, vacation, day or dependent care, legal services,
cafeteria, life,
health, accident, disability, workers' compensation or other
insurance,
severance, separation or other employee benefit plan, practice,
policy or
arrangement of any kind, whether written or oral, including, but
not limited to,
any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
"PURCHASE PRICE" has the meaning set forth in SECTION
2.2(A).
"REAL PROPERTY" has the meaning set forth in SECTION 3.13.
"RESPONSE" has the meaning set forth in SECTION 7.2(D).
"TAX" (and, with correlative meaning, "Taxes," "Taxable" and
"Taxing") means (i) any federal, state, local or foreign income,
alternative or
add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem,
transfer, franchise, profits, license, withholding, payroll,
employment, excise,
severance, stamp, occupation, premium, property, environmental
or windfall
profit tax, custom, duty or other tax, governmental fee or other
like assessment
or charge of any kind whatsoever, together with any interest or
any penalty,
addition to tax or additional amount imposed by any Governmental
or Regulatory
Authority responsible for the imposition of any such tax
(domestic or foreign),
(ii) any Liability for payment of any amounts of the type
described in (i) as a
result of being a member of an affiliated, consolidated,
combined, unitary or
other group for any Taxable period and (iii) any Liability for
the payment of
any amounts of the type described in (i) or (ii) as a result of
any express or
implied obligation to indemnify any other person.
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"TAX LOSSES" has the meaning set forth in SECTION 7.2(E).
"TAX RETURN" means any return, report, information return,
schedule or other document (including any related or supporting
information)
filed or required to be filed with respect to any taxing
authority with respect
to Taxes.
"TERM" has the meaning set forth in SECTION 2.2(C).
"THRESHOLD AMOUNT" has the meaning set forth in SECTION
7.4(A).
1.2 CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the
context of this Agreement otherwise requires, (a) words of any
gender include
each other gender; (b) words using the singular or plural number
also include
the plural or singular number, respectively; (c) the terms
"hereof," "herein,"
"hereby" and derivative or similar words refer to this entire
Agreement; (d) the
terms "Article" or "Section" refer to the specified Article or
Section of this
Agreement; (e) the term "or" has, except where otherwise
indicated, the
inclusive meaning represented by the phrase "and/or"; and (f)
"including" means
"including without limitation." Whenever this Agreement refers
to a number of
days, such number shall refer to calendar days unless Business
Days are
specified. All accounting terms used herein and not expressly
defined herein
shall have the meanings given to them under generally accepted
accounting
principles.
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 SALE OF COMPANY STOCK BY DR. HOFFMAN. Subject to the
terms
and conditions of this Agreement, Dr. Hoffman shall sell to CNSR
all of the
shares of the Company Stock and to deliver the original
certificates evidencing
the Company Stock to CNSR at the Closing. The certificates for
the Company Stock
will be properly endorsed for transfer to or accompanied by duly
executed stock
power in favor of CNSR and otherwise in a form acceptable for
transfer on the
books of the Company. If any such original certificates shall
have been lost,
stolen or destroyed, then Dr. Hoffman shall deliver an affidavit
of lost
certificate in form reasonably acceptable to CNSR.
2.2 PURCHASE OF COMPANY STOCK BY CNSR.
(a) PURCHASE PRICE. Subject to the terms and conditions in
this Agreement, CNSR shall acquire the Company Stock from Dr.
Hoffman and pay to
Dr. Hoffman in exchange for the Company Stock an aggregate
purchase price equal
to Three Hundred Thousand Dollars ($300,000) (the "Purchase
Price"), payable in
the manner set forth in SECTIONS 2.2(B) and (C) below.
(b) CASH PURCHASE PRICE. At the Closing, CNSR will pay to
Dr.
Hoffman an aggregate of Eight Thousand Three Hundred Thirty
Three Dollars and
Thirty Three Cents ($8,333.33) in cash (the "Cash Purchase
Price").
(c) PAYMENT SCHEDULE. The remainder of the Purchase Price,
Two
Hundred Ninety One Thousand Six Hundred Sixty Six Dollars and
Sixty Seven Cents
($291,666.67), shall be paid to Dr. Hoffman pursuant to the
schedule set forth
on SCHEDULE 2.2 attached hereto in cash in thirty-five (35)
equal installments
beginning on the first day of the month following the Closing
Date and
continuing on the first day of each subsequent month until paid
in full.
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2.3 EXCLUDED AND ASSUMED ASSETS AND LIABILITIES.
(a) EXCLUDED ASSETS. Notwithstanding anything to the
contrary
in this Agreement, (i) certain office furniture, such as the
desk in Dr.
Rosenbach's office and the furniture in Dr. Hoffman's office,
and (ii)
personally owned artwork, all as described on SCHEDULE 2.3(A)
attached hereto,
(collectively, the "Excluded Assets"), shall become assets of
Dr. Hoffman
immediately prior to the Closing but may be used by CNSR at no
charge for so
long as Dr. Hoffman remains employed by CNS Response, Inc. and
does not exercise
the repurchase option contained in Section 7.8 below.
(b) EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary in this Agreement, CNSR is not required to, and shall
not, assume, pay,
perform, defend or discharge any of the Company's liabilities or
obligations
arising out of or in connection with the operation of the
Company prior to the
Closing, including, without limitation, accounts payable, any
existing debt
(including debt owed to Dr. Hoffman), any and all liabilities
for
shareholder-related matters, any and all liabilities and
obligations for
employment related matters, any and all severance payments for
the Company's
employees, equipment leases not expressly included on SCHEDULE
2.3(C) attached
hereto, contingent liabilities, real estate leases (except as
otherwise provided
in SECTION 2.3(C) below), and the liabilities described in
SECTION 7.5 below
(collectively, the "Excluded Liabilities"). The Excluded
Liabilities shall be
distributed to and assumed by Dr. Hoffman immediately prior to
Closing in a
manner reasonably satisfactory to CNSR. Dr. Hoffman shall
forgive all loans owed
to him by the Company as of the Closing Date.
(c) ASSUMED ASSETS AND LIABILITIES. CNSR will assume all of
the Company's assets except the Excluded Assets (the "Assumed
Assets"), and (ii)
those liabilities of the Company that are incurred by CNSR on or
after the
Closing and arise out of CNSR's operations of the Company on or
after the
Closing (the "Assumed Liabilities").
2.4 CLOSING.
(a) TIME AND PLACE. The consummation of the purchase and
sale
of the Company Stock under this Agreement ("Closing") shall be
effective as of
11:59 p.m. January 11, 2008 ("Closing Date").
(b) CLOSING DELIVERIES BY THE COMPANY AND DR. HOFFMAN. On or
before the Closing, the Company and Dr. Hoffman shall have
delivered or caused
to be delivered to CNSR:
(i) the original stock certificates
representing all of the issued and outstanding shares of
Company Stock owned by Dr. Hoffman (or an affidavit of lost
certificate in form reasonably acceptable to CNSR), duly
endorsed in blank (or accompanied by duly executed stock
power);
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(ii) a Non-Solicitation Agreement by and
between CNSR and Dr. Hoffman, substantially in the form of
EXHIBIT A attached hereto (the "Non-Solicitation
Agreement"),
duly executed by Dr. Hoffman.
(iii) a certificate of an officer of the
Company, substantially in the form of EXHIBIT B attached
hereto, duly executed by the Company;
(iv) a certificate of Dr. Hoffman,
substantially in the form of EXHIBIT C attached hereto, duly
executed by Dr. Hoffman;
(v) a certificate of the Secretary of the
Company substantially in the form of EXHIBIT D attached
hereto, certifying as of the Closing Date (A) a true and
complete copy of the Articles of Incorporation of the
Company
certified by the Colorado Secretary of State as of a date no
more than ten (10) days prior to the Closing Date, (B) a
certificate of the Secretary of State of Colorado dated as
of
a date no more than ten (10) days prior to the Closing Date,
certifying the good standing of the Company, (C) a true and
complete copy of the resolutions of the board of directors
of
the Company and Dr. Hoffman authorizing the execution,
delivery and performance of this Agreement by the Company
and
the consummation of the transactions contemplated hereby and
(D) incumbency matters;
(vi) resignation letter of each of the
officers and directors of the Company, dated effective as of
the Closing;
(vii) an employment agreement by and between
CNSR and Dr. Hoffman, substantially in the form EXHIBIT E
attached hereto (the "Employment Agreement"), duly executed
by
Dr. Hoffman;
(viii) such other documents as CNSR may
reasonably request for the purposes of facilitating the
consummation of the transactions contemplated herein.
(c) CLOSING DELIVERIES BY CNSR. On or before the Closing,
CNSR
shall have delivered or caused to be delivered to Dr.
Hoffman:
(i) the Cash Purchase Price, by wire
transfer in immediately available funds to an account
designated by Dr. Hoffman pursuant to SCHEDULE 2.2 attached
hereto;
(ii) the Employment Agreement, duly executed
by CNSR;
(iii) the Non-Solicitation Agreement, duly
executed by CNSR;
(iv) a certificate of an officer of CNSR,
substantially in the form of EXHIBIT F attached hereto, duly
executed by an officer of CNSR; and
(v) such other documents as Dr. Hoffman may
reasonably request for the purposes of facilitating the
consummation of the transactions contemplated herein.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
DR. HOFFMAN ABOUT THE COMPANY
Dr. Hoffman represents and warrants to CNSR as of the
Closing
Date, except as set forth on the Company Disclosure Schedule
furnished to CNSR
specifically identifying the relevant section hereof, which
exceptions shall be
deemed to be representations and warranties as if made
hereunder, as follows:
3.1 ORGANIZATION OF THE COMPANY. The Company is a
corporation
duly organized, validly existing, and in good standing under the
laws of the
State of Colorado. The Company is duly authorized to conduct its
business in
Colorado as it is currently conducted. The Company does not
conduct business
outside of the State of Colorado. The Company has full corporate
power and
corporate authority, and holds all material Permits and
authorizations necessary
to carry on its business and to own and use the Assets and
Properties currently
owned and used by the Company. The Company has delivered to CNSR
correct and
complete copies of its charter documents and other
organizational documents,
each as amended to date.
3.2 CAPITAL STOCK OF THE COMPANY. The authorized capital
stock
of the Company consists solely of Ten Thousand (10,000) shares
of common stock,
no par value, all of which have been issued to Dr. Hoffman.
There are no shares
in treasury and no shares of Preferred Stock authorized. No
shares of the
Company's capital stock have been issued since October 31, 1994.
The capital
stock of the Company is duly authorized, validly issued, fully
paid and
nonassessable. Except for this Agreement, there are no
outstanding
subscriptions, options, warrants, calls, commitments or other
rights of any kind
for the purchase or acquisition of, nor any securities
convertible or
exchangeable for, any capital stock of the Company.
3.3 AUTHORITY OF THE COMPANY. The Company has all necessary
corporate power and corporate authority and, except for the
filings necessary to
convert the Company into a provider network entity under
Colorado law, has taken
all corporate action necessary to enter into this Agreement, to
consummate the
transactions contemplated hereby and to perform its obligations
hereunder and no
other proceedings on the part of the Company are necessary to
authorize this
Agreement or to consummate the transactions contemplated hereby.
This Agreement
has been duly and validly executed and delivered by the Company
and constitutes
a legal, valid and binding obligation of the Company enforceable
against the
Company in accordance with its terms except (i) as limited by
applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws of general
application affecting enforcement of creditors' rights generally
and (ii) as
limited by laws relating to the availability of specific
performance, injunctive
relief or other equitable remedies.
3.4 NO AFFILIATES. The Company does not have any Affiliates
and is not a partner in any partnership or a party to a joint
venture.
3.5 NO CONFLICTS. The execution and delivery by the Company
of this Agreement does not, and the performance by the Company
of its
obligations under this Agreement and the consummation of the
transactions
contemplated hereby will not:
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<PAGE>
(a) conflict with or result in a violation or breach of any
of
the terms, conditions or provisions of the charter documents,
bylaws or other
organizational documents of the Company;
(b) conflict with or result in a violation or breach of any
term or provision of any law, Order, Permit, statute, rule or
regulation
applicable to the Company or any of the businesses, Assets or
Properties of the
Company, where such conflict, violation or breach would have a
Material Adverse
Effect on the Company;
(c) result in a breach of, or default under (or give rise to
right of termination, cancellation or acceleration) under any of
the terms,
conditions or provisions of any Permit, note, bond, mortgage,
indenture,
license, agreement, lease or other similar instrument or
obligation to which the
Company or, any of its Assets and Properties may be bound;
or
(d) result in an imposition or creation of any Encumbrance
on
the business or Assets or Properties of the Company.
3.6 CONSENTS AND GOVERNMENTAL APPROVALS AND FILINGS. Except
for the filings necessary to convert the Company into a provider
network entity
under Colorado law, no consent, approval or action of, filing
with or notice to
any Governmental or Regulatory Authority or any other
non-Governmental or
Regulatory third party on the part of the Company, prior to the
Closing, is
required in connection with the execution, delivery and
performance of this
Agreement or the consummation of the transactions contemplated
hereby, other
than as provided in the Company Disclosure Schedule. The Company
makes no
representation as to the necessity of filing any notices or
other filings on or
after the Closing Date with any Governmental or Regulatory
Authority.
3.7 BOOKS AND RECORDS. The minute books and other corporate
records of the Company as made available to CNSR contain a true
and complete
record, in all material respects, of all actions taken at all
meetings and by
all written consents in lieu of meetings of Dr. Hoffman, the
board of directors
and committees of the board of directors of the Company. The
stock transfer
ledgers and other similar records of the Company accurately
reflect all
issuances and record transfers in the capital stock of the
Company. The other
Books and Records of the Company are true, correct and
complete.
3.8 FINANCIAL STATEMENTS AND ACCOUNTS RECEIVABLE.
(a) The Company has previously delivered to CNSR the
Financial
Statements. The Financial Statements (i) are true, correct and
complete, (ii)
are in accordance with the Books and Records of the Company,
(iii) have been
prepared in conformity with Accounting Principles, and (iv)
fairly present the
financial condition and results of operations of the Company, as
of the
respective dates thereof and for the periods covered thereby;
PROVIDED that the
Financial Statements lack footnotes and certain other
presentation items.
(b) All accounts receivable of the Company reflected in the
Interim Financial Statements are bona fide receivables and
represent amounts due
with respect to actual, arms-length transactions entered into in
the Ordinary
Course of Business, as adjusted as shown in the "balance" column
of such Interim
Financial Statements. Such receivables are (i) legal, valid and
binding
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<PAGE>
obligations of the obligors, (ii) subject to no known setoffs or
counterclaims,
except for customary contractual payment adjustments imposed by
third party
payors, and (iii) are current and collectible (within 1 year
after the date on
which they first became due and payable), net of the applicable
reserve for bad
debts on the Interim Financial Statements.
3.9 ABSENCE OF CHANGES. Since the date of Interim Financial
Statements and up to the Closing Date, the Company and Dr.
Hoffman have
conducted the Company's business only in the Ordinary Course of
Business and
there has not been any Material Adverse Effect on the Company,
or to the
Knowledge of the Company, any event or development which,
individually or
together with other such events, could reasonably be expected to
result in a
Material Adverse Effect on the Company, including, without
limitation, any
change to the material contracts listed in Section 3.18 of the
Company
Disclosure Schedule, decline in revenue or loss of employees,
and since the end
of the period covered by the Interim Financial Statements, the
Company has not
taken any action which if taken after the date of this
Agreement, without CNSR's
consent, would violate SECTION 3.26 hereof.
3.10 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Financial Statements, there are no Liabilities, nor, to the
Knowledge of the
Company, any basis for any claim against the Company for any
such Liabilities,
relating to or affecting the Company, other than Liabilities
incurred after the
end of the period covered by the Interim Financial Statements in
the Ordinary
Course of Business which have not had, and could not reasonably
be expected to
result in, individually or in the aggregate, a Material Adverse
Effect on the
Company.
3.11 TANGIBLE PERSONAL PROPERTY. The Company is in
possession
of and has good and marketable title to, or has valid leasehold
interests in or
valid rights under written agreements to use, all tangible
personal property,
equipment, plants, buildings, structures, facilities and all
other tangible
Assets and Properties material to the conduct of the Company's
business as it is
presently conducted, including all tangible personal property
listed in Section
3.11. All such tangible personal property, equipment, plants,
buildings,
structures, facilities and all other tangible Assets and
Properties are listed
in Section 3.11 of the Company Disclosure Schedule and are free
and clear of all
Encumbrances, other than Permitted Encumbrances.
3.12 BENEFIT PLANS; ERISA.
(a) The Company has no commitment, proposal, or
communication
to employees regarding the creation of a Plan or any increase in
benefits under
any Benefit Plan. The Company has no ERISA Affiliates.
(b) The Company has no Benefit Plans that provide benefits,
including without limitation death or medical benefits (whether
or not insured),
with respect to current or former employees of the Company or
any ERISA
Affiliate beyond their termination of service (other than (i)
coverage mandated
by applicable law, (ii) deferred compensation benefits accrued
as liabilities on
the books of the Company or (iii) benefits the full cost of
which is borne by
any current or former employee (or his or her beneficiary)).
(c) The consummation of the transactions contemplated by
this
Agreement will not, either immediately or upon the occurrence of
any event
thereafter, (i) entitle any current or former employee or
officer or director of
the Company to severance pay, unemployment compensation or any
other payment, or
(ii) accelerate the time of payment or vesting, or increase the
amount of
compensation otherwise due any such individual.
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<PAGE>
(d) There are no pending or, to the Knowledge of the
Company,
anticipated or threatened claims by or on behalf of any Benefit
Plan, by any
employee or beneficiary covered under any such Benefit Plan, or
otherwise
involving any such Benefit Plan (other than routine claims for
benefits).
3.13 REAL PROPERTY. Section 3.13 of the Company Disclosure
Schedule contains a complete list of each parcel of real
property leased by the
Company (as lessee or lessor) (the "Real Property") and (ii) to
the Knowledge of
the Company, all Encumbrances (other than Permitted
Encumbrances) relating to or
affecting the Real Property. The Company does not own any real
property. The
Company has a valid leasehold interest in the Real Property.
Each lease with
respect to the Real Property is a legal, valid and binding
agreement of the
Company subsisting in full force and effect enforceable in
accordance with its
terms, and there is no, and the Company has not received notice
of any, default
(or any condition or event which, after notice or lapse of time
or both, would
constitute a default) thereunder. The Company does not owe any
brokerage
commissions with respect to any such Real Property. There are no
Encumbrances
(other than Permitted Encumbrances) against the Company by or on
behalf of
tenants occupying office space adjacent to the Real
Property.
3.14 INTELLECTUAL PROPERTY RIGHTS. Section 3.14 of the
Company
Disclosure Schedule contains a true, complete and correct list
of all of the
Company Intellectual Property owned by the Company and Section
3.14 of the
Company Disclosure Schedule contains a true, complete and
correct list of all
Company Intellectual Property that the Company uses pursuant to
a license,
sublicense or agreement (other than commercially available
over-the-counter
"shrink-wrap" software). The Company has delivered to CNSR
complete and accurate
copies of each agreement, registration and other documents
relating to the
Company Intellectual Property set forth in Sections 3.14 of the
Company
Disclosure Schedule.
3.15 LITIGATION. There are no Actions or Proceedings pending
or threatened or, to the Knowledge of the Company, anticipated
against, relating
to or affecting (i) the Company or (ii) the transactions
contemplated by this
Agreement, and to the Knowledge of the Company, there is no
basis for any such
Action or Proceeding. The Company is not in default with respect
to any Order,
and there are no unsatisfied judgments against the Company.
3.16 COMPLIANCE WITH LAW. Except for the filings necessary
to
convert the Company into a provider network entity under
Colorado law, the
Company is in compliance with all applicable laws, statutes,
Orders, ordinances
and regulations, whether federal, state, local or foreign,
including, without
limitation, compliance with all statutes and obligations related
to the Licenses
and Certification, except where the failure to comply, in each
instance and in
the aggregate, could not reasonably be expected to result in a
Material Adverse
Effect on the Company. The Company has not received any written
notice to the
effect that, or otherwise has been advised that, the Company is
not in
compliance with any of such laws, statutes, Orders, ordinances
or regulations.
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<PAGE>
3.17 CONTRACTS. Section 3.17 of the Company Disclosure
Schedule contains a true and complete list of each material
written or oral
contract, agreement or other arrangement to which the Company is
a party or by
which any of its Assets and Properties is bound (and, to the
extent oral,
accurately describes the terms of such contracts, agreements and
arrangements).
Each contract, agreement or other arrangement disclosed in
Section 3.17 of the
Company Disclosure Schedule is in full force and effect and
constitutes a legal,
valid and binding agreement, enforceable in accordance with its
terms, of each
party thereto; and the Company has performed all of its required
obligations
under, and is not in violation or breach of or default under,
any such contra
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